The US debt to GDP ratio is headed through the roof. In 2009 total US government debt was 83% of GDP. Economists have estimated it to hit 101% of GDP by 2011. As we can see with Greece, moneylenders won’t release capital if they think they can’t get paid for it or the risk of losing their investment is too high. The US is obviously not Greece but it is an economy in crisis all the same. Kenneth Rogoff points out in Business Week that the “reaction of investors may be less abrupt than it was in Greece.” “It happens more gently, but it has to happen.” The market is a ruthless master for sure.
Adding fuel to the fire is the increasing likelihood that Freddie Mac and Fannie Mae are floundering and will most likely need more taxpayer money. The two firms were nationalized by the government in the wake of the financial crisis although the term “conservatorship” is the preferred term; nationalization is a bit too European sounding and hints of socialism. The government announced last December that “..there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat…” * The previous limit was $200 billion, the two firms have already received $111 billion in taxpayer funds. The government of billionaires is very free with our money.
They have every reason to be concerned, according to the WSJ, the two mortgage companies along with the Federal Housing Administration fund nine out of ten American mortgages.
Naturally, investors and free market champions are red faced over the government’s continued involvement in the running of these institutions accusing Washington of “running Fannie and Freddie as an instrument of national economic policy, not as a business.” Like the education system, housing is a very lucrative jewel in the crown for speculators, moneylenders and all the other social wasters.
But other more astute sections of the capitalist class recognize the necessity for their state apparatus taking hold of the reins. The dangers of failure for these institutions was to great---the potential for social upheaval too horrific to consider, better protect the system as a whole. They often admit to themselves the failings of the profit motive when it comes to actually relying on it for the fundamentals in society, “We’re making decisions on (loan modification) and other issues, without being guided solely by profitability, that no private bank ever could.” Says the present Freddie CEO Charles Haldeman. They are well aware of the unreliability of a profit based economic system such as theirs and have no qualms intervening to soften its destructive effects when the system as a whole is threatened.
But mortgage delinquencies are still rising and as this occurs, the two mortgage lenders are required to “set aside” more capital. In this case it means the taxpayer will have to fork over more funds. We can see the dangers of this as unemployment rises, homes are lost, services cut, and disposable income declines---increased taxes will savage living standards further increasing the chances of social unrest. And if the cash is found through more borrowing this threatens then dollar and puts fear in the hearts of the moneylenders who will look for les risky place to earn money without working or demand higher interest rates (charge more for capital).
The movement against the cuts in education and jobs that has taken root in California is a spark that has shaken the capitalist class a little. They are concerned about this movement and do not want it to spread. They are cautious too about emboldening it, giving it any momentum and will try to compromise it through the intervention of the Democratic Party. It has been the norm that any independent movement that arises they suck in to that black hole called the Democratic Party. The heads of organized Labor assist in this strategy aimed at tempering, rendering ineffective, rising independent movements that seek to drive back the capitalist offensive.
The heads of Organized Labor have not joined the California students call for a 24-hour strike and day of action on March 4th instead using their resources to organize rallies in the main and supporting the students call rather than calling for a strike themselves and organizing to make it successful.
The US economy is in for a long period of decline or stagnation at best. More sacrifices are being asked of working people which will drive people in to political activity. The historic vote in Oregon to tax corporations and the rich reflects the mood that exists in US society, an anger and resentment of the rich and the excesses of the market. The Labor leaders who have the same world view as the capitalist class are also aware of this anger and are terrified of it.
Housing is a right, or should be a right in a civilized society. Housing is shelter and shelter should not be an investment. Housing, transportation, education, what we need in life, should not be determined by profit, But in a market economy profit is sacrosanct. Freedom under capitalism means the right to make profit and creating a social environment that facilitates in the long term the making of profit.
As we have said many times on this blog, there is no way forward on a capitalist basis. The capitalist class has forfeited its right to rule; it offers only war, poverty and starvation in the future for the majority of the world’s people; not to mention the horrific environmental destruction that accompanies it.
We stand for democratic socialism. We stand for the collective ownership of the means by which we produce consume and exchange the necessities of life that our collective Labor produces in our interaction with each other and with nature. We are opposed to the profit system and fight to end it. We want to work and join with others who feel the same. Contact us if you want to know more.
*No exit in sight as Fannie and Freddie Flail Wall Street Journal 2-09-10
All national institutions of churches, whether Jewish, Christian or Turkish, appear to me no other than human inventions, set up to terrify and enslave mankind, and monopolize power and profit. Thomas Paine
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