Recently, numbers have been flying around about the total size of the ongoing 2008-2011 neoliberal bailout. Now that the Occupy movements are in full swing, it's important to get our numbers right, because economics is too important to be left to bankster hucksters and PR spinmeisters. Fortunately, journalist and author Nomi Prins (website here) has done the heavy lifting for us here:
US Bailout Tally, October 2011: $9.2 trillion
So $9.2 trillion is the total of all current support in the US, including TARP ($700 billion) and the stimulus package ($787 billion).
Then there's another $6.8 trillion of potential support for Fannie and Freddie, the two Federally-chartered housing agencies. That number is simply the sum total of all Fannie/Freddie mortgages, but that number isn't going to zero (assuming the absolute worst, a deflationary meltdown where radical crazies take over the US government and allow everything to collapse, housing prices would drop 30%, an additional $2 trillion). So maybe the $9.2 trillion will eventually hit $11.2 trillion.
But most of that $11.2 trillion aimed at the financial
sector wasn't "spent" as an outlay or purchase. It was a set of
guarantees, designed to keep the banking system from imploding
completely. One partial exception was the $1 trillion to $3 trillion
spent by the Federal Reserve to purchase dubious assets from the
banksters, assets which are probably not worth that amount (otherwise,
why would they be selling them, when they get can unlimited liquidity
for nearly free?). Net subsidy: noone knows, but it can't be more than
$3 trillion.
Some of the bigger numbers floating around the mainstream media put the total bailout at $27 trillion. Now, this number is not based on fiction, but it's not as scary as it sounds. It's just the $9.2 trillion, plus the $6.8 trillion in Freddie/Fannie Mae loans, plus the total cost of the global stimulus packages ($1 trillion in direct spending from European Union and the BRICs), plus the implied guarantees by the European Central Bank (another $3 trillion in financial support, and $7 trillion in implied guarantees). Total real expenditure of funds: maybe $5.5 trillion globally. That's 9% of our $60 trillion world economy, not the end of the world.
Now, here's where things get interesting. What did the Wall Street banksters do with that $3 to $4 trillion? Only a sliver went to bonuses, or to purchase the vermin called the US political class. Most went to reserves, to compensate for the huge holes in the banking system: yes, most of those dead mortgages, extinct CDOs and worthless derivatives are still on their books. Why can't they just write off all that junk? Because without those zombie assets, the shadow banking system implodes completely, and takes down the standard banking system with it.
The next question is, what the heck is this shadow banking system? The NY Fed has the answer right here, in a bombshell 2010 report. The opening page states: "Shadow banks are financial intermediaries that conduct maturity, credit, and liquidity transformation without access to central bank liquidity or public sector credit guarantees. Examples of shadow banks include finance companies, asset-backed commercial paper (ABCP) conduits, limited-purpose finance companies, structured investment vehicles, credit hedge funds, money market mutual funds, securities lenders, and government-sponsored enterprises."
And note the key chart on page 5 of the report, showing how assets in the shadow banking system grew larger than the regular banking system during the long era of neoliberalism - and then tanked after 2008.
That's why the neoliberal model of bankster bubbles is dead. The glory days of deregulated credit playing insane leveraged games, sloshing around world markets and fueling a debt-dependent consumption boom heavily tilted to the 1% are gone. For. Good.
What we need now is a world for, of, and by the 99%. An economy geared to human need, not rentier greed. A society organized on the principles of democracy, not plutocracy. And a politics of massive public investment in green jobs, green infrastructure, and high-tech human services.
After Occupy Wall Street, it's time to Occupy the Bailout!
Haw....just came back from a toilet reading snatch of THEORIES OF SURPLUS VALUE where Marx writes a bit about 'fictitious capital'.
ReplyDelete"It is also quite correct that “the value or price of land”, which is not produced by labour, appears directly to contradict the concept of value and cannot be derived directly from it. This proposition is [all the more] insignificant when used against Ricardo, since its author does not attack Ricardo’s theory of rent in which precisely Ricardo sets forth how the nominal value of land is evolved on the basis of capitalist production and does not contradict the definition of value. The value of land is nothing but the price which is paid for capitalised ground-rent. Much more far-reaching developments have therefore to be presumed here than can be deduced prima facie from the simple consideration of the commodity and its value, just as from the simple concept of productive capital one cannot evolve fictitious capital, the object of gambling on the stock exchange, which is actually nothing but the selling and buying of entitlement to a certain part of the annual tax revenue."
full: http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch20.htm