Meltdown and Bailout

a little excerpt from Meltdown and Bailout: Why Our Economic System Is on the Verge of Collapse

What's clear is that there is going to be a massive transfer of public wealth to the private sector, and at least the lion's share of that cash, if not all of it, will end up in the hands of an investor class whose recklessness got us into this mess in the first place.

Meltdown

This bailout is a desperate attempt to save the modern economic system from falling under the weight of its deep structural imbalances. As such, it's unlikely to work over the medium and long terms, even if it has the desired immediate effect of propping up creaky markets and restoring their (largely unjustified) sense of security.

...

In the end, investors were basically buying up paper that had only a distant relationship with anything concrete. The link that had long existed between homeowners and lenders was broken, and debt -- in this case debt tied to housing, but also commercial and consumer debt -- became a hot investment vehicle.

Convinced that the market would continue to grow indefinitely -- or maybe that they'd get bailed out if things headed south -- investors leveraged their assets further and further, in effect buying on margin just like the bad old days before the Crash.

The banks and investment houses worked hard to find new ways to make their own pounds or rubles, creating not only new types of debt-based securities, but also coming up with new forms of insurance to (supposedly) shield investors against the risk those loans represented.

Comments

[Joe Clement]

I have been slowly reading this whole article since this morning, while I look for a frickin' job. It was a pleasant surprise to see Zizek quoted by Holland.