Ominously, Rees-Mogg foresees “A momentum of negative events sweeping away financial flood defences; in the 1930s that force overturned democratic governments as easily as it overturned banks. The veteran journalist is referring to the 1930’s hyper-inflation crisis in Germany, which led to the destruction of the Weimar Republic and the rise of Adolf Hitler. “Before we get back to balance, we may see dramatic changes in politics, as well as in business and finance,” Rees-Mogg concludes.

The veteran journalist’s warning comes on the back of news that “U.S. regulators are bracing for dozens of American banks to fail over the next year.” According to an International Herald Tribune report, “Troubles are growing so rapidly at some small and midsize banks that as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months.” [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

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

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

As the markets are finally demonstrating, the "economic good times" spurred by a runaway housing price boom (and powered by astonishingly fraudulent lending practices by dishonest banks) are over. A day of reckoning has arrived, and the unwinding of this false wealth that has been propping up the U.S. economy for so many years is about to be unleashed upon the American people. [More] . . read more

But the fact is that our economic system is a lunatic and suicidal system, and it deserves to go down. Why lunatic and suicidal? It is predicated on the delusion, accepted on every level in every modern society, that unlimited Mahnolo Blahniks are possible on a planet of limited resources. Growth without horizon is simply not possible, but the delusion remains in force, a mass glue-huff and consensus trance hallucination. Endless growth on planet earth is by definition entropic; it implies its own end. Its pursuit is therefore suicidal.

What might replace the current insane system I couldn’t venture to say. Certainly, a lot of people will be hurt if we go down the rat-hole that appears our proper and fitting end. If events trend badly enough, a period of contraction, unemployment, economic depression, homelessness, tent cities, rising crime, boarded up storefronts, abandoned homes will be upon us faster than imaginable... Perhaps the crisis will bring about the devolution of the American living standard to something like sustainability. Perhaps it will only bring out a lot of pissed-off middle-classers who refuse to accept that the American way of life is sick and crazy and has no future. That kind of infantile resentment historically either leads to reform or fascism. [More] . . read more

Now we're in a terrible fix. People are scared and removing their money from the banks and money markets. This is intensifying the freeze in the credit markets and driving stocks into the ground like a tent stake. Meanwhile, our leaders are caught in the headlights, still believing they can finesse their way through the biggest economic cataclysm since the Great Depression.

If something is not done to increase the flow of credit immediately, the stock market will tumble, unemployment will spike, and many businesses will grind to a standstill. We could be just days away from a severe shock to the system. Secretary of the Treasury Henry Paulson's $700 billion bailout does not focus on the fundamental problems and is likely to fail. At best, it puts off the day of reckoning for a few weeks or months. Contingency plans should be put in place so the country does not have to undergo post-Katrina bedlam. [More] . . read more

The Quran prohibits speculative risk, warning the faithful to avoid games of chance in which the probability of loss in is much higher than the probability of gain. Shariah-compliant investments, therefore, avoid speculative risk, including interest rate options, naked equity options, futures, derivative and numerous leveraged products purportedly designed to hedge investments. Many of these financial products attract speculators in hopes of making quick money... In addition to prohibiting high risk investments, the Quran also prohibits no risk investments... Islam does not prohibit passive investments. Nor does it prohibit giving interest-free loans. Debt is not contrary to Islamic law. Charging interest is.

The federal bailout package that the Bush Administration is selling as a quick cure of all problems will only aggravate the underlying cancer of interest-bearing debt. It is unlikely that the infusion of more money will reform institutions and companies built on layers of interest-bearing debt. When the best and the brightest are engrossed in finding ways to make money with money, and no more, the system may look creative and intelligent but it is geared toward shared destruction. [More] . . read more

The banks are hoarding cash to meet their capital requirements. They are trying to compensate for the loss of value to their (mortgage-backed) assets by increasing their reserves. At the same time, the system is clogged with trillions of dollars of bad paper which has brought lending to a halt. The huge injections of liquidity from the Fed have done nothing to improve lending or lower interbank rates. It's been a flop. The market is driving interest rates now. If the situation persists, the stock market will crash. [More] . . read more

The great, soon to be late, Gore Vidal said there was a moment at which the American century ended. Vidal said that when the US of A became the planet's greatest debtor client - I forget the number of trillions - the game was up. He appeared to take satisfaction from that.

I do not. A stock market "correction" implies a recession, over two quarters, from which comes a slump, from which comes a depression, from which comes mass unemployment, and lost homes, and blighted lives, and endemic misery. We left-wing extremists do not, in fact, take much pleasure in being right about capitalism. [More] . . read more