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Financial meltdown
Ding-dong, the wicked witch is dead!
By Kevin Potvin
It’s time for singing and dancing as the big banks start collapsing and stock markets spiral out of control. Hooray!
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To judge from the TV and newspapers, one might figure the recent collapse of big banks, the dizzying gyrations on the stock markets, and the overstretched resources of national central banks struggling to firewall their economies is universally regarded as very bad news. That would be far from the truth. Many people are celebrating, if only with quiet voices in the backs of their minds.
The elated point of view is so toxic to the system (more toxic than the bad commercial paper cluttering up bank’s books, even!) it is arguably the most strict taboo going today, to express joy at news of big banks running aground. It has probably never even occurred to anyone in the daily media that it is even possible to happily welcome these historic financial events. Yet celebrating is exactly what many people are doing these days.
It’s not because they’re nihilistic. The reasons for elation are manifold, economically sound, and socially responsible. Unlike the word famously used by ex-Federal Reserve chair Alan Greenspan to describe most players in the rapidly rising stock markets of the late 1990s, when he called them all “irrational,” those exuberant about the present rapid declines in the markets are very rational.
It comes as excellent news, for example, that huge derivative trader Lehman Brothers has gone out of business along with most of its fellow traveler Merrill Lynch. And it’s cause for dancing in the streets that the company that insured derivative traders against losses, AIG, was brought under government ownership. Already there is official talk of government banning the predatory practice of short selling. With the two remaining derivative traders on the brink of collapse, it’s foreseeable there will soon be talk of outlawing most forms of derivative trading. And there’s more good news yet: with the re-nationalization of mortgage lenders Fannie Mae and Freddy Mac, the biggest gambling operation, and incidentally the one most notorious for preying on the desperation of the poorest by offering clearly unaffordable and obviously speculative mortgages to renters, we can look forward to an upswing in renters again, which promises a corresponding upswing in public distaste for conservative government.
What’s the connection? It was drawn clearly by Greenspan in his autobiography released earlier this year. It was he who dismantled regulations to allow mortgage companies to entice renters into home ownership on the explicit reasoning that an American population more ensnared in home ownership would create an American population more willing to swallow otherwise distasteful conservative government. Homeowners, particularly those with difficult levels of mortgages and insecure jobs become more susceptible to fear, and fear is the bedrock resource for campaigning conservative candidates in elections everywhere. Renters are not so distracted. If jobs change, they can walk and take all their possessions with them.
There will be shrill warnings that the losses and turmoil will spread to the whole economy hurting us all. The warning, however, has the same validity as earlier Milton Friedman-inspired promises the last 30 years that growth and profits at the top would also flow down to everyone else. That never happened, and nor will pain flow down. Both claims are mere propaganda meant to work like some Stockholm Syndrome to ensure the enslaved falsely identify their interests with their enslavers.
Finally, the only real solution to ecological stress in all its myriad and plainly evident forms is much less high-intensity industrial activity and consumption. It would have been pleasant if companies voluntarily wound back their environmental impact. It would have been acceptable if governments implemented laws to wind them back. It would have been relieving if the public proved able to force both to act effectively. But clearly none of these remedies are in the cards. Even totally ineffective measures like the BC Carbon Tax and the Federal Liberal Green Shift policy proposal involve massive political battles that bring no guarantee of success. Imagine the fate of a proposal that would actually be effective at reducing even a little of the nation’s carbon footprint.
Two futures therefore present themselves: ecological collapse or economic collapse. Which poison would you rather choose? Consider that ecological collapse will also bring economic collapse, while economic collapse might preclude ecological collapse, but only if it comes fast and deep enough.
There are many reasons to celebrate the carnage in financial markets, and not many reasons to fear it. The poorest of all in fact will hardly notice anything different no matter what happens.
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The Republic of East Vancouver masthead
The Republic of East Vancouver supports no party, advocates
for no cause, represents no group, serves no master, and considers
problems with no preconceived notions. We hope to afflict the comfortable,
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