chaos rocking financial markets,

[spice756]

WASHINGTON – With chaos rocking financial markets, John McCain assailed "greed and corruption" on Wall Street and promised to clean it up, while Barack Obama blamed White House policies and said his opponent would only deliver more of the same.

The presidential candidates struggled on Monday to seize control of the issue voters say is most important — the economy — with Republicans and Democrats alike saying the man who succeeds may well win the election.
However, in a dizzying day of speeches and statements, neither White House hopeful offered any fresh ideas for turning things around. Instead each relied on the same vague, though vastly different, pitches he has sounded over the past few months for fixing what ails the country.


And they didn't emphasize that they are part of the Congress that has done little to head off the crisis. McCain is a four-term Arizona senator, Obama a first-termer from Illinois.

Bemoaning "the most serious financial crisis since the Great Depression," Democrat Obama faulted Republican McCain's domestic policy agenda as the same as President Bush's — "one that says we should just stick our heads in the sand and ignore economic problems until they spiral into crises."






McCain declared in a new TV ad, "Our economy is in crisis. Only proven reformers John McCain and Sarah Palin can fix it" — though he also told voters in Jacksonville, Fla., "The fundamentals of our economy are strong."
While presidents — and candidates of the party occupying the White House — often take credit for good economies and try to avoid blame for bad ones, financial crises nearly always have multiple causes.

Home loans became more affordable a few years ago when the Federal Reserve kept interest rates low. Politicians of all stripes encouraged home ownership. But lightly regulated financial outfits began slicing and dicing the resulting mortgages into securities and selling them to investors.


http://news.yahoo.com/story//ap/20080916/ap_on_el_pr/candidates_economy (http://news.yahoo.com/story//ap/20080916/ap_on_el_pr/candidates_economy)


Wow it looks like McCain is worse than Bush!!



But lightly regulated financial outfits began slicing and dicing the resulting mortgages into securities and selling them to investors.


This part of the post makes no sense.People just do not make enough money to buy homes.

[ontheleftneil]

Ugh, and what exactly is McCain planning? Go to war with the financial institutions?

[spice756]

Ugh, and what exactly is McCain planning? Go to war with the financial institutions?

He is pro-war and pro-army.Anti-working class and pro-elite.

The problem is people do not have enough money to pay their house bills and the bank is taking their house.

[manic expression]

I have no idea why we aren't talking more about this. Wall Street is in full-on meltdown mode, and we're seeing the culmination of one of the biggest crises in imperialism in decades. Freddie Mac and Fannie Mae being forced into nationalization, Lehman Brothers filing the biggest bankruptcy EVER, AIG going down in flames, Dow Jones falling 500 points (IIRC) in a single day, inflation skyrockets, unemployment is skyrocketing...the list goes on. I'm not sure what the fallout will be on the ground beyond Wall Street, but this is a huge development.

The political end of this is, IMO, academic. Barack Obama came out with a New Deal-type economic plan, but in all likelihood even the most Keynesian of programs wouldn't be enough: the New Deal itself failed to bring the US out of the Depression, it just stabilized it a bit and served as propaganda for the ruling class. Hitler brought the US out of the Depression more than anyone else, as the beginning of WWII marked the first significant rise in the economy after 1929. I should review the specifics of Obama's plan, but the bottom line is that NO government policy could do much at this point: even leaving aside the fact that the market doesn't listen to the White House, the US state is in tremendous debt and Keneysianism would make that even worse. Essentially, the US economy is running out of time, and Barack Obama is still peddling the same old "hope and change" bullsh*t with nothing beyond that.

McCain is acting as the quintessential conservative hack. His idiotic ramblings of "strong fundamentals" are tailor-made for the "patriots" who believe America can do no wrong, not even when it comes to investments. He's just completely oblivious to what's happening today. On the question, "what is McCain planning to do?"...the answer is simple: absolutely nothing. He's aspiring to Hoover, and if elected he'll probably follow exactly in those footsteps.

Capitalism is in big trouble by itself. The need for working class organization could not be greater.

[ckaihatsu]

Home loans became more affordable a few years ago when the Federal Reserve kept interest rates low. Politicians of all stripes encouraged home ownership. But lightly regulated financial outfits began slicing and dicing the resulting mortgages into securities and selling them to investors.

http://news.yahoo.com/story//ap/20080916/ap_on_el_pr/candidates_economy


This part of the post makes no sense.People just do not make enough money to buy homes.


My understanding of this is that it's the difference between the public sector and the private sector. Home ownership is a populist measure, one that is directed towards the middle class, which derives some of their income from investments, or capital -- meaning that they are partially tapping into the blue-collar labor of others.

So if the Fed lowers interest rates and makes home loans more affordable then it also invites interlocutors from the private sector who corrupt the opportunity by inserting themselves in as middlemen, repackaging the affordable home loans into mortgage-backed securities, thus gaining control over that segment of the pipeline.



McCain is acting as the quintessential conservative hack. His idiotic ramblings of "strong fundamentals" are tailor-made for the "patriots" who believe America can do no wrong, not even when it comes to investments. He's just completely oblivious to what's happening today. On the question, "what is McCain planning to do?"...the answer is simple: absolutely nothing. He's aspiring to Hoover, and if elected he'll probably follow exactly in those footsteps.

Capitalism is in big trouble by itself. The need for working class organization could not be greater.


(By the way, I agree with your take on Obama -- as well as your take on McCain -- even if I'm not including it in my excerpting of your post.) The following is from Marxist.com, which is a solid assessment of the mid-term future, in my opinion:


---


The U.S. began with two parties: Federalists and Anti-federalists. The Federalists, led by Alexander Hamilton and John Adams, represented that section of the bourgeoisie which wanted a strong central state apparatus and the development of industry. The Anti-Federalists, led by Thomas Jefferson, eventually became the Democratic Party. Over time, the Democratic Party became the party of the Southern slave owners and the big city political machines in the North.

Later, the Whigs arose and the Federalists disappeared. In the 1850s, the conflict between the interests of the Southern slave and plantation owners and the growing Northern industrialists and financiers led to a crisis culminating in the American Civil War. The Republican Party had been created in 1854, and Abraham Lincoln became their first President in 1860. As a result, the Whigs were displaced as a political force. The fact that the Republican Party was created in 1854 and won control of the White House and Congress only six years later illustrates how quickly events can develop and sharply change the political situation.

If we look at history and the experience of the world working class movement, we can draw some conclusions. Firstly, that the development of a new mass labor party will come about because of a major crisis in society, on the basis of sharp, sudden changes in the situation. Today we can see the developing crisis of the decline of American imperialism and capitalism, which the WIL has explained in other articles. Secondly, that the development of a mass labor party will mean either the end of one of the two major capitalists parties (or at least one of the parties will become much smaller), or they will merge or form a coalition against the new labor party.

http://www.marxist.com/labor-party-prospects-part-one.htm


---


Chris




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[spice756]

My understanding of this is that it's the difference between the public sector and the private sector. Home ownership is a populist measure, one that is directed towards the middle class, which derives some of their income from investments, or capital -- meaning that they are partially tapping into the blue-collar labor of others.

So if the Fed lowers interest rates and makes home loans more affordable then it also invites interlocutors from the private sector who corrupt the opportunity by inserting themselves in as middlemen, repackaging the affordable home loans into mortgage-backed securities, thus gaining control over that segment of the pipeline.


So you are saying becuse Fed lowers interest and made home loans more affordable the private sector thought this is good way of making money.By getting poor people to take out mortgage that they know thay cannot pay back?

[ckaihatsu]

So you are saying becuse Fed lowers interest and made home loans more affordable the private sector thought this is good way of making money.By getting poor people to take out mortgage that they know thay cannot pay back?


Yeah, this overextending of loans is a part of the contradiction within capitalism itself. The contradiction is that while everyone is looking for profits, the only places they have left to go is into increasingly speculative areas, like junk bonds or home loans.

The recent precedent for the current dynamic was seen in Japan in the '90s. (And, of course, here's my political disclaimer: I am not a nationalist of *any* stripe, neither American nor Japanese.)


Here's an excerpt from Wikipedia:

The easily obtainable credit that had helped create and engorge the real estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid. Loan Officers and Investment staff had a hard time finding anything to invest in that would return a profit. They would sometimes resort to depositing their block of investment cash, as ordinary deposits, in a competing bank, which would bring howls of complaint from that bank's Loan Officers and Investment staff. Meanwhile, the extremely low interest rate offered for deposits, such as 0.1%, meant that ordinary Japanese savers were just as inclined to put their money under their beds as they were to put it in savings accounts.[2] Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many so-called "zombie businesses". Eventually a carry trade developed in which money was borrowed from Japan, invested for returns elsewhere and then the Japanese were paid back, with a nice profit for the trader.

http://en.wikipedia.org/wiki/Japanese_asset_price_bubble

[Sendo]

christ. As much as I hate FDR, I really miss him right now. At the very least I know he would be putting a moratorium on bank rushes and foreclosures. The current system is reward the bankers and have the middle class bail them out with their tax dollars while they watch what's left get devalued.

[cyu]

At the very least I know he would be putting a moratorium on bank rushes and foreclosures.

This article is technically about capital flight, but it also applies to market crashes, currency collapses, and bank failures: from http://www.infoshop.org/rants/yu1.html


Capital Flight - What to do

You have just overthrown the government, your far left party has just won a landslide election, or your vast coalition of civic, labor, and religious institutions have simply decided to come together and ignore the existing government. Capitalists are fleeing your country in their private jets. Investors have pulled out all their money. Foreign banks run by capitalists suddenly decide they are no longer willing to make any loans to your "rogue" nation. The former dictator has packed up all his suitcases full of gold, jewels, and cash from your national treasury, and is now nowhere to be found.

Now what?

Economic collapse? Mass unemployment? Depression and starvation? No, of course not.

Wealth is not to be found in currency, in the so-called "precious" metals, in paintings by long-dead painters. None of those are needed to survive. Wealth is found in food, in warmth, in health care, and in the things necessary to produce them. All the land is still yours. All the labor is still yours. Even factory equipment remains, despite the flight of "capital" - that is, the loss of things that represent wealth, but are not wealth themselves. In fact, very little has been lost and virtually all of the productive capacity of your nation remains. All that has changed is the accounting.

Your nation may still have in its treasury the remnants of the capitalist financial structure - gold, other precious metals, paper money from nations around the world. Spend it - as soon as possible. Buy commodities - those things you need to survive and buy any equipment you need to produce the goods you need. That is the real wealth to people who actually have to do the work.

What happens in the rest of the world as the people of your nation are suddenly flooding it with various currencies and "precious" metals, while snapping up real goods? The supply of those currencies and "precious" metals go up, while the supply of real goods go down. These goods become more and more expensive, while "money" becomes more and more worthless. Thus, there is all the more reason to exchange your money as soon as possible for real goods you will need.

When all the old money has been spent, you are free to live, work, and produce the things you need. Self-reliance is the only secure form of wealth. Trade with other nations can still be conducted, but do not hold on to their money - money is mere promise of future wealth, promises that can be broken whether from malice or from inability to fulfill them. Exchange any money for real wealth as soon as you can.

Money within your own economy should be based on real wealth. When farmers produce a bushel of grain, let them issue a paper note representing that bushel of grain. Since that paper note can be redeemed for precisely that amount of grain, there is no inflation between the notes and the grain. These paper notes can be collected by larger farmer organizations that then reissue new notes based on a diversified index of what they produce. While the value of money issued in this way may fluctuate with respect to goods not on the index, it will not change with respect to the goods that back these paper notes. This is the first step to currency stability.

However, be warned that these notes are still only as good as the institutions that issue them. Either you trust that they can always be redeemed, or you redeem them as soon as it is convenient. This is especially true of money you receive from other nations that is supposedly backed in the same way. Distance makes people bolder and less hesitant to break promises. Ultimately, however, convenience would probably mean you will place your trust in an organization of like minded people who will help each other ensure that what you have is really what you have - although you should make sure there are alternatives should you decide to change your mind.

People can probably be trusted when times are easy and when prosperity reigns, but when times are tough, promises are much easier to break than the laws of survival. This is what makes self-reliance of an economy important. This is why local industry and agriculture should be protected. Productively ability is the real source of wealth of the nation.

However, natural disasters also occur. While the world as a whole may be fairly stable, the area around you is much more prone to random fluctuations of climate and geology. Thus self-reliance is not the entirety of a secure economy, but merely the supporting structure. The secondary source of security is prosperity in other geographical locations. The more prosperous others are, the more likely they will come to your aid in times of trouble. The more they have to thank you for their prosperity, the more likely they will come to your aid. Again, merely being creditors to their debt is not enough. Nations are sovereign, whether anarchist or authoritarian. They can break their promises - they can ignore any legalistic claims to debt. It is the general goodwill that can be fostered between two nations or people that will be your salvation in case your own self-reliance fails.

In the end, captial flight isn't really capital flight. Real capital - the people, natural resources, and equipment needed to produce real goods - cannot be packed up in a bag when the capitalist skips town. They will require a lot of labor if they truly want to escape with real capital. What remains when the capitalists are gone are merely the people who are doing the work, and the means to do it.

[spice756]

Yeah, this overextending of loans is a part of the contradiction within capitalism itself. The contradiction is that while everyone is looking for profits, the only places they have left to go is into increasingly speculative areas, like junk bonds or home loans.


The bankers are too blame for the problem they got too greedy with overextending of loans .The bankers had no other work but to get people they know cannot pay the loan off.

The people did not know any better.