[Marxism] The Junk Credit Crisis

Louis Proyect 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.

full: http://www.counterpunch.org/whitney08062007.html




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