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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

yet more toxic debt « Previous | |Next »
April 22, 2009

If the global financial system is stabilising, then the world economy is in the midst of its deepest and most synchronised recession in our lifetimes,; a recession caused by a global financial crisis and deepened by a collapse in world trade. Yet in the IMF's latest Global Financial Stability Report, it is estimated that potential writedowns (of toxic debt) including about $1 trillion already taken, could be nearly $4.1 trillion.

PinnIgreen shoots.jpg Ingram Pinn

The implication is that neither short-term macroeconomic stimulus nor restructuring of balance sheets of financial institutions will generate sustained and healthy global growth.Those who are trying to convince us that the world things are soon going to be the way they were before---the credit party---are whistling in the wind.

This is pretty much the same crowd who failed to see the financial crisis, and then consistently downplayed its significance. The same crowd includes the media, who fell down on the job of speaking truth to power' and informing us what was happening. And the economists, who pride themselves on their rigor and analytical deductions from their axioms of instrumental rationality and market efficiency mostly failed to point out fundamental weaknesses of financial markets and they did not foresee the crisis.

No credible response to the crisis has come from the right. They say why worry about the past? Global capitalism has experienced similar crises and, up until now, has always recovered and proceeded to achieve ever higher levels of material prosperity. It is fear that is holding things back. A reflexive, conservative ideology -- support for tax cuts, no matter the facts and circumstances; a preference for policies that favor the well-off; a bias against the use of public institutions and public regulation---functions to delay, water down, and obstruct the kind of coherent and capable action needed to address the crisis.

| Posted by Gary Sauer-Thompson at 8:49 AM | | Comments (10)
Comments

Comments

The green shoots lie in the information revolution. The new technology would bring "creative destruction" -- making old industries obsolete, while opening up new ones .
.
Some industries are now facing a double whammy from the recession and long-term structural change eroding their businesses. Newspapers and other media are in this position.

Broadband can transmit any medium, and universal broadband service (wireless as well as wireline) could therefore make obsolete all the other major electronic media -- over-the-air broadcasting, cable television, and landline phones.

In 20 years from now it will all look like an old black and white western movie.
"Gold Fever" is whats we got. Then the gold ran out and the bars closed and the wagons with the dancin gals pulled out of town and all the people went back to what they were doing before someone yelled "I dun struck it rich"

It looks a bit that way Les.

That's Satyajit Das' argument - the credit party's over and we'll all just have to learn to pull our heads in and tone it down a bit.

If there's still 4 trillion to go it's hard to imagine credit flowing freely any time soon. Not to the extent that it has supported our current lifestyles anyway.

Did anybody see the 7.30 Report last night? The cardigan-wearing geniuses of Gosford City Council have bought $100 million of CDOs from Lehman Brothers! What on earth is a local council doing with this sort of authority?

duped by the wizards from Wall Street, along with a heck of a lot of other people.

So Australia is now in recession, GDP will fall this year, and the budget revenue has been "ravaged". The IMF is very gloomy about global growth.

Not to worry, say some economists. These sort of financial crises are integral to capitalism--they occur throughout capitalism's history-- and they always lead to greater GDP and increased consumption. Crises are a temporary dip in the constant expansion of capitalism's economic growth/prosperity story.

Gary

I don't disagree about being duped by Wall Street fraudsters, but how do these country bumpkins have the authority to make these sorts of investments with locals taxes?

Gosford City Council's chief cardigan defended the investments, saying their value would pick up when the economy improves. I know squat about such things, but even I know he's urinating into the wind.

Banks falling over left, right and centre, but Gosford City Council will somehow remain unscathed. Right. If their cardigans had wrap around sleeves the people of Gosford would be better off.

Lyn

And we're not talking that $5,000 the community centre needs to fix the leaking roof, we're talking 100 MILLION DOLLARS!

JG, I could be wrong, but I'm under the impression the money wasn't ratepayers' money but the "donations" developers contribute so council will built facilities and infrastructure which support their developments.

That's a nasty practice in the first place. In less polite circles I suspect the 100 million would be referred to as kickbacks.