Thursday, Mar 05, 2009
Nothing we do for banks is for banks. It's all for the benefit of the people
CounterPunch: Blowing Up the Economy
"Nothing we do for banks is for banks. It's all for the benefit of the people that depend on banks -- the businesses, the families, the students -- that require credit in order to do things that are important to their future."
--Treasury Secretary Timothy Geithner, PBS Jim Lehrer News Hour
This isn't a normal recession. In a normal recession aggregate demand declines, economic activity slows, and GDP shrinks. While those things are taking place now, the reasons are quite different. The present slump wasn't brought on by a downturn in the business cycle or a mismatch in supply and demand. It was caused by a meltdown in the credit system's central core.
Posted by troy @ 09:07 AM (318 views) Add Comment
4 Comments
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1. troy said...
"The financial sector now represents 40 percent of GDP, which is to say that the exchange of paper claims to wealth is the driving force behind economic growth. The production of useful things, that actually improve people's lives and raise the standard of living, has been replaced by the trading of complex debt instruments and opaque derivative contracts." from article
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Let's see what smoke and mirrors BoE can come up with today ~ Sky News are already spinning it.
2. Crunchy said...
Just voted in an AOL poll.
Will QE help the UK economy YES 384, NO 1,226, There is hope for the public yet.
I have always wondered why people even bother to vote don't know. Brown and Darling may have taken part.
3. Crunchy said...
1. troy
BTW with every winner there has to be a loser, unless you keep expanding the money supply.
We are financing this doomed miracle economy that is meant to be of benefit to us.
System collapse is now the only wake up call.
4. 51ck-6-51x said...
"the reasons are quite different"
- yeah this time it was like a pre-emptive strike. The credit system froze up because the business cycle would already have turned (long before) if it wasn't for the cheap credit. The market-observable causes were the opacity of, and resultant lack of due diligence due to, certain securitisation of debts along with the Greenspan policies and the build up of IOU payments to the providers of resources (energy, raw materials & labour).
But I'll say it again, it's not the securitisation itself that is the problem. It's the game of pass the parcel - if one can not sell the package as soon as it is received (or created) there is no incentive to lend without due diligence. The reason this was the market state was the implied backing and the perverse incentive structure that existed due to government (plural) policies.