Author Archives: jgoldstein

Although this video may at first seem like a conspiracy theory, some of the people in it speaks about some practices of capitalism.

One of the most interesting parts of this video comes at 57:18 where one of the guys explains how the “federal reserve” is a private bank that bankrupted the United States, and since then our government have been controlled by that private bank.

I’m not a big supporter of conspiracy theories, but this the the same thing that happens to third world countries with the IMF and the World Bank.

The Obama Deception

Ga Young (Gina) Jeon

Professor Jesse Goldstein

“Four Crises of the Contemporary World Capitalist System”

Author: William K. Tabb

Before constructing an outline for this article, I’d like to inform you that Tabb approaches the financial analyses with the motivation to “inform progressive governments and movements for social change (1).” Tabb critiques the contemporary crises in four distinct yet inter-related reasons. He states the following:

            “Crisis one: Financialization and Financial Crisis:

Tabb says:

“The first problem is the financial turbulence that has gripped the economy of the United States and has had widespread effects. It is a crisis that further discredits mainstream Anglo-American economics. I do not know that it is the crisis of capitalism. For this to be the case it would not only have to become much deeper, but its impacts would have to be felt more dramatically as a systemic failure……a deep and painful crisis will be, at best, only the occasion for reforming and not abolishing capitalism (1).”

Summary:

Tabb indicates that the “financial meltdown” has already begun. He begins to question whether or not “financial capitalism can sustain itself.” Tabb mentions two critiques that he feels our financial system is experiencing: the first one being that “capitalism is mutating (Martin Wolfe),” and the second stating that our economy is in a “new hybrid phase: monopoly-finance capital (John Bellamy Foster).”  Tabb makes a legitimate argument in stating that:

“the financial sector gained leverage over the rest of the economy, in effect gaining the power to dictate priorities to debtors, vulnerable corporations, and governments. As its power grew, it could demand greater deregulation, allowing it to grow still further and endangering the stability of the larger economic system (2).”

Basically, Investors made a large sum of money by investing at risk. Investors began to follow the M-M’ circuit, “in which money could be made solely out of money, without the intervention of actual production (2).” As a matter of a fact, globally, investors borrowed money at low interest rates and “invested in high return U.S. financial assets, junk bonds, and derivatives of all sorts (2).” Many investors began to follow this money-making strategy. As a result of this, we are currently experiencing a financial crisis.

The diagram below may help you to better understand why the facts stated above became a large burden on our economy.

Investors

Borrowed money à  purchased more than they could afford à bidding up prices à debt

Sadly, this cycle continues producing more debt than manageable. Tabb views this process as a bubble ready to pop.

Tabb says that:

“Financialization as an accumulation strategy has brought not only severe crisis with the failure of financial markets but has put the United States in a position resembling that of a poor nation in debt to foreign creditors—its currency declining, its trade policies favoring elites, and its government demanding that some taxpayers pay more to recapitalize the financial system while providing more tax cuts to the affluent and corporations (2).”

Basically, while our country is in major debt, it doesn’t fail to discriminate the lower class. It continues to deprive its less fortunate citizens of their needs and fortunes. As a result of this, the financial cycle chokes itself. The circulation (circulation = money) is cut off. Thus, the working class is left to pick and fight over jobs and basic human rights.

Tabb suggests that there is a connection between the following:

Financialization + rising inequalities + declining economic fortunes

It stinks for the working class because seemingly, our government is controlled by corporations and the wealthy. Pessimism dwells among the citizens of the working class.

1.  Corporations bring production of goods and services to foreign countries where they can pay less skilled workers less money to do more work.

            2.  The development of technology continuously puts workers out of work.

3. It is difficult for unions to form because even if a strike breaks out, because of the demand for jobs, the corporations can just hire new people for less money (credited to the National Labor relations board).

Furthermore, it is ironic that

“The U.S. forces its financial regime and rules on the developing world through the mediation of the International Monetary Fund and World Bank, but capital has been expanding financial operations into the so-called emerging markets. Now we see a meltdown on Wall Street and the irony of foreign sovereign wealth funds and other investors having to rescue the pillars of the U.S. financial empire. How should we understand these contradictory developments? This is a political question. It needs to be answered like any other economic matter in which a small elite benefit at the expense of the many (3).”

To the foreign countries, America must look like a greedy pig that fell because it could no longer sustain its own weight. In cases like this one, it is very likely that countries that once conformed to the capitalist patterns of the U.S. will begin to defend their own interests.

            “Crisis two: U.S Imperialism- Losing Hegemony:

Tabb says:

“A second crisis is that of U.S.-led imperialism, which has been discredited both in terms of its regime-change-wars-of-choice and the increasingly effective resistance to the international financial and trade regime we know as the Washington Consensus. Because of the incalculable harm neoliberalism has done, and continues to do, it is now ideologically on the defensive.”

 Summary:

There are so many controversies that continue to be debated at the present moment. Tabb indicates that especially after the failure in Afghanistan and Iraq, U.S. has been discredited domestically and abroad. The U.S. elites utilize times of war as a means for making profit. Tabb specifically mentions key figures in the government: Vice President Cheney, Robert Rubin, and Donald Rumsfeld as recent political figures heavily involved in profit making during times of war abroad. The recent complaint is that the U.S. not only lost Iraq, but jeopardized the stability situations in Afghanistan. In addition, U.S. failed to prioritize domestic needs such as adequate jobs and health care. As a result of this, U.S. credibility declined immensely.

Tabb also mentions the role of the IMF (International Monetary Fund) that brought “instability, not growth” to the areas facing the financial crisis.

Furthermore, Tabb points out that U.S. continually “cradles” the mistakes; and never takes the initiative to “correct” it.

Increasingly, groups fight against traditional imperial powers because it benefits them in NO way. For example: the IMF works in the favor of the elite, ignoring the dire needs of the people in the given country.

Well, Tabb says: “WAKE UP AMERICA!” because the developing countries are no longer going to follow the U.S. like blind sheep. The Banco del Sur serves as a perfect example in this case.

“The Banco del Sur operates on a one country, one vote principle and, building on the Venezuelan Bank for Economic and Social Development priorities, favors cooperatives and community ownership, offering below-market interest rates to public and social enterprises. With a proposed capitalization of seven billion dollars, it represents a serious challenge to the U.S.-controlled Bretton Woods Institutions as well as the Washington-dominated neoliberal Inter-American Bank.”

The weak dollar also serves as a symbol of this “break down.”

“The advantage the United States has enjoyed by being able to borrow in its own currency has been undercut by abuse, outsized current account deficits, and the buildup of dollars in foreign hands. This has progressed to the point where the money creation and lower U.S. interest rates implemented by the Federal Reserve to stave off financial collapse have driven down the currency’s value and encouraged further flight from the dollar.”

As a result of this, the Euro could become a more important reserve currency than the dollar.

            “Crisis three: The New Centers of Power:

Tabb says:

“A third point of crisis is the rise of new centers of power in what had been the peripheries of the capitalist system and the tensions this has unleashed, providing room to maneuver for countries wishing to break with the United States.”

Summary:

By “new centers of power” Tabb is referring to the “E7” (Brazil, China, India, Indonesia, Mexico, Russia, and Turkey) Tabb says that the “E7 is 25 percent larger than the current G-7 and will be driving the growth of the global economy.” Some of the key countries that Tabb points out are:

China: “Beijing Consensus”

This is based on “respect for sovereignty and mutual economic benefit….. is widely appealing as an alternative to Washington’s version of spreading democracy and the “free” market by means of violence.

“SCO” (Shanghai Cooperative Organization) – energy conservation program in which U.S. was denied membership.

Russia:

Selling advanced military systems while working with China and India on energy conservation.

“Oil access/control”

            “Crisis four: Resources and Sustainability:

Tabb says:

“A fourth area of crisis has to do with resource usage, the uneven distribution of the necessities of life, and a growth paradigm that is no longer sustainable. Here grassroots social movements in South Africa and elsewhere are leading actors in resisting privatizations and the imposition of a hyper-individualism that brings disaster for the most oppressed and exploited.”

Summary:

Tabb states a valid argument in stating that “the sustainability of human life is simply not consistent with inherently wasteful capitalist growth.” There is so much pressure being added to the resource base of the planet. There is an important need for ecological development. Tabb indirectly suggests to the United States that there is a need for sincerely assisting developing countries instead of throwing them short-term solutions that serve them no long-term benefit.  

For example:

“Malawi, which for years hovered at the brink of famine, with five million of its thirteen million people needing emergency food aid after a disastrous 2005 maize harvest, decided to subsidize its poor farmers and was soon exporting hundreds of thousands of tons of maize thanks to the help it gave the farmers, whose yields grew dramatically. The United States, while willing to provide food aid from its agricultural surplus (grown with huge federal subsidies to U.S. farmers), refuses to assist farmers in poor countries. Even as it insists that they follow the free market, the United States undermines the ability of third-world farmers to compete by dumping free or low-cost agricultural exports in their countries.”

 

The prices of grains continued to rise. As a result, America began to sell “white flour, corn sweeteners, and corn-fed animal fats is replacing traditional diets for too many of the world’s people. Refined sugars create obesity and promote diseases such as diabetes by replacing the complex nutrients of traditional foods. The uncontrolled profit motive is destroying health and increasing medical costs dramatically as it poisons its customers with adulterated and unhealthy foods (9).”

Tabb shows that U.S. profit motives degrade the quality of lives of the people of other countries. He goes on further to say that media blinds our eyes from seeing the pain that capitalism causes in our profit driven world.

Commentary:

It’s so interesting to me how easily the “human genome” is bought by corporations and the elite. I mean, this article just reveals that there are so many alternative stories beyond the ones that we are “fed” by each morning through corporate owned news channels. It sucks that the elite have to be so selfish. But, in my opinion, the corporations and the elite are enslaved as well. They are enslaved to this competition driven market in which they’ve created. It’s almost as if they’ve created a monstrous creature that now lives on bullying the world market, thus creating instability and continually perpetuating social inequality. (Think about our current financial crisis.) How in the world are rights legitimized? Who determines who should, and who should not have basic human rights? Inequality is continually fostered in this capitalistic-profit driven market. And, yes, it stinks.. This article articulates a perspective that is hardly ever exposed to ordinary American citizens. It’s sad to think about the damage and inequality that U.S. continues to foster globally. It’s something to think about. Are you also a product of this capitalistic society?

You may find the article on the site stated below:

http://sites.google.com/site/radicalperspectivesonthecrisis/finance-crisis/linking-crises/four-crises-of-the-contemporary-world-capitalist-system

When looking for an article to read I always look for a first paragraph that grabs me.  In the article entitled ” Why the U.S stimulus package is bound to fail” by David Harvey this exactly what happened.  Harvey like a very intelligent man compares the financial crisis to an earthquake.

“Much is to be gained by viewing the contemporary crisis as a surface eruption generated out of deep tectonic shifts in the spatio-temporal disposition of capitalist development. The tectonic plates are now accelerating their motion and the likelihood of more frequent and more violent crises of the sort that have been occurring since 1980 or so will almost certainly increase. The manner, form, spatiality and time of these surface disruptions are almost impossible to predict, but that they will occur with greater frequency and depth is almost certain. The events of 2008 have therefore to be situated in the context of a deeper pattern.”

The thing that truly scares me is that just like an earthquake this financial crisis will eventually go away with time, but also like an earthquake the financial crisis will come back again, stronger than ever.

“But tectonic shifts of this sort do not come about as if by magic. While the historical geography of a shifting hegemony as Arrighi describes it has a clear pattern and while it is also clear from the historical record that periods of financialization precede such shifts”

Later in the article Harvey attempts to take a keynesian point of view explaining that it could never work due to such difficult obstacles in its way.

“In the United States, any attempt to find an adequate Keynesian solution has been doomed at the start by a number of economic and political barriers that are almost impossible to overcome. A Keynesian solution would require massive and prolonged deficit financing if it were to succeed.”

This comes down to the fact that Americans along with other “super powers” across the globe could not be sustained if we went into deficit financing.  Therefore this perspective can never happen in this country.  One of the reasons why the United States is in such a bad position is due to the amount of money that we owe other countries.

“The problem for the United States in 2008-9 is that it starts from a position of chronic indebtedness to the rest of the world (it has been borrowing at the rate of more than $2-billion a day over the last ten years or more) and this poses an economic limitation upon the size of the extra deficit that can now be incurred.”

In order for the stimulus package to work is if people know and believe what they are told, where the money is actually going and being spent on.

“In order to work, the stimulus has to be administered in such a way as to guarantee that it will be spent on goods and services and so get the economy humming again. This means that any relief must be directed to those who will spend it, which means the lower classes, since even the middle classes, if they spend it at all, are more likely to spend it on bidding up asset values (buying up foreclosed houses, for example), rather than increasing their purchases of goods and services.”

With so many financial uncertainties these days, the American people want to be comforted in knowing about where ones money is being spent, when will this end and how will we become a better nation from our financial mistakes.  Once again like an earthquake, we as a nation will come out of this and come back stronger than ever.

http://sites.google.com/site/radicalperspectivesonthecrisis/news/harvey-whytheusstimuluspackageisboundtofail

I read a well-written article from the Radical Perspectives On The Crisis blog titled “Staring Into Black Water“. Basically it talks about how determining what will happen in the economy, even in the near future, is virtually impossible. We can see the general problems afflicting the health of the worldwide economy, but only time will tell how deep the problems are rooted. The article argues that eventually the economy will have to fix itself, or cease to exist and start from the beginning.

“But nobody knows how much fictitious capital is out there and how much of it must disappear before the rest of the economy is sufficiently unburdened to catch its breath.”

The article starts off by pointing out one of the central problems of the economy: fictitious capital. This emphasizes the overarching point that knowing how deep the problem goes and in which direction it will go in is impossible, because we don’t know how much fictitious capital is out there. Fictitious capital will have to decrease by the forces of deflation, but that as time goes by the problem grows exponentially worse.

“One option for the ruling class is to do more or less nothing. Let the avalanche rush on until it has hit the bottom. After all a crisis is a moment of correction and, if the correction is not allowed to proceed, the underlying problem will not go away.”

It goes on to say that the most obvious thing we can do is let the “avalanche” of the worsening economy play itself out. While this might be the most obvious choice, it will not be the choice willingly chosen by the ruling class because of the social implications, such as uprisings by the middle and lower classes.

“The limited reach of monetary tools is already painfully clear. Even a zero interest rate is not low enough to get credit flowing again if there is no confidence in tomorrow.”

The article also points out how relatively ineffective our “monetary tools” are when it comes to solving such a global problem. Lowering the interest rates is supposed to be one way the government can intervene, but it does not solve the underlying problems that plague the system as a whole.

“It may be that the loss of purchasing power as a result of the deflation of real estate and other assets is just too great to be compensated for, and that the deflationary wave, after slowing for a while, will accelerate again. Keeping alive weak companies will only postpone their demise and in the meantime lower the profit rate of their stronger competitors”

The article goes on to criticize how “bailing out” companies is only worsening the problem. it may temporarily alleviate some of the symptoms of the worsening economy, but in the long run will actually make things worse.

“So the great stimulus plans may all be in vain, but there is no other option … The crisis of confidence will move from confidence in the banks to confidence in the state. The crisis of confidence will move from confidence in the banks to confidence in the state. “

In the end, I think although people feel that the “laissez faire” approach to solving the world’s economic woes is a poor way to deal with the current crisis, that is what might ultimately happen. Because of globalization, there is not much any single entity can do to sway the global economy in any particular direction. Governments may try to help alleviate the social impacts of a poor economy to make sure that there are still people around to participate in an economy, but the markets will either have to fix themselves or – in the worst case scenario – cease to exist and would have to “start from scratch.” At best, what we can do is try to alleviate the social implications on the crisis, but at some point (and some may argue we may have already reached that point) the only way to restore people’s confidence may be to radicially change or replace the capitalist system altogether.

-Adrian Manea

This article is from the website www.nakedcaptilism.com . I was particular interested in the differences in the Fiscal and Monetary policies in America compared to that of Europe. The article also provided me with some insight on the effects of government intervention in the economy.

This article examines the effects of the financial crisis in Europe and how government officials are handling it. Krugman states in his opening paragraph that

“I’m concerned about Europe. Actually, I’m concerned about the whole world… But the situation in Europe worries me even more than the situation in America. “

The major reason why the situation in Europe is worse than in America is because “Europe has fallen short in terms of both fiscal and monetary policy”

That is the government is not intervening in the Economy effectively. An efficient fiscal plan has not been implemented to stimulate the economy in Europe, nothing of any magnitude as that of president Obama. Krugman elaborates that

“The difference in monetary policy is equally striking. The European Central Bank has been far less proactive than the Federal Reserve; it has been slow to cut interest rates…, and it has shied away from any strong measures to unfreeze credit markets. Europe’s economic and monetary integration has run too far ahead of its political institutions……This is a major reason for the lack of fiscal action: there’s no government in a position to take responsibility for the European economy as a whole. What Europe has, instead, are national governments, each of which is reluctant to … finance a stimulus that will convey many if not most of its benefits to voters in other countries. The difference in monetary policy is equally striking. The European Central Bank has been far less proactive than the Federal Reserve; it has been slow to cut interest rates…, and it has shied away from any strong measures to unfreeze credit markets. After all, while there isn’t a European government, there is a European Central Bank. But the E.C.B. isn’t like the Fed, which can afford to be adventurous because it’s backed by a unitary national government — a government that has already moved to share the risks of the Fed’s boldness.”

Currently it seems like the creation of the Euro may be a problem because it is hard for all the governments of the 16 European nations to come to a general consensus on how the handle their fiscal and monetary policies. As Krugman states “Europe is turning out to be structurally weak in a time of crisis.”

This situation may prove that it is beneficial for the government to intervene in the economy especially in time of crisis. Since, fiscal and monetary policies are essential for the stabilization of the economy. I know that a lot of people may not agree but it is good when the government intervene in the economy especially in the banking industry. We can be contented that if the banks fail up to $200 000 is insured by the Federal Deposit Insurance (FDIC) and most of us do not even have that much money in the bank anyway. In light of the current financial crisis the American government has also implemented several policies to lessen the financial burden of the American society. New home owners can borrow a $7000 interest free loan from the government. President Obama has implemented a stimulus package that will give people a huge tax break. I also do not think that anyone was unhappy with President Bush when they received their stimulus package checks last year.

 I am not pro Socialism but I do not believe that the economy will fix itself. I strongly believe that tgovernment intervention is necessary especially in times of crisis. If you are still skeptical just examine how the financial crisis is affecting Europe. They are debt-ridden, Hungary has $100 billion of external debt, Ukraine is desperate, barely able to pay its gas bill to Russia and Latvia has witnessed riots. The European nation is experiencing a severe financial collapse.

I read an article from nakedcapitalism.com called “Banks Supposedly Will Cut Consumer Credit Card Lines by $931Billion if Reforms Mandated”. I thought this would be a good article to read because in our discussions in class we talked about consumerism and this relates because consumer debt is the reason why credit companies are decreasing people’s credit lines is because they don’t trust cardholders. However, the credit companies are the ones responsible for the problems that stem from debt and the capitalist society in general because they urge people to spend money they don’t have and borrow money from lenders. This article is about a fairly well to do American express customer who was very angry that his credit line went from . How can a credit card issuer give a person a license to be in debt and then punish them when most cannot pay the amounts back. They offered too much credit to begin with. In this quote from the article he is criticising the banks.

“The authorities have made it clear that they intend to throw their weight behind making credit cheaper to consumer via lowering funding costs. How big an offset is that to the $10 billion loss in fees and default charge that the industry is crying about? I suspect the value of the subsidy is considerably greater than what the government wants to take back via tougher regulations.”

In this statement he is referring to the fact that credit card companies are complaining that they will lose 931 billion dollars when the new government regulations are in place that will force them to stop practices like universal default which means that your interest rates go up for one card if you are delinquent with another credit lender and when customers are late with a payment it must be late by 30 days in order to raise interest rates.  So his point is that the card companies shouldn’t be complaining because they are more than making up for it with dramatically reducing peoples credit lines and making it more difficult for people to get credit. In the article he mentioned that 2 of his Amex cards were cut from 50,000 dollars to 3,200!! That is a dramatic decrease and he always paid on time.

He also asserts that the information that was presented in an article in the Financial Times is misleading. The article was called “Credit card reforms to cost banks billions”. He calls it misleading because the source of the information was Morrison and Forrester a law firm.  He said that the number 931 billion was too precise and that they could have chose a financial consulting firm that knows more about the banks.

I think that it is appalling that credit card companies create consumer debt by encouraging people to use their credit cards for everything. Then they turn around and distrust them by reducing credit lines.  Using American Express as an example, they always have ads with celebrities saying that they use Amex for everything. They are aware that we live in a celebrity obsessed culture and they know that normal people want to live like celebrities. So basically they are encouraging people to use up credit. This is what got the banks in a big mess to begin with, offering too much credit to people who couldn’t afford it. Then when the government puts regulations on it they complain. I definitely wouldnt trust the Financial Times for information on whats really going on with the banks because I think its more likely to be skewed in favor of the banks.

This relates to class discussion on consumerism because it is the root of Americas financial woes. We live in a culture that we want more than what we have. We don’t feel a sense of abundance in life so we borrow money in order to travel, and have other luxuries we otherwise couldn’t afford. However how can credit companies expect people to have discipline in a consumer driven society. The answer is they don’t expect it, and thats how they make their money. They are counting on people to screw up so they can make more off of sky high interest rates.

I found a commercial on youtube where Beyonce is shown living her celebrity lifestyle being catered to. In the end of the commercial she says that she uses American Express to shop online because shes so busy. In the end the commercial asks “Are you a card member?” This is proof that the credit card companies are encouraging customers to spend what they do not have. I have yet to see a credit card commercial encouraging people to pay bills on time to avoid interest and using discipline.Here is a link to the commercial so you all can watch:

Amex Commercial

U.S. Weighs Further Steps for Citi

The banking system in the US have been seeing detrimental times and they need help. What is now happening is the Federal Gov’t is stepping in to give these banks much needed aid. What lots of people don’t understand is that they’re not just giving money away. They are actually investing in these failing companies and becoming part owner of them. Everytime the Federal Government buys stock in these companies, the actual worth of the stock declines. At the beginning of the year, Citi was trading at $7. a share. Now its at almost $1. a share. The article from the New York times is described as very hard to read or as Yves put it, reading the article is hard because it ” is so thick that parsing it is like wading through mud.”

“Barely a week after the third rescue of Citigroup Inc., U.S. officials are examining what fresh steps they might need to take to stabilize the bank if its problems mount, according to people familiar with the matter.
Federal officials describe the discussions, which are wide-ranging and preliminary, as “contingency planning.” Regulators are trying to ensure that they are prepared if Citigroup takes a sudden turn for the worse, which they aren’t expecting, these people say.”

First of all, this company has already been rescued 3 times!!! It now seems like the goal of the Federal Gov’t is to keep Citi alive at all costs. According to this excerpt, the Federal Gov’t is already expecting Citi to fail. One argument that can arrive from this is, Why keep bailing out Citi, if it’s done again, then it will be done another time. The issue that comes along with this that the article doesn’t explain is that everytime Citi gets bailed out, the stock holders lost their money and the Gov’t owns more and more of the bank. At this rate, how long would it actually take for Citi to become nationalized and a Government run Institution?

“Citi executives said they haven’t detected signs of corporate clients or trading partners withdrawing their business, even though the New York company’s shares are hovering near $1 apiece — closing Monday at $1.05 on the New York Stock Exchange. Citigroup says it has a strong liquidity position and that its capital levels are among the highest in the banking industry.”

Here we have Citi executives telling everyone the things they need to hear. They are giving hope to the customers that the company is still in good standing with lots of capital and share-holders although the price of the common stock doesn’t  reflect a “strong position,” it is true that Citi has lots of investors and capital, but since the Gov’t started buying up Citi Stock as a form of bailout or assistance for these companies, the value of the stock has dropped tremendously, which now has investors comparing Citi to the other financial giants that hit rock bottom last year. At this point, Citi is hoping that their customers have a sort of renewed belief that the company will prosper without any more government aid.

“Also complicating matters, U.S. officials don’t have a template for winding down a company of Citigroup’s size and complexity, which Federal Reserve Chairman Ben Bernanke made clear at a Senate hearing last week.”

This statement taken from Ben Bernanke shows the current state of the US economy in a strange way. It shows that they never had a specific plan or way with dealing with any company as big as Citi. This to me is a another shot at showing Citi shareholders that the company is simply too huge to actually fail like other institutions did. It also shows that now emergency planning is being done but its late in the game. This also shows how the Government is in the the position where they have to help the financial giant because there’s no other alternative that makes sense.

To better understand Bank Nationalization, check revolutionaryrob’s and jcajuste’s posts about what Professor Roubini talks about.

Ever since Lehman Brothers got bankrupted, serious issues related to subprime loan have caused lower income people to become homeless and squatters. Even though after the economic crisis, most of us continue to build our career, which means that we, or our parents still have enough money to afford it. However, a lot of African Americans and Latinos who live in some area like Antioch, Pittsburg, Brentwood, and Stockton had to move out because of their high rate of mortgage. In the 1960s and 1970s while racial discrimination still existed, non-white people had no right to get loans because of their lower status. During 1990s, when subprime loan became popular, real estate brokers started to offer the loan to those lower income people because they believed that they would make profits. Furthermore, residents did not take a deep consideration of what might happen if the system failed. In order for subprime loan company to make profit as much as they can, they often offered subprime rather than more stable loan.  

In an article “LIVING WITH CRISIS”, a worker from the Berkeley Public Library talks about his African-American co-workers who are seriously suffered by economic crisis.

“One of my Black co-workers moved to one of the most popular suburbs, Antioch, where she now drives over 65 kilometers and it takes at least one hour each way. It has been the same with many others of my non-white co-workers. Because of budget cuts at the level of the State of California for funding education, libraries and public parks, programs will be cut back by an across-the-board 10%. This will probably mean that either our salaries will be reduced by 10% or our hours will be cut back by the same percentage. It is the same with schools and other public facilities, affecting all the rank-and-file employees. My co-worker from Antioch is greatly stressed because if her wage is reduced, she will be unable to afford to pay her mortgage and might lose her house. Her house is clearly “underwater” meaning she owes more for than it is presently worth. Some banks will allow her to “sell short” meaning that she can sell the house for less than what she owes the bank and they will forgive the rest. But if she is underwater too deeply, her only option is either getting evicted because she is foreclosed or “walking away” from the house and letting the bank foreclose and repossess it.”

In her case, she still has job and place to live, however some people don’t. Where those people go is they go back to their houses which they technically have no possession. After they sell their houses, it seems like they gain money to find a place to live; however, the money they get by selling their houses is not enough to pay back their mortgages. If the amount of the mortgages is too high, they still have to keep paying those expenses, therefore some of them get back to where they used to have possessions and stay there under fear of being arrested. As number of squatters increased, some cities in California have renewed the regulation to make illegal to live in a place where there is no water supplies. To keep a place to stay, residents often do what ever they can, even if it is against the laws. However, it is obvious that those residents eventually get frustrated and resist those oppressive laws and they actually did so.

“While usually drawing hundreds of angry people, most of these efforts become nothing more then reformist attempts to lobby politicians to force the banks to renegotiate the mortgage loans. Cities like Oakland have intervened and are trying to pass laws encouraging banks to renegotiate ARM loans into more affordable fixed-rate ones and making it more difficult to evict people still living in their homes.”

 After cities put some efforts for their residents, they got rights to stay their home for a while and consult their loan, even after a notice of foreclosure.

            What has happened in some parts of California is only one aspect of damage caused by economic crisis. Lower class people got suffered much more than any others at this time; however, it could be anybody anytime. Lehman Brothers used to have too much influence through out the world so it was hard to imagine that they fail business that is why whole society had no idea what do with this shocking situation. And we are still processing recovering from economic crisis. In the future, hopefully we are able prevent, and prepare for economic crisis and reduce numbers of people who become homeless or squatters.

Source: Reports on Crisis

            http://sites.google.com/site/radicalperspectivesonthecrisis/struggles/wildcatreportonthecrisisincalifornia

Last year when the world was debating on what shape the recession will take they anticipated it to be a V-Shaped recession lasting about eight months or a recession even lasting longer than that. The opinions ranged from eight months to twenty-four months. Today, after fifteen months it can be easily seen that it has formed a U-Shaped recession. Further studies show that it can last up to a thirty-six month period even if the U.S. takes the necessary aggressive policy action. It won’t be until 2011 that we are able to see the growth rate reach close to two percent. And if these necessary steps aren’t taken we can see this U-Shaped recession goodbye and meet the horrible consequences of the L-Shaped recession.

An L-Shaped recession refers to a steep decline followed by a very low growth during many years. In other words it means the “deadly combination” of economic stagnation and price deflation. If America chooses the same path it is following than it is looking at an economy that will take years to redevelop. The L Shape will only cause the unemployment rate to increase, the adjustments to balance sheets will be even more painful than it is currently, the value of houses will decline further, and the U.S. current account assets will fall dramatically. The L Shaped recession will force the problems to worsen and take an even longer time to heal itself.

This L-Shaped recession occurring is not only affecting the U.S. but it is brutally hurting other nations. “The fall in current-account deficits will be partially compensated for by lower surpluses from oil and gas exporters, such as Middle Eastern countries and Russia. But the bulk of the adjustment would be borne by the world’s largest exporters: Germany, China and Japan….” This L shaped recession will cause a depression which means no one will be able to afford a large deficit for a long time. And that would mean that the economic models of Germany and Japan will no longer work. Since these countries depend so much on exports they are falling to their doom. These countries must “undertake structural reforms that facilitate the shift towards non tradable goods.” The countries can’t see these and they chose to go down another path. Germany is obsessed with their exports and depending on them way too much.

“The Americans dream about a return to a world of credit finance consumption while the Germans dream about assembly lines. In an L-shaped world, these are nightmares.”

The beginning of the article explains why U.S. has forced itself into this huge hole. The government is simply not taking the necessary actions of reforming the financial sector, major economies are depending on national strategies that no longer work for the economy we are presently in, and “exporters are unwilling to spend short term and reorient longer term to stimulate enough demand internally.”

Another article I found explains that the famous “Doctor Doom”, Nouriel Roubini, explains at first that the possibility of the recession being L-Shaped is only about the thirty percent which was about six months ago. Now he is saying that the possibility of this shape is about thirty percent. He implies that the world’s growth rate in 2009 will be negative 0.5 percent. Performances in the financial markets only seem to further prove this type of recession and two of the three indexes of the New York stock markets have reached their lowest levels. The ending of this article explains in simple terms what must be done. “…only when countries all over the world are aware of the gravity of the financial crisis, can they face it more bravely and adopt stronger anti-recession measures in order to pull together in times of trouble to weather hardships.”

Hi guys,

As we spoke last time about Wal-Mart, I wanted to post this article Retail Sales Slide Further, Except at Wal-Mart. After reading it, you will find the answer why people don’t see bad sites of this store.