Shane had said:
>>> As far as I know, the Fed's discount window is still wide open.
>>> The banks can borrow as much--short term--as they want.
>>> So why the hysteria about the financial system "freezing up"?
>>> If banks don't lend to homeowners or consumers, that's not the cause of a
>>> depression.
>>> It's the result.
>>> The "fundamentals" are rotten.
>>> Solution (as always): Inflate, Inflate, and Inflate some more.
me:
>> the problem is not a liquidity problem, where discount loans help. The
>> problem of "freezing up" is with bank capital, collateral, and
>> longer-term credit: this is where the "fundamentals" being rotten
>> comes in.
Shane, now:
> Exactly. So then, if short-term ("liquidity") is no problem, why the
> hysterical
> call (and response from "leftists" like Henwood) for a $700b reflation of
> the banks'
> *capital* structure? Why is this presented as so extreme a crisis as to
> preclude careful analysis and prolonged debate? Because, as Naomi Klein has
> been telling us, only in conditions of media-generated hysteria can such a
> massive swindle be forced down the throat of the populace.
1) I agree with Julio. This kind of insult (snidely implying that Doug
is not a leftist without adding any new information that's worth
anything) simply reminds me (and a lot of other people) of the
Spartacist League and their ilk.
2) the Fed _et al_ have been helping with liquidity problems and this
has not turned out to be enough, because even though there have been
liquidity problems (which is the efficient cause of bank failures) the
underlying capital/confidence problem means that something more is
needed.
3) It seems to me that the media-generated hysteria is based on
reality. However, it's a case where the hysteria is being used for the
wrong purpose, to push for subsidizing the financiers as opposed to
taking over equity, which would likely solve the problem without
involving the same kind of subsidy. To use a Naomi Klein example, the
hysteria after Katrina hit New Orleans had a real basis. But the Bush
League used it to push for privatization of schools, police, etc., to
help their cronies and also to punish DP leaders like the Mayor and
members of minority groups that the GOP doesn't like, if possible to
make sure that Louisiana goes for the GOP.
me:
>> In this case, the banks refusing to lend to homeowners, small
>> businesses, and consumers is not only the result of a "depression" (or
>> whatever we call this mess) _but also_ a cause. There is "cumulative
>> causation" or a "vicious circle."
Shane:
> But these cycles take time measured in years, and action is demanded in
> *days* (at first in hours, but what the hell..) ...
Some of the process has been slow and some of it fast: the vicious
cycle started when the housing bubble started deflating, about a year
ago. That has hit the financiers in short sharp shocks (including
several cases where credit markets seized up) and that has made the
housing & employment situations worse. This in turn has made the
financial shocks worse. The perception -- which seems right to me --
is that the current shock is the Mutha of all Financial Shocks.
As noted, this situation can be used for ill or good. The BL folks use
it to promote their own personal goals and those of their fraction of
the capitalist class.
--
Jim Devine / "Nobody told me there'd be days like these / Strange
days indeed -- most peculiar, mama." -- JL.
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