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Crisis Populism and Rose-Colored Glasses

When it concerns socializing the losses of the financial disaster, the head of Deutsche Bank no longer believes in the "self-healing power of the market." The bankruptcy of neoliberalism is blatant.

Monster Bashing

By Robert Kurz

[This article published in: Freitag 21, May 23, 2008 is translated from the German on the World Wide Web,  http://www.freitag.de/2008/21/08210101.php.]

Every fourth German citizen lives on the poverty line and the middle class dwindles. Filling the tank makes the average monthly budget nearly collapse. The breakdown of old-age security is on the horizon. In the two-class medicine, the insolvent cannot afford sickness any more. At the same time the global food crisis makes headlines. The fear is that billions will soon have nothing to eat. All this is in the midst of the "upswing of a deficit economy" supported by financial bubbles that only really shine in the glass palaces of globalization. The glass palaces could also end soon. The indisposition of mortgage credits in the US played down for months turns out to be a worldwide financial crisis, the greatest crisis since 1945 and the worst since the 1930s. What has happened to the climate catastrophe moved to the background again in the media?

When it concerns socializing the losses of the financial disaster, the head of Deutsche Bank no longer believes in the "self-healing power of the market." The bankruptcy of neoliberalism has become blatant. But as Margaret Thatcher said: There is no alternative as long as capitalism is the life-principle. Fear and panic spread even among the elites of market radical crisis management. German president Horst Kohler once declared "the international financial markets have developed into a monster." Considering his time as director of the International Monetary Fund, he seems to suffer from gaps in memory. He is certainly not alone in this. Franz Muntefering, the German social democrat with the red scarf, blamed the "grasshoppers" of the investment funds as culprits and generously forgot the red-green government that capitulated to the "market forces."

Suddenly they no longer want to be the strapping model students of yesterday. Now they stylize themselves as resistance fighters against the neoliberal "excesses." A humane capitalism, Kohler says, "cannot do without the market- and price mechanism." This option is as likely as the hope that the Berlin government sector will be populated by social guardian angels. The whole economic press identifies the causes of the misery only in the subjective "greed" of actors vilified as scapegoats. Kohler also appeals to the dominant polemic in denouncing the "bizarrely high compensations for individual financial managers." Out of fear of corpses in the cellar, the bankers no longer give credits to one another. Rather they intend to teach a lesson to those who feed the "monster." That resentment and anti-Semitic emotion are exploited does not seem important any more. How the community of crisis democrats moves ideologically near the NPD (Hitler's National Socialist party).is "bizarre" even if the community doesn't like to see this.

The imagery of "monster" and "grasshoppers" illustrates the explanation emergency of a consciousness that has internalized capitalism. The crisis populism of elites numb with fear explains nothing and overcomes nothing. Analysis of the causes of crises was ascribed to the Marxist criticism of political economy. However the theoretical culture of this criticism is blocked. Large parts of the left have accepted the capitalist reality principle in a misguided interpretation of the command socialist collapse. Its disciples now blame the inviolable market- and price-mechanism that caused the air to run out of the official expertocracy. The graduates of economics in unions, employee associations, parties, state bureaucracy and foundations are exchangeable and marked by the same mentality as cloned sheep. Decrying the self-produced "monster," the economic management releases its smart children. They no longer understand their own world. When the professionally ignorant said with Kohler we "were near a collapse of the world financial markets," an all-clear signal was announced instead of a danger signal. The financial crisis spreading to the daily routine threatens to waken the demons of a general despair-competition. Then washing their hands in populist innocence will not help the guardians of "financiability" any more.


By Robert Kurz

[This article published in: Neuen Deutschland 5/23/2008 is translated from the German on the World Wide Web,  http://www.exit-online.org/druck.php?tabelle=autoren&posur=353.]

A short time ago the mother of all financial crises was ripe. In his latest interviews, Josef Ackermann, head of Deutsche Bank, said the blaze that started from US mortgage credits is nearing its end. The effects on the real economy are tolerable. There are no signs of a worldwide economic crisis. Insofar as they were not fired, investment bankers advise their clients to buy net derivatives. They must live from something and pay off their Porsches. The best prospects are seen with rose-colored glasses; everything was only half as wild. Thanks to the glut of money of the central banks and aggressive US interest-rate cuts, sufficient liquidity exists in the market to re-inflate the created credit system. This has been the case for over a year. In a monthly cycle, there were all-clear signals followed every time by the next shock wave.

The estimates of the write-ff needs alone amount to a trillion dollars owing to the collapse of the US mortgage market. By now $344 billion of that amount has been identified. A large share of the losses has not yet appeared on the balance sheets because the banks and financial providers hide and delay the write-offs. The losses in short-term positions that became acutely unsupported were repressed. On the other hand, long-term loans tied with mortgages are in the balance sheets although no one wants to buy them. The hope that the valuation of these securities will rise again when the financial markets are "normalized" is rather na´ve. The prerequisite would be the quick recovery of the US real estate market but there are no signs of that. The crisis of the US credit card system is overdue. Many suffering property owners changed the terms of their debts in this way. However the further penetration of the credit crisis was only postponed.

The inevitable repercussion on the US economy 70% of which depends on consumption has not been fully realized. Since 2002 the "consumer wonder" was mainly fed by credits by means of the real estate bubble. It is not obvious where the purchasing power will come to cushion the economic collapse after the bursting of this bubble amid an unemployment already increasing from month to month. Savings cannot leap in the breach since they do not exist in an appreciable extent. The tax rebates issued up to the middle of July 2008 and amounting to $100 billion given by the US government to 130 million households are only a drop on the hot stone. At present both the recession- and the inflation expectations in the US are at their highest level in 30 years. In view of this state of affairs, the dilemma of the US central bank (Federal Reserve) will first appear in the next months because it cannot simultaneously lower and raise the key interest rate. Despite massive relief with liquidity injections and tax funds, the balance sheets are not revitalized and the effects on the real economy from the financial markets are not blocked. No long life is possible to the rose-colored optimism. The next pessimism attack of Josef Ackermann is pre-programmed.

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