Not just mortgage lenders and subprime borrowers were caught up in the frenzy. A growing crowd of real estate speculators got into the business of buying houses in order to sell them off at higher prices. Many homeowners also began to view the rapid increase in the value of their homes as natural and permanent, and took advantage of low interest rates to refinance and withdraw cash value from their homes. This was a way to maintain or increase consumption levels despite stagnant wages for most workers. At the height of the bubble new mortgage borrowing increased by $1.11 trillion between October and December 2005 alone, bringing outstanding mortgage debt as a whole to $8.66 trillion, equal to 69.4 percent of U.S. GDP.
(...) It was netinvestment in the private sector that was once the major driver of the capitalist economy, absorbing a growing economic surplus. It was relatively high net private non-residential fixed investment (together with military-oriented government spending) that helped to create and sustain the “Golden Age” of the 1960s. The faltering of such investment (as a percent of GDP) in the early 1970s (with brief exceptions in the late 1970s–early 1980s, and late 1990s), signaled that the economy was unable to absorb all of the investment-seeking surplus that it was generating, and thus marked the onset of deepening stagnation in the real economy of goods and services. The whole problem has gotten worse over time. Nine out of the ten years with the lowest net non-residential fixed investment as a percent of GDP over the last half century (up through 2006) were in the 1990s and 2000s. Between 1986 and 2006, in only one year—2000, just before the stock market crash—did the percent of GDP represented by net private non-residential fixed investment reach the average for 1960–79 (4.2 percent). This failure to invest is clearly not due to a lack of investment-seeking surplus. One indicator of this is that corporations are now sitting on a mountain of cash—in excess of $600 billion in corporate savings that have built up at the same time that investment has been declining due to a lack of profitable outlets. What has mainly kept things from getting worse in the last few decades as a result of the decline of net investment and limits on civilian government spending has been soaring finance. This has provided a considerable outlet for economic surplus in what is called FIRE (finance, insurance, and real estate), employing many new people in this non-productive sector of the economy, while also indirectly stimulating demand through the impact of asset appreciation (the wealth effect).

In much of the Western world the rate of profit of non-financial corporations fell steeply between 1950–73 and 2000–06—in the US, by roughly a quarter. In response, firms ‘invested’ increasingly in financial speculation, and the us government helped offset the resulting shortfall of non-residential private investment by boosting military spending (the Pentagon’s annual budget happens to be around the same as the figure put on the Treasury’s recent rescue plan).


(...) For a decade, the combined tails of the housing market and financial sector have wagged the dog of the British economy. As in the us, consumption grew much faster than gdp, financed by rising debt, thanks to booming house prices. A grateful electorate returned the Labour government to office twice in a row.

Friday’s currency turmoil and stock market plunge was a case of the chickens coming home to roost from the class-war policies being waged by European and Asian industry and banking squeezing their domestic consumer markets – that is, labor’s living standards – in favor of export production to the United States. The internal contradiction in this industrial and financial class warfare is now clear: To the extent that it succeeds in depressing labor’s income, it stifles the domestic consumer-goods market. This disrupts Say’s Law – the principle that “production creates its own demand,” based on the assumption that employees will (or must) be paid enough to buy what they produce.
(...) This is not to say that no class warfare is being fought in the United States. Indeed, living standards for most wage earners today are down from the “golden age” of the late 1970s. But the U.S. economy had its own financial deus ex machina to soften the blow: Alan Greenspan’s asset-price inflation that flooded the banks with credit, which was lent out to homebuyers and stock market raiders. Rising home prices were applauded as “wealth creation” as if they were a pure asset, much like dividends suddenly being awarded to one’s savings account. Homebuyers were encouraged to “cash out” on the rising “equity” margin, the (temporarily) rising market price of their homes over and above their (permanent) mortgage debt. So while most mortgage money was used to bid up the price of home ownership, about a quarter of new lending was reported to be spent on consumption goods. Credit card debt also soared. In the face of a paycheck squeeze, U.S. consumers were maintaining their living standards by running further and further into debt.
(...) To understand the dynamics at work, one needs to look at the balance of payments – not so much the balance of trade itself, but the currency speculation, international lending and arbitrage that has dominated exchange rates over the past two decades. Exchange rates no longer reflect relative wage levels, “purchasing power parity” or living costs as in times past. Today, they reflect the flow of international borrowing where interest rates are low and lending at a markup where credit is tight – and then hedging this arbitrage, and jumping on the bandwagon to speculate on which way currencies will go.
(...) [carry trade] Hundreds of billions of dollars, euros and sterling worth of yen were borrowed and duly converted into foreign currencies to lend out at a markup. Arbitrageurs made billions by acting as financial intermediaries making income on the margin between low yen-borrowing costs and high foreign-currency interest rates. As Ambrose Evans-Pritchard wrote over a year ago in the Financial Times, “the Bank of Japan held interest rates at zero for six years until July 2006 to stave off deflation. Even now, rates are still just 0.5 per cent. It also injected some $12bn liquidity every month by printing money to buy bonds. The net effect has been a massive leakage of money into the global economy. Faced with a pitiful yield at home, Japan's funds and thrifty grannies shoveled savings abroad. Banks, hedge funds, and the proverbial Mrs Watanabe, were all able to borrow for near nothing in Tokyo to snap up assets across the globe. BNP Paribas estimates this "carry trade" to be $1,200bn.”
(...) As global currency markets no longer provide the easy pickings of the last decade, the yen carry trade is being wound down. This involves converting Icelandic currency, euros, sterling and other non-Japanese currencies back into yen to settle the debts owed to Japanese banks. This repayment – and hence re-conversion into yen – is pushing the yen’s price up. This threatens to make Japanese exports higher-priced in terms of dollars, euros and sterling. Last week, Sony forecast that its earnings will fall as a result, and other Japanese companies face a similar squeeze in sales, not only from rising yen/dollar prices but from the global slowdown resulting from two decades of pro-financial anti-labor economic policies.
(...) The soaring yen and plunging foreign currency rates are the result of unwinding the Japanese “carry trade” strategy to rescue its banks. Japanese industry will pay the bill. And despite the fall in sterling and the euro, Europe’s policy of emphasizing exports to the American market rather than to sell to its own domestic labor force looks pretty bad in view of the imminent economic slowdown in store. U.S. consumer spending and living standards will have to fall – and it seems, to fall sharply – in order to finance the “trickle down” economy at the top. Current Treasury policy is to bail out the creditors, not the debtors. The banks are being saved, but not U.S. industry, and certainly not the U.S. wage earner/consumer. Instead of pursuing a Keynesian type of deficit spending in a manner that will increase employment (government spending on goods and services, infrastructure spending and transfer payments), the Treasury and Federal Reserve are providing money to the banks to buy each other up, consolidating the U.S. financial system into a European-type system with only a few major banks. The financial system is to become monopolized and trustified, reversing two centuries of economic policy aimed at preventing financial dominance of the economy.
(...) Seeing the imminent shrinkage of the U.S. market, lenders and investors are dumping their shares, not only those of U.S. firms but also stocks in European and Asian export sectors. This is the “inner contradiction” of today’s financial rescue operation. Finance itself cannot survive in the face of a stifled domestic “real” economy.
(...) [the crux] So the world ought to be at an ideological turning point. But the last thing that Europe’s oligarchy wants to see is higher labor standards. Nor does the U.S. financial class. Europe and Asia put their faith in a U.S. consumer-goods market rather than their own. The U.S. financial sector found this appealing as long as consumption was financed by running into debt, not by workers earning more money or paying lower taxes. Industrial and political leaders throughout the world have been so anti-labor that there is little thought of raising domestic living standards via higher wage levels and a tax shift off labor and industry back onto property where progressive tax policies used to be based.
(...) As foreign exporters are rudely awakened the dream of an American demand, when will the point come at which Europe and Asia seek to build up their own domestic consumer markets as an alternative? The first problem is to overcome the ideological bias in which central bankers are indoctrinated, in a world where politicians have relinquished economic policy to bankers trained in Chicago School financial warfare against labor and even against industry. It probably is too much to hope that today’s European central bankers and kindred economic managers will drop their neoliberal anti-labor ideology and see that without a thriving domestic market, their own industrial firms will languish. The solution must come from a revived political sector representing the interests of labor, and even of industry itself as it sees the need to revive domestic markets.

The Obama campaign raised a record-breaking $150 million in September, after having touched $65 million in August, his previous best). In all, the Democratic candidate's total fundraising has crossed $660 million. That's unprecedented even in a country with the world's most expensive election campaigns. And so, though this is a nation accustomed to being drowned in TV ads, the scale of the national and targeted video advertising has been without parallel. And Obama is outspending McCain massively.

More than half of the sub-prime loans were taken out by whites (58%). And at the height of the frenzy in 2006, over one-third (39%) of the loans were taken out by high-income people, yuppies who just had to live in a McMansion or real estate types who bought a house only to make a few improvements and "flip it" (sell it) a few months later.

So for a punishment we're giving you $20 billion in bonuses.
(...) The Federal Reserve Bank of New York reported securities-industry employees averaged $400,000 a year in salary alone last year.

With soldiers under intense pressure in recent years to register combat kills to earn promotions and benefits like time off and extra pay, reports of civilian killings are climbing, prosecutors and researchers say, pointing to a facet of Colombia’s long internal war against leftist insurgencies.
(...) Reports of civilian killings rose to 287 from mid-2006 to mid-2007, up from 267 in the same period a year earlier and 218 the year before that, said the Colombian Commission of Jurists, a Bogotá human rights group.

The ICRC noted that around 40 percent of Iraqis, mostly people living in suburbs and rural areas, are not connected to a water network, and must thus either buy water at a cost of around 50 US cents (40 euro cents) for 10 litres, or collect it from often polluted rivers or wells if they cannot afford it.

After making a comment the same day saying that Russia must reduce its nuclear arsenal, Defense Secretary Robert Gates called on the United States to begin testing its nuclear weapon program and fund a new generation of nuclear weapons.

More than $125.7 billion has now been committed to rebuilding Iraq's infrastructure and government since U.S.-led forces toppled the government of Saddam Hussein five years ago. Though all of that has not been spent, it includes $50.77 billion in money appropriated by the U.S., $57.96 billion in Iraqi funds and $17 billion pledged by other international donor, the bulk of it in the latter in loans and under $5.3 billion in grants.

Lord Keynes held forth (his wife, the prima donna ballerina Lydia Lopolava was the rage at Bretton Woods). He had not wanted to invite the rest of the world, as it were. They, he wrote acidly, “clearly have nothing to contribute and will merely encumber the ground.” If they were allowed, the Bretton Woods conference would be “the most monstrous monkey-house assembled for years.” There was only one woman at the table, Mabel Newcomer (a Vassar Professor of Economics). The delegates from the darker nations could not help set the agenda, for the few that came where were there at the sufferance of their colonial masters (such as the Indians and the Filipinos) , while the free people (such as some Latin Americans and the Chinese) were shown the door when the real deliberations began. The Chinese delegate, to be fair, was Dr. H. H. Kung, a descendant of Confucius and husband of Ailing (“Pleasant”) Soong (whose sisters had married Dr. Sun Yat Sen and Generalissimo Chiang Kai-shek). The richest man in China at that time, Kung didn’t seem to do much to pave the way for the reconstruction of a devastated Chinese mainland.
(...) The delegates from afar had to be there in the Gold Room to put their impressions on the final communiqué. No surprise then that the two major institutions that came out of Bretton Woods, the International Monetary Fund (IMF) and the World Bank (WB), had to be run by an European or an American respectively. No-one else would have a turn. Keynes’ disdain for those not like himself was shared by others, and it was this that moved them to disenfranchise the world from the governance of the IMF and the WB (the main votes on their Boards of Executive Directors are held by the U. S. and Europe). The silence of the colonized and semi-colonized meant that the new monetary policies favored those who had already seized the world’s wealth, and the trade policies that followed set inequality in stone. Chastened by the economic warfare of the 1920s and 1930s that not only brought on the hostilities of World War II, but also contributed to the prolongation of the Depression, the major powers now created a currency regime that would be less volatile. The WB was created to help manage the reconstruction of war ravaged Europe (not Asia, nor Africa, both also burnt to the crisp by European ambitions). The IMF emerged as an institution to tide over countries that had a balance of payments or short-term liquidity problem. There is no mandate to poverty reduction or to the elimination of the vast global inequalities that marked the end of the colonial era. The IMF and the WB were institutions for the maintenance of colonial domination by other means.

Not quite three trillion dollars in hedge funds, or $2.848.000.000.000? So claims Investors Offshore. Although such a sum may sound enormous and indeed amounts to more than twenty percent of the entire GDP of the European Union, it is modest compared to the real private money that is out there. Merrill-Lynch and Cap Gemini have recently published their twelfth annual World Wealth Report , a trustworthy source given that Merrill-Lynch wants to manage as much wealth as possible and therefore has an interest in getting the figures right. Their Report for 2008 counts a shade over ten million "High Net Worth Individuals" in the world-about one in every 670 people. These HNWIs, including the far richer and more exclusive group of "Ultra-HNWIs", in 2007 together controlled $40.7 trillion, that is, $40.700.000.000.000.
(...) The main WIDER findings were not surprising for those who have studied the subject: In the year 2000, 2 percent of adults in the world owned more than half of global household wealth. The richest 1 percent alone accounted for the ownership of 40 percent of global assets while the top 5 percent captured 71 percent and the top 10 percent held 85 percent of the wealth. The bottom half of humanity got along on barely 1 percent of total assets. These figures show the operation of the power law in high gear, especially since the WIDER definition of "wealth" was broader than that of Merrill-Lynch. The WIDER scholars used the classic "net worth" definition, meaning all physical and financial assets, including homes, the principle asset for most people who own anything, less debts.

The IMF plan was for Argentina to go in for further privatisation of public assets and more deregulation, along with maintaining very high real interest rates, in the hope of “restoring investor confidence” and once more attracting foreign capital into Argentina. Instead, the Kirchner government stopped bothering about placating foreign investors and directed its attention to domestic producers. It used a stable and competitive exchange rate regime to ensure that domestic production revived and grew. It focussed on improving the consumption levels of ordinary people and reducing poverty. It sought to provide basic (but privatised) services at more accessible rates, often through renationalisation or through controls on the pricing of utilities. Significantly, the government also took a hard line – which ultimately proved very effective – with Argentina’s external creditors, forcing a majority of them in 2005 to accept a debt write-off agreement that effectively cancelled 65 per cent of the value of the country’s outstanding debt.

To me, the take-over of the free-market system by finance, considered by many as a new, lasting form of capitalism, was only an opportunistic move by capital to surmount its contradictions. The growth in capital’s income and the decrease in labour’s cannot go on indefinitely. The financial side of the system was its Achilles’ heel. Sub-primes are not the cause of the crisis, which is systemic really, but only a minor hitch that triggered it off. After privatizing profits the extant ruling forces will see to it that losses are spread over the whole of society, namely that workers, pensioners and vulnerable Third World countries foot the bill.

U.S. military and CIA drones that patrol the frontier region are believed to have carried out at least 15 strikes since August. The United States rarely confirms or denies involvement.
(or)
As with most of the previous attacks, yesterday's strike appeared to have failed to hit high value targets, initial reports said. Just one of the 18 attacks carried out in recent weeks is said to have killed a major al-Qa'ida figure. The rest claimed mostly civilian lives, provoking greater hostility towards Washington.

For the most part, the refugees said they witnessed only airstrikes and heard artillery fire in the distance. None saw any combat involving troops on the ground in Bajur — something the army says has not been a major feature in a fight that has relied heavily on bombs and rockets fired from planes and helicopters. The army also has some 6,000 to 8,000 soldiers and paramilitary troops on the ground.

Thus, medium term trends point to slowing of growth in the developed countries. One consequence of the process of financial expansion and globalisation is that the policy space available to governments is substantially reduced. If the government in any one country chooses to accelerate employment and output growth by expanding expenditures, any inflation that this might spur would worsen the trade deficit and erode the value of financial assets. This in turn would result in an outflow of capital and trigger a collapse of the currency. As a result, governments learn to limit their expenditures and curtail their deficits, resulting in chronic deflation and slow growth. Whatever growth that does occur, is triggered by private expenditures which are increasingly financed by the excess liquidity that financial deregulation and openness deliver. As noted above, this dependence on debt-financed consumption, investment or housing booms, besides limiting the rate of growth, makes economies prone to crises resulting from speculation. As a result, relatively slower growth is accompanied by greater volatility. The sub-prime crisis and its aftermath is an example of such volatility.

Under huge pressure from Republicans and Blue Dog Democrats alike to cut the budget and reduce the exponential increase in the national debt, what choices would President Obama be forced to make early in his administration? More than likely comprehensive health-care will be whittled down to a barebones plan, "alternative energy" will simply mean the fraud of "clean coal," and anything that remains in the Treasury, after Wall Street's finished its looting spree, will buy bombs to pulverize more Pashtun villages, ensuring yet more generations of embittered mujahideen and jihadis.

The Republican Party that Nixon invented melded the moneyed classes of the Northeast with the white evangelicals of the South. This odd couple went on to simultaneously steal from and oppress the rest of us. The moneyed classes were happy to let the New Puritans impose their stringent morality, since they could always just buy any licentiousness they wanted, regardless of the law. And the New Puritans were so consumed with cultural issues such as homosexuality, abortion, school prayer and (yes) fighting school desegregation that they were happy to let the northeastern Money Men waltz off with a lion's share of the country's resources, consigning most Americans to stagnant wages and increasing debt. The Reagan revolution consolidated this alliance and brought some conservative Catholic workers into it.

Today, on a visit to lower Manhattan, there would be no smoldering fires, no smoke, no raw throats, no gaping holes, no smashed buildings, no ruins, and yet, as you walked those streets, you would almost certainly be strolling among the ruins, amid the shards of American financial, political, and even military superpowerdom. Think of it as Bush's hubris and bin Laden's revenge. You would be facing the results, however unseen, of the real 9/11, which is still taking place in relative slow motion seven years later. It should scare us all.

As we goggle at the fluttering financial figures, a different set of numbers passes us by. On Friday, Pavan Sukhdev, the Deutsche Bank economist leading a European study on ecosystems, reported that we are losing natural capital worth between $2 trillion and $5 trillion every year as a result of deforestation alone. The losses incurred so far by the financial sector amount to between $1 trillion and $1.5 trillion. Sukhdev arrived at his figure by estimating the value of the services - such as locking up carbon and providing fresh water - that forests perform, and calculating the cost of either replacing them or living without them. The credit crunch is petty when compared to the nature crunch.

"However, a majority of the people, who did not have even Rs. 20 a day for consumption, were not touched by this euphoria. At the end of 2004-05, about 836 million or 77 per cent of the population were living below Rs.20 per day," it said.

We can see where this is leading. The wealthiest 1 percent of the population will come into possession of even more returns to wealth than the 57 percent that they are now taking. In contrast to the Statue of Liberty’s inscription “give me your poor … yearning to breathe free,” the Fed – and now the Treasury, with Congressional blessing – is taking from the public purse and giving to America’s wealthiest investors and insiders. This “Robin Hood in Reverse” program is being done without strings, without asking banks to stop paying dividends, exorbitant executive salaries and golden parachutes, and without taking over banks with negative net worth of the kind that many homeowners are experiencing.

Ahtisaari opened the meeting by declaring, “We are not here to discuss or negotiate,” after which Chernomyrdin read aloud the text of the plan. (4) Ahtisaari says that Milosevic asked about the possibility of modifying the plan, to which he replied, “No. This is the best that Viktor and I have managed to do. You have to agree to it in every part.” (5) Ristic reports that as Milosevic listened to the reading of the text, he realized that the “Russians and the Europeans had put us in the hands of the British and the Americans.” Milosevic took the papers and asked, “What will happen if I do not sign?” In answer, “Ahtisaari made a gesture on the table,” and then moved aside the flower centerpiece. Then Ahtisaari said, “Belgrade will be like this table. We will immediately begin carpet-bombing Belgrade.” Repeating the gesture of sweeping the table, Ahtisaari threatened, “This is what we will do to Belgrade.” A moment of silence passed, and then he added, “There will be half a million dead within a week.” Chernomyrdin’s silence confirmed that the Russian government would do nothing to discourage carpet-bombing.(6)

As character assassination attacks on Sen. Barack Obama have now taken over Sen. John McCain's campaign, and because McCain cites his military experience as of prime importance, now is the time to focus closer attention on a facet of the Arizona Senator's own character. This is related to his 23 combat missions for Operation Rolling Thunder - the Pentagon's name for U.S. bombing of North Vietnam.

The truth is the advanced capitalist system has been dependent on a process of financialization (the increase in the financial superstructure relative to the "real economy") as the main means of combating the stagnation of production and investment for decades now -- beginning in the 1960s, but accelerating in the 1980s, and accelerating still more in the 1990s. It is the underlying tendency to stagnation rooted in exploitation and inequality that is the root problem. (This was brilliantly and relentlessly explained in a long series of articles by Monthly Review editors Harry Magdoff and Paul Sweezy from the 1960s to the 1990s.) Financialization, the blowing of one bubble after another (ideologically justified by neoliberalism), was offered as the solution to stagnation in the real economy. It was this that mainly spurred economic growth in the United States and elsewhere at the center of the system given the stagnation of investment in new productive capacity (held down by existing overcapacity). Ultimately, however, there was no "solution" other than the wiping out of capital: "the real barrier to capitalist production," Marx wrote, "is capital itself."

It is the increasing gap between rich and poor that constitutes the inequality, and rearranging the race and gender of those who succeed leaves that gap untouched. In actually existing neoliberalism, blacks and women are still disproportionately represented both in the bottom quintile—too many—and in the top quintile—too few—of American incomes. In the neoliberal utopia that the Obama campaign embodies, blacks would be 13.2 per cent of the (numerous) poor and 13.2 per cent of the (far fewer) rich; women would be 50.3 per cent of both. For neoliberals, what makes this a utopia is that discrimination would play no role in administering the inequality; what makes the utopia neoliberal is that the inequality would remain intact.

For that reason, the most disturbing part of Herold's report may have been his discussion of the "condolence" money paid, occasionally, to the survivors of Afghan civilians killed by our actions. These payouts have ranged from as low as $400 per dead civilian to several thousand dollars. Herold puts this into perspective: "Approximately $80,000 was spent on the rehabilitation of every sea otter affected by the Exxon Valdez oil spill, that is, ten times the condolence amount offered by the U.S. military to the family of an Afghan killed."

One of the best studies of corporate welfare in the US is published by my old enemies at the Cato Institute. Its report, by Stephen Slivinski, estimates that in 2006 the federal government spent $92bn subsidising business. Much of it went to major corporations such as Boeing, IBM and General Electric. The biggest money crop - $21bn - is harvested by Big Farmer. Slivinski shows that the richest 10% of subsidised farmers took 66% of the payouts. Every few years, Congress or the administration promises to stop this swindle, then hands even more state money to agribusiness. The farm bill passed by Congress in May guarantees farmers a minimum of 90% of the income they've received over the past two years, which happen to be among the most profitable they've ever had. The middlemen do even better, especially the companies spreading starvation by turning maize into ethanol, which are guzzling billions of dollars' worth of tax credits.

Abdulsada's struggle is anything but rare here. Though precise figures don't exist, most approximations put unemployment across Iraq at between 30 percent and 60 percent. U.S. officials estimate that well over half of Iraqis who want to work can't find jobs.