Help understanding the current crisis

[Blanquist]

1. I have heard Alan Woods and Vladimir Putin call the current crisis a 'classic crisis of overproduction'

What does this mean exactly? Too many things are produced and not enough people with money are able to buy it?

I have heard, before, Warren Buffet and Mark Cuban say that home building should be stopped and homes destroyed.

Would this have been a possible solution? Was that the problem?

2. When it comes to the current austerity, is this more something that needs to happen, or something the ruling classes want to happen?

Is austerity absolutely necessary to clean up the balance sheets of capitalism and let the system survive, or is this more a case of it not necessary needing to happen but a situation where the ruling classes simply can't help themselves with such a great opportunity.

[Lenina Rosenweg]

The roots of the current crisis are an over accumulation of capital. Its complicated but basically too much capital lowers the overall rate of profit accumulation by capitalists.

One aspect of this is that because capitalism is based on exploiting the surplus value created by the worker's labor power, the working class is not able to buy back what it produces.

This is expressed in a lot of ways. Right now international banks and corporations are sitting on about 7.5 trillion dollars in cash. They can't invest this because there aren't productive investment opportunities.Essentially right now there is a capital strike.

A 50% tax on this would instantly end the European sovereign debt crisis.

Capitalism has faced this crisis before. It reacts to a crisis of over accumulation of capital by devaluation. Sometimes currency depreciations but more often recessions and depressions.

Part of the current crisis is a result of the neo-liberalism which was imposed on the world from the early 1970s onward.

I don't know about the "Sage of Omaha's" plan to destroy housing stock. I wouldn't be surprised, these people have more houses than they know what to do with while homelessness is sky rocketing in Greece, Eastern Europe and is high thoughout the US.

I woukld think Alan Woods and Putin may more lean towards left Keynsianism in this, its true that "too much stuff is being produced", a crisis of over production but it goes deeper than this.
http://www.socialistworld.net/doc/5740

These articles might help, although written from a liberal perspective

http://www.commondreams.org/view/2012/05/09-10

http://www.counterpunch.org/2012/05/08/austerity-backlash/

[Invader Zim]

Just to add some specifics to what has been said above:

The cause of this is the fact that there is too much debt. People, and banks in particular, borrowed and lent money to people and institutions without the means to pay the debt back. This was particularly true of the property market and mortgages. And banks and building societies would buy and sell debt, in this case toxic debt, to each other. When one of them started going under, and called in its debts, it created a chain reaction of everyone else calling in their debt - but the people they needed the money from couldn't cough up. That and the fact that property prices were too high artificially. People were paying well above the actual realistic value of a property and borrowing in order to pay it. So when the banks, who effectively own the house because they put up the money, reclaim the mortgage and sieze ownership of the property and put it up for sale they soon found that people weren't willing to pay £400,000 for a property that was realistically worth only say £200,000. The people they lent to couldn't cough up the £400,000, so the bank can only reclaim £200,000 when they lent £400,000. So they lost their money and then recalled other debts.Which meant everyone else was fucked. So the whole thing went into melt down.

That is basically the cause of the economic crisis in a nutshell, bankers taking increasingly dangerous risks on who they gave mortgages too, and the bizarre cultural expectation to own a home, which results in people paying way over the odds for a property instead of renting. Which is basically down to Thatcher and Reagan's consumerist policies in the 1980s. Thatcher, for example, deregulated the lending rules for banks (which would have preventing this fuck up in Britain at least) and flogged a large chunk of Britain's council houses, which in no small part added to this expectation that renting is for schemies and that everyone should race each other to get on the property ladder. And banks exploiting that.