In the days leading up to the U.S. presidential elections we have not seen the sort of massive drops in the stock market that were daily occurances in previous weeks. Some corporate media have actually begun to talk about loosening of credit. the impact of the reduction in the prime lending rate, and maybe it won’t all be so bad after all.
Don’t believe it.
Take a look at the business pages. That’s the one place in the corporate media where you can expect to read the truth, or at least the truth as understood by those who continue to believe that capitalism really is the only viable economic system.
On the day before the presidential elections, and therefore perhaps largely unnoticed amidst the hoopla, headlines show quite clearly the movement of the unfolding global recession as it rolls from the banks and Wall Street across the entire economy. First there’s Circuit City. Now this was a big enough story that some news sources put it on their (print or digital) front page. At a time when you might expect retailers to be gearing up for the holiday season, including hiring part-time help and developing sales strategies to maximize their December take, just the opposite is going on at the second largest electronics retailer in the U.S. Circuit City execs announced yesterday that they were celebrating the holidays by closing 155 stores across the country and reducing their workforce by 17%.
We can’t talk about capitalist overproduction without being sure to mention the U.S. auto industry. You know, they used to say “What’s good for General Motors is good for the country.” But if the inverse is true and what’s bad for GM is bad for us, then you had better start socking away that money into the mattress, because yesterday the automaker announced that its sales were down 45% – and the news was not much more cheery for Ford, with sales down 30% and Toyota down 23%. In fact, car sales for October in the U.S. were the lowest since 1983! So again, what looked like a problem on Wall Street last week is now another sign of a steep recession caused by overproduction — too many goods that not enough people can afford. If the news from Circuit City shows the recession already reaching the retail sector, then the news from Ford Country makes a similar showing for an important U.S. manufacturing sector.
That this really is a crisis of overproduction – the type that Marxists says is inevitable in a capitalist economy – is confirmed by the news from the manufacturing sector as a whole, which reports a 26 year low in new orders.
Think of it this way. Thanks to the wonders of technological innovation, increases in human productivity, and the development of incredibly more efficient means of global communication, all of which have been pioneered in the last quarter century, capitalism has managed to destroy an enormous percentage of the value that it created over that very same quarter century. And now, the economists continue to quietly assert, we are in for a global recession that is likely to be the greatest since (at least) the Great Depression of 1929.
But with all of this bad news about overproduction rolling from one sector to another, making it more and more certain that fewer people will be able to purchase what capitalism has created, certainly the good news is that the reductions in the cost of borrowing money mean that the channels of credit will open and clever enterpreneurs will soon begin innovating and producing again, right? That’s what they keep saying in hopeful tones on the front page. But on the business page, there’s this:
Monday November 3, 2:04 pm ET
By Martin Crutsinger, AP Economics Writer
Fed survey: Banks tighten lending standards further on all types of consumer, business loansWASHINGTON (AP) — Banks tightened up further on all sorts of lending from home mortgages to credit cards and business loans as the worst financial crisis in seven decades took a bigger toll on the economy.
The Federal Reserve says its latest quarterly survey of bank lending practices found high numbers of banks reporting tighter credit standards across a broad range of loan products.
The Fed says its survey, released Monday and conducted in the first two weeks of October, found that sizable percentages of banks had “continued to tighten their lending standards and terms on all major loan categories over the previous three months.”
In other words, the very phenomenon that started the whole mess – tightening credit markets, inability to borrow money, and therefore inability to hire more workers, produce more goods, etc. – continues to have a grip on the market even after a trillion dollar bail out and significant rate cuts, not just in the U.S. but globally.
It looks like this party is far from over. The big question for working people is whether we’re going to be the ones who are left to pay the bill.
Filed under: Economic crisis
