Upside down and backwards

The economic news continues to be unfathomably grim:

The Dow Jones industrial average traveled to Saskatchewan early this morning and leased a P&H 320XPCÖ industrial mining drill, which it then used to bore 2.7 miles beneath the crust of the earth, releasing a bright orange flow of molten lava, on analysts’ worries that other analysts were not worried enough, while other were worried too much.

It's also confusing. Every few days there is news about billion dollar bailouts. Today it's Citigroup--too big to fail. And why did 700 billion become the magic number? The Obama reconstruction plan is estimated to cost that much.

The language is always that of immediate crisis and chaos--if X doesn't happen right away, "it would create chaos." I guess they keep repeating that line because it works--it gives more money to the banks. More and more and more and more. Apparently more than 10 trillion dollars of wealth has been wiped out. Where did it go? It seems to have something to do with imagination land.

The economic news is about more layoffs, more foreclosures, more declines in consumer spending and confidence. There were lots of people at the mall in Victor, New York, this weekend. I wonder if they were buying stuff or just hanging out.

I don't get this at all. I think some very bad people are robbing the world blind. And we just sit around thinking about whether it's a good idea to get an Xbox 360 or not.

Comments

[bob allen]

These schemes always seem to be hatched over a weekend-- and why were the auto execs made to grovel and "leave (in corporate jets) empty handed" whilst Citibank gets bailed out with no questions (publicly) asked? This is about crushing the auto unions, obviously...

[anon]

It's not a zero-sum game. If I buy a Picasso for $100 million and then the market crashes and I'm forced to sell it for $10 million, the $90 million has been permanently contracted out of the money supply, causing deflation. Nobody was on the other side of that transaction. Same goes for stocks or real estate. Wealth can be created and destroyed, as it has been forever.

[pebird]

It's times like this that the classics - overproduction crisis, money is a relation, etc., come back into fashion.

One reason these numbers sound so big is that capital is truly globalized - public spending has been so constrained over the last 25 years that our daily media ration of economic numbers has been in the billions and not the trillions. If we wait a while we will probably see quadrillions and then zillions.

Unfortunately, my personal experience is in the thousands and looks to soon be in the hundreds.

I hope the food bank can get a bailout soon.

[mao.mimosa]

It seems clear that this is, as you've noted, a crisis of overproduction, where what's being overproduced is that most valuable of commodities: debt.

Despite all this, I still hear people saying that people have a duty to go shopping because consumers drive the economy.

This seems like a joke -- the solution to too much debt is to buy more stuff. But it is no joke, of course, but rather a remarkable clinging to the one narrative we have for understanding politics these days, such that even as the govt is doling out close to $2 trillion to offset debts, we will still concede to market-based solutions.

[pebird]

Overproduction is a consequence of private ownership and also functions to increase private ownership.

As market forces reduce the rate of profit for a given product/service over time, private investors look for new opportunities - this is the driving "creative" force of capital.

This herd mentality creates a "bubble" in an economic area - the analogy to musical chairs has some resonance - think of Zizek's explanation of drive - circling around a void. In this case the void is competitive loss and the repeating action is to drive the market "value" of the asset higher and higher. Then the process collapses and we are left to pick up the pieces and start again.

From a social perspective, the damage to the material economy is severe - social surplus (capital) has been mis-invested - actual wealth has been expended in material not needed (suburban land tracts in Arizona, Florida, $1MM+ condos in downtown urban areas), while socially needed investments have been avoided (health care, education, etc.).

Overproduction creates too much of a material something. Debt is the relation used to facilitate the process.

Lets not fall into the trap of saying all debt is bad - in some ways it is a neutral instrument - it is simply a relationship to facilitate the investment of wealth.

Some of the fascinating things about the current situation are that Obama hints at these problems with his rhetoric, but of course he cannot address the root causes. The question is: will bandaids be enough to "fix" the problem.

Also all of the bailout to date has been used to cushion the fall of capital - those participants that lost in the latest game of musical chairs - even those that turned off the music.

For example, it is said that we need to bail out the banks so that student loans can be made again. I wager that if the government were to make those loans directly, you would see the banks think about starting up business again (stopping their strike). No different than using scabs to break up a labor strike.