You’ll enjoy reading this:
http://www.swans.com/library/art14/mdolin31.html
A Quick Look At The Credit Crisis
by Michael Doliner
“(Swans - March 10, 2008) By now most people know that the “subprime” crisis is no such thing. What has happened is the final result of the long decay of the rate of profit (1) in the American economy. As productive activity no longer paid, investors turned to interest on credit to provide sufficient rates of return....”
Nice clear must-read. Thanks for a spectacular article. Really cuts to the chase...
“These liabilities seem to be as large as the entire American banking system.”
“The American economy now depends upon all the players going along with good news they all know is bogus.”
“Since everyone’s exposure is hidden nobody knows who is holding these worthless securities and is thus essentially broke, so nobody wants to lend any money to anybody.”
“Credit card defaults and car loan defaults are rising almost as fast as mortgage defaults. To repay or not to repay is now seen as a purely business, rather than a moral, decision. This pulls out the supports from all the mathematical models upon which the system is based.”
“The really fun news is that this is only the tip of the iceberg.”
“Nobody knows which banks are already bankrupt, and now even the little guy is no longer finding his obligation to pay all that much of an obligation. In the end the whole credit system depends upon the social convention that debts ought to be repaid, and this social convention seems to be dissolving. When people begin walking away, lower interest rates are not going to help.”
Page 73
The discovery by financial capitalists that they made money out of issuing and selling securities rather than out of production, distribution and consumption of goods accordingly led them to the point where they discovered that the exploiting of an operating company by excessive issuance of securities or the issuance of bonds rather than equity securities not only was profitable to them but made it possible for them to increase their profits by bankruptcy of the firm, providing fees and commission of reorganization as well as the opportunity to issue new securities.