A Bankrupt Empire Hits The Wall:
"Today There Was Full-Blown Carnage"
"It’s Kind Of Like Catching A Falling Knife Right
"A Fairly Disorderly And Hysterical Move"
"By Spreading To Other Markets, The Subprime Mess
Is Driving Up Interest Rates For Borrowers Of All Sorts, Which Can Lead To A
The Articles Below: T
Contrary to absurd fantasies,
crises that interrupt the operation of capitalism don’t just go on day after
day at the same or increasing levels of panic and collapse. There will be weeks ahead when everything
seems quiet, and alarming news reports like the ones below fade away.
But as the contagion spreads
through more and more realms of production, distribution and accumulation, dramatic
upheavals become more frequent and severe; the interruption of the cycle of
production, distribution and accumulation becomes more pronounced; and it
becomes ever clearer to everyone in the society that a serious downturn has
arrived, with falling production, cuts in employment, and intense downward
pressure on wages.
Occasional violent shocks --
the bankruptcy of some major corporation or financial institution – grab
headline attention transiently, but play out against the background of a
slower, grinding attack on the standard of living of the working class as a
And who better suited to
preside over attacks on the standard of living of the American working class
and use the government to impose discipline upon it than the Democratic Party?
And who less suited to do so
than the Republican Party, too clearly identified with wealth and naked, crude
corporate greed? The relatively few
remaining political representatives of the American ruling class who still have
enough intelligence to perceive reality know that.
Meanwhile, within a year or
two, the want of ready money, called a credit crisis, will finally reach the
debt instruments of the Imperial government itself.
Those who today look for safety
from the violence shaking financial markets by buying U.S. treasury bonds and
notes, the famous "flight to quality" reporters love to point to today, will
come to regard those instruments as toxic waste, and wonder how they could ever
have been so foolish as to seek safety in the worthless paper of a bankrupt
With that, the crisis matures
into a crisis of confidence in the government and the class of capitalists the
government was instituted, designed, and is operated to serve.
No, we have not been through
Certainly not during Vietnam,
when the U.S. economy was still relatively stable, with substantial capital
reserves and deriving some income from the Empire, rather than seeing the
relative costs of the Empire pile up mountains of dollar denominated debt that
can never be repaid short of a violent depreciation of the dollar sufficient to
impoverish much of the population.
Never before in U.S. history
has a major crisis in the sphere of economic relations, expressing both massive
private and governmental bankruptcy, come at the same time as a failing
Imperial war draining off what little national capital remains.
Those who babble mindlessly
about a new world being possible had best appreciate that this indeed will be a
new world, and it will not be pretty.
One question, of some
importance, will be whether our troops will choose to serve the vast majority
of Americans who are the working class of the United States, or will choose to
serve the few on top who oppress, exploit, and torment us for their own benefit,
and who preside over the hopelessly antiquated economic relations that bring on
Imperial war abroad and economic disaster at home.
The answer to that question
will depend, more or less, perhaps decisively, on what links we have forged
with our class brothers and sisters in arms.
Now, not later.
Those who are willing to invest
substantial amounts of time in forging those links, and see no greater priority
in their lives, of necessity must find each other and begin the work.
A few who have made that
commitment can accomplish infinitely more acting together in an organized way
than an assortment more numerous who half-step their way lamely and hesitantly
along because they have other priorities.
It has been said there is a
world to win. There is also a world to
lose, a more dangerous possibility now than has been the case previously in
July 27, 2007 By MICHAEL
HUDSON, PETER A. MCKAY and AARON LUCCHETTI, Wall St. Journal
By bidding up stock prices all year,
investors were effectively betting the housing slowdown wouldn’t engulf the
broader economy. Yesterday, that confidence appeared to be shaken.
Stocks and corporate-bond markets tumbled
amid selling that was more widespread than during the three previous days of
triple-digit declines this month.
Along with risky bonds and
anything connected to the housing market, investors sold off stocks,
emerging-markets bonds and even high-quality corporate debt. The record trading
volume in stocks reflected rising anxiety.
Meanwhile, roughly 1,300, or nearly 17%, of
the around 7,800 stocks that trade on U.S. exchanges hit their lowest price of
the past 12 months.
To many investors, that made yesterday’s
selloff more ominous than other big declines this year. Sid Bakst, a senior
portfolio manager at investment firm Robeco Weiss, Peck & Greer, said the
steady drip of bad news on subprime-mortgage loans and the failure of some
leveraged buyouts to get long-term financing has made investors increasingly
"As each day has gone by,
things have been leaking a bit more," Mr. Bakst said. "But today there was
The Dow Jones Industrial Average sank 311.50
points, or 2.3%, to finish at 13473.57, after being down as much as 440 points
At the New York Stock Exchange,
trading curbs designed as safeguards against a crash remained in effect for
nearly all of yesterday’s trading session.
The selloff marked the biggest
three-day point drop for the Dow industrials in five years and wiped $105.9
billion off the average’s market value.
The broader Standard & Poor’s 500-stock
index slid 35.43 points, or 2.3%, to 1482.66, leaving it up 4.5% on the year.
The technology-focused Nasdaq Composite Index shed 48.83 points, or 1.8%, to
2599.34, and was up 7.6% on the year.
Yesterday’s volume on the nation’s three
major stock exchanges totaled 10.59 billion shares, up 34% from the previous
record, which was set earlier this year.
When volume is high, investors take big market moves more seriously.
The moves in the stock and bond markets, and
discouraging news about home sales and orders for capital equipment, led the
federal-funds futures markets -- where traders can bet on the Federal Reserve’s
next move -- to conclude that the central bank is now much more likely to cut
interest rates sometime this year.
Yesterday, investors sold off
stocks whose performance is tied to the ups and downs of the economy, like
energy companies, industrials and basic-materials companies, a sign investors
now think the economy will slow down. Those sectors were among the market’s
leaders this year.
Energy stocks, which were up
25% on the year before yesterday, led the way down after ExxonMobil Corp.
reported weaker-than-expected earnings. The energy sector had accounted for
roughly a third of the stock market’s earnings growth over the past two years,
meaning high oil prices actually had a positive impact on stocks.
But now energy prices, which have flirted
with new highs recently, are clearly a drag on the market.
The meltdown in the
subprime-mortgage market was clearly the factor that set off the cascade of
Investors fears have been
heightened by the sheer complexity of collateralized-debt obligations and other
structured finance vehicles, which makes it difficult for investors to judge
just how bad conditions are in the subprime sector, said Arthur Tetyevsky,
chief U.S. credit strategist at HSBC.
"Now it’s a much broader, much
more nebulous, much more intimidating issue for the market. And that’s adding to the duress that we’ve
seen in the market," Mr. Tetyevsky said.
By spreading to other markets,
the subprime mess is driving up interest rates for borrowers of all sorts,
which can lead to a credit crunch.
Many bearish observers thought the housing
slump might cause an economic slowdown by cutting into consumer spending, which
accounts for about two-thirds of the U.S. economy.
Consumer spending has held up reasonably
well, however, and now worries about the economy are focused on whether tighter
credit will undermine companies’ ability to borrow money so they can expand and
keep boosting their stock values.
The impact of tighter credit is
already apparent in the market for high-grade debt.
Yesterday, for example, Tyco
Electronics Ltd. pulled a $1.5 billion bond deal "due to unfavorable conditions
in the debt markets," the company said.
Selling bonds for a company
like Tyco, which has put its past scandals behind it, is normally a routine
As another example, Mr. Tetyevsky pointed to
the price action on a $1.5 billion bundle of 30-year bonds issued two weeks ago
by Lehman Brothers Holdings Inc.
By yesterday the quoted yield on those bonds
was roughly 2.4 points above the yield on 30-year Treasurys, widening from a
spread of roughly 2.15 points on Wednesday and 1.7 points back on July 12.
That’s a big increase for the
investment-grade bond market and a sign that investors are nervous and want to
get paid more for risking their money, even on bonds that are considered to
have a very low chance of default.
Some analysts said the credit market, which
had rallied strongly for several years, was due for a downturn. RBC Capital Markets fixed-income strategist
T.J. Marta said the high-grade-bond market’s move may simply be a symptom of
the air being let out of a credit bubble that had gotten too big.
"But the concern is that this
is a fairly disorderly and hysterical move, and that always carries the risk
that you hit a tipping point where things get out of control," Mr. Marta said.
Juggling his phone on the floor of the New
York Stock Exchange, broker Steven Grasso weighed in on a stock market where
investors’ fear has replaced greed as the most-prominent emotion.
The bond market "is a huge concern,"
said Mr. Grasso. "It’s been overhanging the market. New companies keep getting lumped into what’s
happening to subprime....People thought it would be a handful of companies, but
we’re seeing a marketwide impact."
Mr. Grasso said many companies’ borrowing
costs will go higher, lowering their earnings.
Until recently, emerging-market bonds had
largely weathered the turmoil in the U.S. and European credit markets. That’s a
testament to the strong economic fundamentals and financial stability of many
emerging economies. But, in another sign
of the disquiet in the markets, Russian energy giant OAO Gazprom abruptly
postponed a bond offering planned for yesterday.
"It’s kind of like catching a
falling knife right now," said Edwin Gutierrez, an emerging-market portfolio
manager at Aberdeen Asset Managers in London, of yesterday’s trading. "I wouldn’t be in a hurry to add risk."
U.S. investors awoke to overnight selling in
key Asian and European markets. In addition, the Australian asset-management
firm Absolute Capital announced that it was halting withdrawals from two funds
with about $200 million in assets invested in credit instruments, including
As the morning progressed, the
Commerce Department released data showing that new-home sales in the U.S. fell
6.6% in June -- more than quadruple the decline expected by economists in a
survey by Dow Jones Newswires.
The government also announced a
smaller-than-expected rise of 1.4% in June orders for big-ticket items known as
But mutual-fund investors have picked up
their selling as volatility has increased recently, according to TrimTabs
"There Is A Full Blown Liquidity Crisis At Hand In
World Financial Markets"
"Right Now, Virtually All Sources Of Liquidity Are
Drying Up Faster Than Anyone Would Have Thought"
"The Speed Which This Liquidity Crisis Is Emerging
Is Amazing Many"
Jul 27 2007 By Chris Laird, Prudent
For the last several years, corporate
buyouts, corporate stock buy backs and such, the Yen carry trade, and the
mortgage derivatives markets have added tremendous liquidity to world financial
markets. In tandem with this, the market
analysts came to view a 'world stock bull’ emerging, and even the most
conservative market bears started to get into this world stock bull theme in
The total amount of these sources of
financing and liquidity in the last 2 years is over $5 trillion, and has been
one of the major supports for stock markets.
All of a sudden, these sources
of liquidity are vanishing so fast, that market experts are amazed.
This all came together in about 3 or 4 weeks
after the Bear Stearns mortgage derivatives mess revealed how illiquid
structured finance (derivatives in mortgages and such) can become –
After that, investors started
to flee from billions of dollars value of structured finance offerings in the
last several weeks, and in the blink of an eye, almost the entire derivatives
financing universe lost liquidity across the board.
This is a prime cause of the latest world
Right now, virtually all
sources of liquidity are drying up faster than anyone would have thought.
Or, put another way, with corporate buy outs
and stock buybacks at over $1 trillion in the last year alone – that is now
almost gone as support for the markets.
Investment banks such as Morgan and Goldman have had to park about 40
huge deals planned this year, as they have not been able to sell of the bonds
and financing for these deals.
This picture emerged in only about 3 weeks.
Continuing, the now well known debacle with
mortgage derivatives – structured finance packaging risky mortgages into so
called AAA rated tranches – have led to financial crises at Bear Stearns,
Italease, killed deals with Morgan, and Goldman and others, and caused that
sector to lose liquidity to zero basically, in a mere two or three weeks after
the problems with Bears two now worthless hedge funds emerged.
Now, the almost the entire mortgage
derivative universe is tanking – and huge margin calls by banks to counter
parties are happening- and no one wants to buy.
Then, the long threatening
unwinding of the Yen carry trade is afoot, the Yen strengthening significantly
now for two weeks, and as that continued apace, world stock markets finally
started to fall apart – or crash – this week.
Lots of cheap Yen are borrowed at about 1%
and invested in every financial market imaginable. As the Yen rises, investors have to sell out
stocks and whatever, and then pay back Yen at higher exchange rates – a sure
This effect is magnified by a factor of ten
by hedge funds who use 10 to 1 or more leverage.
And the list of liquidity
drying up goes on, but, only a few weeks after the Bear Stearns CDO (mortgage
derivative mess) showed that no one wanted to buy CDOs any more, that rumbled
through credit markets, and now, as one trader said, 'there is a full blown
liquidity crisis at hand in world financial markets’.
This is not just about CDOs, but has now
scared almost the entire structured finance (derivatives) universe because it
showed how illiquid they can become- basically instantly illiquid.
And, as, in the case of Bear, or Italease,
bankers have to call in loans from counterparties who hold their structured
finance derivatives, and find that their counterparties cannot fulfill the 'margin’
calls in many cases – read as a liquidity crisis.
Then, as this all is occurring,
world financial markets are crashing, as the easy liquidity for corporate
buyouts and buybacks, and mortgage financing, all of a sudden vanishes in only
about 3 weeks.
The speed which this liquidity
crisis is emerging is amazing many.
"What Are, Generally Speaking, The Characteristics
Of A Revolutionary Situation?"
Whatever you may think of the
politics of this writer, he was rather skilled at figuring out when a
revolutionary situation was present:
He describes the essential
1. A ruling class split and at war within itself
about what to do: "a crack through which the dissatisfaction and the revolt of
the oppressed classes burst forth"
2. An economic crisis hammering the working
3. A war that breaks the passivity of "peacetime"
4. He might have added, had this been written
later, a rulings class so blind and stupid it can’t conceive of a whole
population rising in revolution against it, and an army happy to join the mass
movement from below.
1915, Excerpts from Collapse Of The Second
International & IMPERIALISM AND SOCIALISM IN ITALY, Kommunist, Nos. 1.2,
1915, By V. I. Ulyanov. [The writer used
the pen name "Lenin" to keep the government from terrorizing his family. Excerpts]
For a Marxist there is no doubt that a
revolution is impossible without a revolutionary situation; furthermore, we
know that not every revolutionary situation leads to revolution.
What are, generally speaking,
the characteristics of a revolutionary situation?
We can hardly be mistaken when
we indicate the following three outstanding signs:
(1) it is impossible for the
ruling classes to maintain their power unchanged; there is a crisis "higher up,"
taking one form or another; there is a crisis in the policy of the ruling
class; as a result, there appears a crack through which the dissatisfaction and
the revolt of the oppressed classes burst forth.
If a revolution is to take
place …. it is necessary that "one is incapable up above" to continue in the
(2) the wants and sufferings of the oppressed
classes become more acute than usual;
(3) in consequence of the above
causes, there is a considerable increase in the activity of the masses who in "peace
time" allow themselves to be robbed without protest, but in stormy times are
drawn both by the circumstances of the crises and by the "higher-ups"
themselves into independent historic action.
Without these objective
changes, which are independent not only of the will of separate groups and
parties but even of separate classes, a revolution, as a rule, is impossible.
The co-existence of all these
objective changes is called a revolutionary situation.
This situation existed in 1905 in Russia and
in all the periods of revolution in the West, but it also existed in the
seventh decade of the last century in Germany; it existed in 1859,1861 and in
1879-1880 in Russia, though there was no revolution in these latter instances.
Because a revolution emerges
not out of every revolutionary situation, but out of such situations where, to
the above-mentioned objective changes, subjective ones are added, namely, the
ability of the revolutionary classes to carry out revolutionary mass actions
strong enough to break (or to undermine) the old government, it being the rule
that never, not even in a period of crises, does a government "fall" of itself
without being "helped to fall."
"Much Has Been Left In The World That Must Be
Destroyed By Fire And Iron For The Liberation Of The Working Class"
Take the present army. It is one of the good examples of
organisation. This organisation is good
only because it is flexible; at the same time it knows how to give to millions
of people one uniform will.
Today these millions are in their homes in
various parts of the country. Tomorrow a
call for mobilization is issued, and they gather at the appointed centres.
Today they lie in the trenches, sometimes for months at a stretch; tomorrow
they are led into battle in another formation.
Today they perform marvels, hiding themselves
from bullets and shrapnel; tomorrow they do marvels in open combat. Today their
advance detachments place mines under the ground; tomorrow they move dozens of
miles according to the advice of flyers above ground.
We call it organisation when, in the pursuit
of one aim, animated by one will, millions change the forms of their
intercourse and their actions, change the place and the method of their
activities, change the weapons and armaments in accordance with changing
conditions and the vicissitudes of the struggle.
The same holds true about the fight of the
working class against the bourgeoisie.
Today there is no revolutionary
situation apparent; there are no such conditions as would cause a ferment among
the masses or heighten their activities; today you are given an election ballot
- take it.
Understand how to organise for it, to hit
your enemies with it, and not to place men in soft parliamentary berths who
cling to their seat in fear of prison.
Tomorrow you are deprived of
the election ballot, you are given a rifle and a splendid machine gun equipped
according to the last word of machine technique: take this weapon of death and
destruction, do not listen to the sentimental whiners who are afraid of war.
Much has been left in the world
that must be destroyed by fire and iron for the liberation of the working
And if bitterness and despair
grow in the masses, if a revolutionary situation is at hand, prepare to
organise new organisations and utilize these so useful weapons of death and destruction
against your own government and your bourgeoisie. .
This is not easy, to be sure.
It will demand difficult preparatory
activities. It will demand grave
This is a new species of organisation and
struggle that one must learn, and learning is never done without errors and
The relation of this species of
class struggle to participation in elections is the same as storming a fortress
is to maneuvering, marching, or lying in the trenches.
This species of struggle is
placed on the order of the day in history very infrequently, but, its
significance and its consequences are felt for decades.
Single days when such methods
can and must be put on the programme of struggle are equal to scores of years
of other historic epochs.
The question has been put
squarely, and one cannot fail to recognise that the European War has been of
enormous use for humanity in that it actually has placed the question squarely
before hundreds of millions of people of various nationalities: either defend,
with, rifle or pen, directly or indirectly, in whatever form it may he, the
great-nation and national privileges, in general, as well as the prerogative or
the pretensions of "our" bourgeoisie, that is to say, either be its adherent
and lackey, or utilize every struggle, particularly the clash of arms for
great-nation privileges, to unmask and overthrow every government, in the first
place our own, by means of the revolutionary action of an internationally
There is no middle road; in
other words, the attempt to take a middle position means, in reality, covertly
to join the imperialist bourgeoisie.
IRAQ WAR REPORTS
U.S. Soldier Killed In Diyala
July 27, 2007 Public Affairs Office, Camp
Victory Release No 20072607-06
TIKRIT, Iraq — One Task Force Lightning
Soldier died as a result of injuries sustained from an explosion near his
vehicle while conducting operations in Diyala province, Thursday.
Everett Soldier Who Joined Army For His Daughter Killed
July 27, 2007 By ROB PIERCY, KING 5 News
EVERETT, Wash. — The family of Army Private
Michael Baloga, who grew up in Everett, says he has been killed in Iraq.
"He was probably my best friend," says Baloga’s
sister, Leah Valade. "He was the last person I would expect or want anything
bad to happen to. I was really upset because I know the risks involved with him
going over there, but I was really proud he took the initiative to do something
he wanted to do with his life."
After graduating from Sequoia High School in
Everett, Baloga worked construction.
Then his daughter, Isis, came along. Wanting
to give her more than he could at the time, he joined the Army.
On his Myspace page, Baloga wrote that two of
his goals in life were to watch his daughter graduate and give his daughter
away at her wedding.
"The whole reason he went into it was pretty
much for his daughter," said Valade. Baloga was a cavalry scout at Fort Hood,
Texas. He shipped out just about a year ago to Camp Normandy in Northern Iraq.
Every few weeks, he’d send his family an
"Every time he’d come back from a mission, he’d
tell me, 'I’m back, I’m okay, you can stop worrying now," said Valade.
Exactly what happened Thursday that killed
Baloga was not immediately clear. All Valade knows is that there was some sort
of explosion and her brother died. Not
just a brother, but a friend.
"Make sure you tell the people you love, that
you love them everyday, because you never know when they’re going to be gone,"
The Baloga family is gathering in Idaho,
where Baloga’s father lives. No funeral arrangements have been made.
Army Nurse From Puerto Rico Killed In Iraq
Jul 16, 2007 By Michael Melia, The Associated
SAN JUAN, Puerto Rico — A Puerto Rican
soldier killed in a mortar attack in Baghdad’s Green Zone was the first Army
nurse to die from combat-related injuries in the Iraq war, a Pentagon
spokeswoman said Friday.
Army Capt. Maria Ines Ortiz, 40, who had been
serving in Iraq since September, was caring for wounded Iraqis at a hospital
inside the fortified district that also hosts the U.S. Embassy and Iraq’s
parliament, her family said.
"She touched everyone’s lives and everything
about her was positive," her fiance, Juan Casiano, said from her mother’s home
in Pennsauken, N.J. "She always carried a smile."
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