Sunday, October 05, 2008
Hard rain posted by Richard SeymourSo, the stock markets turned up their noses at $700bn. Too little too late, apparently - all the stress and the bullying and arm-twisting and bribing and threats of 'martial law' were to no avail, at least if the idea was to avert catastrophe. According to Nouriel Roubini, the bail-out may either be inadequate or make matters worse, or both. After all: "When a nuclear option of a monster $700 billion rescue plan is not even able to rally stock markets, you know this is a global crisis of confidence in the financial system." So: "The next step of this panic could be the mother of all bank runs, i.e. a run on the trillion dollar-plus of the cross-border short-term interbank liabilities of the U.S. banking and financial system, as foreign banks start to worry about the safety of their liquid exposures to U.S. financial institutions. A silent cross-border bank run has already started...". Aside from which, European governments are already behaving as if a run on the banks across the Eurozone and beyond is approaching. (I could swear that the German finance minister who announced that savings would be protected insisted only a few days ago that the problem was an American one and that no decisive intervention in the banking system was required).
But let's get this straight: it isn't that $700bn is too little, or even $810bn if you include the pork barrel measures included in the final bill. As mentioned before, the total cost of bail-outs so far in the US alone totals $1.7 trillion. This raises the US federal debt to $10.1 trillion. One of the measures of the bail-out bill was to raise the borrowing limit to $11.3 trillion, so they evidently expect it will soar again. Given that the US stock markets can lose over a trillion dollars in a single day (29/9), this may not seem like much. It's a ten hour working day for a decent broker who, as you know, conjures up the wealth in sort of Rumplestiltskin operation before deciding to invest it in ways that are selflessly designed to benefit the working class. But someone will eventually have to start paying this back, and the Rumplestiltskin machine is on the blink. Either McCain or Obama are going to break some hearts once they get in - unless they seriously expect the US to continue to be able to sell unlimited debt securities at a time when its major financial institutions are imploding, they will probably make big cuts in public spending and increase taxes for everyone but the 'donor community' (a lovely phrase to describe ruling class political bribery).
The trouble is, who's going to have the money to pay it back if you can't touch the real wealth? Arguably, the US working class can work it off, as they worked off the deficit from the Reagan/Bush years under Clinton's "belt-tightening" regimen. However. If Joseph Stiglitz is right, and we're facing the prospect of an L-shaped growth trend, with mass foreclosures, soaring unemployment and GDP contraction (while "C.E.O.’s, investors, and creditors are walking away with billions"), where will the money come from? This is where the global struggles over domination of energy, as well as land, labour and resource markets sharpen and become dangerous. We have seen a short preview in Georgia, and that is very much 'To be continued'. On top of that, and very much related, we have the war that is still expanding into Pakistan, and the prospect - put on hold for the time being - of a military attack on Iran by either the US or its regional proxies. But these will look like pretty small beer indeed if the US is in need of loot and goes hunting, on whatever pretext. Moreover, there is the problem of managing Americans who get ideas above their station. The largest recent spate of US working class struggle was the massive migrant labour mobilisations, and the subsequent rounds of state repression have broken that up for the time being. But this doesn't mean that the beast is dead. As I pointed out the other day, if it had been up to much of corporate America, there would have been goose steps by the Potomac during the last Great Depression, rather than New Deal liberalism. Their coup failed in part because General Butler ratted them out, but who needs a coup these days? They don't have to rely on a private army now (not even one as illustrious as Blackwater), because:
Army Unit to Deploy in October for Domestic Operations
Beginning in October, the Army plans to station an active unit inside the United States for the first time to serve as an on-call federal response in times of emergency. The 3rd Infantry Division’s 1st Brigade Combat Team has spent thirty-five of the last sixty months in Iraq, but now the unit is training for domestic operations. The unit will soon be under the day-to-day control of US Army North, the Army service component of Northern Command. The Army Times reports this new mission marks the first time an active unit has been given a dedicated assignment to Northern Command. The paper says the Army unit may be called upon to help with civil unrest and crowd control. The soldiers are learning to use so-called nonlethal weapons designed to subdue unruly or dangerous individuals and crowds.
But what would the legal scope for such operations be? Thanks to the act known to its acquaintances as HR 5122, passed unanimously by the Senate in 2006, these troops can be stationed anywhere in the United States. The executive can order that the troops take control of any National Guard units, without state consent, and implement martial law in the event of a serious public disorder. I suspect they brought this law in with the intention of using it at some point. They can even hire Blackwater, as I believe they did during the 'little Somalia' which, you may recall, did serve as a testing ground both for the implementation of martial law and for disaster capitalism. And, well, speaking of those Mexican labourers? During the Great Depression, and later in the mid-1970s, Mexican workers who had been invited during boom time were ethnically cleansed ('repatriated', legally and illegally) in the hundreds of thousands. Not that race matters in America any more. Oh, these are just a few of the many possibilities for an even more bunkered authoritarian state in an era of intractable capitalist crisis.