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Here’s How to Fix the Wall Street Mess …from Michael Moore

Alex,10,told his Dad that he was interested in camels.His Dad gave him a book.About two weeks later Dad asked Alex what he thought of the book
Alex said ‘Well it’s like this Dad.This book tells me more about camels than I ever wanted to know’

I hope that you do’nt feel the same way about this mailing list and the crisis!!

Friends,
The richest 400 Americans — that’s right, just four hundred people — own MORE than the bottom 150 million Americans combined. 400 rich Americans have got more stashed away than half the entire country! Their combined net worth is $1.6 trillion. During the eight years of the Bush Administration, their wealth has increased by nearly $700 billion — the same amount that they are now demanding we give to them for the “bailout.” Why don’t they just spend the money they made under Bush to bail themselves out? They’d still have nearly a trillion dollars left over to spread amongst themselves!
Of course, they are not going to do that — at least not voluntarily. George W. Bush was handed a $127 billion surplus when Bill Clinton left office. Because that money was OUR money and not his, he did what the rich prefer to do — spend it and never look back. Now we have a $9.5 trillion debt. Why on earth would we even think of giving these robber barons any more of our money?
I would like to propose my own bailout plan. My suggestions, listed below, are predicated on the singular and simple belief that the rich must pull themselves up by their own platinum bootstraps. Sorry, fellows, but you drilled it into our heads one too many times: There… is… no… free… lunch. And thank you for encouraging us to hate people on welfare! So, there will be no handouts from us to you. The Senate, tonight, is going to try to rush their version of a “bailout” bill to a vote. They must be stopped. We did it on Monday with the House, and we can do it again today with the Senate.
It is clear, though, that we cannot simply keep protesting without proposing exactly what it is we think Congress should do. So, after consulting with a number of people smarter than Phil Gramm, here is my proposal, now known as “Mike’s Rescue Plan.” It has 10 simple, straightforward points. They are:
1. APPOINT A SPECIAL PROSECUTOR TO CRIMINALLY INDICT ANYONE ON WALL STREET WHO KNOWINGLY CONTRIBUTED TO THIS COLLAPSE. Before any new money is expended, Congress must commit, by resolution, to criminally prosecute anyone who had anything to do with the attempted sacking of our economy. This means that anyone who committed insider trading, securities fraud or any action that helped bring about this collapse must go to jail. This Congress must call for a Special Prosecutor who will vigorously go after everyone who created the mess, and anyone else who attempts to scam the public in the future.
2. THE RICH MUST PAY FOR THEIR OWN BAILOUT. They may have to live in 5 houses instead of 7. They may have to drive 9 cars instead of 13. The chef for their mini-terriers may have to be reassigned. But there is no way in hell, after forcing family incomes to go down more than $2,000 dollars during the Bush years, that working people and the middle class are going to fork over one dime to underwrite the next yacht purchase.
If they truly need the $700 billion they say they need, well, here is an easy way they can raise it:
a) Every couple who makes over a million dollars a year and every single taxpayer who makes over $500,000 a year will pay a 10% surcharge tax for five years. (It’s the Senator Sanders plan. He’s like Colonel Sanders, only he’s out to fry the right chickens.) That means the rich will still be paying less income tax than when Carter was president. This will raise a total of $300 billion.
b) Like nearly every other democracy, charge a 0.25% tax on every stock transaction. This will raise more than $200 billion in a year.
c) Because every stockholder is a patriotic American, stockholders will forgo receiving a dividend check for one quarter and instead this money will go the treasury to help pay for the bailout.
d) 25% of major U.S. corporations currently pay NO federal income tax. Federal corporate tax revenues currently amount to 1.7% of the GDP compared to 5% in the 1950s. If we raise the corporate income tax back to the level of the 1950s, that gives us an extra $500 billion.
All of this combined should be enough to end the calamity. The rich will get to keep their mansions and their servants, and our United States government (“COUNTRY FIRST!”) will have a little leftover to repair some roads, bridges and schools.
3. BAIL OUT THE PEOPLE LOSING THEIR HOMES, NOT THE PEOPLE WHO WILL BUILD AN EIGHTH HOME. There are 1.3 million homes in foreclosure right now. That is what is at the heart of this problem. So instead of giving the money to the banks as a gift, pay down each of these mortgages by $100,000. Force the banks to renegotiate the mortgage so the homeowner can pay on its current value. To insure that this help does no go to speculators and those who have tried to make money by flipping houses, this bailout is only for people’s primary residence. And in return for the $100K paydown on the existing mortgage, the government gets to share in the holding of the mortgage so that it can get some of its money back. Thus, the total initial cost of fixing the mortgage crisis at its roots (instead of with the greedy lenders) is $150 billion, not $700 billion.
And let’s set the record straight. People who have defaulted on their mortgages are not “bad risks.” They are our fellow Americans, and all they wanted was what we all want and most of us still get: a home to call their own. But during the Bush years, millions of them lost the decent paying jobs they had. Six million fell into poverty. Seven million lost their health insurance. And every one of them saw their real wages go down by $2,000. Those who dare to look down on these Americans who got hit with one bad break after another should be ashamed. We are a better, stronger, safer and happier society when all of our citizens can afford to live in a home that they own.
4. IF YOUR BANK OR COMPANY GETS ANY OF OUR MONEY IN A “BAILOUT,” THEN WE OWN YOU. Sorry, that’s how it’s done. If the bank gives me money so I can buy a house, the bank “owns” that house until I pay it all back — with interest. Same deal for Wall Street. Whatever money you need to stay afloat, if our government considers you a safe risk — and necessary for the good of the country — then you can get a loan, but we will own you. If you default, we will sell you. This is how the Swedish government did it and it worked.
5. ALL REGULATIONS MUST BE RESTORED. THE REAGAN REVOLUTION IS DEAD. This catastrophe happened because we let the fox have the keys to the henhouse. In 1999, Phil Gramm authored a bill to remove all the regulations that governed Wall Street and our banking system. The bill passed and Clinton signed it. Here’s what Sen. Phil Gramm, McCain’s chief economic advisor, said at the bill signing:
“In the 1930s … it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets. “We are here today to repeal [that] because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom. “I am proud to be here because this is an important bill; it is a deregulatory bill. I believe that that is the wave of the future, and I am awfully proud to have been a part of making it a reality.”
This bill must be repealed. Bill Clinton can help by leading the effort for the repeal of the Gramm bill and the reinstating of even tougher regulations regarding our financial institutions. And when they’re done with that, they can restore the regulations for the airlines, the inspection of our food, the oil industry, OSHA, and every other entity that affects our daily lives. All oversight provisions for any “bailout” must have enforcement monies attached to them and criminal penalties for all offenders.
6. IF IT’S TOO BIG TO FAIL, THEN THAT MEANS IT’S TOO BIG TO EXIST. Allowing the creation of these mega-mergers and not enforcing the monopoly and anti-trust laws has allowed a number of financial institutions and corporations to become so large, the very thought of their collapse means an even bigger collapse across the entire economy. No one or two companies should have this kind of power. The so-called “economic Pearl Harbor” can’t happen when you have hundreds — thousands — of institutions where people have their money. When you have a dozen auto companies, if one goes belly-up, we don’t face a national disaster. If you have three separately-owned daily newspapers in your town, then one media company can’t call all the shots (I know… What am I thinking?! Who reads a paper anymore? Sure glad all those mergers and buyouts left us with a strong and free press!). Laws must be enacted to prevent companies from being so large and dominant that with one slingshot to the eye, the giant falls and dies. And no institution should be allowed to set up money schemes that no one can understand. If you can’t explain it in two sentences, you shouldn’t be taking anyone’s money.
7. NO EXECUTIVE SHOULD BE PAID MORE THAN 40 TIMES THEIR AVERAGE EMPLOYEE, AND NO EXECUTIVE SHOULD RECEIVE ANY KIND OF “PARACHUTE” OTHER THAN THE VERY GENEROUS SALARY HE OR SHE MADE WHILE WORKING FOR THE COMPANY. In 1980, the average American CEO made 45 times what their employees made. By 2003, they were making 254 times what their workers made. After 8 years of Bush, they now make over 400 times what their average employee makes. How this can happen at publicly held companies is beyond reason. In Britain, the average CEO makes 28 times what their average employee makes. In Japan, it’s only 17 times! The last I heard, the CEO of Toyota was living the high life in Tokyo. How does he do it on so little money? Seriously, this is an outrage. We have created the mess we’re in by letting the people at the top become bloated beyond belief with millions of dollars. This has to stop. Not only should no executive who receives help out of this mess profit from it, but any executive who was in charge of running his company into the ground should be fired before the company receives any help.
8. STRENGTHEN THE FDIC AND MAKE IT A MODEL FOR PROTECTING NOT ONLY PEOPLE’S SAVINGS, BUT ALSO THEIR PENSIONS AND THEIR HOMES. Obama was correct yesterday to propose expanding FDIC protection of people’s savings in their banks to $250,000. But this same sort of government insurance must be given to our nation’s pension funds. People should never have to worry about whether or not the money they’ve put away for their old age will be there. This will mean strict government oversight of companies who manage their employees’ funds — or perhaps it means that the companies will have to turn over those funds and their management to the government. People’s private retirement funds must also be protected, but perhaps it’s time to consider not having one’s retirement invested in the casino known as the stock market. Our government should have a solemn duty to guarantee that no one who grows old in this country has to worry about ending up destitute.
9. EVERYBODY NEEDS TO TAKE A DEEP BREATH, CALM DOWN, AND NOT LET FEAR RULE THE DAY. Turn off the TV! We are not in the Second Great Depression. The sky is not falling. Pundits and politicians are lying to us so fast and furious it’s hard not to be affected by all the fear mongering. Even I, yesterday, wrote to you and repeated what I heard on the news, that the Dow had the biggest one day drop in its history. Well, that’s true in terms of points, but its 7% drop came nowhere close to Black Monday in 1987 when the stock market in one day lost 23% of its value. In the ’80s, 3,000 banks closed, but America didn’t go out of business. These institutions have always had their ups and downs and eventually it works out. It has to, because the rich do not like their wealth being disrupted! They have a vested interest in calming things down and getting back into the Jacuzzi.
As crazy as things are right now, tens of thousands of people got a car loan this week. Thousands went to the bank and got a mortgage to buy a home. Students just back to college found banks more than happy to put them into hock for the next 15 years with a student loan. Life has gone on. Not a single person has lost any of their money if it’s in a bank or a treasury note or a CD. And the most amazing thing is that the American public hasn’t bought the scare campaign. The citizens didn’t blink, and instead told Congress to take that bailout and shove it. THAT was impressive. Why didn’t the population succumb to the fright-filled warnings from their president and his cronies? Well, you can only say ‘Saddam has da bomb’ so many times before the people realize you’re a lying sack of shite. After eight long years, the nation is worn out and simply can’t take it any longer.
10. CREATE A NATIONAL BANK, A “PEOPLE’S BANK.” If we really are itching to print up a trillion dollars, instead of giving it to a few rich people, why don’t we give it to ourselves? Now that we own Freddie and Fannie, why not set up a people’s bank? One that can provide low-interest loans for all sorts of people who want to own a home, start a small business, go to school, come up with the cure for cancer or create the next great invention. And now that we own AIG, the country’s largest insurance company, let’s take the next step and provide health insurance for everyone. Medicare for all. It will save us so much money in the long run. And we won’t be 12th on the life expectancy list. We’ll be able to have a longer life, enjoying our government-protected pension, and living to see the day when the corporate criminals who caused so much misery are let out of prison so that we can help reacclimate them to civilian life — a life with one nice home and a gas-free car that was invented with help from the People’s Bank.
Yours,
Michael Moore
Here’s a backup link in case we crash that site again. They are going to attempt their own version of the Looting of America tonight. And let your reps know if you agree with my 10-point plan.

The Big Bang model that blew up in our faces

By Philip Augar

Published: September 28 2008 19:56
Last updated: September 28 2008 19:56

The grisly end of Bradford & Bingley casts a different light on the deregulation of Britain’s financial services industry in 1986. That was the year when the Big Bang ushered in the Americanisation of the City and the first Building Societies Act opened the door to friendly society demutualisations.
For many years the success of this deregulation has been taken for granted and was the subject of much backslapping on its 20th anniversary. But the consequences of those reforms, especially the introduction of aggressive financial techniques and the replacement of benign mutual ownership with hard-driven shareholder value are the underlying cause of the implosion of Britain’s mortgage banks over the past year. This event is the visible fault line of a broken financial system. It is of such profound significance that it requires a re-assessment of deregulation, the business model it created and the governance it needs.
The Big Bang was not just about the ending of restrictive practices on the stock exchange. It marked the start of a new era of non-intervention by government and gave the green light to market forces. Shareholder value became the sole yardstick by which businesses were judged. Shareholders became more outspoken in their criticism of management and less tolerant of under-performance. During two decades of anything-goes management, chief executives in all sectors explored every conceivable avenue to grow earnings per share including share buy-backs, buy-outs, mergers, leverage and financial engineering.
They were egged on by the investment banks. These financial institutions became so profitable and powerful that they were able to buy in the very best talent to dream up and sell innovative new products. It was an unequal contest between fast-talking investment bankers with almost limitless resources and chief executives under pressure from shareholders to match the fastest growth rates in the market. With governments on both sides of the Atlantic and both sides of the political divide standing back from intervention and regulators vying for the Lightest Touch crown, the influence of transaction-oriented investment banks swelled.
In the UK the first casualties were the City’s home-grown investment banks that lasted little more than a decade before being squeezed out by powerful competitors from Wall Street. In a macabre twist, it now seems fortunate that Britain’s major banks were not up to their necks in investment banking in 2008: the mind boggles at the wounds they might have inflicted on themselves and the national economy in today’s circumstances.
But just as the British investment and clearing banks were getting out of the investment banking space, we now know that trouble was brewing elsewhere in the financial services sector. A second Building Societies Act in 1997 triggered a wave of demutualisations that year, including Alliance & Leicester, Halifax and Northern Rock, and Bradford & Bingley three years later.
The timing was unfortunate. The individuals running these banks ran slap bang into financialisation in its pomp. “Originate and distribute” banking was all the rage. The investment bankers claimed to have “transformed risk” through their credit derivatives, off-balance sheet vehicles and securitisations. Governments and regulators were easing off the brakes in respect of capital adequacy, disclosure and intervention. Hedge funds moved shareholder activism from a minority pursuit practised by maverick raiders to a mainstream activity and companies could not afford to slip. Benign economic conditions and low interest rates encouraged leverage and risk-taking.
All of this happened while the chief executives of Britain’s mortgage banks were finding their feet as listed businesses. They saw other financial institutions including the investment banks themselves growing earnings through aggressive financing schemes and their shareholders pressed them to do the same. New banking regulations offered maximum flexibility and national regulators seemed unconcerned.
Britain’s mortgage banks changed their business model and become heavily reliant on wholesale banking and securitisation. It was a mile away from the original friendly society model that lent out only what the members had deposited. It was high risk and high reward and its demise asks fundamental questions of the deregulated, free-market system that allowed it to happen.
The writer was group managing director securities at Schroders and is the author of The Greed Merchants and other books. His new book Chasing Alpha will be published by Bodley Head in the new year

The Sky is Falling in!

Friends,
Everyone said the bill would pass. The masters of the universe were already making celebratory dinner reservations at Manhattan’s finest restaurants. Personal shoppers in Dallas and Atlanta were dispatched to do the early Christmas gifting. Mad Men of Chicago and Miami were popping corks and toasting each other long before the morning latte run.
But what they didn’t know was that hundreds of thousands of Americans woke up yesterday morning and decided it was time for revolt. The politicians never saw it coming. Millions of phone calls and emails hit Congress so hard it was as if Marshall Dillon, Elliot Ness and Dog the Bounty Hunter had descended on D.C. to stop the looting and arrest the thieves.
The Corporate Crime of the Century was halted by a vote of 228 to 205. It was rare and historic; no one could remember a time when a bill supported by the president and the leadership of both parties went down in defeat. That just never happens.
A lot of people are wondering why the right wing of the Republican Party joined with the left wing of the Democratic Party in voting down the thievery. Forty percent of Democrats and two-thirds of Republicans voted against the bill.
Here’s what happened:
The presidential race may still be close in the polls, but the Congressional races are pointing toward a landslide for the Democrats. Few dispute the prediction that the Republicans are in for a whoopin’ on November 4th. Up to 30 Republican House seats could be lost in what would be a stunning repudiation of their agenda.
The Republican reps are so scared of losing their seats, when this “financial crisis” reared its head two weeks ago, they realized they had just been handed their one and only chance to separate themselves from Bush before the election, while doing something that would make them look like they were on the side of “the people.”
Watching C-Span yesterday morning was one of the best comedy shows I’d seen in ages. There they were, one Republican after another who had backed the war and sunk the country into record debt, who had voted to kill every regulation that would have kept Wall Street in check — there they were, now crying foul and standing up for the little guy! One after another, they stood at the microphone on the House floor and threw Bush under the bus, under the train (even though they had voted to kill off our nation’s trains, too), heck, they would’ve thrown him under the rising waters of the Lower Ninth Ward if they could’ve conjured up another hurricane. You know how your dog acts when sprayed by a skunk? He howls and runs around trying to shake it off, rubbing and rolling himself on every piece of your carpet, trying to get rid of the stench. That’s what it looked like on the Republican side of the aisle yesterday, and it was a sight to behold.
The 95 brave Dems who broke with Barney Frank and Chris Dodd were the real heroes, just like those few who stood up and voted against the war in October of 2002. Watch the remarks from yesterday of Reps. Marcy Kaptur, Sheila Jackson Lee, and Dennis Kucinich. They spoke the truth.
The Dems who voted for the giveaway did so mostly because they were scared by the threats of Wall Street, that if the rich didn’t get their handout, the market would go nuts and then it’s bye-bye stock-based pension and retirement funds.
And guess what? That’s exactly what Wall Street did! The largest, single-day drop in the Dow in the history of the New York Stock exchange. The news anchors last night screamed it out: Americans just lost 1.2 trillion dollars in the stock market!! It’s a financial Pearl Harbor! The sky is falling! Bird flu! Killer Bees!
Of course, sane people know that nobody “lost” anything yesterday, that stocks go up and down and this too shall pass because the rich will now buy low, hold, then sell off, then buy low again.
But for now, Wall Street and its propaganda arm (the networks and media it owns) will continue to try and scare the bejesus out of you. It will be harder to get a loan. Some people will lose their jobs. A weak nation of wimps won’t last long under this torture. Or will we? Is this our line in the sand?
Here’s my guess: The Democratic leadership in the House secretly hoped all along that this lousy bill would go down. With Bush’s proposals shredded, the Dems knew they could then write their own bill that favors the average American, not the upper 10% who were hoping for another kegger of gold.
So the ball is in the Democrats’ hands. The gun from Wall Street remains at their head. Before they make their next move, let me tell you what the media kept silent about while this bill was being debated:
1. The bailout bill had NO enforcement provisions for the so-called oversight group that was going to monitor Wall Street’s spending of the $700 billion;
2. It had NO penalties, fines or imprisonment for any executive who might steal any of the people’s money;
3. It did NOTHING to force banks and lenders to rewrite people’s mortgages to avoid foreclosures — this bill would not have stopped ONE foreclosure!;
4. It had NO teeth anywhere in the entire piece of legislation, using words like “suggested” when referring to the government being paid back for the bailout;
5. Over 200 economists wrote to Congress and said this bill might actually WORSEN the “financial crisis” and cause even MORE of a meltdown.
Put a fork in this slab of pork. It’s over. Now it is time for our side to state very clearly the laws WE want passed. I will send you my proposals later today. We’ve bought ourselves less than 72 hours.
Yours,
Michael Moore

Bail Out Blues

Wall Street has polluted the economy with toxic mortgages. It should pay for the cleanup
All comments (1)

Joseph Stiglitz
guardian.co.uk,

Tuesday September 30 2008 10:34 BST
Article history

It doesn’t take a genius to figure out that the United States’ financial system – indeed, global finance – is in a mess. And now, with the US House of Representatives having rejected the Bush administration’s proposed $700bn bail-out plan, it is also obvious that there is no consensus on how to fix it.
The problems in the US economy and financial system have been apparent for years. But that didn’t prevent America’s leaders from turning to the same people who helped create the mess, who didn’t see the problems until they brought us to the brink of another Great Depression, and who have been veering from one bail-out to another, to rescue us.
As global markets plummet, the rescue plan will almost certainly be put to another vote in Congress. They may rescue Wall Street, but what about the economy? What about taxpayers, already beleaguered by unprecedented deficits, and with bills still to pay for decaying infrastructure and two wars? In such circumstances, can any bail-out plan work?
To be sure, the rescue plan that was just defeated was far better than what the Bush administration originally proposed. But its basic approach remained critically flawed. First, it relied – once again – on trickle-down economics: somehow, throwing enough money at Wall Street would trickle down to Main Street, helping ordinary workers and homeowners. Trickle-down economics almost never works, and it is no more likely to work this time.
Moreover, the plan assumed that the fundamental problem was one of confidence. That is no doubt part of the problem; but the underlying problem is that financial markets made some very bad loans. There was a housing bubble, and loans were made on the basis of inflated prices.
That bubble has burst. House prices probably will fall further, so there will be more foreclosures, and no amount of talking up the market is going to change that. The bad loans, in turn, have created massive holes in banks’ balance sheets, which have to be repaired. Any government bail-out that pays fair value for these assets will do nothing to repair that hole. On the contrary, it would be like providing massive blood transfusions to a patient suffering from vast internal hemorrhaging.
Even if a bail-out plan were implemented quickly – which appears increasingly unlikely – there would be some credit contraction. The US economy has been sustained by a consumption boom fueled by excessive borrowing, and that will be curtailed. States and localities are cutting back expenditures. Household balance sheets are weaker. An economic slowdown will exacerbate all our financial problems.
We could do more with less money. The holes in financial institutions’ balance sheets should be filled in a transparent way. The Scandinavian countries showed the way two decades ago. Warren Buffet showed another way, in providing equity to Goldman Sachs. By issuing preferred shares with warrants (options), one reduces the public’s downside risk and ensures that they participate in some of the upside potential.
This approach is not only proven, but it also provides both the incentives and wherewithal needed for lending to resume. It avoids the hopeless task of trying to value millions of complex mortgages and the even more complex financial products in which they are embedded, and it deals with the “lemons” problem – the government gets stuck with the worst or most overpriced assets. Finally, it can be done far more quickly.
At the same time, several steps can be taken to reduce foreclosures. First, housing can be made more affordable for poor and middle-income Americans by converting the mortgage deduction into a cashable tax credit. The government effectively pays 50% of the mortgage interest and real estate taxes for upper-income Americans, yet does nothing for the poor. Second, bankruptcy reform is needed to allow homeowners to write down the value of their homes and stay in their houses. Third, government could assume part of a mortgage, taking advantage of its lower borrowing costs.
By contrast, US treasury secretary Henry Paulson’s approach is another example of the kind of shell games that got America into its mess. Investment banks and credit rating agencies believed in financial alchemy – the notion that significant value could be created by slicing and dicing securities. The new view is that real value can be created by un-slicing and un-dicing – pulling these assets out of the financial system and turning them over to the government. But that requires overpaying for the assets, benefiting only the banks.
In the end, there is a high likelihood that if such a plan is ultimately adopted, American taxpayers will be left on the hook. In environmental economics, there is a basic principle, called “the polluter pays principle.” It is a matter of both equity and efficiency. Wall Street has polluted the economy with toxic mortgages. It should pay for the cleanup.
There is a growing consensus among economists that any bail-out based on Paulson’s plan won’t work. If so, the huge increase in the national debt and the realisation that even $700 billion is not enough to rescue the US economy will erode confidence further and aggravate its weakness.
But it is impossible for politicians to do nothing in such a crisis. So we may have to pray that an agreement crafted with the toxic mix of special interests, misguided economics, and right-wing ideologies that produced the crisis can somehow produce a rescue plan that works – or whose failure doesn’t do too much damage.
Getting things right – including a new regulatory system that reduces the likelihood that such a crisis will recur – is one of the many tasks to be left to the next administration.
In cooperation with Project Syndicate, 2008.

The great crash of 2008

James Buchan
Published 25 September 2008
The world’s financial institutions are gripped by fear, yet policymakers can do nothing. They are ignorant of how banks now work and have to take poacher-turned-gamekeeper Henry Paulson at his word

Of all the phantoms conjured from the financial depths in the past ten days, the most ghastly appeared on the dark Wednesday, 17 September, when interest on the short-term obligations of the United States government, the one-month Treasury bill, turned negative and became a penalty. Such terror had overtaken the markets that they were willing to suffer a loss on their money in the hope that, in the deep bosom of the US Treasury, some of it would be kept safe.

Yet the terror of that day was not just to do with loss: money lost, job gone, wife fled, house foreclosed, sailboat beached. It was an elemental panic, such as overran the financial markets on 19 October 1987, the day the Dow Jones Industrial Average fell 23 per cent. It was a recognition that the world is not as we have been told and that the conception of value that lies at the root of modern society is, and has always been, a fiction.
In this panic, there is no reality in the sense of actual existence to prices and Lehman Brothers Holdings can be worth $15bn on Monday and nothing at the weekend. The world is held together only by instances of agreement between two or more people. It is an education that everybody should pass through, and my generation has done so twice, in 1987 and 2008. It is as if the gods of financial markets have been reading Hegel, and learnt that “through repetition, that which at the beginning appeared as merely accidental or possible, is confirmed as a reality”.
Not that governments are thinking much about Hegel. Like generals fighting their grandfathers’ wars, policymakers are haunted by the Depression of the 1930s, where a crash in financial markets was transformed by selfish national policies into a collapse in world trade, and unemployed men walked in droves from Sydney to Melborne, shooting rabbits for food.
Andrew Mellon, the former investment banker who was US treasury secretary at that time, thought to break value down to a sort of puritan or moral core. He is said to have burst out to President Hoover: “Liquidate labour, liquidate stocks, liquidate the farmers, liquidate real estate! It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”
His reincarnation, Henry Paulson (also once a star investment banker), has opted instead for expediency in which pure fear cuts through all moral entanglements. He has won over the administration and some supporters in Congress to his colossal plan to take $700bn or more of bad loans on to the Federal government’s books. It is the equivalent of the entire US budget for social security. In promoting his plan, Paulson said: “I am convinced that this bold approach will cost American families far less than the alternative – a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion. The financial security of all Americans . . . depends on our ability to restore our financial institutions to a sound footing.”
Ben Bernanke, chairman of the Federal Res erve, was crisper: “There are no atheists in foxholes and no ideologues in financial crises.”
In effect, the US public will recapitalise the silly bankers at a cost of perhaps $2,000 per American adult and child, maybe much more, maybe much less. In Britain, the authorities are reluctant to wield what Paulson calls the “bazooka”, trying to ensure instead that the banks continue to do business with one another. Banks, under the so-called special liquidity scheme, can shore up their creditworthiness by exchanging their questionable mortgage securities for Treasury bills, securities that carry the faith and credit of the UK, which has never failed.
Already, £100bn has been drawn and nobody knows how much more will be required for both schemes. In truth, bankers have little clue now what they have (assets) or what they owe (liabilities). AIG, the insurance group that all but bankrupted itself insuring bank loans against default, asked the US authorities at the weekend of 13-14 September for $20bn, then for $40bn and finally $85bn.
What are we to make of a banking business that must be recapitalised by the public every generation? That, like the nuclear power industry, holds a gun to the public head two or three times each lifetime? And in the intervening periods treats the public like poor relations?
In all the commentary on the crisis, certain facts have been thought too elementary for consideration, so I shall consider them. The first is this: the business of banking is not profitable (as you have been told) but miserably unprofitable. It is this unprofitability rather than the idiocy or wickedness of bankers that makes the enterprise so unstable. The arrogance of bankers, their extravagant rewards and public philanthropy, are the abstract counterparts of the massive architraves and pediments of the old bank architecture, such as the Barclays Bank headquarters in Norwich. How could they not be safe as houses?
The fundamental business of taking in money and putting it out again earns a wafer-thin interest margin and will only keep bankers in luxury if it is conducted on a colossal scale. Even the most prudent banks borrow ten times their own capital, while investment banks (who do not take deposits from the public) borrow very much more: Lehman Brothers 30 times, and even the respectable Goldman Sachs 22 times. At that extent of what is known in the US as leverage, a small fall in values wipes out the bank’s capital, leaving its lenders exposed to loss, and their lenders likewise in a daisy chain of failure. Commercial banks are not well-managed institutions and investment banks (with the exception, it is said, of Goldman Sachs) are not managed, in the industrial sense, at all. An unsupervised trader can wipe out a bank’s entire capital, as in 1995 at Baring Brothers, or so terrify management that they reverse his trades at fire-sale prices, as at Société Générale last February.
Even at that level of leverage, profitability is still too low and banks have sought ways to ex pand their lending through various legal and quasi-legal means. (J K Galbraith used to say that as the speculative waters subside, all manner of crimes are revealed to an astonished public view.)
In a regulatory filing, AIG made no secret that some of its credit insurance instruments were designed to help banks evade restrictions on their lending. Another tactic was to combine packets of loans into interest-bearing securities and sell them on to other investors. This allowed banks to replenish their funds and originate more loans, but at the risk of spreading the default far and wide – which is why bad debts in run-down cities in the Midwest affected investors in London, Frankfurt and Tokyo.
Too many banks
The second point follows from that. The banking system is not undercapitalised for the ordinary purposes of trade, as Paulson would have us believe, but overcapitalised to the point of obesity. A brief walk down the high street of a county town reveals that. It was the genius of the short-sellers, or bears, to recognise that there are far too many banks and bankers for the use of the public – and for this insight, like Cassandra, they are hated and shunned. Paulson wants to maintain the banking industry in its bloated condition for fear that an orderly reduction in banking will turn into a rout. We will then be plunged back into the days of the Hoover administration, when 11,000 banks closed their doors for ever and business simply stopped. Yet Paulson’s attempt to maintain the banking system at the extent or level of 2005 or 2006 may not be successful.
The reason is that the run on the banks which started at Northern Rock in Newcastle in September 2007 has unfolded at a time of rising, not falling, incomes and profits. The last phase of mortgage lending in the US and UK, and also in countries such as Spain and Ireland, was never likely to be repaid even in golden days. In the ordinary rhythm of trade and business, business activity will eventually contract or already is contracting. As industrial companies fall into loss and individuals lose their jobs, debts of a more solid character than 110 per cent loan-to-value mortgages will fall into arrears. Unable to raise capital in the markets, banks will once more need public support, or will fail. The Paulson “bazooka” and the swap arrangements at the Bank of Eng land may expand to the point when they impair the credit of the nation, expressed in its currency’s exchange-rate. And what of poorer or less sophisticated countries who are also unable to borrow? While all eyes have been on London and New York, the Russian stock market has halved. This is the nightmare of the 1930s where the engine of world trade simply peters out.
Yet policymakers are constrained by their ignorance of financial markets, have no ideas of their own, and must take the poacher-turned-gamekeeper Paulson at his word. In Britain, new Labour shed its ancestral scepticism of the City more comprehensively than, say, the reformed German Social Democrats. As the intoxication recedes, Labour must recall in hot flushes its excruciating naivety. Peter Mandelson’s “We are intensely relaxed about people getting filthy rich” is as embarrassing as Gordon Brown’s hero-worship of the US central banker, Alan Greenspan, whose stock has fallen faster than Lehman Brothers common.
Yet if the financial chaos spreads out into the tangible world of job centres and shuttered factories and empty office blocks – a world where men and women, unlike bankers, must live with the consequences of their folly – politicians will demand their pound of flesh. In the US, both presidential candidates Barack Obama and John McCain are mining a popular hatred of the East Coast money men that goes back deep into the 19th century. They will place restrictions on bank lending and securities underwriting just at the point where there is no lending or underwriting of securities. Bowing to the winds of change, both Goldman Sachs and Morgan Stanley have abandoned their privileged position as investment banks and submitted to regulation by the Federal Reserve, right there alongside First Farmers & Merchants of South Succotash with its 600 checking accounts.
William McChesney Martin, the Federal Reserve chairman in the 1950s and 1960s, used to say that the job of the central banker is “to take away the punch bowl just as the party gets going”. Greenspan, who at two decades at the Federal Reserve accommodated the banks in all they required, conspicuously failed to do so. In these circumstances, there will be a call for returning central banks to political control. Margaret Thatcher always opposed independence of the Bank of England, because it seemed to her an admission of political failure. She also doubted – and even her enemies would not disagree – “whether we had people of the right calibre to run such an institution”. These central banks, once returned to political control, will find it hard to resist a little inflation to lighten the burden of public and private debt.
The melancholy aspect of the crisis lies not in the humbling of proud men such as Dick Fuld of Lehman Brothers or Greenspan himself, but in our ignorance. An entire epoch of finance passes in which we lived, but did not understand. Truly, as Hegel said, philosophy comes too late to teach the world how it should be, and Minerva’s owl begins her flight into gathering darkness.
James Buchan is the author of “Frozen Desire: an Inquiry into the Meaning of Money” (1997)

Michael Moore’s new film for free

Friends,

This is it. The time has arrived! At midnight tonight, you can be one of the first people ever to legally download, for FREE, a brand new, feature-length film. It’s my new movie, “Slacker Uprising,” ( http://slackeruprising.com/ ) and I’m giving it to you as a gift of thanks for coming to my films over the 20 years I’ve been a filmmaker. It’s also one of my contributions to help get out the vote November 4th. That’s why I’m giving you my blanket permission to not only download it, but also to email it, burn it, and share it with anyone and everyone (in the U.S. and Canada only). I want you to use “Slacker Uprising” in any way you see fit to help with the election or to do the work that you do in your community. You can show my film in your local theater, your high school classroom, your college auditorium, your church, union hall or community center. You can have your friends and neighbors over to the house for a viewing. You can broadcast it on TV, on cable access, on regular channels or on the web. It’s completely free — I don’t want to see a dime from this. And if you want, you can charge admission or ask for a donation if it’s to raise money for a candidate, a voter drive, or for any non-profit or educational purpose. In other words — it’s yours!

“Slacker Uprising” chronicles the 62-city tour I did leading up to the 2004 election. It is electrifying to see the tens of thousands of young people who were ready then for the uprising –and who, this year, are actually making it happen. This is my concert film tribute to the young voters who are going to save this country from four more years of Republican rule.

There are a number of ways, beginning at midnight tonight, that you can download or stream “Slacker Uprising” thanks to our distributor, Brave New Films ( http://bravenewfilms.org/ ):

1) Blip.tv will provide standard resolution streaming, free of commercials and advertising
2) Amazon Video on Demand will provide a high quality version of the above stream
3) iTunes will make it easy for you to download “Slacker Uprising” on your iTunes, iPod, or Apple TV, and view it there or transmit it to your television. This way, the film can be portable as well as for home viewing.
4) Hypernia is providing bandwidth, servers and management to host “Slacker Uprising” online, so you can download the film and view it at any time or burn it onto a DVD.

I am fortunate to have all these great people bringing you my movie for free. There will be no ads and they have all agreed to supply their services free of charge. All of them wanted to be part of this historic moment when the first major feature-length movie is being released for free on the internet.

(For those of you who don’t download, there will be a low-cost DVD available: http://slackeruprising.com/buy.php )

This past Thursday we held the world premiere of “Slacker Uprising” in Ann Arbor (you can read about it here: > http://www.michaelmoore.com/words/mikeinthenews/index.php?id=12277 ). The response was incredible and I want to encourage you to screen this movie with large groups. I believe it will inspire our get-out-the-vote efforts at a time when we need to get millions registered ( https://www.voteforchange.com/ ) in the next two weeks.

Thanks again for all your support over the years. I hope you’ll like my new film. It’s all yours, anytime after midnight tonight. Enjoy!

Yours,
Michael Moore
MMFlint@aol.com
http://slackeruprising.com/
http://www.michaelmoore.com/

P.S. I’ll be doing a live chat, tonight at 11:00 PM ET, on Daily Kos (http://www.dailykos.com/story/2008/9/21/225040/528/97/606029 ), in the hour countdown leading up to the internet release of my film.

Hope to see you online!

Join Mike’s Mailing List ( http://www.michaelmoore.com/mikesmailinglist/index.php )
Join Mike’s Facebook Group ( http://www.new.facebook.com/pages/Michael-Moore/24674986856 )
Become Mike’s MySpace Friend ( http://www.myspace.com/mmflint )

Keir Starmer QC

Keir has spoken many times to the NCLG and CLGs and had agreed to speak at the 2009 Conference before this was announced.We congratulate him on his appointment and we can look forward to a peroid when human rights will be respected.You may recall that the previous incumbent Ken Macdonald spoke out against the 42 day extension for the holding of terrorist suspects

CONFERENCE 2009

SOME OF YOU HAVE ALREADY OFFERED TO SPEAK AT THE 2009 CONFERENCE- see www.nclg.org.uk for initial details-

WE WOULD LIKE MORE SPEAKERS. PLEASE LET ME (img@kent.ac.uk) KNOW IF YOU WILL SPEAK AND THE PROVISIONAL TITLE OF THE TALK

‘Keir Starmer has an ability to motivate and is not easily cowed. If there is a row with the government he will fight his corner’ The next director of public prosecutions is a QC with a passion for human rights.

Stephen Bates
Friday August 1 2008
The Guardian
It did not take long after last week’s announcement that the human rights barrister Keir Starmer QC is to be the next director of public prosecutions from this autumn for the bloggers to start commenting. “Another soft, liberal, human rights lefty when the country is crying out for tough leadership,” asserted one, as if the two were incompatible. “It will be easy street for the offenders,” claimed another. A third – all the way from New Zealand – pronounced: “Another catastrophe befalls the country.”Just as well, perhaps, they did not realise that Starmer was named by his solidly Labour-supporting parents in the heart of commuter-belt Surrey after that founding socialist hero Keir Hardie. “It’s one of those names you hate when you’re growing up,” says Starmer. “But you grow to appreciate later.”There is another, legal, view. Starmer, 45, is one of the brightest lawyers of his generation. With the air of a cavalry officer or a city gent in the words of one who knows him, floppy-haired and square-jawed, he has been one of the key developers and interpreters of human rights legislation in recent years. He is a Labour supporter, but not a bleeding heart liberal of the bloggers’ imaginings. Starmer is a barrister – QC for the last six years and joint head of the Doughty Street chambers – who has fought high-profile human rights cases, including litigation he will now have to give up on behalf of the widow of Alexander Litvinenko, but he is also an adviser to the policing board of Northern Ireland, the Association of Chief Police Officers and sporting organisations as diverse as the Jockey Club and the Football Association (he is a passionate Arsenal supporter and plays football for north London teams twice a week).The point is, says his colleague Gavin Millar QC, Starmer’s motivation is to establish concern for human rights at the heart of the legal system. “We both came into the profession in the 80s when there was a generation of young lawyers concerned about miscarriages of justice and making the law more accessible, not speaking arcane language that no one could understand. You would not find Keir customarily in wing collar and stripy trousers.”Nor is there incompatibility in a career defender becoming director of public prosecutions, he says. Starmer will follow Sir Ken Macdonald, who took the same path and, five years ago, received the same criticisms, though by general legal consensus has done a good job. Millar said: “Traditionally the police have had their hands on the prosecution of cases and that has to change. It has to be more of a partnership with the prosecuting lawyer following the case through, taking the ultimate decisions. Prosecutors have an ethical obligation to decide in the public interest. There is no incongruity that someone who has been a defence lawyer should know best how to look at a case from the other side.”Starmer is the first graduate in his family. He is one of four children, the son of a toolmaker and a nurse, who now devote their time to rescuing donkeys: “Whenever one of us left home, they replaced us with a donkey.” Starmer was educated at Reigate grammar school, sharing violin lessons with Norman Cook, now better known as Fatboy Slim, before reading law at Leeds. “I had the idea of changing things for the better. I was always interested in constitutional issues and politics. I thought I’d become a solicitor but then the idea of actually presenting an argument, being the person who got up in court, began to appeal,” he said. A first class degree was followed by a BCL (bachelor of civil law) at Oxford. He was called to the bar in 1987, initially joining the old Middle Temple chambers of John Mortimer and the Liberal Lord Hooson before moving on to Doughty Street, specialising in human rights issues and founded among others by Helena Kennedy and Geoffrey Robertson. Starmer has appeared 17 times before the House of Lords, and in the European court, on behalf of clients as diverse as the relatives of a man shot by Sussex police, David Shayler and the McLibel Two, and has also worked on privacy issue cases with the Guardian and with Liberty. He has led the successful opposition to the death penalty in the courts of the Caribbean and is a member of the foreign secretary’s death penalty advisory panel. A colleague says: “He has fantastic leadership qualities and you don’t get to be head of chambers without being well-liked by your colleagues. He has an ability to motivate and he is not easily cowed – if there is a row with the government he will certainly fight his corner.”At the moment there is another priority in his life: his first child was born a month ago. His wife, Victoria, is a solicitor who currently mentors deprived children. “He is getting rather boring about nappy-changing,” said Millar. “I gave him a copy of Kafka’s The Trial today and said he should read it every year. He says he already knows it backwards.”
The CV
Born 1962; married to Victoria
Education: University of Leeds, University of Oxford, St Edmund Hall
Career: Called to bar 1987; legal officer Liberty until 1990; barrister specialising in human rights law, Doughty Street Chambers 1990-;fellow, human rights centre,University of Essex; consulted on human rights issues for Association of Chief Police Officers, human rights adviser, Northern Ireland Policing Board 2003-; Awards and interests: QC of the Year in the field of human rights and public law by the UK-wide legal directory, Chambers & Partners, 2007; Justice/Liberty human rights lawyer of the year award 2000; Keen recreational football player, and “mad about Arsenal”, according to a colleague.
Copyright Guardian Newspapers Limited 2008

Letter to The Guardian

Sir,

Your columnists in the past week have concentrated on the financial markets.This is a profound mistake for the root of the crisis lies not in the sphere of finance but in the sphere of production or what we like to call the real economy.

The origin of the crisis is in the rate of profit in manufacturing and industry which has over the past decade or more stagnated. Undoubtedly, the mass of profit has increased but this has to be spread over larger and larger amounts of capital invested in these areas leading to a fall in the rate of profit overall.

The vast expansion of production since the end of the Second World War with all its benefits to consumers, at least in the developed world, leads to this problem. Paradoxically it is the very success of capitalism which leads to crisis

For in these circumstances capital looks for larger profits elsewhere – in our present case in housing, land, consumer credit and financial speculation in stocks, shares, oil, metals and agricultural commodities. This creates a financial bubble (see Vol 111 Capital) which eventually bursts.

Capital is happy to take risks for the larger profits although it does seek to spread that risk through derivatives and other financial instruments. But,of course,when the bubble bursts this spread of the risk brings down many.

The mortgage lenders gambled on employment continuing to grow,wages to rise and property prices to go on increasing. Employment did grow but much more slowly than they had assumed,wages stagnated and when the mortgage defaults began property prices fell rapidly. In other words their gamble failed and the bubble burst.

Contrary to your columnist, John Eatwell (19th September), better regulation of the financial market would not have prevented this crisis occurring. Given the long 15 year boom, which we had experienced, their gamble could be said to be based on reasonable assumptions, was certainly not irrational and was not that risky.

What of the future? It may seem odd but the solution to the problem of the rate of profit is a recession or, indeed, a depression.

Capital invested in production needs to be reduced by forcing the least efficent firms to go bust, wages need to be reduced and living standards to fall so that more of the value of production goes to capital and workers should be persuaded to be more productive – that is to produce more value.

This process has already begun and will accelerate in the coming months. This, I am afraid, is the price we have to pay for the capitalist economic system which, at its best, is the most productive the world has ever seen with massive benefits to consumers in boom peroids but which is inherently prone to crisis with brutal consequences for all.

Your columnists, maybe, should be persuaded to take a crash (sic.) course in Marx.

Ian Grigg-Spall

Petition (Avaaz)

On Monday Lehman Brothers, one of the world’s biggest investment banks, went bust with debts of $613 billion, and other institutions and markets are plunging. Many are calling this the worst moment since the Crash of 1929 — the global financial crisis is at the tipping point, and citizens everywhere must raise our voice for action in the public interest.[1] Our jobs, savings, pensions and public services are in danger because of the financiers’ folly — now the snowballing crisis risks triggering a global recession, hurting the poor most and drowning out all the other issues we care about. Trillions of public money are being staked to stop a global meltdown, but no-one’s addressed the basic causes yet — so we’re launching an urgent campaign for regulation to stop the financiers’ risky practices, which have saddled the world with unsustainable levels of debt and risk.[2] A former prime minister has promised to help deliver our call to European leaders next week, we’ll bring it to US Congress and the next president too — but we need a massive outcry to get them moving — so please follow the link below now to sign the petition, then forward it widely to friends and family:
Global financial markets sometimes seem untameable — but the rules that govern them are full of simple flaws and loopholes, and if we seize this moment and act together we can fix them. Cut free by deregulation and driven by greed, the financiers built up huge debts and risks without proper oversight, seeking short-term returns from tax dodges and engineering spaghetti-like financial complexity. Left without decent rules, they thought they could make up their own, and the profits rolled in for a wealthy few — then it all came tumbling down, with the rest of us left to pay the price for the failure of their dangerous games. Even champions of the free market are now calling for better regulation.[3] We’re finding powerful allies flocking to the cause, like former Danish Prime Minister Poul Rasmussen who’s pledged to take our campaign to fellow European politicians at a key vote on proposals for global financial reform next Tuesday, saying “By taking action on this issue, Avaaz members can show European and world leaders the strength of public support for more transparency and better regulation. Reform of our financial markets is a vital step towards a fairer globalisation — and your voice can help to make it happen.”[4] Last week the US effectively nationalised its biggest mortgage providers, Fannie Mae and Freddie Mac; last night, it did the same to the world’s biggest insurance company, AIG. Still the crisis rolls on. Adjustments are inevitable, but if we fail to address the fundamental causes of the financial crisis global recession will be deep and long, and future disasters even bigger. For too long we’ve left global finance alone because it seemed too complicated for ordinary mortals to get a grip on; but it turns out that common sense and public scrutiny were needed after all.These markets touch the life and heart of every one of us, from the shop-floor worker to the chief executive, the woman giving birth in hospital to the pensioner facing a penniless old age. Society doesn’t end where the market begins — and with leaders apparently paralysed, our voices are urgently needed to help set a course beyond this crisis. So sign the emergency campaign today at this link, and forward this message to family and friends who might be affected too: http://www.avaaz.org/en/global_finance_action
With hope and determination,Paul, Graziela, Ricken, Ben, Iain, Veronique, Brett, Pascal, Milena and the whole Avaaz team
Sources:
Reuters: “Lehman fallout threatens global recession
http://www.reuters.com/article/idUSN1550153420080915
For a detailed and authoritative explanation of the debt explosion and the dangers of complexity, see the Annual Report of the Bank for International Settlements (30 June 2008), particularly the introduction and conclusion: http://www.bis.org/publ/arpdf/ar2008e.htm
Financial Times: “The end of lightly regulated finance”, Martin Wolf, 6 May 2008. http://blogs.ft.com/wolfforum/2008/09/the-end-of-lightly-regulated-finance-has-come-far-closer/“Seven habits finance regulators must acquire”, 6 May 2008. http://www.ft.com/cms/s/0/52bf0f4a-1b8b-11dd-9e58-0000779fd2ac.html“Six principles for a new regulatory order”, Lawrence Summers (former US Treasury Secretary), 2 June 2008 http://www.ft.com/cms/s/0/52bf0f4a-1b8b-11dd-9e58-0000779fd2ac.html
Avaaz met with Poul Rasmussen and other European and American progressives yesterday to coordinate our efforts. Among the key proposals are “capital requirements” (holding sufficient funds to back loans or debts) and “transparency” (telling regulators, investors and the public what you own and what you owe). For more background, see this interview: http://www.euractiv.com/en/financial-services/interview-real-step-regulate-hedge-funds/article-175450
Also: “Financial markets can not govern us”, letter from Poul Nyrup Rasmussen and other former European presidents, prime ministers and finance ministers to European Commission President Jose Manuel Barroso, 19 May 2008: http://www.telegraph.co.uk/money/graphics/2008/05/22/cneu122.pdf———————-
ABOUT AVAAZAvaaz.org is an independent, not-for-profit global campaigning organization that works to ensure that the views and values of the world’s people inform global decision-making. (Avaaz means “voice” in many languages.) Avaaz receives no money from governments or corporations, and is staffed by a global team based in London, Rio de Janeiro, New York, Paris, Washington DC, and Geneva.
Click here to learn more about our largest campaigns.Don’t forget to check out our Facebook and Myspace and Bebo pages!

Letter to the editor of The Times (for entertainment and comment)

Sir,

Your leader writer of 17th September 2008 should go back to University for a crash (sic) course in Marx

He quotes Marx but completely misunderstands him.

Yes “Capital is money, capital is commodities.” By virtue of it being value, it has acquired the occult ability to add value to itself. It brings forth living offspring, or, at the least, lays golden eggs

But Marx does not argue that capital and money are the source or creators of value – labour power is that source and creator. Capital masquerades as the creator but this is an illusion (Vol 1 Capital).

Capital and money are stored value not the creators of value – they create nothing but enable capitalists to grab value from labour power as profit, dividends and interest; what Marx calls ‘the occult ability to add value to itself’.

The root of the present crisis is because the rate of profit in manufacturing and industry has over the past decade or more stagnated The mass of profit has increased but has to be spread over larger and larger amounts of capital invested in these areas.

In these circumstances capital looks for larger profits elsewhere albeit at the cost of assuming greater risks-in our present case in housing,land,and financial speculation in stocks, shares, oil, metals and agricultural commodities. This creates a financial bubble (see Vol 111 Capital) which eventually bursts. Capital is eager to take the greater risk for the larger profits (contrary to your columnist Mick Hume) but seeks to spread that risk through derivatives – nothing new there – re-read your Marx Mick!

But when the bubble bursts the spread of the risk brings down many.

The mortgage lenders gambled on employment continuing to grow, wages to rise and property prices to go on increasing. Employment did grow but much more slowly than they had assumed. Wages stagnated and when the mortgage defaults began property prices fell rapidly. In other words their gamble failed.

Further, contrary to your columnist Chris Dillow, hedge funds are archetypal financial speculators interested only in short term gains – therefore they win in boom or bust -eg HBOS shares yesterday on which hedge funds made a killing by driving them down.Their ability to survive has nothing to do with ownership structures

Editor, send them all back to uni!!

Ian Grigg-Spall