[Marxism] The Long Fall

Louis Proyect lnp3 at panix.com
Thu Nov 8 09:47:46 MST 2007

Counterpunch, November 8, 2007
The Long Fall
A Market Without Parachutes


America is finished, washed up, kaput. Foreign investors and central 
banks around the world have lost confidence in US markets and are headed 
for the exits. The dollar is sinking, the country is insolvent, and its 
leaders are barking mad. That's bad for business. Investors are voting 
with their feet. They've had enough. Capital is flowing to China and the 
Far East in a torrent. It's "sayonara" downtown Manhattan and"Hello" 
Tiananmen Square.

The dollar fell another 2 per cent last night, gold soared to $840 per 
ounce, oil topped $98 per barrel, General Motors reported a $39 billion 
loss after the market closed on Tuesday, the real estate market 
continued its downward slide, and the major investment banks are 
marching in lock-step towards bankruptcy.

The news is all bad. The nation's economic foundation is in shambles. US 
credibility is shot. Bush and Greenspan have put us on the road to ruin. 
Now their work is done. We're flat broke.

The catalogue of fiscal ailments now facing the country is too long to 
list. We'd need a ledger the size of a small encyclopedia. There's been 
a stampede away from the dollar even though it's already lost over 60 
per cent of its value since Bush took office and even though central 
banks around the world will lose their shirts if it collapses. They 
don't care. They're getting out while they can.

Cheng Siwei, the vice chairman of China's National People's Congress, 
announced yesterday that China would continue to diversify its $1.4 
trillion reserves away from the dollar to "stronger currencies" like the 
euro. "Strong currencies"; isn't that Paulson's line? Siwei's comments 
ignited a firestorm in the currency markets triggering a big blow-off of 
the greenback. The poor dollar has no place to go now but down, and it's 
on a greased pole to the bottom. With consumer spending paralyzed by the 
decline in home equity and frozen wages, and the banks "stuffed to the 
gills" with over a trillion dollars of mortgage-backed sludge; the 
prognosis for the hobbled dollar is looking grimmer by the day. The 
bulging trade deficits and dwindling foreign inflows haven't helped 
either. The greenback has suddenly become the global pariah; all it 
needs is a leper's rattle and a tin cup.

The news is no better in the real estate industry either, where the 
nation's biggest builders are reporting record losses and inventory is 
backed-up 11 months. Sales are off 22per cent in one year alone. 
Foreclosures are skyrocketing, jumbo loans (over $417,000) are 
impossible to get regardless of one's credit history, 40 per cent of all 
mortgages (subprime, Alt-A, piggyback, reverse amortization, 
interest-only) have been eliminated, and entire projects in Florida, 
Arizona, Las Vegas, and California's Central Valley have stopped 
building altogether. Tens of thousands of unoccupied homes across the 
Southwest have been reduced to ghost towns. Nothing is selling. The 
building boom, that began when Alan Greenspan ginned-up the Fed's 
printing presses in 2002, has turned into the biggest housing bust in 
American history.

On top of that, the banks are tightening lending standards and shunning 
potential buyers just when the economy needs a boost in demand. Loan 
originations are down and bankers are spooked by the gathering storm in 
the credit markets. That means that home sales will continue to be 
sluggish, prices will correct more quickly, and the anticipated "soft 
landing" will turn into a full-blown crash.

full: http://www.counterpunch.org/whitney11082007.html

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