Was Serfdom Really That Bad?

The sky is falling! The sea is rising! The ice cap is melting! So the Fed chair pushes his Great Depression analysis; the Treasury head extends his hand to worried creditors. According to the recent Forbes 400 list those wealthy creditors have a net worth of $1.6 trillion. If these distressed loans will appreciate in value for a payback to taxpayers they would also appreciate for the Forbes 400. If collapse is in the cards why isn't Buffet rallying his class to save the system? Since the Fannie and Freddie takeover gives the power to Paulsen to renegotiate mortgage loans why has he not begun to do so? If Bernanke is such a student of the '30s why doesn't he understand pushing on a string? Which was the robber baron who said that a depression is when money returns to its rightful owner?

The basic problem is that the masses of the people, that is to say, the workers and those who would be workers if the financial industry hadn't exported all those jobs, can't afford to buy houses, rent apartments, buy digital tvs or cars or even pay off their existing loans. And giving money to wealthy investors won't change that reality. And listening to journalists and the usual suspects they interview doesn't aid understanding either. Everyone recognizes and acknowledges the housing bubble but when it pops they scramble and scream how we need to pump in money to reinflate the bubble, even though doing so would only put off the reckoning for a few days. Oil companies want new oil leases not to drill for oil but to prop up their stock prices since reserves drive equity prices. Paulsen wants money to buy up debts to keep the housing bubble intact. But stock prices remain, even after yesterday's 777 drop in the Dow and 109 in the S&P, greatly overvalued and probably need to fall another 20% to achieve an historically realistic PE ratio. The housing-income ratio remains excessive so house prices should fall another 15-20%.

It does seem true that without intervention credit dries up, the economy stalls and unemployment shoots up. But even if intervention occurs with a taxpayer buyout there still won't be a market of money-flush consumers ready to buy houses or cars or dishwashers. And that is why there is much recent writing, from the New York Review of Books to the Economist, about a major push for infrastructure spending. The capitalists want it not because they like bridges but because they realize consumers are tapped out so they hope for profits from the taxpayers where infrastructure costs are spread out over the entire population. Of course, the trillions of dollars that would cost added to the ten trillion of current government debt, let alone all the recently incurred Treasury debt or even the $700 billion current proposal, would make serfs of us. And that is the point; the capitalists realize that their historical paradigm -- hire workers to make things and pay them to buy those commodities -- is dead. It died more than 35 years ago and has been only a zombie since then, energized and moving through debt. And now the payment is due: Final Notice!

Up through 1980 it was generally believed that the US debt was a bill to someday pay off but with Reagan and ballooning debt through military spending + rich people tax cuts many perceptive observers realized that we were entering a new era: the income stream. Capitalists don't really want to be capitalists in competition with each other. They want to be monopolists where they can dictate terms and prices. But even then they don't like monopoly where they have to dirty their hands actually running factories and warehouses; now they aspire to be rentiers. They simply want to own everything and collect monthly allotments from 80-90% of the population and the government. And this is what motivates all the propaganda and legislation over "intellectual property" and that is Bill Gates' new capitalism. Gates went from competing, more or less, to win the operating system war to monopoly in the PC market and now into the "software as a service" realm where consumers will pay monthly bills to use MS Office. And Monsanto wants a rentier income from every green bean or ear of corn eaten by all people in all places all the time. The real engineering that contemporary corporations seek is legal: they own; we pay or die.

Last week Michael Bloomberg, New York mayor and on the Forbes list with $20 billion, was interviewed and explained that the current situation grew out of financial innovation which was a response to crisis (not his word). Bloomberg said that computerization and telecommunications had led to automated and instantaneous stock trading and that made the stock broker redundant and obsolete. An astute and revolutionary comment by Hizzoner. When automation and speed hit an auto factory the workers lose their jobs. But Wall Street adapted by inventing new investment vehicles and strategies so they could not only keep their jobs but make even more money. Today is the fruit of that innovation. Now we have SIV and CDS. CDS (credit default swaps) are simply ways of gambling and their "value" (which assumes they have any value at all) can be created out of thin air and their current stated worldwide value is $61 trillion while 2007 worldwide GDP was only $57 trillion. Obviously the inmates are running the asylum.

If there is a solution it would be for nationalization of housing itself. Take over the mortgages and renegotiate them down so that people can afford not only to make the payments but also afford the food to cook in those kitchens. Let the investors take the hit. And if they squawk then we can enact wealth laws to fund these expenditures and even job creation overall. Most people buy houses to live in, not to flip for a profit. Let specualtors suffer and let's move more people into all those empty tract homes. If our government can go into trillions of dollars of debt to pay investors and make war it could also spend the money improving the real lives of real people. It is becoming clear that for perhaps the first time in history socialism is not just a moral imperative but an objective necessity. The capitalists can no longer create jobs for the masses or increase people's real incomes. History moves slowly but it moves inexorably. One hundred and fifty years ago one didn't need to be a genius to know that slavery needed to end (economic problems of slave replacement was recognized among slaveholders in the 1770s) but it took a devastating civil war to settle the issue. We may not survive another international war with nuclear weapons. Greed, envy and lust dominate our culture and these 'sins' are fostered by Wall Street investors. It's long overdue that these sinners be reined in and corralled.