The Scale of the Crisis

I've been snarfling around figures, for wont of something better to do, and have found quite a few. For instance, 141 banks seem to have failed up to October in the United States since last year, when the figure didn't reach ten. 141 banks in three quarters of the year. They have names like Main Street Bank, America United, Neighbourhood Community, and Corn Belt--all reassuring and even idyllic. They're gone. Hard-working Americans of the sort glorified in Presidential campaigns have lost their money, and successors to those banks will be merrily gouging the debts transferred.

Liberal capitalism has an ideology, though its proponents do not recognise their rationalisation as such because it seems so much more objective and reason-based than other forms of logic. So, for instance, if you believe in cost and the bottom line as reflective of an ultimately measurable reality, you will no more baulk at bank failures--the ultimate product of poor application to calculus--than you will at, say, making the poor cut themselves off from water or electricity by installing token- or card-based water meters. Each to their own and each on their own, judged by the outcome of the risks they take.

I've never seen a self-guided tennis ball, but that is how many in the power structure see citizens and consumers now, and how those of common sense are encouraged to follow. Struck and bandied as the stars will, we are nevertheless encouraged to believe that the economy is the product of decision somewhere. Whose decisions made those banks fail?

Curiously, the calculus even applies when it is abundantly clear that many market transactions depend upon people not understanding the risks. Take New Jersey's deal with Goldman Sachs, for instance. The State was sold a contract on auction rate bonds that no-one understands, and which cannot now be executed. Nevertheless, under the terms of the deal, the state must now pay Goldman Sachs a million dollars a month until 2013 for something that is not happening and which cannot happen.

New Jersey is associated in the public mind with funny business, but the Governor is straight as a die. John Corzine, is a former Chairman and CEO of Goldman Sachs, and rose to prominence in that strange post-1989 moment when bond traders were accorded cultic status. There's no suggestion of impropriety; instead, the deal was perfectly normal. That's the crazy part. It is almost as though people have to believe that understanding occurred and risk was adopted; the reality is that people had to go through the motions and hand over other people's money as surely as they would have done in the past to any prince or Pharaoh.

There are so many debts and transactions tied up with states, of course, that the eleventh amendment to the constitution is effectively neutered. Any modern Huey Long who wanted to repudiate such iniquity would no doubt end quickly in the same way. Where are the strict constitutionalists and limners of the American Revolution when you need them?

Exactly the same thing happened on this side of the Atlantic with the public finance initiative. Governments convinced themselves that debt which they underwrote was not debt, that hospitals they paid for were owned by others, to whom they had to pay rent, and that maintenance of computer systems, administration, buildings and cleaning were all things that they would be fairly charged for before buying their own buildings back--all to avoid a spike on interest rates or crowding out, neither of which they officially believed in.

How on earth could politicians be so stupid as to believe that the businesses they kept applauding as creatively destructive, disciplined and ruthless actually wouldn't abuse their power or position at the drop of a hat? How can you hold one view about the nature of a thing when it comes to workers, and then expect it to be nice when it comes to dealing with you?

So this is where fifteen years of delusion and lies gets a society; failed banks, and suffocating debt, and shivering consumers. And that's before the unemployment and insolvencies hit. Never mind, there is always the consolation of identity politics to comfort us.

Today is St Crispin'sand Crispinian's Day. Unlike Henry V--not a comparison people would normally draw anyway--I would rather be abed, somewhere else, and not here.

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