RE: [OPE] Questions on the Financial Crisis.

> The financial crisis has two main pillars:
> 1) Unreliable loans that marketed in the way mathematical models prescribed, would allegedly reconstitute them “…
> in ways that it is supposed to eliminate most of the risks” (60 minutes).
> 2) Risk saving devises like “credit default swaps” that insured the investors in the case of the financial instrument
> failure. But these swaps by virtue of their name were not subjected to the regulations applicable to common
> insurances. Therefore, those who sold swamps (well known financial institutions) were not required to have
> capital reserve to face the trigger of the insurance.
 
 
Hi Alejandro:
 
On what foundation do these 'pillars' rest?
 
The question of "unreliable loans" is not only related to the financial sector
and the housing market.
 
It is also related to income and employment.
 
What has been happening with real wages in recent decades? Have
they remained relatively stable? If wages are stable but housing prices
were increasing at a rate far in excess of the rate of inflation, how are
people able to afford those houses?
 
Where have jobs been created in the US economy and what are the
wages for those jobs? What kinds of jobs have been lost and what did
they pay? How has the trend towards contingent (part-time) labor
affected the purchasing power of a significant and growing segment of the
working class? How has the loss of manufacturing jobs in entire regions
in the US affected regional unemployment and wages?
 
What has been happening with the long-run average rate of profit in the
US economy and how has that affected the international mobility of capital?
 
How have austerity programs in the US in recent years affected the
purchasing power of workers? Is there no relation at all between
escalating medical costs and defaults on home loans?
 
Are we witnessing merely a "financial crisis" or the decline and fall of
an Empire?
 
In answering these questions, one moves away from simplistic answers
- such as those reported in the "60 Minutes" story - of greed and
incompetence.
 
In solidarity, Jerry
 
 
 

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Received on Mon Nov 10 11:33:07 2008