Capitalism on trial

[Joanne98]

The neoliberal dogmas that have dominated for more than 25 years are discredited, but they need to be replaced by more than proposals for re-regulating the banks.

THE WORLD financial system is in the grip of the most severe crisis since the Great Depression of the 1930s–and there’s worse to come, not only for the banks and speculators of Wall Street, but far beyond, in every part of the U.S., and around the globe.

The business world has been struck by a man-made earthquake, and people will be paying for this economic disaster for years to come in a number of ways–higher prices for food and other necessities, millions of foreclosures and evictions, greater unemployment, growing poverty, government programs cut back or eliminated, and rising tensions throughout society.

The claim will echo around the corporate media that this was the inevitable consequence of all Americans “living beyond their means.” Don’t believe it. The vast majority of people who will have to pay the price for this disaster are blameless. They did nothing wrong.

The crisis was caused by an irrational free-market system and the insatiable greed of a small class of rulers who continually seek greater wealth and power, without regard for the costs.

Wall Street’s meltdown is an indictment of the capitalist system, which has, once again, proven itself “unfit to rule,” as Karl Marx and Frederick Engels wrote more than 150 years ago.

The immensity of this crisis demands an alternative that goes far beyond new regulations on the banks and government interventions to save whichever band of corporate parasites is failing this week. Ultimately, it demands a vision of a different kind of society altogether–a socialist world dedicated to the principles of solidarity, democracy and liberation, rather than the wealth and power of a tiny minority.

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IT’S IMPOSSIBLE to exaggerate the scope of what has taken place in the financial world in the past several weeks. Scenarios that would have been dismissed as the fantasies of radical doomsayers a month ago now appear as accepted fact on the front pages of newspapers like the Wall Street Journal.

The latest previously inconceivable turn of events–latest, as of Thursday afternoon, when this article was being written, but that doesn’t mean it will last the week, much less the month–was the U.S. government’s effective nationalization of the largest insurance company in the world, American Insurance Group (AIG).

When desperate efforts by Treasury Department and Federal Reserve Bank officials to find a private-sector rescuer for AIG failed, the government stepped in with an $85 billion loan, payable over two years, in return for effective control of the company.

Set together with the takeover of mortgage giants Fannie Mae and Freddie Mac less than 10 days before, the U.S. government–that neoliberal scourge of nationalization in other countries–now owns the two largest mortgage companies and the single largest insurance company in the world.

Why, you might wonder, is an insurance company like AIG on the verge of bankruptcy because of a crisis associated with the bursting of the housing bubble and the resulting foreclosures on sub-prime mortgages?

Good question.

AIG got into trouble almost entirely because of an obscure part of its business–selling what are called “credit default swaps,” which amount to an insurance policy on investments in bonds. Basically, AIG was selling financial protection to investors and companies that bought bonds–if the seller of those bonds defaulted on the promise to pay back the principal, plus interest, investors could cover their losses.

Credit default swaps are pretty much an invention of the last 10 years. Yet these financial insurance policies today may cover as much as $62 trillion worth of debt, according to estimates–greater, that is, than the total annual production of goods and services of every country of the world.

Continued>>>
http://dandelionsalad.wordpress.com/2008/09/22/capitalism-on-trial/

[OHdem10]

1. The Great Depression of the thirties was a FAILURE OF

CAPITALISM. The lesson then was "Unfettered Capitalism will ultimately
fail". In other words, Capitalism may be the best financial system
but it has to be regulated in order to succeed for a good society.

It was the Democratic Party who brought us through that crisis.
F.D. R saved Democracy and saved Capitalism

It is too bad many in our Democratic Party drank that Kool-Aid
of the Right. Forgetting one's heritage always leads to problems.