By Fred Magdoff
The monetary predicament has created a number of difficulties for operating humans: collapsing wages, misplaced jobs, ruined pensions, and the nervousness that incorporates now not figuring out what the next day willbring. Compounding all this can be a loss of trustworthy details that speaks to the realities of staff. Commentators and pundits appear extra careworn than a person, and economists—the so-called "experts"—still hold to bankrupt ideologies that did not are expecting the situation and supply not anything to provide an explanation for it.
In this brief, transparent, and concise e-book, Fred Magdoff and Michael D. Yates clarify the character of the commercial difficulty. opposite to traditional knowledge, the authors display that this quandary isn't really a few aberration from a typically benign capitalism yet quite the traditional or even anticipated final result of a completely irrational and damaging approach. No volume of tinkering with capitalism, even if or not it's discredited neoliberalism or the go back of Keynesianism and a "new" New Deal, can conquer the center contradiction of the procedure: the day-by-day exploitation and degradation of nearly all of the world’s humans by means of a tiny minority of commercial owners.
While the present monetary maelstrom has laid naked the internet of greed, corruption, and propaganda which are principal to capitalism, in basic terms an aroused public, challenging the proper to overall healthiness care, respectable employment, a safe previous age, and a fresh and fit setting, can lead the us and the area out of the worst trouble because the nice melancholy and towards a procedure of creation and distribution conducive to human happiness. This publication is aimed essentially at operating humans, scholars, and activists, who wish not only to appreciate the realm yet to alter it.
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Extra resources for The ABCs of the Economic Crisis: What Working People Need to Know
I" " 1974 11111111 [ I 1982 1990 1111111IIII 1998 2008 78 THE ABCi OF THE ECONOMIC CRISIS widi llie rest of tlic world-widi so much more consumed in the United States from abroad than the country exports-amounted to $2 billion per day, 365 days a year, and over the last four years lias represented more dian 5 percent of each year s GDP. Under typical circumstances a nation with a large trade deficit will find its currency depreciated that is, exchanging for less and less foreign currency. As with anything else when supply greatly exceeds demand, prices fall.
A 20- or 30-to-I (or greater) " TOTAL RETURN ON OWN MONEY $100* ($151/200) 76% " - 7(, THE ABC. OF THE ECONOMIC CRISIS leverage then made sense because a lot of money and bonuses could be made if the bet went your way. But it would be owners of the company s stock diat would take the brunt of any damage if bets went south. In April 2004 the five main large investment banking firms (including Goldman Sachs, whose CEO, Henry Paulson, became the Bush administration's Treasury Secretary in 2006) convinced the Security and Exchange Commission that because their mathematical risk models could predict how much leverage they could safely use ' , , diey should be free of the 12-to-1 SEC limit on the amount of debt they could take on.
The result: the system is liltingfrom investment to speculation. BUSINESS WEEK, Scplember 16, 1985 - The explosion of debt was direcdy related to, and encouraged by, the growth of the importance of financial institutions in the economy. High levels of debt (leverage) were used to enhance the profit-making potential of various bets. One of the ways to make money widi money is to lend it out, sell the loan and pocket die fees, and continue making loans. Now, none of this would work if there were no borrowing.