>>Two years after the 2008 bailout, the economy continues to struggle with a lack of credit, the hallmark of recessions and depressions. Credit (or debt) is issued by banks and is the source of virtually all money today. When credit is not available, there is insufficient money to buy goods or pay salaries, so workers get laid off and businesses shut down, in a vicious spiral of debt and depression.<<
This is too simplistic of an explanation. I've seen it here for 20 years in Japan, which went to the new banking standards earlier than the US did. Doing so caused the fake bankruptcy of some rather large banks and some smaller ones, but this was mostly a sop to US-based private equity interests, who wanted a way into Japan's banking system (which would give them lots of credit to put into the US bubbles). At a local level, loans are available and at very low interest rates--at least so it seems. But individuals and small businesses don't want the loans or can't qualify to get the loans. Meanwhile, everyone and thing with money to put somewhere ends up either directly or indirectly buying and holding government bonds or cash savings (with the idea that at least these things don't lose money). Loans are the source of profits for banks that take savings, but in the bubble years even small banks and savings and loans -- and credit unions -- ended up bypassing much of the local loan markets and going to the financial bubbles to try and get better returns. So banking institutions weren't interested in local housing or student loan markets, but other financial entities created housing, student loan and personal credit bubbles and fed them back to the banking system as portfolios of 'securities' and 'insurance'. They did the same thing back in the 80s using different instruments of financial bubble-ization and mass destruction, with similar results only on a somewhat smaller scale. Basically what the US financial markets have said to the American people is: you don't qualify for credit to buy a house or a university education unless we can make huge profits from 'securitizing' such debt. So all that money will sit in stocks, bonds, and cash--with some hedge fund investing--until the next bubble is created. Unless the whole system crashes. The only bubble that is immune from another crash for the next 3-5 years is the health insurance, health care and medicine pricing bubble(s) in the US. And that , as it turns out, is what Obama had Clinton out trying to sell to the American public during the recent round of interviews and appearances (since the plan basically uses federal money to keep growing the health care business in the US while not helping uninsured and under-insured working people). And we all know Clinton is a good salesman. CJ _______________________________________________ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
