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CounterPunchers! We Mean It!
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Today's Stories November 3, 2009 Mike Whitney November 2, 2009 Steven Higgs Ishmael Reed David Macaray Bouthaina Shaaban David Michael Green David Swanson Ellen Brown Adam Federman James McEnteer Stephen Fleischman Website of the Day October 30 - Nov. 1, 2009 Alexander Cockburn Jeffrey St. Clair / Carl Ginsburg Mike Whitney Joe Bageant Gareth Porter Saul Landau Anthony DiMaggio Dave Lindorff Rannie Amiri Niranjan Ramakrishnan Jayne Lyn Stahl Rev. William E. Alberts Alvaro Huerta Martha Rosenberg Binoy Kampmark Norm Kent Charles R. Larson Roth's "The Humbling:" Nothing Like a Novel From an Old Pro Ron Jacobs David Yearsley Lorenzo Wolff Kim Nicolini Poets' Basement Website of the Weekend October 29, 2009 Michael Neumann Mike Whitney Gary Leupp Conn Hallinan Marshall Auerback Laura Flanders Eamonn McCann David Macaray Mark Weisbrot Stephen Soldz Christopher Brauchli Website of the Day October 28, 2009 Moshe Adler Dave Lindorff Frank Joseph Smecker Alexandra Early M. Shahid Alam Vijay Prashad John Ross Franklin Lamb Gregory Travis Susan Galleymore Website of the Day October 27, 2009 Mike Whitney Patrick Cockburn Stewart J. Lawrence Alan Farago Ralph Nader Dave Lindorff Bouthaina Shaaban Brian M. Downing Elections in Afghanistan, the Second Time Around Iain Boal Carl Finamore Jayne Lyn Stahl Website of the Day October 26, 2009 Bill Quigley / Paul Craig Roberts Uri Avnery Mike Whitney Michael Snedeker Shamus Cooke David Michael Green Martha Rosenberg Patrick Bond Binoy Kampmark Website of the Day October 23-25, 2009 Alexander Cockburn Christopher Ketcham Jeff Gore Gareth Porter Jayne Lyn Stahl Saul Landau Mike Whitney Nikolas Kozloff Ron Jacobs Russell Mokhiber Missy Beattie Ricardo Alarcón de Quesada Stephen Lendman David Ker Thomson Rannie Amiri Ronnie Cummins Norm Kent Charles R. Larson David Yearsley Lorenzo Wolff Ben Sonnenberg Kim Nicolini Poets' Basement Website of the Weekend October 22, 2009 Dan Pearson / Jonathan Cook Paul Craig Roberts The US as Failed State Mark Engler Johann Hari Brian M. Downing Eric Toussaint Tom Mountain Israel Shamir Charles Thomson Website of the Day October 21, 2009 Pam Martens Linn Washington, Jr. Liaquat Ali Khan D. K. Wilson Franklin Lamb Norman Solomon Stephen Fleischman Patrice Higonnet Binoy Kampmark Kevin Coval / Website of the Day October 20, 2009 Sharon Smith Tariq Ali Mark Brenner Bouthaina Shaaban Michael D. Yates Dean Baker Dave Lindorff John Ross Ricardo Alarcón de Quesada Kevin Zeese Gilad Atzmon Website of the Day October 19, 2009 Mike Whitney Greg Moses John Ross Michael Donnelly Jayne Lyn Stahl Eric Walberg Russell Mokhiber Barbara Rose Johnston John V. Whitbeck Christopher Ketcham Website of the Day October 16-18, 2009 Alexander Cockburn Saul Landau Paul Craig Roberts Carl Ginsburg Ralph Nader Nikolas Kozloff Carlo Galli Dave Lindorff Catherine Rottenberg
/ Neve Gordon Marshall Auerback Nicola Nasser Windy Cooler James L. Secor Ron Jacobs Wes Jackson Jesse Lerner-Kinglake David Ker Thomson Against Leaders Missy Beattie Emily Ratner Stephen Martin Michael Snedeker Charles R. Larson David Yearsley Peter Stone Brown Poets' Basement Website of the Weekend October 15, 2009 Andrew Cockburn Brian M. Downing Ramzy Baroud Danny Weil M. Idrees Ahmad Margaret Kimberley Ricardo Alarcón de Quesada Harvey Wasserman Nirmal Ghosh Charles R. Larson Website of the Day October 14, 2009 Michael Neumann M. Reza Pirbhai Gareth Porter Paul Craig Roberts John Strausbaugh Fortress Moon Ralph Nader Dean Baker Charles Modiano Nadia Hijab Walter Brasch Website of the Day October 13, 2009 Peter Linebaugh Shamus Cooke John Ross Brendan Cooney Frida Berrigan Yves Engler David Macaray Dave Lindorff Mark Weisbrot Ricardo Alarcón de Quesada Binoy Kampmark Website of the Day October 12, 2009 Pam Martens Mike Whitney Martha Rosenberg Jessica Arents Eamonn McCann Bill Hatch Sen. Russell Feingold Niranjan Ramakrishnan Gideon Levy Iyad Burnat Alan Cabal Dan Bacher Website of the Day October 9-11, 2009 Alexander Cockburn James Bovard Kathleen and Bill Christison Andy Worthington Marc Levy Tariq Ali Mike Whitney Paul Craig Roberts Alan Nasser Jack Z. Bratich Steve Breyman David Michael Green Dave Lindorff Paul Buchheit Jim Goodman Missy Beattie Michael Leonardi Nadia Hijab Mel Packer David Macaray James T. Phillips Charles R. Larson Michael Donnelly David Yearsley Lorenzo Wolff Poets' Basement Website of the Weekend October 8, 2009 Saul Landau Paul Fitzgerald / Linn Washington, Jr. Marshall Auerback Dave Lindorff David Rosen Chris Darimont / Misty MacDuffee John V. Walsh Stewart Lawrence Charles R. Larson Website of the Day October 7, 2009 Brendan Cooney Paul Craig Roberts Dean Baker Jonathan Cook John Stanton Joanne Mariner Ricardo Alarcón de Quesada Stephen Lendman Sen. Russell Feingold Mary Lynn Cramer Website of the Day October 6, 2009 Mike Whitney Gareth Porter Jonathan Cook Boris Kagarlitsky Iain Boal Ron Jacobs John Ross Michael Dickinson Stephen Fleischman Ira Glunts Missy Beattie Website of the Day October 5, 2009 Pam Martens Mike Whitney Paul Craig Roberts Harry Browne Sara Mann Omar Barghouti Shamus Cooke Brenda Norrell Fred Gardner Binoy Kampmark Copenhagen Blues: McChrystal and the Afghan Trap Website of the Day October 2-4, 2009 Alexander Cockburn Saul Landau Diana Johnstone Greg Moses William Blum Brian Cloughley Russell Mokhiber John Ross Ellen Brown David Ker Thomson David Macaray Gary Engler Robert Fantina Lisa Stolarski / Naomi Archer Anthony Papa Joe Allen Harry Browne Ron Jacobs Charles R. Larson David Yearsley Poets' Basement Website of the Weekend
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What Minksy SawWhy the Crisis Isn't Going AwayBy MIKE WHITNEY Size matters. And it particularly matters when the size of the financial system grossly exceeds the productive capacity of the underlying economy. Then problems arise. Surplus capital flows into paper assets triggering a boom. Then speculators pile in, driving asset prices higher. Margins grow, debts balloon, and bubbles emerge. The frenzy finally ends when the debts can no longer be serviced and the bubble begins to crumple, sometimes violently. As gas escapes, credit tightens, businesses are forced to cut back, asset prices plunge and unemployment soars. Deflation spreads to every sector. Eventually, the government steps in to rescue the financial system while the broader economy slumps into a coma. The crisis that started two years ago, followed this same pattern. A meltdown in subprime mortgages sent the dominoes tumbling; the secondary market collapsed, and stock markets went into freefall. When Lehman Bros flopped, a sharp correction turned into a full-blown panic. Lehman tipped-off investors that that the entire multi-trillion dollar market for securitized loans was built on sand. Without price discovery, via conventional market transactions, no one knew what mortgage-backed securities (MBS) and other exotic debt-instruments were really worth. That sparked a global sell-off. Markets crashed. For a while, it looked like the whole system might collapse. The Fed's emergency intervention pulled the system back from the brink, but at great cost. Even now, the true value of the so-called toxic assets remains unknown. The Fed and Treasury have derailed attempts to create a public auction facility--like the Resolution Trust Corporation (RTC)--where prices can be determined and assets can be sold. Billions in toxic waste now clog the Fed's balance sheet. Ultimately, the losses will be passed on to the taxpayer. Now that the economy is no longer on steroids, the financial system needs to be downsized. The housing/equities bubble was generated by over-consumption that required high levels of debt-spending. That model requires cheap money and easy access to credit, conditions no longer exist. The economy has reset at a lower level of economic activity, so changes need to be made. The financial system needs to shrink. The problem is, the Fed's "lending facilities" have removed any incentive for financial institutions to deleverage. Asset prices are propped up by low interest, rotating loans on dodgy collateral. While households have suffered huge losses (of nearly $14 trillion) in home equity and retirement savings; the financial behemoths have muddled through largely unscathed. The Fed handed Wall Street a golden parachute while ordinary working stiffs were kicked to the curb. That's why household spending has plunged while the big brokerage houses are gearing up. Here's an excerpt from an article by former Morgan Stanley analyst Andy Xie which explains what's really going on:
See? The financial Goliaths are still leveraged to their eyeballs. Fed chair Ben Bernanke has bent-over-backwards to preserve the system in its present form. That's why the lending facilities should be viewed with a degree of skepticism. They weren't set up merely to rescue the system from disaster, but to keep asset prices artificially high so institutions could continue to maximize profits via risky investments. And, it's worked, too. The S&P 500 is up over 60 percent since March 9. Still, even though Bernanke has succeeded in resuscitating the flagging financial sector, investors remain pessimistic. According to Bloomberg News:
Few people seem to believe in the much-ballyhooed economic recovery. And even though the media triumphantly announced the "end of the recession" last week (when GDP came in at 3.5 percent) a closer look at the data leaves room for doubt. Goldman Sachs analysts put it like this:
Positive growth is an illusion created by government spending. In fact, the economy is still flat on its back. Consumer spending and credit are in sharp decline. Unemployment is steadily rising (although at a slower pace) and wages are flatlining with a chance of falling for the first time in 30 years. Deflationary pressures are building. The talk of a "jobless recovery" is intentionally misleading. Jobs ARE recovery; therefore a jobless recovery merely points to asset-inflation brought on by erratic monetary policy. Surging stocks shouldn't be confused with a real recovery. Bernanke is a scholar of the Great Depression. He is familiar with Hyman Minsky and Minsky's "Financial Instability Hypothesis", which states that, "A fundamental characteristic of our economy is that the financial system swings between robustness and fragility and these swings are an integral part of the process that generates business cycles." Boston Globe correspondent, Stephen Mihm, summarized Minsky's theory in his article "When Capitalism Fails":
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what he called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further. As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit. Once that kind of economy had developed, any panic could wreck the market. The failure of a single firm, for example, or the revelation of a staggering fraud could trigger fear and a sudden, economy-wide attempt to shed debt. This watershed moment - what was later dubbed the “Minsky moment” - would create an environment deeply inhospitable to all borrowers. The speculators and Ponzi borrowers would collapse first, as they lost access to the credit they needed to survive. Even the more stable players might find themselves unable to pay their debt without selling off assets; their forced sales would send asset prices spiraling downward, and inevitably, the entire rickety financial edifice would start to collapse. Businesses would falter, and the crisis would spill over to the “real” economy that depended on the now-collapsing financial system. Stability leads to instability. By zeroing in on capitalism's genetic flaws, Minsky countered the prevailing orthodoxy that markets are fundamentally efficient and rational. He not only showed that capitalism was inherently crisis-prone, but also, that it was most vulnerable during those periods which seemed to be most stable. (Like during Greenspan's "Great Moderation".) Stability invites speculation and risk-taking. Investors are buoyed by market euphoria and fat returns; borrowing to purchase dodgy equities turns into a mania which distorts prices and leads to massive credit bubbles. Eventually, the foundation cracks and debts cannot be rolled over. Then markets tumble. The point is, Bernanke knows that a bloated financial system poses unnecessary risks to the economy; just as he knows he should wind-down existing lending programs (which just encourage more speculation) and focus on rebuilding household balance sheets. The only way to put the economy back on a solid foundation is by helping struggling workers get back on their feet so they can create more demand. The objective should be full employment and broad, sustained wage growth, which is precisely what Minsky's recommended. Stephen Mihm again:
Minsky's analysis not only sheds light on the causes of the current crisis, but also provides a practical way to fix the system. Too bad Bernanke's not paying attention. Mike Whitney lives in Washington state, He can be reached at fergiewhitney@msn.com
Inside the New Print Edition of Our Subscriber-Only Newsletter! Obama and Black America Ten months into Obama-time, the plight of black Americans is terrible. Yet overwhelmingly they rally behind the president. In a powerful report from the Deep South Kevin Alexander Gray asks the question: what should the black political agenda be? Mark Rudd counterposes “organizing” with “activism” and describes what it will take to build a movement. H. Bruce Franklin gives a chronology of the march into Afghanistan. Get your new edition today by subscribing online or calling 1-800-840-3683 Contributions to CounterPunch are tax-deductible. Click here to make a donation. If you find our site useful please: Subscribe Now! CounterPunch books and t-shirts make great presents.Order CounterPunch By Email For Only $35 a Year !
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Now Available from CounterPunch Books! Yellowstone Drift:
"Powerful and shocking ..
Waiting for
Lightning
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