The Choice for the G-20
"The wages of men should be recognized in the social order as more important than the wages of money...." Abraham Lincoln
The leaders of the world are about to gather in New York and Pittsburgh to address the catastrophic failure of the global economy at a time when many are using the stock market boom to argue that recovery is in sight.
The hype around the stock bubble -- for that is what it is -- will most likely weaken any resolve to deal with the huge challenges posed by an out-of-control finance sector and a failing global economy.
The US economy has shrunk by $400 billion since the crisis began, the Japanese economy by Y 40 trillion; and the UK economy by 16 billion GBP.
Unemployment worldwide is expected to rise in 2009 to the historically unprecedented level of 240 million, the highest ever level on record.
This is the G-20's challenge: do they obey their democratic mandates at Pittsburgh and recognize that the wages of men and women are more important to democracy and stability than the easy money made from the wages of money?
Or do they go down in history as the wimps that fed and pandered to the destructive King Kong, the colossal and unaccountable monster that is the finance sector, towering over the global economy, destroying value and jobs, and weakening democracies?
This Summit represents a turning point in history. World leaders can act to tame the beast, regulate and constrain it, or choose to do no more than give the monster a gentle rap on the knuckles for excessive bonuses, and then allow it to continue on its debt-deflationary rampage through the global economy.
The casualties of this ruinous "bankers' crisis" are to be found all around Pittsburgh, site of the G-20 summit. In Pennsylvania alone more than 191,000 people have lost their jobs since August, 2008.
Nationally, 25 million Americans are unemployed, or under-employed. 40 million Americans are now living in poverty -- on incomes below $11,200, according to a recent Commerce Department report. The number of Americans getting food stamps is up 700,000 since May.
At the same time as we hear talk of a housing market revival, in July alone 360,000 middle-class Americans were evicted from their properties by banks. 2.3 million properties have this year been defaulted upon, auctioned or repossessed, and the number is rising at record rates. Banks have so many properties on their books they are turning to auction houses to conduct mass sales. This affects the housing market as a whole by steadily deflating prices across the board.
Only yesterday I heard of a New Yorker who offered to buy from a bank for just $60k a repossessed house valued at a $150k. His offer was declined and the house put up for auction. He attended the auction, and purchased the same house for 25k. A massive destruction of value -- not just of that property but of all the properties in the area.
At the same time Americans are walking away from their debts. Serious mortgage delinquencies (90 days non-payment) rose to a new high of 43 percent in the second quarter of the year. A number likely to subvert any real recovery is the recent data on credit contraction by banks and other financial institutions. Over the last quarter private sector credit in the US contracted by an astonishing $2.32 trillion -- "an unprecedented event in the postwar period".
Perhaps the biggest deterrent to recovery is the decline of real incomes. For all Americans, income fell by 3.1 percent between 2007 and 8 -- and has fallen further since then.
The great delusion spun by the finance sector is that the next recovery can be built on this destruction of value and wages, as long as the wages of money can continue to grow.
For against the grim backdrop outlined above, one sector is doing extraordinary well: the banking sector. "Guaranteed by the state, enjoying in essence free money and with, as yet, no increase in regulation, banks have been swinging for the fences." According to the Fed, banks have increased their assets by 10 percent to a staggering $14,200 bn.
Backed by the Federal Reserve's free money, and with taxpayer-funded bailout money bulging in their pockets, the finance sector has plunged into the Casino that is the stock market, and lured a tide of individual investors in behind them. This bubble is due to burst, and when it does many more thousands will lose precious savings.
The choice for the G20 is clear: to back the wages of men and women that elected them, or to back the wages of money.
Because none of the G-20 leaders have the courage or the political backbone of either Abe Lincoln or FDR, we know which way they will choose.
Michael Brenner: G-20: On a Wing and a Prayer
Here is why we are likely to be disappointed by what happens in Pittsburgh: the outlook is for an emphasis on the superficial to mask collective inaction on the basics of a badly flawed system.
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I was once proud to be of the baby boomer generation. We were going to laugh at worldly goods and change the world with love and peace. And we have become grasping hedonists pillaging our children's future with debt. We have yoked our grandchildren to the slave treadmill to satisfy our greed. It used to be custom to bequeath a farm or some money to one's kids, but now we are bequeathing debts.
We shouldn't even be thinking of getting 'things back to normal' in economics and finance. 'Normal' was what got us here. Many who profited from the bubble economy are trying to talk up a recovery to milk the last bit of juice from the gravy train.
A new economy which rewards those who create wealth is required. Excuse my pessimism for thinking that the G20 will not deliver.
Just a technical question...In my opinion, Ms. P's analysis and conclusions concerning the state of the economy are exactly right, however, I'd appreciate some explanation of how banks are invested in the stock market. Given the state of the REAL economy, the most recent runup in the prices of stocks (of which I am not invested) seemed basically driven by a feeling of euphoria on the part of speculators (sorry, they prefer to be called "investors", of course).. Anyway, I just don't know enough about exactly how banks are involved with the stock market--but maybe I shouldn't want to know. .
It is all about global capitalism. Multi-nationalism's race to the bottom of the wage ladder. This is what G-20 has been. It must end.
http://eye-on-washington.blogspot.com
Globalization has been mismanaged.
Globalization is a myth...only believed in by fanatics and fools.
I just attended the premier of AGE OF STUPID, I live in Pittsburgh and I question the G 20 wasting resources for a two day conference to discuss the world economy that is in shambles.
Businesses are forced to close, the transit system is being rerouted, thousands of police are being brought in to control protesters and protect the dignitaries.
The collusive corruption continues unabated...
We need more than banking regulations, we also need usury laws and employment laws. The way FDR created a middle class in the U.S. and the way they have been created every where else is through employment laws. Employment laws don't directly redistribute wealth, but they allow organization of labor (the NLRB 1935) that can them negotiate for fair wages. Other laws protect individuals and groups - OSHA, discrimination laws, FSLA, ERISA, etc. But these laws have been watered down and enforcement has been all but eliminated as Republican Presidents have appointed libertarian and pro-business Federal Judges who want to return to the Lochner Era. We are still gong backward. This G20 summit can be a starting point for change, but it is going to take a lot of effort and just as in the Great Depression it will take 20 or 30 years to reap the benefit of that change. In today's "it's my money and I'm gonna keep it" and Americans' need for instant gratification it is hard to see how a plan to restore the New Deal and Middle Class America will ever have a chance.
Great article. Yes, "Capitalism", as it is called now, if left to its own devices, will of course ultimately devour itself. That process started long ago, and has picked up speed as it gets closer to the point of no return. The interesting thing is, for all its bravado about being the only system that motivates progress, Capitalism may in the end cost us more than it has ever created. And there are other economic paradigms that may result in a happier, healthier society and planet, which we may discover once we come out from under Capitalism's huge shadow. Just sayin.......
You have a great point and I agree, but it's even deeper than what you say. You are still constrained by thinking some sort of economic system or other, has to prevail. I say, no it does not. Capitalism is based on competition. The ultimate in competition is WAR. We need to do a total re-think and get into co-operation and abandon once and for all; competition, because it's killing us.
If everyone had a "perfect" and equal work ethic co-operation may work. Without competition the majority would be far less motivated to produce and suceed. As a small business owner, without creating a competetive environment my employees would probably do close to nothing.
Fantastic article and comments! I wished many more people were as sensible as you are!
We need a real democracy in the US. Capitalism and free market is taking us in a suicidal downfall, it is unsustainable.
I doubt the politicians in the G-20 are going to do anything about it...if a democrat congress, senate and president can't stand their ground on health care reform what can we spect from a G-20 summit on global economy?.
Yes, but unfortunately, because of its massive accumulation of power, Capitalism will not go quietly into the night, nor will we the people be able to hasten its exit. It will come to an end, as all systems and cycles do, but it will have to die a "natural" death, crushed under the weight of its own unsustainable fallacies. It is a system literally based on the vices of greed, selfishness, and exploitation - such a system is doomed to eventual failure. If we survive, Humans will always need some form of commerce, but a system based on virtue, altruism, and long-term sustainability would be far preferable to what we have now.
Amen to that, Edva. We've got Global Warming/Climate Change and Oil Descent bearing ever more swiftly down on us which will be catastrophic. Are our leaders and governments preparing us? The answer is no! All we do is deny, obstruct, obfuscate, dicker, bloviate, lie and whine about an economic system (exploitative, destructive, poisonous and ultimately unsustainable) that has brought us to the brink of extinction.
Take it from someone in the world of Finance... as soon as these guys got their bailout money and realized, actually realized, that Bear Sterns was an anomaly, and the that the government would *NOT* allow another big firm to fall they lost all fear.
Why are banks rushing to pay back the TARP money? Not out of a sense of social responsibility. Not out of a sense of shame. Not out of gratitude for the help. No, the reason they want to pay it back is because they want to get rid of bonus and executive compensation limits or any other sort of expense reigning wrought by accepting government funds..
They haven't learned a thing. That is what happens when you spare the rod (in a sense). We should have let these companies fall, I guarantee you that in spite of their yelling, they would have gotten their bearings straight and worked together to consolidate or stay afloat were there no other option. Instead, they have weathered the storm, are paying back their rich uncle, and are salivating, just waiting for the opportunity to get back to business the way they did it in the old days.
What's the old saying? Eat what you kill?
The G20 is another government without suffrage or national input; it exists as part of the apparatus that exported most decent-paying jobs overseas to capitalize on slave labour. Putting it "on a diet" as one poster suggests is akin to offering a heroin junkie a candy bar; it will eat that before rampaging for another angry fix.
If you reading this live in/near NYC or Pittsburgh, don't just sit there -- let your voice of dissent be heard:
news.infoshop.org/article.php?story=20090918192207470
That's a bad metaphor. The body does not need heroin to live. The body does need food to live. And the market needs money. An over eater has a very hard time going cold turkey from food. It kills them. Same goes for the market and spending. It's not as simple as heroin. It's about sorting the healthy foods from the unhealthy ones. It's about eliminating deep fried twinkes but allowing some occasional deep fried vegetables so you don't feel deprived. It's about reteaching eating habits (spending habits, market habits, life habits) and finding a healthy balance of pleasures and health. The market has to understand why the changes are good for it in the long run. The market and the people are going to have to find a new value system where the rewards are, long steady health, instead of the fast sugar highs of frivolous indulgences. It's a life style change and mind set change, of not only wall street but the majority of the American people. We are all tied to the same body. And that body has heart disease. And it is hard as hell to be addicted 2 food and have to put food in your mouth every day, in order to live. That's why cold turkey from food does not work. And that is why learning how to eat healthy, while still having enough pleasure in the process, is vital to our survival. It's moderation. The golden means.
It's so easy to point fingers. But how much debt do we have? How much do we live beyond our means? How much do we blow on things we don't need? And what is the perfect balance of living in an atmosphere that is nourishing and makes us feel content while at the same time not stretching our budget past it's ability to not borrow more than we can afford? It always goes back to Mahatma Gandhi. "Be the change you want to see in the world."
Obama, "We are the ones we have been waiting for".
It's a systemic problem. We are all in this ship together and it's not easy to turn the ship if we are not all rowing in the same direction. And that sure the hell means wall street too. Do you know what Obama's job is? As a leader it's not forcing rules. As a leader it's getting the majority to understand why we must all row in the same direction. If he can't do that, then he can not lead. And right now our boat is filling with water.
Like it or not, wall street is part of the heart of middle class America now. Wall street got some seriously needed life support. The next step is about teaching it new eating habits. That is not as easy as it looks. It never is. Cold turkey diets almost always fail. It has to be a slow process of elimination and moderation done over time. It has to be a true life style change. Reforming the market is rather comparable to reforming eating habits of a mass over eater, with 5 resent bypasses in the heart, who is addicted to fried food and sugar. The first step is getting the market to understand that the change in diet is needed for their own life's sake.
I don't like it. It's a pyramid scheme, as has been shown over and over again.
If we don't go about fixing the systemic problem in a very real way, then it will not even be a pyramid anymore. It will be a black hole.
No, I don't buy the analogy. Take every go.d.am red cent from the SOBs and redistribute it (pause for the collective GASP!) to the public sector so we could attempt to (re)build our infrastructure to be the envy of at least a few Third World nations. That's right, every cent. They'll survive just fine. Who knows, they might even have to get a job doing work that is actually productive.
The majority of middle class America have 410k's. Main street and wall street are not so black and white. Not long ago the majority of middle class America has lost half of their hard earned retirement money. Those over 65, were by far, the worst off for it. with stocks back up to a healthy level those over 65 can cash out and retire with out fear now. That might not seem like a big deal to you, but to countless middle class seniors like my mother and father, it's almost everything. With out the bail outs they would have lost 30 years of hard savings. On $70,000 a year combined they were able to put two kids through college and save $800,000 with a 410k and saving bonds. In order to do that they had to live very frugal and wisely. Despite all of that, just a few months back, they had lost $400,000 in the stock market crash.. and with out the government stepping in to help, they would have lost almost all of it. You have no idea of the pain and grief and fear my mother and father were going through not long ago, clearly. And it's the same story for so many older middle class families. Not rich people. So, so far from it.
Reform, yes, we need it. But we need it done in a measured pace. Slow and steady. That's how you turn the ship and not flip it over.
As of _yet_ there is no law that you_must_ put your money in the Stock Market. But you are correct .
lol I meant 401k.
Pure public financing of elections is the only way to bring about any of the change listed in these comments--especially with the Supreme Court about to allow unlimited donations by corporations. But if you think the money changers are fighting back on health insurance reform...imagine the push back on public financing.
This Administration, under the direction of the International Monetary Financier Power, is set to manage an economic and population contraction policy. Usury and speculation in every financial transaction is unsustainable. It is a dishonest devise that redistributes the gains of production and labor, ultimately contracting production and the population. Lyndon LaRouche has confronted the monetary financier global system as the disease: usury, speculation, forced trade, outsourcing jobs and industry, perpetual war, trillions in bailouts, market forces, unemployment in the millions, cost cutting in education and medical services are taking the population to their doom. If the United States does not implement economy formation measures, the U.S. economy will stop functioning. Put the Fed into bankruptcy protection, get the bailout trillions back, banks that qualify will join the U.S. National Bank. Credits and currency will be issued into the population's physical economy: the absolute priorities; based on the perpetuation and improvement of the productive facilities on which their conditions of life depend. Only the United States can confront the International Monetary Financiers; The U.S. must lead and cooperate with other nations; create a reorganization of the world financial/economic system. www.larouchepac.com
With the largest DEFENSE BUDGET on this globe no wonder we have nothing left to take care for our people like other countries do. This large Defense Budget also makes us the bully in this world, and
we have to learn the hard way, that is not the way to go. Someone is making money off these wars, which are based on lies (Gulf on Tonkin, WMDs in Iraq, etc.) and the money these people are making off these wars is not sustaining the rest of the country. Now I heard on MSNBC today that if we want to win the war in Afghanistan we need to be willing to pay higher taxes for the extra troops. Is that insane or what. Just what would we gain if we should win in Afghanistan? We can't even get the oil from Iraq which most thought the war was fought over that. BTW, did we even win that war LOL.
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