Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. More Speculation on Demise of the PPIPFrom Wall Street Pit:Financial Crisis: The Two Sides of the Balance Sheet Wall Street Pit By James Kwak|Jun 30, 2009 Noam Scheiber at The New Republic has the inside scoop (hat tip Ezra Klein) on why Treasury is letting the Public-Private Investment Program die a quiet death (although at this point the legacy securities component may still go ahead). In short, the argument is that the point of PPIP was to help banks raise capital by cleaning up their balance sheets; since they have been able to raise capital themselves, there is no need for PPIP. According to one person Scheiber spoke to: "If you had asked–I don't want to speak for the secretary–what's problem number one? I think he'd say capital. Problem two? Capital. Problem three? Capital." This represents the latest swing of the pendulum between the two sides of the balance sheet. As anyone still reading about the financial crisis is probably aware, a balance sheet has two sides. On the left there are assets; on the right there are liabilities and equity; equity = assets minus liabilities. (There are different definitions of capital, depending on what subset of equity you use.) The goal has always been to provide confidence that there is enough capital to withstand the impact of market and economic turmoil--in particular, its impact on the toxic assets that litter banks’ balance sheets. However, there are two alternative approaches to doing this. One is to add more equity to the right side by issuing new stock (preferred or common). (This would add cash to the left side to keep them in balance.) The other is to reduce the uncertainty of the left (asset) side by helping banks sell toxic assets; even if the banks have to sell them for a little less cash than their current balance sheet value, this would have the salutary effect of reducing vulnerability, since cash does not lose value (at least not in an accounting sense). Alternatively, you could achieve the same effect by insuring the value of the assets while leaving them on bank balance sheets, because then the risk transfers to the insurer. Read the rest of the post Labels: bailout, banking system, Federal Reserve, financial crisis, PPiP Eurozone Moves into Deflation for First TimeFrom The Financial Times:Eurozone inflation turns negative By Ralph Atkins in Frankfurt Financial Times Published: June 30 2009 11:03 | Last updated: June 30 2009 18:16 Eurozone annual inflation has turned negative for the first time since records began, creating a headache for the European Central Bank as it seeks to draw a line under emergency measures to tackle continental Europe's recession. Consumer prices in the 16-country eurozone were 0.1 per cent lower in June than the same month a year before, according to Eurostat, the European Union's statistical office. It was the first time eurozone annual inflation had fallen below zero since comparable records began in 1991. The fall in prices reflects sharply lower energy costs and the effects of the region's worst economic downturn since the second world war. Annual inflation is hugely undershooting the ECB's target of "below but close" to 2 per cent. Read the rest of the article Labels: bailout, European Union, financial crisis, GDP Optimism...They keep saying the UK should emerge faster and stronger than other economies (and that may still turn out to be the case, give horrible performances elsewhere) from the recession--or whatever it is--but the carnage continues to get worse:Economy suffers steepest fall in 50 years The Independent By Russell Lynch, Press Association Tuesday, 30 June 2009 The UK economy recorded its sharpest decline in more than 50 years during the first quarter of 2009, figures showed today. And revisions to figures revealed the current recession began earlier than first thought, with a 0.1 per cent decline seen between April and June last year compared with previous estimates of zero growth. Output fell 2.4 per cent in the first three months of the year - the fastest rate since 1958, the Office for National Statistics (ONS) said. The economy also showed an annual decline of 4.9 per cent - the biggest fall since ONS records began in 1948. The first-quarter decline of 2.4 per cent is much worse than the 1.9 per cent first estimated and comes after bigger-than-expected falls in construction and the UK's key services sector. The plummet in activity between January and March was almost equal to the 2.5 per cent fall suffered during the whole of the recession in the 1990s, Investec's David Page said. He warned: "The economy is now likely to undergo a peak to trough adjustment in excess of 5 per cent, nearly as big as the overall 5.9 per cent collapse seen from 1979-1981." The scale of the decline could put pressure on Chancellor Alistair Darling's forecasts for the public finances this year. Read the rest of the article Labels: bailout, economic indicators, financial crisis, GDP, United Kingdom WSJ: Why Cleaning Banks' Books Is So HardIt was almost impossible to get this without being a subscriber, so I'm reproducing it in full (here's the link to the article, which has accompanying charts:JUNE 30, 2009 Wall Street Journal Wary Banks Hobble Toxic-Asset Plan By DAVID ENRICH, LIZ RAPPAPORT and JENNY STRASBURG The government's plan to enable banks to dump troubled assets is facing troubles of its own. Markets initially rallied when Treasury Secretary Timothy Geithner announced in March a two-pronged plan to offer favorable government financing to entice investors to buy bad loans and toxic securities from banks. But that initiative--called the Public-Private Investment Program, or PPIP--has lost momentum. Big banks worried about having to sell at fire-sale prices while small banks feared they would be shut out. Potential buyers balked at the risk of doing business with the government, concerned that politicians might demonize them for making big profits. The program's problems threaten to stymie efforts by struggling smaller banks, in particular, to clean up their balance sheets. That in turn could hinder efforts to revive the nation's economy. A look at why the program has stumbled underscores how difficult it has been to solve one of the economy's biggest problems: Mountains of bad debt sitting on the books of the nation's banks. As those loans and securities lose value, they are saddling the banks with losses and constricting their ability to lend. U.S. officials and investors are playing down expectations for the plan--originally billed as a $1 trillion endeavor. Some federal officials say the banking environment has improved since the program was unveiled. They assert that because a dozen or so big banks recently succeeded in raising capital, they are under less pressure to sell bad assets. Early this month, the Federal Deposit Insurance Corp. essentially shelved one arm of PPIP--the government-financed buying of bad bank loans. Mr. Geithner recently said the other part--to facilitate the buying from banks of troubled securities, many backed by real-estate loans--could be scaled back because investors are "reluctant to participate." This week, the government is expected to name investment firms to manage this securities-buying portion. "The fits and starts on all this stuff has added to the uncertainty that makes [investors] stay on the sidelines," says Trabo Reed, the deputy banking superintendent in Alabama, where many small and midsize banks are looking for cash infusions from investors. Lee Sachs, counselor to the Treasury secretary, says the department remains committed to the program and has received more than 100 applications from would-be investment managers. "One of the goals of the PPIP program has been to help create liquidity in frozen markets," he says. "Some banks will sell assets. Even those that do not will benefit from the greater ability to value the assets they hold." The slimmed-down program will focus not on bad loans, but on toxic securities, which are a problem for a relatively small fraction of the nation's banks. That is bad news for hundreds of smaller banks burdened with growing piles of defaulted loans. These banks are less able to tap capital markets than their larger rivals, so they have been eager for U.S. help unloading loans as a way to bolster their capital cushions. Many of them can face big problems if just one or two large loans go bad. Seventy banks, most of them community institutions, have failed since the start of last year. Analysts are bracing for hundreds of lenders to collapse in the next few years. Because these lenders often play key roles supporting their local economies, taken together, they are important to the financial system and to a U.S. economic recovery, says Kenneth Segal, senior vice president at Howe Barnes Hoefer & Arnett Inc., an advisory firm for small and midsize lenders. During the last banking crisis, nearly two decades ago, the government established the Resolution Trust Corp. to sell off the bad loans and securities of banks that had failed. Many experts credit the RTC with helping defuse that crisis. This time around, efforts to rid banks of soured assets have sputtered repeatedly. In late 2007, federal officials helped cobble together a plan for a bank-financed fund to buy securities held by bank investment funds, but the effort was aborted. In 2008, the Bush administration established a $700 billion program to buy banks' soured assets. Partly because of the complexity of valuing those assets, the U.S. abandoned that plan, instead opting to directly pump taxpayer money into banks. Scott Romanoff, a Goldman Sachs Group Inc. managing director, has referred to the current effort, PPIP, as "the greatest program that never occurred," because it "created confidence in the markets so banks can raise equity capital." In recent weeks, markets have lost some vigor amid renewed concerns about the economy. That could make it more difficult for big banks to raise additional capital. Banks also could face further losses as bad assets decline more in value. On March 23, when Mr. Geithner unveiled PPIP, the Dow Jones Industrial Average surged nearly 500 points, or 7%, its biggest gain since October, on hopes that the program would nurse the banking industry back to health. Many bank executives were skeptical about whether the program could succeed. Even before it was announced, some had grumbled that federal officials weren't consulting them, and instead were crafting the initiative with input from would-be investors. Some banking executives say they warned that they would be loath to sell at the kind of prices investors were likely to demand. Executives at Citigroup Inc. shared those concerns, according to people familiar with the matter. While the New York bank was sitting on at least $300 billion of risky loans and securities, selling them at discounted prices would require painful hits to its already thin capital ratios, these people say. Some Citigroup executives had a different idea: Maybe they could turn a profit by bidding on their own toxic assets at discounted prices, using government financing, according to the people familiar with the talks. Other big banks also talked about setting up distressed-asset units to snap up troubled loans and securities, including from their parent companies, with taxpayer financing. FDIC Chairman Sheila Bair later publicly shot down the idea. Citigroup declined to comment. Meanwhile, many small-town bankers hoped the program would help them unload the bad assets--generally loans to finance commercial real-estate projects--that were hurting their balance sheets. Some potential buyers had surfaced before PPIP was announced, but they were offering such low prices that few banks could afford to sell the loans without severely denting their capital cushions. The hope was that PPIP would help narrow the gap between buyers and sellers. Investors would be able to bid more because the government would offer buyers little-money-down financing, along with some downside protection. "We have illiquid assets," says Patrick Patrick, chief executive of Towne Bancorp of Mesa, Ariz. "It would be helpful to have a vehicle where you could sell them at market and be able to restructure our balance sheet." Like many small banks, Towne Bancorp has been hurt by a handful of loans to finance real-estate projects that went belly up. In the first quarter, the bank said two souring commercial real-estate loans caused its portfolio of loans at least 90 days past due to swell by 52%. Such loans represent more than 22% of Towne Bancorp's $143 million in assets. The company has been trying for months to sell 19 pieces of real estate--including undeveloped land and a warehouse--that it seized when loans went into default. When PPIP was announced, big-name investors were intent on figuring out how to profit from it. Raymond Dalio of giant hedge-fund firm Bridgewater Associates, which oversees $72 billion in assets, initially expressed interest in participating. But within days, he was blasting it, saying buyers and sellers would have difficulty agreeing on pricing and fund managers that profited would be exposed to criticism from politicians. The way PPIP is set up "makes us not want to participate and it makes us question the breadth of interest that we will see in the program," he wrote to clients. Lawyers for hedge funds and private-equity investors warned clients about the risks of doing business with the government. The industry was unnerved by the restrictions placed on banks participating in another federal bailout program, the Troubled Asset Relief Program. Fund managers were also bothered by President Barack Obama's criticism of the hedge funds holding Chrysler LLC debt who had refused the government's buyout offers. In conference calls with bankers and investors, FDIC officials emphasized that PPIP was critically important to cleanse banks of their bad assets. "I think you know the stakes are very high with this," Ms. Bair, the FDIC chairman, said during a March 26 call, according to a transcript. "We need this program to work." Ms. Bair and her deputies encountered skepticism. In an April 9 conference call with the FDIC, Mark Wolf of TRI Investments LLC, described his Carlsbad, Calif., firm as a potential PPIP bidder. "Unless you've got a process that either forces banks to sell or does a better job of encouraging them to sell, we're just going to see banks sitting back and dribbling these things out through an eyedropper over the course of time," he said. Some bankers were hesitant. "If these loans are bought at a discount, we create a hole in capital," Lou Akers, executive vice president of Adams National Bank in Washington, told FDIC officials on the March 26 call. He suggested that regulators consider changing the way they calculate banks' capital in order to cushion the blow. Government officials were noncommittal, a transcript of the call indicates. FDIC officials emphasized on the conference calls that PPIP was intended to benefit all banks, not just industry giants. But smaller banks began to worry they'd be locked out. To participate in PPIP, local lenders were told, they would have to pool their loans with other banks. The process, which the FDIC said it would facilitate, was designed to simplify the bidding process for government officials and prospective investors. The agency didn't want thousands of banks put their loan portfolios on the block separately. But the FDIC planned to require participating banks to kick in a minimum amount of assets, and some small-town bankers worried they wouldn't have enough to qualify. Too high a minimum "will virtually eliminate all community banks from being able to participate in this program," wrote Julian L. Fruhling, president of Legacy Bank in Scottsdale, Ariz., in a letter to the FDIC. Still, some investment firms that were hoping to help manage the government's program were optimistic. Laurence Fink, chief executive of BlackRock Inc., said in mid-April during a trip to Japan that if his firm is selected as a manager, it was ready to raise $5 billion to $7 billion to buy securities through PPIP. He said he hoped to raise money from individual investors in Japan and the U.S., and that potential returns could be as high as 20%. The FDIC and other regulatory agencies were planning to use their "stress tests" of the nation's top 19 banks to push them to sell assets via PPIP, according to people familiar with the matter. But in the weeks before the stress-test results were announced in May, market sentiment began to improve. A number of banks succeeded in raising capital by selling new shares to the public. Once the stress tests were wrapped up in May, even more banks sold shares--a total of roughly $65 billion within a month. The capital-raising removed regulators' leverage to encourage participation in PPIP, according to government officials. Around the same time, BlackRock reduced its goal for the size of its potential PPIP investment fund to about $1 billion, say people familiar with the matter. Earlier this month, the FDIC formally postponed the loan-buying portion of PPIP, called the Legacy Loan Program. "Banks have been able to raise capital without having to sell bad assets through the LLP, which reflects renewed investor confidence in our banking system," Ms. Bair said. Next month, the FDIC intends to use PPIP for a far narrower purpose: to auction loans the agency has seized from failed banks. Eventually, it hopes to resuscitate the loan-buying program so that smaller banks can benefit from it. But that could be tricky. The U.S. initially justified PPIP by invoking its "systemic risk" powers, which enable regulators to step in when the financial system is at risk. Regulators have debated whether such a justification would remain if the program were geared toward smaller banks. FDIC officials doubt they will muster the necessary consensus among regulators to invoke the special powers and keep the loan program alive, according to a person familiar with the matter. Many banking experts contend that the financial system won't fully stabilize until banks get rid of their bad assets. Mr. Segal, the bank adviser, complains that federal officials have cited recent capital raising by big banks as evidence that "the system is OK." That may be true "for the top 15 or 20 banks," he says. "But for everybody else, there really needs to be more attention paid." Labels: bailout, banking system, financial crisis, PPiP, toxic assets Steep Increase In Fannie/Freddie DelinquenciesThis is bad news: Fannie and Freddie mainly deal in prime, not subprime, mortgages. Job losses are the culprit. From The Wall Street Journal:By JAMES R. HAGERTY JUNE 29, 2009, 4:44 P.M. ET Wall Street Journal Fannie Sees Jump in Overdue Home Loans Fannie Mae reported a steep increase in the percentage of home mortgages with overdue payments. The government-backed mortgage investor said in a monthly summary released Monday that 3.42% of the single-family mortgages it owns or guarantees were 90 days or more delinquent in April, up from 3.15% a month before. Fannie's main rival, Freddie Mac, reported last week that its single-family delinquency rate for May was 2.62%, up from 2.44% in April. Fannie and Freddie are the main providers of funding for U.S. home mortgages. Although the two companies bought many of the riskier types of home loans in recent years, their main business is in prime mortgages. More prime borrowers have been falling behind as they lose jobs or their incomes fall. Richard DeKaser, an independent economist in Washington, D.C., blamed the continuing rise in loan delinquencies on the spike in job losses and on what her termed the "evaporation" of home equity amid falling home prices, leaving many borrowers without a cushion when they lose their jobs. Read the rest of the article Labels: economic indicators, Fannie Mae, financial crisis, Fredddie Mac, housing market More Background on Coup in HondurasAs the situation in Honduras continues to unfold in unexpected ways, we recommend reading the posts from the America's Policy Program.Labels: America's Policy Program, coup, Honduras Another chance to see Steve EarlyIf you can't make it to Cambridge tonight to see Steve Early talk about his new book, Embedded with Organized Labor: Journalistic Reflections on the Class War at Home (see earlier blog posting), he'll be speaking next week in Boston, with Elaine Bernard & Rand Wilson.Steve will address his critique of organized labor, and his vision of how American workers can get out from under the terrible economic and political constraints they endure. Rand Wilson and Elaine Bernard will draw on Steve's analysis to provide their own reflections. More information here. The event will take place on Tuesday, July 7, at 7:00 p.m. at Encuentro 5, a space for progressive movement building, located in Chinatown. Labels: Elaine Bernard, Embedded with Organized Labor, Encuentro 5, labor, labor organizing, Rand Wilson, Steve Early, unions Economists on IranThe Union for Radical Political Economics (URPE) has recently updated its Web page on Iran. The site features URPE members whose expertise is the political economy of Iran, many of whom come from Iran.Among the highlights: Reza Ghorashi, Tom O'Donnell, Ervand Abrahamian and Manijeh Saba presented a panel at the 2009 Left Forum (on April 18 in New York City) called "Obama and Iran: A New Beginning?" Audio recordings of the talks are posted on the URPE Web page. You can also listen to panels from previous years for background information on Iranian internal politics, the roles of oil and nuclear power, regional power relations, Iran and Israel, etc. Labels: Economists, Iran, Union for Radical Political Economics, URPE TONIGHT: Steve Early on unions --- Boston-area eventMeet the author ofEmbedded with Organized Labor: Journalistic Reflections on the Class War at Home A new book by Steve Early, former CWA organizer, labor journalist, lawyer and frequent contributor to The Boston Globe Speaking at: Porter Square Books (at Porter Sq. Shopping Center across from Red Line T-stop) 25 White St., Cambridge, Mass. (617-491-2220) Monday, June 29 7:00 to 8:30 P.M. With after-party at Christopher’s Restaurant across the street... Find Out More About: —Workers and the economic crisis —The fight for health care reform —The fate of “Employee Free Choice” —Current struggles for union democracy and rank-and-file control —The future of national labor federations like Change to Win and AFL-CIO Sponsored by: Monthly Review Press, Labor Notes, Massachusetts Jobs with Justice, CWA Locals 1400 and 1298, IBEW Locals 2222 and 2321, Boston Newspaper Guild, TNG-CWA, IUE-CWA Local 201, Boston DSA, Boston Radical Education Project, Solidarity, Socialist Alternative, and Dollars & Sense Magazine Refreshments will be served. For more information, call: 617-930-7327 To order the book online, visit: www.monthlyreview.org Labels: labor, labor organizing, Steve Early, unions Background on Military Coup in HondurasThe Honduran military has forcibly taken President Manuel Zelaya and put him on a plane to Costa Rica.Two very interesting reports from the Council on Hemispheric Relations (COHA) discuss the background to the coup. 21st Century Socialism Comes to the Honduran Banana Republic discusses the moves that Zelaya had taken as part of the leftist wave in Latin America: joining the alternative free-trade alliance known as ALBA, raising the minimum wage by 60%, and announced plans to support indigenous groups and increase literacy. However, the report also details the increasingly autocratic actions he has taken when faced with opposition. A quick update from Friday discusses the situation leading up to the coup. The Christian Science Monitor has an excellent breaking news piece on today's events. Labels: COHA, Council on Hemispheric Affairs, Honduras, Rafael Zelaya Bloomberg Preview: June UnemploymentThey see a loss of .2% for the month, which will take it up to 9.6%, and attribute the slower pace to long-awaited signs of stabilization in manufacturing:Unemployment Probably Rose at Slower Pace: U.S. Economy Preview By Shobhana Chandra June 28 (Bloomberg) Unemployment in the U.S. probably rose at a slower pace and the manufacturing slump eased this month as evidence mounted that the end of recession is in view, economists said before reports this week. The jobless rate rose 0.2 percentage point to 9.6 percent, the highest level in 26 years, according to the median of 58 estimates in a Bloomberg News survey. The gain would be the smallest since November 2008. A survey of purchasing managers may show manufacturing shrank at the mildest pace in 10 months. Government efforts to stabilize housing and consumer spending are only now starting to pay off, indicating it will take months before a recovery develops. The job market will remain one of the biggest threats to the emerging rebound as companies from General Motors Corp. to Kimberly-Clark Corp. focus on cutting costs by trimming payrolls. Read the rest of the article Labels: economic indicators, financial crisis, unemployment On The Situation In IranFirst, a piece by Slavoj Zizek, turned down by the New York Times, which was posted on LBO talk.Second, an FT article on the power struggle at the top, focusing on the supreme leader, Ayatollah Khamenei: Man in the News: Ayatollah Ali Khamenei Financial Times By Roula Khalaf Published: June 26 2009 19:14 | Last updated: June 26 2009 19:14 Not long ago, Ayatollah Ali Khamenei was in an enviable position. Manipulating the levers of power from behind the scenes, the 70-year-old turbaned cleric with oversized glasses was credited with every pragmatic decision taken by the Islamic Republic. Iran's belligerence and extremism, meanwhile, were conveniently laid at the feet of the firebrand president, Mahmoud Ahmadi-Nejad. When the supreme leader spoke, he delivered the last word. No one dared contradict him, or offer an alternative opinion. But that was before disputes erupted over the presidential election a fortnight ago, before Mr Khamenei declared the controversial vote "a divine victory", and before he unleashed his forces to repress peaceful opposition. Now his followers are forced to remind Iranians, time and again, that he had spoken "the last word". The rage of Iran's protesters has turned against him, with an "I hate Khamenei campaign" launched on Facebook, and cries of Allahu Akbar on rooftops at night, an act of defiance borrowed from the days of the 1979 revolution, designed to tell him that no one is above God. These days, Mir-Hossein Moussavi, the opposition leader who says the election was stolen from him, issues statements responding to the ayatollah. It is not in the interest of the country, he said this week, for the supreme leader to be "equated" with the president. And no, he had no intention of bowing to the brutal pressure and accepting a rigged election result. Labels: Ayatollah Ali Khamenei, Iran, Mor-Hossein Moussavi, Slavoj Zizek 2 On Subprime/Mortgage MessFirst, a link to Doug Henwood's latest (June 25th) radio program, which features an excellent interview with Alyssa Katz on the history of mortgage lending in the U.S. from the '30s on. Second, this piece about a recent study which casts interesting light on the role of the Community Reinvestment Act on subprime lending (courtesy of Economist's View):Most Subprime Lenders Weren't Covered by CRA The Big Picture By Barry Ritholtz - June 27th, 2009, 9:00AM The CRA brouhaha last year led the Orange County Register to run an analysis of "more than 12 million subprime mortgages worth nearly $2 trillion" in late 2008. What did their data based analysis discover? "Most of the lenders who made risky subprime loans were exempt from the Community Reinvestment Act. And many of the lenders covered by the law that did make subprime loans came late to that market--after smaller, unregulated players showed there was money to be made." Among their research conclusions: Nearly $3 of every $4 in subprime loans made from 2004 through 2007 came from lenders who were exempt from the law. State-regulated mortgage companies such as Irvine-based New Century Financial made just over half of all subprime loans. These companies, which CRA does not cover, controlled more than 60 percent of the market before 2006, when banks jumped in. Another 22 percent came from federally regulated lenders like Countrywide Home Loans and Long Beach Mortgage. These lenders weren't subject to the CRA law, though some were owned by banks that could choose to include them in their CRA reports. Among lenders that were subject to the law, many ignored subprime while others couldn't get enough. Read the rest of the piece Labels: Alyssa Katz, bailout, Barry Ritholtz, Community Reinvestment Act, Doug Henwood, financial crisis, subprime lending, The Big Picture Giovanni Arrighi: Internationalist par excellence (1937-2009)An obituary by Salimah Valiani for the left economic sociologist Giovanni Arrighi, who died on June 18th. It is originally posted at Pambazuka News.A good friend in New York City from Latin American circles, then a good friend from African solidarity circles based in Toronto, asked me to write something about Giovanni Arrighi, who died of cancer on June 18, 2009. Because of these two requests, and though I have not been in contact with him for years, I thought I should write something, as one of the few who knew Arrighi, among the many touched by his work. That two of my friends from completely different circles both asked me to write seems emblematic of Arrighi's reach: An internationalist par excellence, open to considering the historic trials of a range of collectivities, however they define themselves. I remain a student of Arrighi's thought, but studied directly under him only in 1998, when I began a PhD at the State University of New York (SUNY) in Binghamton. Having read Arrighi’s work on labour force and capitalist development in Southern Africa, I headed for Binghamton in large part because he was there. The department of Sociology at SUNY-Binghamton was the centre for world systems studies in the 1980s and 1990s, though fading when I reached there. Giovanni Arrighi, along with Immanuel Wallerstein, Terence Hopkins, Dale Tomich, Caglar Keydar, others from the global North, and a host of intellectuals who came yearly to Binghamton from the global South, had built the graduate program, combining what may be called orthodox Marxist ideas with historical approaches to capitalism more familiar in Latin America, Africa, and Asia. There was plenty of heated debate. How did the Atlantic slave trade fit into the development of world capitalism? What about formal colonialism, and countries of largely peasant-producers? Does national development have to emulate development in Western Europe in order to be called 'capitalism'? One of the first things that stood out to me was that Arrighi had the rare ability to articulate plainly a differing opinion to his co-panelist, or colleague, while keeping warmth in his voice. I never saw him take offence or become defensive in intellectual discussion. This was a trait I would never forget and always learn from. Having left his country of birth, Italy, for pre-independence Zimbabwe, in the early 1960s, Arrighi began exposing himself to completely new environments from early in life – a flexibility which would be reflected in much of his research and theorising. A young graduate of economics wanting to escape the feudal-like university system in Italy for paid academic work, he got a job in the satellite of a British university in Africa, not unlike the American university satellites now proliferating in the continent. After joining, with other academics, in some pro-independence, campus political activity, he was jailed for a week and sent away, in 1966. He then spent three years at the University of Dar es Salaam in Tanzania, where scores of people and Mwalimu Julius Nyerere had recently made Tanganyika and Zanzibar (fused to form Tanzania) British-free. Unlike many progressive Europeans, Arrighi understood the historic importance of achieving independence from European colonisers, even if it wasn't a socialist victory at the same time. With his exceptional clarity of mind, Arrighi, in this instance and many others, was able to make the distinction between the historically necessary and the historically possible. Similarly, in his work on China and the potential of its current transformation, unlike most Western progressives, Arrighi is not condemning of the Communist Party's changing policy direction, leaving judgement open for the unfolding of history. This openness, and ultimately, hope, comes from Arrighi’s appreciation of the ancient history of collective resistance in China, of which the Maoist revolution is only a very recent example. Returning to Italy in 1969, where he spent about ten years, Arrighi became well known among students for his radical critique of development theories. Countering dominant theories of development, which prescribed a capitalist route for post-colonial societies, and assumed the development history of Western European countries as the norm, Arrighi, along with Samir Amin, Andre Gunder Frank, and others showed how violence, coercion, and world scale inequality were instrumental in forming capitalist relations in colonies, precluding liberal democracy as an outcome. Like Amin and Gunder Frank, Arrighi then went on to pose larger questions about development and capitalism – how is it that world wealth and power are concentrated in a handful of countries – a question still relevant today. His major work, The Long Twentieth Century (1994), was the answer he offered, having worked on the question for some 15 years, primarily in Binghamton. The dedication in the book is worth noting, as it demonstrates the intimate relation Arrighi had to his intellectual inquiries: 'Between conceiving a book like this and actually writing it, there is a gulf that I would never have bridged were it not for the exceptional community of graduate students with whom I have been fortunate to work during my fifteen years at SUNY-Binghamton. Knowingly or unknowingly, the members of this community have provided me with most of the questions and many of the answers that constitute the substance of this work. Collectively, they are the giant on whose shoulders I have travelled. And to them the book is rightfully dedicated.' Unlike most, who dedicate books to their partners or close family, Arrighi dedicated his book to his students of the period. Perhaps these were his close family and partner-to-be, but this underlines the point: Here was a man who lived the knowledge he was seeking, who built his life around it. This type of commitment is reflected in all of Arrighi's writing. Responsible to the extreme, his effort to read all inter-related works existing previous to his, in various disciplines, is evident in lengthy bibliographies and rich frameworks. Along the same lines, for the intellectual contributions which he found useful to combine in his own analysis, Arrighi always acknowledged the precise ideas attached to names – from Terence Hopkins, to Fernand Braudel, to Paul Sweezy, to Sugihara Kaoru. Towards what we know now was the end of his life, Arrighi spoke of the need for a world based on mutual respect between humans, and a collective respect for nature. In a recent interview David Harvey asked if this could be called socialism. In classic Arrighi-honesty, Arrighi replied that socialism is a word which has been abused, which has become associated with the practice of state control gone sour. In the interview he assigned David Harvey to find a new expression for this vision. This is a task for us all to share, in honour of the memory of Giovanni. Salimah Valiani is a researcher in political economy and world economic development, an activist, and a writer. Labels: Binghamton, capitalism, development economics, Giovanni Arrighi, internationalism, socialism, world systems theory How Striken Banks Are Making MoneyYou guessed it--fees. From Reuters:June 26th, 2009 Fee bonanza spells more trouble for banks Reuters By: Alexander Smith Alexander Smith is a Reuters columnist. The views expressed are his own Investment banks are going to have a lot of explaining to do. After the lows of 2008, and despite the mauling they've had from politicians and the public, 2009 is going to be a bumper year for those that lived to tell the tale. The banks have pocketed an incredible $16 billion in fees in the second quarter, according to Thomson Reuters first half data on deals and fee income, released on Friday. True, this is down from Q2 2008, when fees were almost $24 billion. But it should not come as a surprise to anyone who has been watching--often in disbelief--the huge amount of capital raising that has been going on in both the equity and bond markets. Take the bond markets, where total first-half issuance--excluding financials--has already reached $598 billion, outstripping previous records for an entire year. If anyone pretends it has been tough selling these bonds, don't believe them. The sales teams have been pushing at an open door, with fund managers buying anything they could get their hands on. The fees are good and so far this year, the risk has been limited. The ones to suffer have been the loan desks, with syndicated lending hitting a 13-year low. But since this market has always been seen as a loss-leader to help sell other products, there are probably fewer tears being shed at the top of the banks involved. The real star of the show, however, has been equity capital markets. Traditionally the poor cousins to the sexier and higher profile "rainmakers" in mergers and acquisitions, ECM desks have raked in underwriting fees of $7.6 billion in Q2 alone, almost half the industry total. As with bond issues, lead managing or underwriting such deals does carry a risk, but so far this year that has been limited as shareholders have lapped up the rights issues. There's no denying that many companies badly needed capital and that the banks have the expertise to get these deals done. The question that will increasingly be asked is whether the fee structure can still be justified. True, rights issues can fail, as underwriters of the 4 billion pound offering by British bank HBOS last year no doubt recall. But with banks charging bigger fees and pricing offerings at larger discounts, the rewards currently outweigh the risks. One area of investment banking which is still in the doldrums is M&A, despite the best efforts of some of the brightest minds in the game to get dealmaking back on track. The Thomson Reuters data shows global M&A revenues declined for a third consecutive quarter, with fees on completed deals down some 66 percent on the same period last year at just $3 billion. M&A activity--measured by the value of deals done--is down almost 45 percent so far this year, the lowest figure since 2003 and the sharpest fall since 2001. Of course, it is possible that these big fees will be wiped out by continued losses on the toxic assets that some investment banks still have on their balance sheets. But for an industry that was teetering on the brink last autumn, investment banking appears in rude health. With a second backlash already beginning as salaries rise and bonuses come back into fashion, the big investment banks--particularly those which still owe taxpayers money or government shareholders--will need to make sure their lines are well rehearsed. At the time of publication Alexander Smith did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. Labels: baillout, banking system, financial crisis TDCotE (xii): Idealists Should Grow UpThe Dull Compulsion of the Economic (xii)A series of blog postings by D&S collective member Larry Peterson Idealists Should Grow Up I've long harbored a notion that the more modern societies tend to emphasize moral discourse, the less scope actually exists in the same societies to act according to moral precepts in any meaningful or consistent sense; and that all the talk tends more to express--or repress--a sense of helplessness in the face of shrinking agency than any desire to actually encounter the changing world. Hence, I read Onara O'Neil's review of Moral Clarity: A Guide for Grown Up Idealists in FT Weekend (there's no link to it yet that I can see on the FT website) with a sense of weariness and disgust. It's depressing enough to watch the rest of the society get off with on this kind of intellectual and spiritual self-abuse; but when someone gets away with saying that progressives--and, by extension, I suppose, hard leftists--"have nothing to say about...dignity and nobility", as O'Neil claims, I just want to scream. And when she goes on, in the same sentence, to denounce progressives because they "have no heroes", I can no longer just sit back and take it. What ever happened to the left that prided itself on witticisms like (I think this is Brecht) "When they start talking about heroes, it's time to emigrate"? Have we all gone completely soft? It's not that materialists have nothing to say about human dignity and nobility. It's just that, rather than referencing hopelessly vague, and almost-always seriously compromised normative notions, the most admirable leftists have chosen, first and foremost, to let the facts speak for themselves. It is the inevitable contradictions that follow from capitalist social relations that lead, amongst other things, to the decreasing scope of agency that makes personal morality less and less relevant in society. That being the case, it's easy to look round and see how both the economic system, as well as the filthy, sodden superstructural plaster used partially to staunch--and partly to hide--the wounds opened up by the former, fall absurdly short of the promises they deliver. This doesn't mean leftists and progressives don't employ moral standards any less than anyone else; it's just that they realize that an undue reliance on them is unnecessary at best, and hypocritical--hence potentially an obstruction to the sustenance or creation of bonds of true and effective solidarity--at worst. Unfortunately, the fostering of this sort of sense of morality as critique is being increasingly relinquished by progressives. That's why it's all the more important to object whenever people like O'Neill start singing their obfuscatory siren-songs. Labels: Larry Peterson, Onora O'Neill, the dull compulsion of the economic Fast Food and Healh Care ReformThis Boston Phoenix review of the new film Food, Inc. contains much many people already know (it's nice to review such things from time to time, though), but it contains one essential thought, anyway: that "You can't have health care [reform] in this country without changing the food industry".Factory food Why the cheap, mass-produced food we eat is killing our environment, our economy--and us Boston Phoenix By MIKE MILIARD | June 25, 2009 Since Squanto taught the Pilgrims to plant maize, no food has been more emblematic of the evolution of American eating habits than corn. That's been true from the sepia-tinged golden age of the Midwestern breadbasket to the present day, where those yellow kernels are lab-engineered and recombinated into a dizzying array of futuristic foodstuffs. In Mark Kurlansky's new anthology, The Food of a Younger Land (Riverhead--which compiles reportage and recipes from "America Eats," an unfinished venture of the Depression-era WPA Federal Writers' Project — we visit Pop Corn Days in North Loup, Nebraska. There, fairgoers munched from "bushels of popped fluffiness" while watching the procession of the Pop Corn Queen, "heralded by buglers with green capes over their uniforms . . . regal in her robes of lustrous gold satin." We also learn how, across the Midwest, corn was "cultivated for uses in 'johnny-cake,' corn mush, 'big hominy,' ash-cake, corn whisky, corn pone, or the small loaves called 'corn dodgers.' " Read the rest of the article Labels: agribusiness, environmental crisis, fast food industry, health care reform, public health crisis Incomes Surge, Wages and Salaries FallThis is entirely due to the administration's one off $250 payments to various groups receiving government benefits like Social Security; otherwise, the figures were noteworthy because they document that workers received their first quarterly drop in wages in 50 years. Also: savings increased to an almost unheard-of (well, not for more than a decade) 7%, which sits uneasily with the green shoots notions of recovery, dependent as they are on a sustained revival in consumer spending and, especially, in housing. From the Financial Times:US incomes surge as stimulus kicks in By Alan Rappeport in New York Financial Times Published: June 26 2009 14:16 | Last updated: June 26 2009 15:33 Personal income in the US surged in May thanks to an infusion of government stimulus funds, while consumers raised their spending modestly as confidence about the state of the economy continues to improve. However, most of the monthly rise was the result of Federal benefit transfers and lower taxes. Americans, still facing rising job cuts and falling home prices, have been hoarding most of the additional funds, lifting the savings rate to a 16-year high in May. Households are reverting to a more sustainable spending path vis-à-vis income that allows scope for paying down debt and adding to savings,” said Joshua Shapiro, chief US economist at MFR. Official figures showed on Friday that incomes jumped by 1.4 per cent last month, or $167.1bn, beating economists' expectations and doubling the previous month’s revised rise of 0.7 per cent. Read the rest of the article Labels: baillout, financial crisis, fiscal stimulus, personal income guarantee, savings and loan crisis Yet Another Thing The City Can Be Proud OfFrom The Financial Times. Reminded me of Karl Marx's immortal New York Tribune piece on the Duchess of Sutherland, the link to which (courtesy Marxists.org) I'm attaching as well.Rothschild and Freshfields founders' had links to slavery, papers reveal By Carola Hoyos Financial Times Published: June 26 2009 23:32 | Last updated: June 26 2009 23:32 Two of the biggest names in the City of London had previously undisclosed links to slavery in the British colonies, documents seen by the Financial Times have revealed. Nathan Mayer Rothschild, the banking family's 19th-century patriarch, and James William Freshfield, founder of Freshfields, the top City law firm, benefited financially from slavery, records from the National Archives show, even though both have often been portrayed as opponents of slavery. Far from being a matter of distant history, slavery remains a highly contentious issue in the US, where Rothschild and Freshfields are both active. Read the rest of the article (with a link to an accompanying video) Labels: City of London, Freshfields, House of Rothschild, Karl Marx, slavery and capitalism Monbiot on Climate Change BillObama should really change his slogan to "Yes, We Can't". I suspect this sort of thing will characterize the crafting of legislation on financial regulation and health care as well:Environment George Monbiot's blog The Guardian Why do we allow the US to act like a failed state on climate change? The Waxman-Markey climate bill is the best we will get from America until the corruption of public life is addressed It would be laughable anywhere else. But, so everyone says, the Waxman-Markey bill which is likely to be passed in Congress today or tomorrow, is the best we can expect--from America. The cuts it proposes are much lower than those being pursued in the UK or in most other developed nations. Like the UK's climate change act the US bill calls for an 80% cut by 2050, but in this case the baseline is 2005, not 1990. Between 1990 and 2005, US carbon dioxide emissions from fossil fuels rose from 5.8 to 7bn tonnes. The cut proposed by 2020 is just 17%, which means that most of the reduction will take place towards the end of the period. What this means is much greater cumulative emissions, which is the only measure that counts. Worse still, it is riddled with so many loopholes and concessions that the bill's measures might not offset the emissions from the paper it's printed on. You can judge the effectiveness of a US bill by its length: the shorter it is, the more potent it will be. This one is some 1,200 pages long, which is what happens when lobbyists have been at work. Read the rest of the blog entry Labels: Barack Obama, climate change, George Monbiot, lobbyists Obama in His LabyrinthFrom the Financial Times:Deficit disorder By Edward Luce Published: June 25 2009 19:53 | Last updated: June 25 2009 19:53 Back in February, Barack Obama's presidency suffered an early setback when Judd Gregg, the Republican senator from New Hampshire, withdrew as his nominee for commerce secretary. Mr Gregg, who was to be the most high-profile exhibit of Mr Obama's bipartisan credentials, decided he could not belong to an administration that would preside over such high budget deficits. The figure then being projected for this year was above the $1,000bn mark for the first time. But in the few short months since, the number has rocketed much further--to $1,800bn (1,106bn pounds, 1,291bn euros) or 13 per cent of gross domestic product. The Congressional Budget Office, a nonpartisan watchdog, forecasts that the US will post deficits in excess of a trillion dollars in each of the next 10 years. Even on its relatively optimistic assumptions for economic growth, moreover, the CBO predicts national debt will double to 82 per cent of GDP in the next decade--a level not seen since the second world war. This would push the US close to the chronic debt levels seen in Japan and Italy. "People used to talk about America's long-term fiscal crisis," says Douglas Elmendorf, head of the CBO. "That crisis is now." Once merely a worthy subject of concern, America's fiscal outlook has rapidly become the object of widespread alarm. "Aside from weapons of mass destruction and terrorism, America's fiscal situation is the most dangerous challenge facing the country," says Mr Gregg. "Unchecked, it will reduce growth, weaken the dollar and ultimately undermine America's global leadership role." Read the rest of the article Labels: baillout, Barack Obama, financial crisis, fiscal policy, Monetary Policy, tax policy UN Summit on the Financial CrisisThe G8 will meet in early July in the Italian town of L'Aquila, in a less luxurious setting than had originally been planned, according to a recent Guardian article:The organiser of next month's G8 conference near the earthquake-hit Italian town of L'Aquila today shrugged off the strong aftershocks felt in the area on Monday, suggesting a few tremors may bring the world leaders closer to the victims. We can only hope that the proximity of big-wigs from the rich countries to tent cities and the homeless will get them to remember the less well-off while they discuss ongoing measures to deal with the global financial crisis. Meanwhile, less-rich countries pushed the UN, via the General Assembly, to hold a summit on the financial crisis. Here are some resources on the summit:
—CS Labels: financial crisis, G20, G8 summit, United Nations Rebound ... in Bankers' PayFrom the New York Times (6/23):The Times doesn’t say whether or not these figures are inflation-adjusted. But even if they’re not: are you making 40% more than you were in 1998, even in nominal terms—as the analysis projects bankers will in 2009? We’re not. The chart accompanies a piece on Citigroup raising employees’ salaries to make up for their smaller bonuses: Citigroup Has a Plan to Fatten Salaries Read the article here. Labels: Bank of America, Citibank, Citigroup, compensation, Morgan Stanley, New York Times Two More Items on Reform of Financial RegulationTwo more items on the Obama administration's proposed reforms of financial regulation. First, one by William Greider in the Nation:Obama's False Financial Reform Read the rest of the article. And this, from Jane Hamsher at Firedoglake: 238 Members of Congress Disagree with the President: The Fed Needs More Accountability See the original post. Labels: banking regulation, Federal Reserve, financial regulation, The Fed, William Greider Two Views of the CrisisA brief, clear comparison from Simon Johnson on the Baseline Scenario blog:There are two views of the global financial crisis and—more importantly—of what comes next. The first is shared by almost all officials and underpins government thinking in the United States, the remainder of the G7, Western Europe, and beyond. The second is quite unofficial—no government official has yet been found anywhere near this position. Yet versions of this unofficial view have a great deal of support and may even be gaining traction over time as events unfold. Go to the original blog for links, including the slides he mentions. Labels: bailout, banking crisis, banking regulation, Baseline Scenario, deregulation, finance sector, financial crisis, financial regulation, fiscal stimulus, larry Summers Two Good Pieces on Global Finance from FPIFTwo nice relatively new pieces from the good folks at Foreign Policy in Focus. Hat-tip to LF for alerting me to these. (I like that FPIF lists the editor in charge of an article as well as the author—great idea.)Overhauling Global Finance Read the rest of the article. Plus this one on the IMF, by Aldo Caliari, who has written for D&S:
Read the rest of the article. Labels: financia crisis, Foreign Policy in Focus, IMF, Joseph Stiglitz, United Nations World Hunger Reaches 1 Billion MarkNot because there isn’t enough food—see the last paragraph below.From the U.N. Food and Agricultural Organization, as reported by the AP on Saturday: The global financial meltdown has pushed the ranks of the world’s hungry to a record 1 billion, a grim milestone that poses a threat to peace and security, U.N. food officials said Friday.Read the full article here. Labels: agriculture, FAO, food crisis, food security, hunger, rising food prices, United Nations TDCotE (xi): Littlle Zakaria Dresses Like GrownupThe Dull Compulsion of the Economic (xi)A series of blog postings by D&S collective member Larry Peterson Little Zakaria Dresses Like Grownup I usually don't pay much mind to Fareed Zakaria. The Newsweek columnist and frequent television commentator has seemed to me for some time to epitomize most of the familiar failings of the mainstream press: the endless recycling of conventional wisdom, failure to think creatively or with integrity, the obsequiousness towards insiders, you name it: but with a palpable dosage of telegenics thrown in, which no doubt reinforces a "good Muslim" sentiment in its turn. But this week, he published the pompous-sounding "Capitalist Manifesto" in Newsweek, and I found myself reading it, driven by a perverse desire to see how bad it could possibly be. Instead of awful, though, I found the piece totally banal: if this is the best the ruling classes can do by way of propaganda, we socialists shouldn't have much to fear at all. Too bad that propaganda isn't all that matters. The striking thing about Zakaria's piece is that is doesn't amount to much of a manifesto at all. Manifestos, of which Marx and Engels' is the immortal exemplar, both summarize the past and show how past and present trends are set to contribute to a discernable future. Zakaria's piece, except for one brief section which I'll discuss presently, is totally oriented towards the past and present; and all he does is to regurgitate conventional wisdom, as is his wont, for two purposes. First, he wants to say that, despite its unfortunate excesses, capitalism is the most productive means of arranging social production known to man, and, secondly, that for all the talk of crisis, that capitalism isn't likely to be replaced by anything else. In support of the latter idea, he points at similarly dire assessments of the Asian crisis of 1997-8 and the dot.com meltdown, and proclaims that life goes on, with Asia rebounding and Twitter replacing Pets.com. Regarding the former claim, Zakaria takes refuge in paraphrasing that great democrat Winston Churchill (who called Gandhi a "half-naked fakir", and enthused over the carpet-bombing of Arab villages) to the effect that capitalism is the worst system, except for all the others. He also salutes the notion that capitalism has taken more people out of dire poverty in less time than any other system. But most of the essay consists in historical assessments characterized by huge generalizations and simplifications (one example: Zakaria salutes Canada's banking sector, attributing its containment of exposure to the global financial crisis to its conservatism. But it is arguable that Canada's economy, so based on natural resources and exports to the United States--both of which require a certain modicum of stability--could hardly develop a banking sector characterized by free-wheeling deals of the sort Britain or the US did; and Zakaria's breathtaking generalization leaves little room for such subtleties to influence his unruly argument). In this sense, as I said before, his piece is dull, not so much dumb; and one can easily brush aside the tribute to capitalism's productivity by recalling that such successes are disproportionately centered in China, which is hardly capitalist in the conventional sense, and that for all the gains there, there have been huge losses (in healthcare and education, particularly, and one of the chief reasons underlying the world financial crash, the accumulation of excess savings in poor countries, has much to do with the withdrawal of the primitive safety net that existed in China up to the 1980s). And, we must remember that rises in living standards in the developing are being accompanied by the development of huge "precariats" in the developed one. Also, many of the gains of the boom years--in asset values, jobs created, you name it--have been virtually wiped away by the crisis, and will be a long time in returning. So when Zakaria fatuously mentions Twitter replacing Pets.com, he can't extend the same argument about all the jobs created since the mid-nineties that have simply vanished. One more thing Zakaria says that deserves mention: he opines that a world brought to its knees in terms of growth will probably opt for more capitalism, not less, in the coming years. And he refers to economist Robert Schiller, who says more derivatives are required by modern finance, not less, if investments are to be made as efficient and secure as they can be. Regarding the latter, I can only quote from Paul Mason's fine book on the crisis, Meltdown: "however useful derivatives trading might be for finding the true price of shares (and it is), the end result is that profits are funnelled from ordinary savers into the pockets of the rich" (page 78). As long as savings continue to be generated in this lopsided way (and, despite movements in this direction both in the poor and rich worlds, the same situation essentially holds), derivatives will almost certainly be dedicated to destructive uses. Zakaria's comment about growth, along with a few commonplace suggestions on financial re-regulation, are about as much there is regarding the future. A manifesto worthy of the name would be dedicated to teasing out developed suggestions regarding how capitalism will adapt to climate change, the changing balance of power in the world, or perhaps how it will succeed in providing employment opportunities despite the fact that job-creating power is diminished in most upcoming industries compared to their predecessors, or that capitalism seems more challenged where harnessing technology profitably is concerned (consider its retarded uptake of green technologies, biotechnology, and even information technology) anyway. Or how older workers, whose pensions have or will evaporate due to the crisis, are to be re-integrated into the workforce along with legions of youngsters in the developing world. Considering that the former are, in most economic models, supposed to provide much of the demand for the labor of the latter, you'd think a "manifesto" would address this new complication. But all we get from Zakaria is, of all things, an appeal to morality. I have in the past fulminated on the tendency of economists and financial commentators to reduce the crisis to a deficiency in confidence, or "animal spirits", rather than acknowledging the real economic disasters that culminated in the crisis. But Zakaria goes beyond this, opting for the last refuge of the soft-headed, morality, to point toward a future for capitalism: Throughout this essay, I have avoided treating this economic crisis as a grand morality play—a war between good and evil in which demon bankers destroyed all that is good and true about our societies. Complex historical events can rarely be reduced to something so simple. But we are suffering from a moral crisis, too, one that may lie at the heart of our problems. And here's Zakaria's big idea: There's a need for greater self-regulation not simply on Wall Street but also on Pennsylvania Avenue. We get exercised about the immorality of politicians when they're caught in sex scandals. Meanwhile they triple the national debt, enrich their lobbyist friends and write tax loopholes for specific corporations—all perfectly legal—and we regard this as normal. The revolving door between Washington government offices and lobbying firms is so lucrative and so established that anyone pointing out that it is—at base—institutionalized corruption is seen as baying at the moon. Not everything is written down, and not everything that is legally permissible is ethical. Who was the last ex-president to refuse to take a vast donation for his library from a foreign government that he had helped when in office? But the politics of "gut check" have culminated in the victory of Obama, whose "change we can believe in" has consistently amounted to little except (besides rhetoric) the recruitment of the same interests to regulate the downturn as they did the bubble. From financial re-regulation to health care, this administration has committed itself firmly to the least ambitious proposals imaginable to combat intractable problems. In the Communist Manifesto and other works, Marx and Engels spoke eloquently of the ways in which modern production, despite its benumbing and exploitative effects, also contained a progressive element, that of cooperation, which could allow the working class to organize politically and change the productive system in ways that would enhance the latter and potentially be harnessed without the friction of competition to result in a more effective mode of production, as well as one that fostered incalculably greater human happiness. Zakaria, precisely because he does not interest himself adequately in the material forces conditioning conventional wisdom, can say nothing eloquent about his beloved capitalism whatsoever aside from an empty and ineffectual appeal to morality. It's all the more a shame that those material forces have had such a corrosive effect on working class consciousness (and in this respect Marx and Engels did not come close to anticipating actual developments)--and culture generally--that more people are going to look to Zakaria's manifesto than Marx and Engels'. Labels: Barack Obama, Fareed Zakaria, Friedrich Engels, Karl Marx, Larry Peterson, Paul Mason, the dull compulsion of the economic CIA Hiring Failed Wall Street AnalystsAccording to the Wall Street Journal, the CIA is recruiting out of work financial analysts from Wall Street.Why would they seek out the financial expertise of the people most directly responsible for the global economic meltdown? The CIA now produces a daily Economic Intelligence Brief for President Barack Obama, chronicling economic, political, and leadership developments that could impact the world economic order. We can only hope that this explanation is only a cover for their real mission: covertly placing Wall Street's failed finest in charge of the financial and economic sectors of our worst enemies. --d.f. Labels: CIA, Daniel Fireside, economic meltdown, unemployment, Wall Street Plunging State Income Tax RevenuesAn interesting piece from Mish's Global Economic Trend Analysis (a blog).States in Deep Trouble Over Plunging Income Tax Revenues The Nelson A. Rockefeller Institute of Government has issued a State Revenue Flash Report discussing an across the board enormous drop in personal income tax revenues. Total personal income tax collections in January-April 2009 were 26 percent, or about $28.8 billion below the level of a year ago in states for which we have data. In April 2009 alone (April being the month when many states receive the bulk of their balance due or final payments), personal income tax receipts fell by 36.5 percent, or $18.2 billion. There are numerous tables in the report worth a look. In fact, the entire 9 page PDF is worth reading in entirety. States most dependent on Personal Income Taxes 68.5% of Oregon's Tax Revenue from PIT. Collections off 27.0% 57.2% of Massachusetts' Tax Revenue from PIT. Collections off 28.5% 55.9% of New York's Tax Revenue from PIT. Collections off 31.8% 47.5% of California's' Tax Revenue from PIT. Collections off 33.8% 52.4% of Connecticut's Tax Revenue from PIT. Collections off 25.9% 52.7% of Colorado's Tax Revenue from PIT. Collections off 25.4% Arizona's collections were down a whopping 54.9% depending 25.3% on Personal Income Taxes. South Carolina, Michigan, Vermont, Rhode Island, New Jersey, Idaho, and Ohio are also in deep trouble. 20 states depending on personal incomes taxes for > 25% of total taxes were down 20% or more on collections. This is a very grim report on state finances. Here's the original post. Labels: income tax, recession, state budget shortfalls Some Takes on the Regulatory OverhaulHere are some assessments of the Obama administration's overhaul of financial regulation:In his front-page New York Times article on Wednesday (upgraded from the left-hand column of the business section), Joe Nocera finds "only a hint of Roosevelt" in what Obama described as "a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression." Michael Greenberger of the University of Maryland comments on the new regulations in an interview on WBAL Radio, AM 1090 (Baltimore) on Wednesday (it opens up directly into Quicktime audio, but the interview comes through just fine). And Greenberger contributed to this piece from Reuters (also from Wednesday).
Hat-tip to Lynn Fries for these links (though I'd seen the Nocera piece in my morning paper). Labels: financial crisis, financial regulation, Joe Nocera, Timothy Geithner |