"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.
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.
http://eye-on-washington.blogspot.com
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.
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?.
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?
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
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.
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.
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.