[Marxism] Subprime crisis

[Patrick Bond]

Louis Proyect wrote:
> (Posted to lbo-talk by Michael Pollak)
>
> This is a very short, very clear 

Michael, this praise is unworthy of you, especially use of 'clear': that 
giveaway word that you are about to be bullshitted by an economist. 
There's nothing 'clear' about the kinds of correlations made in this 
infantile paper: to equity prices, current account deficits, GDP 
stagnation, public debt... there are so many multicollinearity problems 
here it's hard to know where to start. And so where are the *crucial* 
factors that have pulled reinvestable resources out of value circulation 
and into financial speculation? Declining rates of profit in 
manufacturing; the rise of inventories and general overaccumulation of 
fixed capital; political power shifts that give higher rates of return 
to finance via monetarism; stagnant wages that generate consumer 
pressure for credit innovation; new unregulated financial instruments; 
etc. etc.

> there have been 18 big banking crisis in advanced industrial
> countries.
>   

Does that tell you anything about the respect Rogoff - former IMF chief 
economist - has for middle-income countries? Here's the sort of logic 
that you get from this lad: "While much praised at the time, 1970s 
petro-dollar recycling ultimately led to the 1980s debt crisis, which in 
turn placed enormous strain on money center banks." So the problem that 
in the process of working out the debt, more Third World people died 
early than - my educated guess - were killed by Hitler and Stalin put 
together, deserves not a remark here.

Here's their excuse: "In order to focus here on data most relevant to 
present U.S.situation, we do not consider the plethora of emerging 
market crises, nor industrialized country financial crises from the 
Great Depression or the 1800s." Pathetic. Much better from the 
mainstream is Barry Eichengren's 2000 study for the World Bank, which 
put all the debt cycles in historical perspective, at least.

> The only difference is that this time we recycled the
> money to a developing country in the US, namely the subprime borrowers.
> But the effect on the banks was the same.
>   

Oh come on, pretty much *everyone* doing marxist work on finance these 
past couple of decades has made the point that the credit and portfolio 
investment system exacerbates uneven development whether within the US 
or globally.

It's junk like this paper that makes me grieve even more, that comrade 
Henwood has been so sanguine about financial crises... :-)