Re: [Marxism] Answering 6 questions on the economic collapse

[Steve Palmer <spalmer999@xxxxxxxxx>]

If there are no claims on the assets, then how come this is coming up in the 
bankruptcy court? I don't find this credible.

There have certainly been discussions in judicial circles about the existence 
of CDS encouraging a company to throw itself into bankruptcy in order to 
trigger the CDS events. This is the equivalent of throwing a game in order to 
win a bet, or, taking the insurance simile, the financial equivalent of arson.

It's a bit like a high-wire act: journalists like to quote the big numbers in 
order to shock thrill and scare their readers. The crazy totals, like the whole 
mountain of derivatives, certainly nets out to considerably smaller amounts. 
It's like taking everything in the credits column and everything in the debits 
column, adding each up and then adding both together instead of subtracting. 
Yes it's a big number, but when tracked through the books, the net difference 
is very much smaller, and that is what matters.

It's not the absolute amount that matters, but the consequences of the 
disruption in the chain of payments. There are numerous stories now emerging in 
the financial press of the consequences of the credit freeze. Hungary, Ukraine, 
Latvia, Estonia, Lithuania are all talking with the IMF as a consequence. 
Several M&As have been called off. Airbus has put off expanding it's production 
line. It wouldn't surprise me if Boeing is deliberately dragging out the 
machinists' strike because the company can't get credit it needs. States are 
having financing problems.

Milton Friedman and Anna Schwartz, in their Monetary History of the USA show 
that in the last depression, the absolute loss of capital due to banks going 
under was quite small. What was important was (in their way of thinking) the 
resulting decline in the money supply leading to depressed economic activity. 
For us, of course, the decline in the money supply is the result not the cause: 
its quantity though is still a metric, even if it needs to be interpreted 
differently.

Tuesday October 21st is the day that the Lehman CDS settlements are supposed to 
conclude. The total is thought to be around $400bn, but some have estimated 
that most of these will net out to $6bn. We'll see. The WaMu cycle starts a 
couple of days later. 

Your belief in the robustness of the capitalist system is impressive and your 
account of a dramatic rescue plan a charming fairy tale. I'm still waiting on 
an explanation, without hand-waving, of how they can turn this all round 
without slicing and dicing the US middle class and a massive attack on the 
working class.

I'm not sure who's expecting capitalism to collapse due to the sacredness  of 
contracts. All the contracts do is try to distribute the losses among 
individuals and groups within the capitalist class; they aren't responsible for 
the crisis. Capitalist crisis has nothing to do with the observance or not of 
its legal niceties, but with insufficient surplus-value to expand its capital.

--- On Fri, 10/17/08, Joaquin Bustelo <jbustelo@xxxxxxxxx> wrote:

[stuff snipped]

__________________________________________________
Do You Yahoo!?
Tired of spam?  Yahoo! Mail has the best spam protection around 
http://mail.yahoo.com 

________________________________________________
YOU MUST clip all extraneous text when replying to a message.
Send list submissions to: Marxism@xxxxxxxxxxxxxxxxxxx
Set your options at: 
http://lists.econ.utah.edu/mailman/options/marxism/archive%40archives.econ.utah.edu