[Democrat] Congressional leaders Dodd, Schumer and Frank all embraced the $700billion federal bailout from the beginning and remain its biggest champions. Alas, the only principled opposition to the federal bailout has come from the most crackpot wing of the Republican Party. As Jim Bunning, one of that wing’s spokesmen, protested, “This massive bailout is not the solution, it is financial socialism. It is un-American.” (These knee-jerk conservatives seem not to understand that the basic tenet of socialism requires the redistribution of wealth downward, not upward, as this bailout will accomplish)...

The proposals being floated by Democrats to soften the blow of the bailout will provide no relief from rising gas, food, housing and healthcare costs crippling those who rely on their own labor to earn tangible income — nor will it protect the thousands of workers who lose their jobs in the coming months. [More] . . read more

One can even argue about the correct date to take as the starting point of the present recession. It was certainly preceded by two great American bubbles, the dot-com bubble of the late 1990s and the U.S. housing bubble of this century. On one view, the present recession began on August 7, 2007 - only a year ago - when the sub-prime mortgage crisis came to the surface. That date could also be used to mark the bursting of the U.S. housing bubble, which is still having so damaging an impact on mortgage banking. Alternatively, one could reasonably start the present recession from the bursting of the dot-com bubble itself, which was the beginning of a bear market on Wall Street. That happened in the early months of 2000, already eight years ago. If this is a depression, it is a matter of choice whether one regards it as one or eight years old...

The present recession has some characteristics which make me think that it will be a relatively long one. The recession is centred on banking and property. In an ordinary recession, one has to wait for consumers to regain their confidence, which, in turn restores the confidence of business. Now one has to wait for the bankers as well. At present, banks are too anxious even to lend to each other, let alone to expand consumer credit or business loans. [More] . . read more

Republican deregulation brought about fraud in mortgage lending and dangerous financial instruments which have collapsed the housing market, leaving a million or more homeowners facing foreclosure. The financial system is in disarray and might collapse from insolvency. The trade and budget deficits have exploded. The U.S. trade deficit is larger than the combined trade deficits of every deficit country in the world. The U.S. can no longer finance its wars or its own government and relies on foreign loans to function day to day...

Republicans have run roughshod over the U.S. Constitution, Congress, the courts and civil liberties. Republicans have made it perfectly clear that they believe that our civil liberties make us unsafe - precisely the opposite view of our Founding Fathers. Yet, Republicans regard themselves as the Patriotic Party. The Republicans have violated the Nuremberg prohibitions against war crimes, and they have violated the Geneva Conventions against torture and abuse of prisoners. Republican disregard for human rights ranks with that of history’s great tyrants. The Republicans have put in place the foundation for a police state.

I am confident that the Democrats, too, will make a mess. But can they beat this record? We must get the Republicans totally out of power, or we will have no country left for the Democrats to mess up. [More] . . read more

But there's a simple and accurate answer: materialism and greed which has become a run-away epidemic in the contemporary capitalist world in general, and in the U.S. in particular, is the root of the problem. The oil crisis may be partly rooted in the desire of China and India to live a standard of material well-being comparable to that in the West, but it's mostly rooted in the speculative trading of oil futures that has artificially jacked up prices wildly. The collapse of the mortgage and banking industries has largely been a product of speculative investments as banks and mortgage companies sought to make super profits on their mortgage loans by turning them into monetary forms that could be traded and against which others could borrow money. It is this speculation, not solely the absence of the commodities, that has been a major source of the problem. . . read more

The good news is that, if the U.S. economy collapses, the Pashtun farmer in northeastern Pakistan, the Iraqi shopkeeper in Fallujah, the Iranian worker in Tehran, and the peasant in Venezuela, will no longer have to worry about being bombed or having their children mowed down by a U.S. helicopter gunship. The U.S. would no longer have the funds to pay for such foreign wars. And because a collapse of the U.S. consumer economy would also drag the rest of the world into a prolonged global slump, perhaps reminiscent of the 1930s, we might actually see a significant enough drop in carbon emissions from idled cars, factories and power plants that the global warming catastrophe that is threatening us all will be significantly delayed, giving humanity time to come up with a serious long-term response. [More] . . read more

In the 21st century, the US economy has been kept going by debt expansion, not by real income growth. Economists have hyped US productivity growth, but there is no sign that increased productivity has raised family incomes, an indication that there is a problem with the productivity statistics. With consumers overloaded with debt and the value of their most important asset--housing - falling, the American consumer will not be leading a recovery. A country that had intelligent leaders would recognize its dire straits, stop its gratuitous wars, and slash its massive military budget, which exceeds that of the rest of the world combined. But a country whose foreign policy goal is world hegemony will continue on the path to destruction until the rest of the world ceases to finance its existence.

Most Americans, including the presidential candidates and the media, are unaware that the US government today, now at this minute, is unable to finance its day-to-day operations and must rely on foreigners to purchase its bonds. The government pays the interest to foreigners by selling more bonds, and when the bonds come due, the government redeems the bonds by selling new bonds. The day the foreigners do not buy is the day the American people and their government are brought to reality. This is not the financial position of a superpower. Will what happened to Lehman Brothers today be America’s fate tomorrow? [More]  . . read more

We must be thankful for this sign that American democracy is not completely dead and supplanted by executive branch authority. However, whatever bailout package that emerges will fail unless it takes into account the following.

Any package that maintains the mark-to-market rule and permits the resumption of short-selling will undermine itself. In panic conditions without the existence of a market, the mark-to-market rule results in asset prices being driven below their values, thus eroding balance sheets and producing insolvencies. Short-selling permits short-sellers to profit by destroying the share prices of institutions suffering balance sheet problems, thus eliminating their ability to borrow and driving them into failure. A bailout, however large, that maintains the mark-to-market rule and permits short-selling will pour money into a black hole. [More] . . read more