23 January, 2008
The spirit of graft and lawlessness is the American Spirit. — Lincoln Steffens, The Shame of the Cities, 1902
Last night’s late night news on BBC2 (22/1/08) had five ‘experts’ pontificating on about the ‘business cycle’ and they spent around twenty minutes trying avoid explaining where Capitalism was headed and whether anybody or institution had any control over it. They failed miserably, talk about empty heads talking, it was an embarrassing display of denial, something the BBC is really good at,
“Stock indexes are set to be highly volatile in coming weeks, they warned.” — BBC News Website
Volatile? At least that’s what the European Central Bank and the Bank of England are telling us. Volatile is bank-speak for powerless.
If you judge the latest crisis of capital accumulation by the headlines in the ‘business’ section of the MSM, you could be excused for thinking that it’s all down to jittery investors what with statements like:
“The uncertainty about corporate earnings growth in 2008 has risen, not only in the financial sector,” said Matthias Schellenberg, managing director at ING Investment Management.
“The markets are expecting a flood of profit warnings in the next few months.”
We have been living with the ‘boom and bust’ cycle of capitalism for centuries and whilst it’s true that that the ‘boom and bust’ cycle is intrinsic to capitalism, MSM ‘explanations’ for its causes are laughable.
Take for example the BBC’s Q&A Webpage where we read under the heading ‘What can stop the falls [in the value of shares]’:
“That’s a tricky one.”
In other words, nothing can be done about it, followed by a series of anodyne ‘answers’ to the question which reveal two things about corporate media coverage of capitalist economics:
1. Never call a recession a recession, just keep on saying that it’s ‘around the corner, maybe’, a ridiculous response given that we are already in a recession.
“The big question is whether we are just seeing a bad month for shares – or whether this is the start of a bear market that could see share prices sliding for years.”
So questions get answered with, you guessed it, more questions.
2. Blame it all on the ‘sub-prime mortgage’ scandal but don’t even begin to question the real cause of ‘cheap’ credit. The BBC’s Q&A page says:
“All of the problems were kicked off by record levels of defaults on sub-prime mortgages in the US.
“Sub-prime mortgages are [were] offered to people with inferior credit records or unpredictable incomes.”
It goes onto say that:
“It turned out that US lenders had been repackaging the debt and selling it to banks worldwide.
“The default levels meant that the repackaged debt was of questionable value.”
Questionable value? Repackaging? But it stands to reason that if you lend money to people who havenâ€™t a hope in hell of repaying it (as they were conned into the deals in the first place) then the result is inevitable; repossessions and the inevitable collapse of the housing market (and then some).
“A US Federal Judge, C.A. Boyko in Federal District Court in Cleveland Ohio ruled to dismiss a claim by Deutsche Bank National Trust Company. DB’s US subsidiary was seeking to take possession of 14 homes from Cleveland residents living in them, in order to claim the assets.
“Here comes the hair in the soup. The Judge asked DB to show documents proving legal title to the 14 homes. DB could not. All DB attorneys could show was a document showing only an “intent to convey the rights in the mortgages.” They could not produce the actual mortgage, the heart of Western property rights since the Magna Charta if not longer.
“Again why could Deutsche Bank not show the 14 mortgages on the 14 homes? Because they live in the exotic new world of ‘global securitization’, where banks like DB or Citigroup buy tens of thousands of mortgages from small local lending banks, ‘bundle’ them into Jumbo new securities which then are rated by Moody’s or Standard & Poors or Fitch, and sell them as bonds to pension funds or other banks or private investors who naively believed they were buying bonds rated AAA, the highest, and never realized that their ‘bundle’ of say 1,000 different home mortgages, contained maybe 20% or 200 mortgages rated ‘sub-prime,’ i.e. of dubious credit quality.” — The Financial Tsunami: Sub-Prime Mortgage Debt is but the Tip of the Iceberg By William F. Engdahl
Contrast the BBC’s innocuous description of the situation with the following:
“President George W. Bush called for $145 billion in tax cuts, describing the measures as a “shot in the arm” for the U.S. economy, which caused stock values to plunge in Australia, Tokyo, Hong Kong, China, and across Europe. “There’s something approaching panic in the market” said an analyst with Bank of America.” — Source: The News Dissector, 23 January, 2008
What the BBC doesn’t explain is its disingenuous description of bad debts as ‘repackaging’, in other words, burying the damn things in financial ‘instruments’ so complex that nobody has any idea where these bad debts actually are (devised by a bunch of greedy nerds with useless degrees in economics and business ‘management’).
“Fraud, corruption and racketeering went so deep as to make an important contribution to the greatest single crisis the United States faced during the 20th century – the Great Depression.” — Gangster Capitalism – The United States and the Global Rise of Organized Crime, p.54
Move over Halliburton.
But the real cause can be traced back to the ‘de-regulation’ of the financial markets and especially the banking sector. ‘De-regulation’ is just news-speak for the legalisation of what used to be a crime and obviously with good reason (remember the Savings & Loan crisis of the 1980s? See my ‘Bush Family Connections: Silverado Savings & Loan Scandal‘, itself the first major effect of de-criminalising, sorry, deregulating the laws governing the actions of the financial sector).
In turn, it reveals the simple fact that capitalism is fundamentally a criminal endeavor of grand proportions, one that makes the ‘Mafia’ look like amateurs (See ‘Selling the biggest lie of them all – Capitalism‘, my review of ‘Gangster Capitalism – The United States and the Global Rise of Organized Crime’ by Michael Woodiwiss).
It was only because of the ’29 Crash that under Roosevelt’s ‘New Deal’ the state imposed regulations on the business ‘community’, for just as with today’s meltdown, the ’29 Crash was caused in large measure by the criminal actions of the capitalist class, the self-same laws that were abolished in the 1980s. So what goes around, comes around eh.
“The number and variety of rackets in the United States during the 1920s and early 1930s was vast. Many Americans knew or at least suspected that politicians, judges, lawyers, bankers and business concerns collected many millions of dollars from frauds, bribes and various forms of extortion.” — Gangster Capitalism – The United States and the Global Rise of Organized Crime’, p.47
The irony of ‘de-regulation’ is that it came about as a result of the last major crisis of Capital, the so-called Energy Crisis of the early 1970s and the falling rate of profit following the actions of countries like IRAQ in nationalising their oil industry and of OPEC raising the price of oil.
“Do we want the communists to own the banks, or the terrorists?” asked financial commentator Jim Cramer. “I’ll take any of it.”
Neo-liberalism, letting the market decide and ‘de-regulation’ is just a polite way of describing Gangster Capitalism or back to business as usual before those damn Commies interfered with a good thing.
Thus the BBC, along with the rest of the capitalist press, dare not speak the ‘credit crisis’ by its real name- Capitalism, nor obviously the real history of ‘boom and bust’ lest we, the public finally cotton to what’s going on and who will the pay the price, as ever, the poor of the planet.