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Fri

30

Nov

2007

A Diary Of The Onset Of The Greater Depression - Carolyn Baker Book Review
Friday, 30 November 2007 09:38
by Carolyn Baker
Carolyn Baker Reviews Danny Schechter's e-book SQUEEZED (Click on link to Download)
Vulture restructuring is a purging cure for a malignant debt cancer. The reckoning of systemic debt presents regulators with a choice of facing the cancer frontally and honestly by excising the invasive malignancy immediately or let it metastasize through the entire financial system over the painful course of several quarters or even years and decades by feeding it with more dilapidating debt. Henry Liu,

For more years than I can count I've heard Danny Schechter's name bandied about in progressive circles, but for all his tireless activism, he did not fully capture my attention until I saw his stunning documentary "In Debt We Trust." By that time I had forsaken my myopic focus on imperialism, the Iraq War, the Democratic Party, and of course, Bush-bashing. It was becoming painfully and increasingly clear to me that history was repeating itself, and being an historian, I was well aware that it never does so in exactly the same manner but often with enough mirroring of earlier eras that it behooves human beings to sit up and pay attention.

About the same time that "In Debt We Trust" appeared on my radar screen, Chalmers Johnson's Nemesis was released, hammering home the inescapable similarities between the fall of the Roman Empire and the demise of the United States. Despite the divergence of focus between Schechter's documentary and Johnson's Nemesis, both ultimately reveal that the American empire is descending into catastrophic financial collapse, already bankrupt, which will eventually result in the abject impoverishment of all but a very few of its privileged inhabitants. After purchasing "In Debt We Trust" I showed it regularly to a particularly endangered species in the empire's economic war on its own citizens, students.

As a result, many "come to Jesus meetings" and "true confession sessions" ensued in my classes as they unburdened their souls regarding the gargantuan student loan debt with which they would leave college and their accelerating awareness that glamorous, cushy, lucrative jobs with which they might pay off their debts would not exactly be falling at their feet. Then came Danny's new e-bookSqueezed and his request that I review it. After reading it, the above description "a diary of the onset of the Greater Depression" came to mind. Let me explain. I had recently read Doug Casey's "What's About To Hit Us Will Be Far Bigger Than The Great Depression" in which he uses the term "The Greater Depression" to describe the economic tsunami dead-ahead.

Then after readingSqueezed, I realized that Danny has given us an extraordinary diary explaining exquisitely how we arrived on this path. "Great Depression" and "diary" are words that automatically hook most historians, and clearly, I'm no exception, particularly since I have acquired some financial literacy in recent years and have come to understand the quintessential role of economics in world, national, and local events. Early in the book the following quote from the National Association For Business Economics appears, and I find it absolutely stunning:
The combined threat of subprime loan defaults and excessive indebtedness has supplanted terrorism and the Middle East as the biggest short-term threat to the U.S. economy.
Some sleight of hand the ruling elite have accomplished since 9/11, namely, that while Americans were pondering the color of the government's daily terrorist threat assessments, that government and its corporate cronies was taking them to the cleaners, picking their pockets, swindling, cheating, extorting, defrauding, hustling, ripping-off, double-dealing, conning, hornswoggling, hoodwinking, fudging, gouging, bamboozling, scamming, screwing, shafting, and let's not forget bilking the American middle and working classes. Hey, look over there-see the Italian spider climbing up the wall-or Osama hiding under your bed? And while you look, we'll steal you deaf, dumb, and blind! Schechter succinctly informs the reader early-on of the book's contents stating that:
*It discusses how debt has restructured our economy and put our people under a burden that many will never crawl out of. It shows how access to credit has, for many, gone, in Steven Green's phrase "from a luxury to a necessity to a noose." It identifies the profiteers and calls for an investigation and the prosecution of those behind this shrewdly engineered ponzi scheme. *It offers the critique of a media critic who has monitored flawed and superficial reporting on the subject and who is trying to challenge the news media to improve its coverage the problem and it also monitors some of what it has done. It discusses the making of my own new film intended to fill part of void. The story of In Debt We Trust: America Before the Bubble Bursts discusses its impact and the battle to get it seen. * It advocates a debt relief movement in America and argues that such a movement would have tremendous resonance across the spectrum of political life. It urges citizens to get involved and politicians to respond.
On each topic, Squeezed superbly elucidates the key issues and documents the twists and turns of the odyssey that has resulted in the early stages of the Greater Depression which we have now entered. Near the end of the book appears a Q & A section with Schechter and Gregory Paschal Zachary of Alternet from a 2006 interview entitled "Young Borrowers Face A Life Of Debt". The portion of the dialog I found most illuminating was the interviewer's question:
Paschal Zachary: You suggest at times that there is a conspiracy to trap as many Americans as possible into crushing debt, simply in order for banks to boost profits. Is it really that bad? Schechter: The card companies are a cartel. They collaborate as much as they compete. They use the same techniques. There are people who see techniques, and the companies who use them, as evil. I don't personally like those terms. But I think the card companies are insensitive. They are chasing revenue and they don't care how they get it. They go over the top.
While I agree with Danny's answer, what really intrigues me is the interviewer's question, again echoing that dreaded word that sends progressives screaming into the night as if their hair is on fire: conspiracy. You see, in progressive circles we can say anything about anything as long as we don't imply that anything was a conspiracy. It all just sort of happened because stuff just happens, and it's "irrational" and a bit wacky to imply otherwise. Earlier in the book, Schechter offers a blistering paragraph that probably did set Zachary's hair on fire if he's read the e-book and if he really is as terrified of "conspiracy theory" as he sounds:
Driving this change is a growing concentration of power in the financial and banking sector. That, in turn, unleashed a process called FINANCIALIZATION with the economy dominated by a vast CREDIT AND LOAN COMPLEX every bit as insidious as the Military Industrial Complex. This Complex is shadowy and omnipresent, active in funding our politicians and lobbying for laws that benefit their businesses. At the same time, it is invisible to most of us. It operates through a fog of shadowy lobbyists, interconnected institutions and highly legalized (and hence poorly understood) rules, laws and procedures underpinning the market system and the high-speed computers that move money and buy/sell orders around the world in seconds.(xxii)
A powerful explanation indeed, but not quite specific enough in my opinion. Within the past few days, former Assistant Secretary of Housing and Urban Development (HUD), Catherine Austin Fitts, also formerly an investment banker on Wall St. with Dillon Read, has posted on her blog a section entitled "Who's Who In The Housing And Mortgage Bubble" in which she catalogs the major players in the housing bubble/mortgage crisis in terms of banking giants, government agencies, credit rating agencies, the nation's top four auditors, and various industry associations. Given the dearth of this kind of clarity regarding the mortgage mess, Fitts's posting is priceless. Schechter devotes one section of the book to mis-information and bogus reporting on the part of mainstream media's coverage of the current economic meltdown. In it he correctly exposes the fallacies behind rosy economic forecasts but does not address another chimera, that is, the ostensible "losses" being suffered by Goldman Sachs, Citibank, AIG, and others.

I documented the transparency of these so-called losses in my September article "Bush's Bogus Bailout", and Fitts has superbly documented them on her Solari website and on her blog. In addition, she has researched more thoroughly than anyone I know, in all of her writings and particularly at her Aristocracy Of Stock Profits website, the prodigious criminality of the American political and corporate capitalist systems. The question that few have asked is: Who are the losers? When we see CEO's like Charles Prince leaving Citgroup with a $42 million severance package and $53 million in stock options, can we respond with anything but bemused scorn at the simplistic reportage that financial institutions involved in the mortgage crisis are "losing" anything?

And when Citigroup is bolstered with a $7.5 billion infusion of cash from an Abu Dhabi investor in what has become the "great American fire sale" conducted by the same corporate pimps who created the housing bubble, can we feel anything but rage at their criminality, enabled by their media accomplices? Even more egregious than media complicity is that of politicians who wallow in the spoils of the debt industry. Schechter cites David Sirota's October, 2007 blogpost (48): Donations plentiful to candidates in midst of possible predatory lending regulation ... Payday lenders have given nearly $64,000 to the 2008 candidates for president, with a vast majority of that going to Democrats, many of whom have accused the industry of unfair lending practices ... Democratic presidential candidates Hillary Clinton, a U.S. senator from New York, and New Mexico Gov. Bill Richardson each has received more than $22,000 from payday lending sources, more than any other candidates during the campaign.

As Squeezed notes, these Democrats and many more also caved in on the 2005 bankruptcy bill written by and for the credit card industry.

Pam Martens in her fabulous November 28 article "Crony-Capitalists Fiddle While Main Street Burns" states that "The saga of how the top minds in Washington and on Wall Street have dealt with the deepening financial crisis in the U.S. would make a great Hollywood screenplay, except for this: It's absurdly unbelievable." Comparing the "sinking" of Citigroup to the doomed Titanic, Martens opens the article with a largely unknown fact, namely that:
The largest bank in the United States (by assets), Citigroup, is discovered to have stashed away over $80 Billion of Byzantine securities off its balance sheet in secretive Cayman Islands vehicles with an impenetrable curtain around them. Citigroup calls this black hole a Structured Investment Vehicle or SIV. Wall Street insiders call it a "sieve" that is linked to the breakdown in trading of debt instruments around the globe and the erosion of wealth in assets as diverse as stock prices to home values. Additionally, tens of billions of dollars in short term commercial paper backed by these and similar Alice in Wonderland assets are sitting in Mom and Pop money market funds at the largest financial institutions in America, with a AAA rating from our renown credit rating agencies.
While over time, Citigroup, Goldman Sachs, and other subprime players have managed to maintain sterling personas in the eyes of outsiders, those who dig deeply such as Fitts, Martens, and Schechter have discovered a very different reality behind the smoke and mirrors. The magnitude of that horror movie reveals itself almost daily in ever-new disclosures regarding the venality at the core of the housing bubble disaster.

Indeed, there are victims of massive corporate fraudulent inducement, but they are not members of upper-level management of Citigroup, Goldman Sachs, J.P. Morgan Chase, or Lehman Brothers. They are millions of former homeowners soaking in financial bloodbaths of foreclosure and bankruptcy, as well as the hoards of employees that have been and will be laid off as a result of the carefully-crafted housing bubble train wreck. As if all of this were not egregious enough, Bethany McLean, Fortune Magazine Editor and co-producer of "Enron: The Smartest Guys In The Room" comments on the a pending lawsuit by what's left of Enron against Citibank which claims that Citi helped the now defunct firm manufacture financial statements. Well, we all know what happened to the pensions and retirement funds of former Enron employees.

Worse yet, asSqueezed points out, "The dollar may be in a free fall. Hold on to your hats and your homes." Freefall? Yes indeed, said Gerald Celente, Director of Trends Research Institute in a story reported on November 19 by United Press International which stated that a financial crisis will likely send the U.S. dollar into a free fall of as much as 90 percent and gold soaring to $2,000 an ounce. Celente, forecasting a "Panic of 2008" asserted that "We are going to see economic times the likes of which no living person has seen."

Sunday Telegraph reporter Liam Halligan stated in "Dollar's Fall Is Now A Bigger Political Issue Than An Economic One" that "The importance of ‘dollar divestment' cannot be overstated. At the very least it means the greenback has much further to fall — plunging the US into recession. But it begs a bigger, more alarming, question: How will Washington react to the end of the US hegemony?"

Astutely, Schechter picks up on the "Shock Doctrine" nature of the crisis as perceived by Naomi Klein through the lens of "disaster capitalism" and concludes:
One analyst in the New York Times called it "shock therapy," the very term writer Naomi Klein explores in her new book on "disaster" capitalism showing the link between the shock therapy once doled out in mental hospitals, shock and awe bombing, shock interrogation techniques whose aim is to "disorient" prisoners and shock strategies used in economic policy that has devastated so many countries in which it was tried.
Now it has come home to the US - the country that has been exporting it overseas. On a recent Democracy Now show, Klein explained:
"The history of the contemporary free market was written in shocks.... Some of the most infamous human rights violations of the past thirty-five years, which have tended to be viewed as sadistic acts carried out by anti-democratic regimes, were in fact either committed with the deliberate intent of terrorizing the pub- lic or actively harnessed to prepare the ground for the introduction of radical free-market reforms."

The only difference here is that, so far, there have been no serious reforms proposed and the market is anything but free. With its interest cut, the Fed bails out and rewards the very institutions that were profiting on ill gain profits from predatory lending.(70)
And now for the part that is really American-you know-all of the "So what do we do about it?" questions. Danny would answer:
The first step is raising awareness. People don't usually talk about this problem. It's a point of embarrassment to be overwhelmed by debt. When you give people permission to talk about this, they pour out. We also need grassroots political action to promote responsible lending. We have to roll back the bankruptcy law changes. We have to fund counseling and advice. We need to make financial literacy part of our educational system.
Fundamentally, I agree with him, but as he already knows, I no longer believe in any intact political system that could make any of this happen. When I talk about debt, I almost always speak of it in relation to the Greater Depression we have entered and take these realities much further by illustrating how they are an integral part of the collapse not only of the American empire, but of civilization itself.

For years I have been referring to the Terminal Triangle: Peak Oil, climate change, and global economic meltdown, the latter explained in Danny's book in terms of the international ramifications of the Greater Depression. And of course, there are "other horsemen" of the apocalypse, as enumerated by Sally Erickson in her recent blog, so I find it impossible to discuss the mortgage crisis without connecting it with the additional impending global catastrophes that spell the end of the world as we have known it. Just as we have entered the Greater Depression, we are engulfed by collapsing institutions-especially the American political system, which are in an abject state of dissolution and therefore incapable of affecting change at requisite levels, for all the reasons Danny has so thoroughly documented in his book.

As for an educational system that will teach financial literacy instead of testing students five hours a day, four days a week-well, there's just too much dumbing down to be done. After all, who prints those tests and the textbooks students can barely read even when they're seniors in high school? Go to the head of the class if you answered: "Subsidiaries of all the scumbag corporations you just mentioned above."

When I talk about collapse, my second paragraph usually goes something like, "Get out of debt, get out of debt, get out of debt-unless you plan to be an unincarcerated (or incarcerated) wage slave of corporate capitalism for the rest of your life."

I could not agree more with Danny's directive to talk about debt, become financially literate as individuals, avoid and liberate ourselves from debt, and watch and share with others "In Debt We Trust." But I must add that all evidence points to the frightening reality not only of an economic depression dead-ahead, but an even more frightening scenario: a world in which it will be very difficult to obtain food, drinkable water, or healthcare-thanks again to the Terminal Triangle.

As I scour the blogosphere, I find almost no progressive voices discussing the dire economic realities of this moment. After all, it's much easier to bash Bush, obsess about clueless, corporately-owned candidates, or blog about green products, green shopping, green living, and all manner of green-wash. Meanwhile, I continue to ask: What have you done to prepare for a post-petroleum world? As the Terminal Triangle becomes ever-more cataclysmic, how will you acquire food, drinkable water, and healthcare for yourself and your loved ones?
Feeling "squeezed" now? You ain't seen nothin' yet.  
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