[Marxism] The Junk Credit Crisis
lnp3 at panix.com
Mon Aug 6 11:44:26 MDT 2007
Counterpunch, August 6, 2007
The Junk Credit Crisis
Judgment Week on Wall Street
By MIKE WHITNEY
It's a Bloodbath. That’s the only way to describe it.
On Friday the Dow Jones took a 280 point nosedive on fears that that
losses in the subprime market will spill over into the broader economy
and cut into GDP. Ever since the two Bears Sterns hedge funds folded a
couple weeks ago the stock market has been writhing like a drug-addict
in a detox-cell. Yesterday’s sell-off added to last week’s plunge that
wiped out $2.1 trillion in value from global equity markets. New York
investment guru, Jim Rogers said that the real market is "one of the
biggest bubbles we’ve ever had in credit" and that the subprime rout
"has a long way to go."
We are now beginning to feel the first tremors from the massive credit
expansion which began 6 years ago at the Federal Reserve.
The trillions of dollars which were pumped into the global economy via
low interest rates and increased money supply have raised the nominal
value of equities, but at great cost. Now, stocks will fall sharply and
businesses will fail as volatility increases and liquidity dries up.
Stagnant wages and a declining dollar have thrust the country into a
deflationary cycle which has---up to this point---been concealed by
Greenspan’s "cheap money" policy. Those days are over. Economic
fundamentals are taking hold. The market swings will get deeper and more
violent as the Fed’s massive credit bubble continues to unwind.
Trillions of dollars of market value will vanish overnight. The stock
market will go into a long-term swoon.
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