Economic collapse: more to come

Posted March 16th, 2010 in Blog, Featured Comments Off on Economic collapse: more to come

Fostering Ecological Hope
Today from Margaret Swedish:

Think we’re moving out of recession?  They tell us that to cover over the fact that we are not, actually, moving out of recession, or that this is just a particularly deep and lasting recession that will end one day, maybe in 2011. But in reality, much, much more is going on, including a permanent restructuring of the global economy – and not in a good way.

The New York Stock Exchange soars back over 10,000. Unemployment continues to hover just under 10 percent, though real unemployment is more like 16-17 percent. Banks and financial institutions are getting back their mojo, while this year will see potentially millions more home foreclosures. CEOs get big bonuses, while wages decline and health benefits disappear. And those 401k’s they talked us into, to replace guaranteed pensions?  How did that work out for you?

Meanwhile, if you pay attention to the news, you know that the banks and Wall Street institutions are back doing the very same things they were doing before the crash, the ones that led to the 2008 collapse – reckless and high-risk investments, bundled securities and collateralized debt obligations. If they can’t play with mortgages like they used to, now they’re playing with things like our seniors’ life insurance policies, literally betting on the life spans of the elderly. Those who do this kind of stuff have no conscience or any moral sensibility that connects them to the real world of human suffering caused by their practices.

It is a purer form of capitalism than the one where well-paid factory workers built a car and a company sold the car and made a profit, the profit being connected to the real thing made. Then, to be sure you have a base of buyers for your product, you pay workers well enough that they can actually buy a car.

Those were the old days. Now if you have money you can invest and make more money disconnected from any thing produced – along with the workers who once produced the thing. Instead of paying coal miners to go into tunnels, you can blow off the top of a mountain and use a giant machine to scrape off the detritus to get to the coal seam. The profits now, and our electricity, are less and less connected to the real humans who once mined our coal but now live on unemployment, unless that has run out, so maybe they can get a minimum wage job at some local MacDonalds. Then you can take your profit and invest in things like derivatives or currency trading, and make a fortune.

Alex Rodriguez makes $25 million playing baseball, and Warren Buffet, worth gabillions, begs the government to tax him more because the system is so incredibly unfair.

I’m preaching.  What am I really writing about today? It’s my fear over what is still to come as this insane phase of global capitalism and profit-making moves towards the next crisis – which was written about on the front page of today’s New York Times, Corporate Debt Coming Due May Squeeze Credit, another boring headline masking one great big explosive news story.

“…2012 is the beginning of a three-year period in which more than $700 billion in risky, high-yield corporate debt begins to come due, an extraordinary surge that some analysts fear could overload the debt markets.

“With huge bills about to hit corporations and the federal government around the same time, the worry is that some companies will have trouble getting new loans, spurring defaults and a wave of bankruptcies.”

But wait, there’s more: In 2012 the U.S. government will need to borrow $2 trillion to cover our projected deficit and to refinance old debt. At the same time, the growing impoverishment of the nation means tax revenue will decrease over the next years. So you can see the looming credit crunch that awaits us.

“Sovereign debt aside, the approaching scramble for corporate financing could strain the broader economy as jobs are cut, consumer spending is scaled back and credit is tightened for both consumers and businesses.

“The apocalyptic talk is not limited to perpetual bears and the rest of the doom-and-gloom crowd.

“Even Moody’s, which is known for its sober public statements, is sounding the alarm.

“‘An avalanche is brewing in 2012 and beyond if companies don’t get out in front of this, said Kevin Cassidy, a senior credit officer at Moody’s.”

So, you see, there’s some alarm here. It could get bad enough that the U.S. could lose its triple-A rating.

Private equity firms and many nonfinancial companies were able to borrow on easy terms until the credit crisis hit in 2007, but not until 2012 does the long-delayed reckoning begin for a series of leveraged buyouts and other deals that preceded the crisis.

“That is because the record number of bonds and loans that were issued to finance those transactions typically come due in five to seven years, said Diane Vazza, head of global fixed-income research at Standard & Poor’s.

“In addition, she said, many companies whose debt matured in 2009 and 2010 have been able to extend their loans, but the extra breathing room is only adding to the bill for 2012 and after.

“The result is a potential financial doomsday…”

Really, don’t buy this bunk about getting us to go out and start buying and spending again to get the economy moving. Save your money as much as you can, live as simply as you can, because this wholly unsustainable economic system is headed for waves of future crashes – until we figure out that its time is over and that we must reinvent the economy altogether, along with its logic;

– until we are prepared to move from economies based on profit, enrichment, consuming, investing money to make money, to an economy whose central purpose is to enrich life on this planet, one modeled on the workings of life, rather than tearing apart its fabric, what holds it together;

– until individual gain and competition are no longer the driving forces of our economic lives (they are not ecologically truthful anyway because this is not how life or evolution works), until we are humble enough to recognize limits to growth and limits to what the planet can endure of our damaging ways of being;

– until we can come to terms with a certain human pathology that affects us all as we became infected with this notion that we are over and above nature, that it is at our service, losing in the process our innate sense that we belong to it, it gave birth to us, takes us back again, that its magnificent workings and connections are part of the very meaning framework of our lives, source of spiritual insights, awe, and myths that gave birth to religions and cultures over thousands of years.

after-tax income disparities

Meanwhile, the gap between the rich, that small slice of the population that continues to do very well, and the poor, which is becoming  more and more of us, just continues to grow and grow to obscene proportions. From the group, Working Group on Extreme Inequality:

Last year, CEOs made an average of $10.8 million in total compensation, including stock options grants, according to an Associated Press survey of 386 Fortune 500 companies.  That’s more than 364 times the pay of an average worker and 885 times the annual income of a full-time minimum wage earner.

In the last three decades, there has been an explosion in the gap between the compensation of top CEOs and their employees.  In 1980, the ratio between highest paid and average compensation in a Fortune 500 company was 42 to one.  By 2000, it has risen to over 500 to one.  In 2007, the ratio was 411 to one.

This is a great website if you want to get angry about how the rich are hoarding wealth as the U.S. era of a vibrant and stabilizing middle class comes quickly to an end.

Friends, an era is ending, a way of being in this world, this western economy now spreading across the planet in which growth has become our god, a false god, yet one we have come to believe is as natural as breathing. We don’t know how to live any other way.  And yet, all indications – ecologically and economically – point to the reality that we have come to its limits. We will either find a new path for the human on this planet or else face multiple disasters as the crises continue to unfold, ecologically and economically.

Life will be the richer for finding this new path. The human will encounter along the way the potential for a burst of new meaning like we have not seen in many generations.  I prefer the fear and uncertainty of finding this new way to the fear and certainty of what awaits us if we continue on the path that has led us to the brink. This site is about hope. Hope is real when it becomes incarnate in the decisions we make in the face of the real world crises that confront us now.


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