Gerry Canavan

the smartest kid on earth

Posts Tagged ‘worst financial crisis since World War II

Sunday Night Links

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Thirteen Ways of Looking at a Sovereign Debt Crisis

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…at the Atlantic. #13 in particular is the one that’s got my hair on fire, in no small part because it gives us #7, 8, and 9 as a bonus.

‘Riskless Return’

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Ezra Klein on my broken record: If the federal government’s borrowing costs rise, so will everyone else’s. Mortgages rates will jump, car loans will be harder to come by, universities won’t be able to float bonds, cities won’t be able to fund themselves.

Treasuries are supposed to set the rate of “riskless return” — the price of loaning someone money and knowing, with perfect certainty, that they’ll pay you back, with interest. So when lenders decide how much to charge, they start with the riskless rate and then add to it to cover the risk that you won’t pay them back, and the inconvenience of having to wait for you to pay them back.

It’s a practice called benchmarking, and it’s everywhere: in your mortgage, your credit card, your car payments, the loan you took out to hire three new employees at your business. It’s even common internationally. The fact that Brazilian loans tie themselves to the American government’s debt just shows the high esteem in which the world holds us.

But if the rate on 10-year Treasuries rises, it means rates rise for everything else, too. That’s why economists consider the Federal Reserve’s power to affect interest rates — a power it has virtually exhausted during this crisis — so potent: if you can move the basic interest rate, you can move the whole economy.

End of the World Blues

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So what happens if the U.S.’s bond rating does get downgraded? Some 7,000 top-rated munis would be automatically downgraded if the U.S. government lost its AAA rating. In addition the credit ratings of a host of state and local governments, housing bond programs, higher education and non-profit institutions, and other entities dependent on the federal government would be reviewed, Bloomberg reports. 

And it could get much worse than that. There are huge swaths of the global economy that are predicated on the idea that the U.S. government will absolutely never default. Additionally, there’s no telling what sorts of CDS-style time-bombs and investment-product doomsday machines are out there waiting to be triggered if the U.S. were to be downgraded as a result of all this political posturing. Recall that the stock market crash of 2008 was triggered in large part by the downgrading of a single firm’s credit rating. The U.S. is orders of magnitude more important to the world economy than AIG.

In short, the Republicans have completely lost their minds.

Depressing News Watch

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Links for Tuesday

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* Cleveland, the true birthplace of Superman. Via Boing Boing.

* In the future, Google prioritizes your email for you.

* A majority of Republicans think Obama “probably” wants to impose Sharia law. In other news, a majority of Republicans are apparently complete idiots.

* The dog that hasn’t barked (but we keep hoping): the infinitely prolonged dissolution of the GOP. Meanwhile, Gallup’s methodological problems aside, Democrats appear doomed this November. At least we have a good shot at getting rid of Richard Burr.

* America may not ever recover from the financial crisis.

* I came across this somewhere over the weekend and now can’t get it out of my head: “Girlfriends from the Past,” a highlight of the disappointing second season of Flight of the Conchords.

*And this, from Stanley Fish: In the brief period between the bombing and the emergence of McVeigh, speculation had centered on Arab terrorists and the culture of violence that was said to be woven into the fabric of the religion of Islam.

But when it turned out that a white guy (with the help of a few of his friends) had done it, talk of “culture” suddenly ceased and was replaced by the vocabulary and mantras of individualism: each of us is a single, free agent; blaming something called “culture” was just a way of off-loading responsibility for the deeds we commit; in America, individuals, not groups, act; and individuals, not groups, should be held accountable. McVeigh may have looked like a whole lot of other guys who dressed up in camouflage and carried guns and marched in the woods, but, we were told by the same people who had been mouthing off about Islam earlier, he was just a lone nut, a kook, and generalizations about some “militia” culture alive and flourishing in the heartland were entirely unwarranted.

This switch from “malign culture” talk to “individual choice” talk was instantaneous and no one felt obliged to explain it. Now, in 2010, it’s happening again around the intersection of what the right wing calls the “Ground Zero mosque” (a geographical exaggeration if there ever is one) and the attack last week on a Muslim cab driver by (it is alleged) 21-year-old knife-wielding Michael Enright.

Polygraph 24: Call for Papers

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Polygraph 24—Call for Papers
Special Issue: Resistance to Finance

http://www.duke.edu/web/polygraph/cfp24.html

What does financial capitalism demand of us in thought and in action today?

Financial capital is one of the fundamental structuring forces in our world. Evidence of this is ubiquitous: the severity and extent of the most recent global financial crisis, the collapse of whole national economies (as in Greece and Iceland), the steadily progressing securitization of pensions and savings, a growing volume of derivatives trading that already dwarfs “real” global GDP.

Yet many critical accounts of corporate globalization, free trade, neoliberalism, and so on all too rarely emphasize the fact that high finance constitutes the very condition of possibility of capitalism as we know it. Other available forms of economic critique, from world-systems theory to dependency theory to theories of Empire, often do grant high finance the central role that it in reality occupies, but rarely go beyond critique to directly address the question of resistance. Too often, critique remains mired in highlighting isolated acts and agents of malfeasance rather than producing totalizing, systemic claims with real leverage. We now know this state of affairs to be in need of immediate rectification.

We also know that action is demanded, but its contours are not yet well defined. The clout of finance capital has received ample attention in Marxist economics, neo-classical economics, and other quarters—yet the accounts produced thus far of what is to be done have been less than satisfactory. What political responses on the part of on-the-ground social movements and both current and potential bodies of governance are necessary? Are some already underway but obscured from view? What alternative economic futures can we begin to construct out of the wreckage of the most recent crisis and the structural shifts that produced and accompany it? Is it necessary to break the global economy of its speculative bent and return it to its “real” roots, or is this antithesis, stemming from Hilferding’s classic critique of “fictitious capital,” fundamentally ill-conceived? Should the focus of political action be shifted away from past struggles—against multinational corporations, free trade, and the powerful political allies of both—in the direction of the financial crux of the global economy? What would such a change in focus entail?

Potential topics:
Financial capitalism and Marxism
* The continued efficacy or potential obsolescence of previous critical outlooks (world systems theory, Empire theory, etc.) in confronting global finance
* The centrality of the question of global finance in any meaningful critical engagement with globalization
* Systemic global inequality, post-Fordism and crisis

Resistance
* Forms of political subjectivity capable of comprehending and acting within (and against) high finance as it stands
* What is the role of the state in confronting financial capital?
* Real and hypothetical political movements and direct action
* Strategies of flight and subtractive action, whether individual (e.g. walking away from mortgage contracts) or institutional (e.g. Argentina’s post-crisis debt restructuring)

Alternative financial institutions and orders
* Jacques Sapir’s recent call for a “new Bretton Woods” system (akin to Antonio Negri’s call for a “new New Deal”)
* Microfinance and financial decentralization
* The global Tobin tax on of financial transactions and other forms of regulation
* Neo-Luddism and the return to the “real” economy
* Radical political economy and the pursuit of anti-capitalist alternatives

Other
* Historical perspectives on high finance, dealing with periodization, secular trends, particular crises and institutions, and exemplary modes of resistance
* Mystification, abstraction and the “new” digital/virtual economy
* Epistemological barriers to adequate critique of the global financial system
* Perception and belief as primary structural forces in the financial system
* Artistic representations of the financial world as possible critical tools
* Socio-political underpinnings of the financialization of the world

Deadline for submissions: January 31, 2011
Email complete manuscripts to the issue editor at lucas.perkins@duke.edu.