Tag Archives: subprime loans

Rulers’ Subprime Fiasco Slams Workers, Spurs Fascist Solution

The subprime mortgage fiasco has highlighted a huge problem for the U.S. ruling class, even as it comes down like a sledgehammer on the working class. Since January 1, in the firestorm roaring through stock markets worldwide, capitalists have destroyed $5 trillion worth of value created by workers’ labor power. As the subprime cancer spreads, workers in the U.S., where it began, face mass foreclosures, layoffs and wage and service cuts, with black and Latino workers hardest hit because of racist discrimination.

U.S. rulers, on the other hand, while trying to make workers at home pay for the crisis, have fears going far beyond the domestic lending and spending crunch. The Council on Foreign Relations (CFR), the rulers’ leading think-tank, worries about “the geopolitical and geoeconomic effects a U.S. downturn might bring, particularly at a time that finds other powers [ruling classes — Ed.] on the rise, the price of vital commodities spiking and U.S. prestige in question.” (CFR website, 1/18/08) The threatened recession makes U.S. imperialism and its war machine all the more desperate for cash.

“War at Any Price?” — a report released by Congressional Democrats in November — shows that Iraq and Afghanistan will have cost $1.6 trillion by the end of 2008. It says that even with a drawdown to 55,000 troops in Iraq by 2013 (indicating a long-term occupation) the price tag will reach $3.5 trillion by 2017.

The rulers’ huge problem stems from the fact that they have nowhere near prepared the U.S. for all-out imperialist war. During World War II, the Roosevelt-led capitalist class mounted such an all-out mobilization by: (1) drafting 14 million youth into the armed forces (in a population barely one-third of the present 300 million); (2) instituted rationing of gas and food (each family had to present coupons at the store to buy meat — limited to 4 oz. per person daily — sugar, butter, etc.;  (3) decreed a government-imposed wage freeze and price controls; and (4) banned all strikes. Not one new car, washing machine or radio was manufactured in the U.S. for four years — all the factories were producing tanks, bombers and weapons of war. Tax rates topped out at 94%! (It’s 35% now.)

Compare this to Bush’s “war on terror.” His advice: “go shopping; don’t let the terrorists win.”
U.S. rulers approached the war against Nazi Germany and fascist Japan with total reality. While the Democrats decry the Iraq-Afghanistan price tags mentioned above, they don’t mention the fantastic sums a Middle-East re-invasion or war with China would require.

To prepare for World War III and endless imperialist wars against rising rivals in the European Union, China and Russia, U.S. rulers must exercise all-out control not only over the working class — fascism — but also over those members of their own class who guard  their own short-term profits at the expense of the long-range survival of their system as a whole, as they did in World War II.

While Obama’s camp has been slow in divulging its fiscal program, it can’t be far removed from Hillary Clinton’s who claims to have the solution. She intends to use the state apparatus to force reluctant capitalists to give up some of their profits to meet the main bosses’ war needs — the “sacrifice” of “treasure” called for in her husband’s Hart-Rudman Commission reports. Clinton told the New York Times (1/21/08) she would immediately raise the top income tax rate from 35% to 39.6%.

She also seeks to slash exorbitant executive pay, which would steer more profit to the ruling-class billionaires and banks that own companies. Hillary decries “professional corporate managers who are not the creators of the corporation.” She’ll protect billionaires like George Soros, the Rockefellers, Warren Buffet and others, who see the need to discipline their class to save their system’s top-dog status. Bill Clinton robbed the poor — by dismantling Welfare — to finance the Pentagon. Hillary would continue that crime, and the racist super-exploitation of black and Latino workers, intensifying Workfare to lower wage levels of all workers.


Given actual military expenditures, proposed bipartisan “economic stimulus” packages, topping out at $1,200 per household, come off as a cheap election-year bribe, with each side trying to take credit for a paltry payoff. In reality, the rulers’ oil wars are robbing workers blind, while they slaughter working-class youth by the hundreds of thousands. The Democrats’ report cited above admits, with anti-Bush dismay, that from 2002 to 2008, “The total economic cost of the war in Iraq [and Afghanistan] to a family of four is a shocking…$20,900.”…. The future impact on a family of four skyrockets to…$46,400 for Iraq and Afghanistan when all potential costs from 2002 to 2017 are included.”


Clinton plans to clean up the subprime mess with a 90-day moratorium on foreclosures and a freeze on subprime mortgage rates. Her purpose is more political than economic. She wants to impose police-state control over finance and industry. She’s following Franklin Roosevelt’s severe disciplining of U.S. capitalists in the run-up to World War II. Clinton promises “the toughest regulatory scrutiny of any president in a generation.”

It was financial deregulation, prompted by inter-imperialist rivalry in the 1980s and 1990s, which set the stage for the subprime debacle. At that time U.S. banks needed to consolidate and grow in order to compete with giant European and Japanese counterparts. Citibank led the charge against regulation and in 1999 succeeded in shattering the main regulatory obstacle to bank expansion, the 1933 Glass-Steagall Act, which had kept commercial and investment banks separate. Today Citi is perhaps the world’s biggest bank but holds yet untotaled billions of worthless subprime debt.

Capitalism by its very nature must create economic boom-and-bust cycles as well as imperialist wars in its insatiable competition for maximum profits. In the current era, it must impose fascism on the working class as well as discipline its own class to be able to preserve its system. Clinton, Obama and the rest of the candidates are dedicated to promoting and defending this bosses’ dictatorship over the working class. Supporting any one of them would be a serious mistake. Rather we should join and build the Progressive Labor Party, which has the long-term goal of communist revolution, enabling the working class to collectively decide how to apportion, according to need, the social value it alone collectively produces.

Clinton, Obama Advisors: All War, All the Time

With Hillary Clinton and Barack Obama falling all over each other posing as “anti-war” candidates, take a look at their pro-war advisors.
Clinton has:
• Madeleine Albright, Bill’s Secretary of State, the main force behind her husband’s Iraq sanctions that the UN says killed up to one million Iraqi civilians (half of them children). When asked about those sanction-caused child deaths, Albright told “60 Minutes,”: “We think the price was worth it.”
• General Wesley Clark, architect of the bombing of Serbia, who publicly stated the U.S. would bomb civilian targets regardless of “collateral damage” — civilian casualties.
• Richard Holbrooke, a Jimmy Carter aide, oversaw weapons shipment to dictator Suharto’s Indonesian military (see page 7) during the latter’s invasion and massacre of 200,000 people in East Timor.
Obama has:
• Zbigniew Brzezinski, Carter’s National Security Advisor, who boasted responsibility for the $3 billion CIA creation of the Afghan jihadist movement in 1979 which produced Osama bin Laden. When asked about its “negative consequences,” he replied, “What’s a few riled-up Muslims?”
• Anthony Lake, a Bill Clinton aide who played a key role in the U.S. invasion of Haiti.
• Sarah Sewall, author of the introduction to Bush’s General Petraeus’s Army Counterinsurgency Manual which U.S. troops use worldwide in imperialist oil wars.

Such is the motley crew that will spread wider wars no matter who’s elected president. They’re all defenders of U.S. imperialism.
the American Petroleum Institute, and the National Association of Manufacturers, is one of his biggest individual donors.

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The Demon Is Capitalism

A Demon of Our Design: Markets, Hedge Funds and the Perils of FInancial Innovation
By Richard Bookstaber
John Wiley & Sons, Inc., 2007

“Complexity cloaks chaos” concludes Richard Bookstaber in A Demon of Our Own Design. He draws on insider knowledge of recent Wall Street debacles to paint a future of bigger, more frequent financial collapses. The need to reinvigorate value-producing manufacturing becomes more severe with each crash: the attacks on the working class sharper.

Historically, many empires have been undone by letting go of their domestic manufacture-based economies. A seventeenth-century Spaniard enthused: “Let London manufacture… as long as our capital can enjoy them. …All the world serves [Madrid] and she serves nobody.” Eventually, London used its manufacturing to become the center of a new empire, while’s Spain’s empire declined.

Speculation: U.S. Imperialism’s Hidden Weakness

The financial sector now accounts for 31 percent of U. S. corporate profits — up from 20 percent in 1990 and 8 percent back in 1950. But, larger percentages of financial profits come from hedge fund speculation. New York Times business columnist Floyd Norris blames these financial “innovations” for spreading the housing-related credit market crisis.
On the other hand, China has a growing industrial economy allowing it to become an emerging imperialist competitor. Not long ago U.S. “experts” questioned China’s economic viability since Chinese banks carried too many non-performing loans. China Investment Corporation, the state-run investment fund, will spend two-thirds of its $200 billion shoring up these banks. Their percentage of “bad” loans has already dropped by half.
Chinese imperialists got this capital from exploiting workers in their vast, rapidly-expanding manufacturing sector. They can get away with it because capitalist leaders long ago hijacked the communist revolution. They’ve turned it into it’s opposite — another exploitive capitalist nightmare.

Spiral to Hell

Bookstaber gives a running account of financial “innovations” beginning in the 1980s. He explains the mathematics behind investment strategies that caused such infamous disasters as the 1987 crash and the demise of Long Term Capital Management. He worked with many of the players and admits to contributing to financial catastrophes.
He freely admits speculative “financial tools” help for only a few years. The investment community “invents” one speculative scheme after another trying to stay ahead of the inevitable payback. By now, the very design of financial markets insures a “liquidity spiral to hell.”

His solution is to reduce “tight coupling and complexity of financial transactions.” The financial markets shouldn’t use “every financial instrument that can be dreamt up.” Speculation shouldn’t rely on large sums of borrowed money. This “leverage” speeds up the spiral to catastrophe, spreading the danger to areas beyond the original investment. Bookstaber hopes “simpler financial instruments and less leverage will create a market that is more robust and survivable.”

He never asks why U.S. bosses turned to financial speculation in the first place. Industrial opportunities to extract surplus value and profit failed to keep pace with those of emerging imperialist competitors. U.S. financial titans were forced to speculate to keep up. Bookstaber’s solution is fanciful in this climate.

Workers Create All Value

The value of an automobile or airplane is greater than the sum of the parts that make it up. The amount of labor in production creates the increase in value. The boss can’t use this extra value until he sells the product. Marx called this part of the process exchange. Exchange itself doesn’t create any value.
As exchange becomes less connected to creation of value, it turns into speculation. One boss can make money at the expense of another, but no value is created in the exchange. That’s what increasingly opaque hedge funds are all about. Eventually the house of cards collapses if no extra value is created to back up these financial “tools.”

Ruling-class strategic thinkers have awakened to the danger and to the need to actually produce value. They are re-industrializing on the backs of low-paid immigrant and black labor, starting with expanding subcontractors.

Racist practices like this hurt all workers. The network of non-union subcontractors has grown to include low-paid sub-assembly and assembly factories. Conditions in traditional union plants — with older white and black workers — are being driven down to subcontractor levels. Even in union facilities, the new hires get paid half what veteran co-workers make. The bosses may not be able to stop speculation, but they can and will attack us.

Re-industrialization with low-paid domestic labor is only the beginning. The bosses hope to rein in emerging imperialist competitors like Russia and China through control of Mideast oil. The current wars are only a prelude to more bloody oil wars. Eventually, direct confrontation will be necessary, leading to world war.

Poverty, war, racism and economic crisis are the demons of the capitalist design. We need a new design that produces for the needs of our class, not the profits of the bosses — communism.

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