Global Economic Crisis: Finance Is the New Mode of Warfare

Tuesday, July 19, 2011
By Paul Martin

By: Michael Hudson
Market Oracle
Jul 18, 2011

“When I was in Norway earlier this year, one of its politicians sat next to me at a dinner and said, “You know, there’s one good thing that President Obama has done that we never anticipated in Europe. He’s shown the Europeans that we can never depend on America again. No matter how good he sounds, no matter what he promises, we’re never again going to believe the patter talk of an American President. Mr. Obama has cured us. Our problem is what to do about the American people that don’t realize this nightmare that they’ve created, this smooth-talking American Tony Blair in the White House.”

I’m Bonnie Faulkner.Today on Guns and Butter, Dr. Michael Hudson.Today’s show, “Guns, Finance and Butter: Finance is the New Mode of Warfare.”

The jobless recovery

Michael, I read the in the newspapers that the great recession, so-called, has long since ended, but unemployment remains stubbornly high with only a measly 18,000 jobs created in June. I believe the term that was coined some time ago is a jobless recovery. What is a jobless recovery?

We call that a depression – in this case, caused mainly by debt deflation. Just because the stock market is being inflated by the Federal Reserve doesn’t mean that the economy itself is growing. It’s shrinking – from a combination of families and businesses having to pay off debts rather than spend their income on goods and services, and the government’s shift of taxes off finance, insurance and real estate (FIRE) onto labor and industry.

The economy is getting worse and worse – deeper negative equity (mortgage debts in excess of property prices), shrinking markets, stores going out of business, rising defaults and foreclosures, job layoffs – with new graduates having to pay student loans but not having a job.

That’s why the stock market is down 160 points today.The financial sector realizes that the game is over. From America to Ireland,Greece and the rest of Europe, financial interests are insisting that governments take responsibility for paying off the bad bank debts to their bondholders and other bankers in cross-deals and gambles on derivatives that have gone bad. The problem is that these banks have made bad real estate loans and other gambles. In Ireland, the collateral backing these loans is only about 20 percent of the face value of the mortgages.

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