World financial crisis deepens

"You don't understand."

Yes, never have...but I keep my torch handy in case we all decide to storm the castle. I liked the recent Icelandic drums. I wonder what the Irish will use.

Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

Bob Dylan

Finally

Soros Says Financial Crisis Marks End of a Free-Market Model

http://www.bloomberg.com/apps/news?pid=20601087&sid=ay0FPxGdth_k&refer=home

Billionaire investor George Soros said the current economic crisis has its roots in the financial deregulation of the 1980s and marks the end of a free-market model that has since dominated capitalist countries.

Liberalization of the financial industry begun by the Reagan administration has led to a series of breakdowns forcing government intervention, Soros told economists and bankers last night at a private dinner at Columbia University in New York. The global recession, triggered by the collapse of the U.S. housing market, has “damaged the financial system itself,” he said.

Regulators are in part to blame because they “abrogated” their responsibilities, Soros, 78, said. The philosophy of “market-fundamentalism” was now under question as financial markets have proved to be inefficient and affected by biases rather than driven by all the available information, he said.

“We’re in a crisis I think that’s really the most serious since the 1930s and is different from all the other crises we have experienced in our lifetime,” Soros said.

Soros, founder of New York-based hedge-fund firm Soros Fund Management LLC, said last month at the World Economic Forum in Davos, Switzerland, that the Obama administration’s plan to buy toxic assets from U.S. banks won’t be enough to get financial institutions to start lending again.

A more effective approach for restarting the economy would be to inject capital directly into the banks and cut minimum capital requirements, Soros, whose firm oversees $21 billion, has said.

Soros’s Quantum Endowment Fund returned 8 percent last year. That compared with an average loss of 18 percent by hedge funds, according to data compiled by Hedge Fund Research Inc. of Chicago.

Brown: World needs 'global New Deal'

Quote:

BERLIN, Germany (CNN) -- The world needs a "global New Deal" to haul it out of the economic crisis it faces, Prime Minister Gordon Brown of the United Kingdom said Sunday.

"We need a global New Deal -- a grand bargain between the countries and continents of this world -- so that the world economy can not only recover but... so the banking system can be based on... best principles," he said, referring to the 1930s American plan to fight the Great Depression.

Brown was speaking as the leaders of Europe's biggest economies met to try to forge a common position on the global financial crisis ahead of a major summit in London in April.

French President Nicolas Sarkozy said the world's response to the global financial meltdown had to be profound and long-lasting, not just tinkering around the edges.

"Europe wants to see an overhaul of the system. We all agree on that. We're not talking about superficial measures now or transitional measures -- we're talking about structural measure, which need to be taken," he said.

"No more replastering, the structure is rotten!" - Paris 1968

Japan's Bernie Madoff

Has Kazutsugi Nami downed his last beer as a free man?

http://www.forbes.com/2009/02/22/dispatch-japan-fraud-markets_0223_tokyo_dispatch.html

Canadians who are suddenly worried about whether they can afford to retire or pay for their child's education have no qualms about telling their investment manager what's really on their minds, unloading their fears, frustrations - and even hostility - on their adviser's lap.

It's creating major stress across the industry, according to a Toronto-based adviser whose clients have resorted to angry calls and insults, while colleagues have been personally blamed for their clients' losses.

http://www.theglobeandmail.com/servlet/story/RTGAM.20090223.wladvisor23/...

London's Metropolitan Police are preparing themselves for a "summer of rage":

Supt Hartshorn, who heads the Metropolitan Police's public order branch, said he feared there could be "mass protest" at rising unemployment, failing financial institutions and the downturn in the economy.

 http://www.telegraph.co.uk/news/newstopics/politics/lawandorder/4784934/...

Banking on the Brink

http://www.nytimes.com/2009/02/23/opinion/23krugman.html

Comrade Greenspan wants us to seize the economy’s commanding heights.

O.K., not exactly. What Alan Greenspan, the former Federal Reserve chairman — and a staunch defender of free markets — actually said was, “It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring.” I agree.

[url=http://www.globalresearch.ca/index.php?context=va&aid=12418][color=red][... Doublethink: "Nationalize the banks." "Free Markets."[/b][/color][/url] The language of deception

Quote:

Today’s clash of civilization is not really with the Orient; it is with our own past, with the Enlightenment itself and its evolution into classical political economy and Progressive Era social reforms aimed at freeing society from the surviving trammels of European feudalism. What we are seeing is propaganda designed to deceive, to distract attention from economic reality so as to promote the property and financial interests from whose predatory grasp classical economists set out to free the world. What is being attempted is nothing less than an attempt to destroy the intellectual and moral edifice of what took Western civilization eight centuries to develop, from the 12th century Schoolmen discussing Just Price through 19th and 20th century classical economic value theory.

Any idea of "socialism from above," in the sense of "socializing the risk," is old-fashioned oligarchy – kleptocratic statism from above. Real nationalization occurs when governments act in the public interest to take over private property. The 19th-century program to nationalize the land (it was the first plank of the Communist Manifesto) did not mean anything remotely like the government taking over estates, paying off their mortgages at public expense and then giving it back to the former landlords free and clear of encumbrances and taxes. It meant taking the land and its rental income into the public domain, and leasing it out at a user fee ranging from actual operating cost to a subsidized rate or even freely as in the case of streets and roads.

Another good essay from professor Michael Hudson

At least a few people out there are telling it like it is:

'There will be blood'

Harvard financial guru Niall Ferguson predicts prolonged financial hardship, even civil war, before the ‘Great Recession' ends

http://www.theglobeandmail.com/servlet/story/RTGAM.20090223.wferguson0223/BNStory/crashandrecovery/home

how desperate will Big Pharma get?

V

http://www.bloomberg.com/apps/news?pid=20601087&sid=aiqmSoL6sVbk&refer=home

AIG wants more money!

American Insurance Group, the insurance giant that is 80-percent owned by the US government, is in discussions with the government to secure additional funds so it can keep operating after next Monday, when it will report the largest loss in U.S. corporate history, CNBC has learned.

Sources close to the company said the loss will be near $60 billion due to writedowns on a variety of assets including commercial real estate.

http://www.cnbc.com/id/29353282

"how desperate will Big Pharma get?" Just read your link accompanying that posting, LT. 

It's being mentioned (see: http://business.theglobeandmail.com/servlet/story/RTGAM.20090225.wscotiareal0225/BNStory/Business/home ) - but it's not yet the disaster in Canada that it is for many places in the US. Prices are only down 10%.

It's been interesting reading this thread...things certainly have gotten pretty scary out there.  But I have to take issue a little with the assertion that free market capitalism is what got us into this mess.

 I think an overly-centralized, over-regulated economy is partly responsible.  I also think we are mistaken to have a system running on fiat currencies, i.e. money that has no intrinsic value, and that can be created at will by government whether the savings or real wealth are there or not. 

 And I think it's time to admit that fractionalized reserve banking doesn't work.  Allowing banks to multiply the amount of money you deposit into a new larger number without the physical holdings to back it up, and then using that invented money to set rates and to lend it out at interest (either back to you or to other lenders) is pure insanity, and exponentially inflates the debt bubble.

And no wonder the bubble got so big, and that it's bursting has been hurting so much...it's the undoing of decades and decades of crazy economic policy enacted by bureaucrats who really had no clue about economics to begin with.  And this pretty much describes the bureaucrats we have running things today!

 If I were religious at all, I'd be praying.

gulcher wrote:

And I think it's time to admit that fractionalized reserve banking doesn't work. Allowing banks to multiply the amount of money you deposit into a new larger number without the physical holdings to back it up, and then using that invented money to set rates and to lend it out at interest (either back to you or to other lenders) is pure insanity, and exponentially inflates the debt bubble.

Quote:

So governments need to rein in banks?

No definitely not...for the most part I think the banking system is over-regulated.  And deposit insurance is wasteful.  The banks are large bureaucracies that cost the average consumer more money than they should to operate.  There are too many managers, accountants, auditors, committees, etc all making sizable incomes without providing real value to the consumer.

However, what little regulation I would keep for banks, I would ensure that all banks maintain a high percentage, if not 100% of their reserve requirements for every transaction they process. 

I feel it's a much sounder alternative to the current system of multiplying deposits by a centrally-planned number, and using that new false amount to in turn lend to consumers and other institutions.  A bank that must have most or all of the money in its physical possession before it can lend that same amount out is much safer, and less wasteful.  And there'd be no need for deposit insurance.

Of course, that idea wouldn't work without getting our currency back onto a precious metal standard of some sort.  Right now our money has no intrinsic value, and that makes it far too easy to print and spend whenever it's deemed necessary or convenient, whether the government has the savings to back it up, or not.  That isn't responsible policy, in my opinion and leads to the creation of debt bubbles...like the one we're currently dealing with.

gulcher wrote:

And no wonder the bubble got so big, and that it's bursting has been hurting so much...it's the undoing of decades and decades of crazy economic policy enacted by bureaucrats who really had no clue about economics to begin with. And this pretty much describes the bureaucrats we have running things today!

Quote:

So banks need to rein in governments?

 I'm having trouble with your post, I think that facts are getting in the way of your ideology... you may have to dispense with them if you're serious about blaming over-regulation by governments for the failure of private greed.

Yes, government should be limited...limited in terms of size and mandate.  We're currently seeing the market react to years and years of over-sized governments and the massive overhead they carry with them.  For decades governments have grown into large bureaucratic entities that cost an awful lot of money to run.

Private greed isn't the problem, the problem is that private companies for too long have been run in collusion with western governments.  They've co-existed nearly as one plundering body that has managed - through top-heavy management, nepotism, and endless regulation - to take most of the wealth away from the constituents/consumers who are supposed to be calling the shots, and placed it in the hands of the few at the top of the pyramid.

Free market capitalism would allow more people access to wealth creation if that system were allowed to work, but instead of that we've had generations of corporatocracy...where large companies have become one with government encapturing the average citizen in a life of perennial debt, and abject serfdom.

gulcher wrote:

whether the government has the savings to back it up, or not

Quote:

We are their savings.

And you would think this would restrict government spending to only what they take from their constituents, in reality though, the government skips the inconvenient step of having to "save up" for big expenditures, and instead jumps right into borrowing and spending. 

 The government will run a deficit to pay for things it doesn't have enough revenue to afford...and they borrow that money at interest either from the private banks who create the money out of reserves they don't actually have, or foreign creditors who agree to buy our treasuries.

And now we're seeing governments around the world borrowing money/creating debt in order to "stimulate" their economies, and attempt to mitigate the effects of having a massive debt-load. It's ridiculous.

How did too much regulation funnel money to the top of the pyramid? That makes no sense at all. You are labouring under the delusion of a pure, mathematical, Adam Smith-esque version of capitalism that doesn't exist in the real world. There is no level playing field and there never will be, unless we create it ourselves.

I read an article a while back about one of those World-Of-Warcraft type games and how the designers tried to create a functioning economy for their virtual universe. Being good nerds, used to thinking in terms of abstract systems, they wanted to set up a perfect unregulated capitalist model and just let it run wild. They were so sure it would work like a charm, but instead it was a huge failure. What happened was utterly predictable to anyone not sucked in by the delusions of capitalist ideology. A select few players got a leg up on the others early on, and kept pressing their advantage to keep taking all the wealth for themselves. Very quickly a small handful of characters were super-wealthy and the rest were miserably poor, with little opportunity to change their circumstances since the rich characters were so much more powerful than everyone else. The designers had to start intervening in a big way to even out their economy so that people would have money to spend and it would actually function.

This is how capitalism works in the real world, (and apparently in virtual simulations). Capital accumulates. That's the whole logic of it. If this weren't true there would be no point to the whole thing. I use my money to make more money and I use the power this gives me to destroy your ability to make money because that leaves more market share for me to make money in. I drive your business under and then buy it so that you work for me, and all the profit that used to be yours is now mine. You want unregulated capitalism? It ends with you working 14 hour days with no weekends or vacations, and you still wind up selling me your children as slaves just to buy some food.

Yes, the essential problem is that all the wealth has been funnelled upwards. Too much money is in too few hands. But it is the lack of regulation that has caused this, and a presence of regulation that prevents it. Why do you think the rich are always pushing to de-regulate the system? Not because they're scared of accumulating too much wealth, I can tell you that! They want to de-regulate precisely because it allows them to get richer and richer and richer, sucking all the wealth that the system creates to themselves. 

Learn a little history and you'll find that the general trend is that high regulation accompanies prosperity (60's 70's) and low regulation leads to collapse (now). The facts are in. The jury's out. You're just plain wrong. Capitalism is not a sustainable system. Without intense regulation and constant oversight, it can't even keep upright, which just goes to show that there's no reason to keep it around at all.

Merowe wrote:

He is a criminal parasite and typical of his class. For his contribution to running that bank into the ground, wiping out thousands of working people's savings, he should get nothing more than one bullet, with the bill for it sent to his wretched family. 

Well that's pretty mean spirited. I think the state might afford the cost of a bullet. No state burial though. Have to draw the line somewhere. 

  Gulcher do you and have you paid  for everything you need to enable you  live on and I assuming  to work, upfront and in cash? 

[url=http://www.globalresearch.ca/index.php?context=va&aid=12476][color=red][... "Great Financial Crisis":[/b][/color] A whole new kind of struggle is emerging[/url] Interview with John Bellamy Foster

Quote:

MW: The financial crisis is quickly turning into a political crisis. Already governments in Iceland and Latvia have collapsed and the global slump is just beginning to accelerate. Riots and street violence have broken out in Greece, Latvia and Lithuania and worker-led protests have become commonplace throughout the EU. As unemployment skyrockets and economic activity stalls, countries are likely to experience greater social instability. How does one take deep-seated discontent and rage and shape it into a political movement for structural change?

JBF: The first thing to recognize is that we are suddenly in a different historical period. One of my favorite quotes comes from Gillo Pontecorvo’s 1969 film Burn!, where the main character, William Walker (played by Marlon Brando) states: “Very often between one historical period and another, ten years suddenly might be enough to reveal the contradictions of an entire century.” We are living in such a period; not only because of the Great Financial Crisis and what the IMF is now calling a depression in the advanced capitalist economies, but also because of the global ecological crisis that during the last decade has accelerated out of control under business as usual, and due to the reappearance of “naked imperialism.” What made sense ten years ago is nonsense now. New dangers and new possibilities are opening up. A whole different kind of struggle is emerging

U.S. decline in GDP in fourth quarter of '08 worst in over a quarter of a century:

"What a ghastly report," said John Ryding, chief economist at RDQ Economics. "Since the recession started in December 2007, this will almost certainly be the longest postwar recession, and now potentially the deepest one as well."

Output fell 6.2 percent at an annualized rate in the fourth quarter of 2008, revised downward from a previous estimate of a 3.8 percent decline. The drop was even steeper than many economists had feared - the consensus estimate had been a 5.4 percent decline - and was much lower than the 0.5 percent contraction from the previous quarter.

http://www.nytimes.com/2009/02/28/business/economy/28econ.html?ref=business

"Night of the Living Taxpayer Ownership "

[laughs out loud!]