Fundamentals: Debt, Banking, and Bankruptcy

Context

The US Banking system today faces challenges it has never faced: how can those in debt pay off loans when most of them are not earning enough, have no savings, and are paying off loans with loans from banks who are getting loans/credit from hedge funds and loan shark investment banks which are going bankrupt? This includes the federal government, state governments, investment banks, commercial banks, and any john and jane doe on the streets. Everybody in the mess is in debt to somebody in the mess. This is a very serious situation, one that objectively has no place to go but down.

The fundamentals of capitalism are simple: goods sold in capitalist countries must be sold at a profit. On a global scale multinational corporations must compete for contracting market spheres. In a glutted national economy, the rate of profit falls at an accelerated rate because they are more goods made than can be sold. With this excess supply, prices tend to fall pushing down profits. The lowered profits mean even greater competition as companies strive to maximize their profits. This results in the merger and acquisition flurry we have seen called diversification. Just as the production of goods is international so is the distribution of human labor power. The circulation of labor power is stifled because there is a glut of human labor power as well as a glut of commodities. For tens of millions of workers the crisis has already reached depression levels. Review the hard data below. But understand much of it has to be mined, given that millions of unemployed workers are being "defined" out of existence.

In the United States, there is a hidden unemployment rate which classifies over 24 million out of work workers as "individuals choosing not to work." The largest percentage of these are Black, though the largest number is white. They had no unemployment insurance. They had no chance of a job at the unemployment office, so they stop going. As a result they add to the already 8 million who get unemployment insurance and the government classifies as "those without a job and actively searching." But their numbers are not counted, they do not count. But as the economy sheds thousands of middle class jobs, their benefits run out, they too end up out in the streets and not counted, it becomes clear that this way of covering data (as to hide high unemployment rates) is being exposed.

As a result, nearly 45% of African Americans who could be in the labor force are not counted because of this definitional slight of hand. With rising gas prices, inflation, cuts in health care benefits, cuts in housing subsidies, cuts in education spending, cuts in medical co-payments, cuts in retirement benefits, falling home prices and tightening credit markets, consumers and businesses have also cut spending. As a result, the U.S. economy is in freefall. The total number of payroll jobs fell by 63,000 in February 2008, an even bigger decline that the drop of 22,000 jobs in January, which had been the first large monthly decline since 2001. The Labor Department said that applications for unemployment benefits totaled 378,000 last week. That was an increase of 22,000 from the previous week and the highest level in nearly two months. The four-week average for new claims rose to 365,250, which was the highest level since a flood of claims caused by the 2005 Gulf Coast hurricanes.

Important Economic Indicators as of March 19,2008
Inflation	CPI increased by.31% since January 2008, with oil prices rising to $111.00 per barrel. Forcing up air travel prices, gasoline prices, heat fuel prices, etc.
Black Inner City Unemployment	White unemployment is 5%; Black unemployment is 11.3 % as of January 2008; Black inner city unemployment approaches 23% in the ten 1,000,000+ populated cities with the largest African American populations.
Real GDP	Negative rate, decrease for the first quarter of 2008
Federal Reserve	The Federal Reserve bailed out Bear Stearn at $30bn with a front firesale from JP Morgan at $2 per share on a company that had traded last year at $178.00 per share; then opened discount loan window for capitalist banks in trouble at $200bn taxpayer monies.

Economic Indicator	Statistical Value	Last Updated
Real GDP	11677.1 billion (0.6% annual rate) Quarter 4, 2007	01/31/2008
Nominal GDP	14084.1 billion (3.3% annual rate) Quarter 4, 2007	01/31/2008
Black Inner city Unemployment Rate	23.6% for 3/3/2008	03/01/2008
Total National Debt	21.3 trillion (deficit) period ending March, 2008)	03/12/2008
Federal Budget	$412.33 billion (deficit) for FY 2007 + first three months of 2008. Add the $200 billion the Federal Reserve has set aside and the $30 billion they used to save Bear Stearns and the total is $642 billion in deficit.	03/17/2008
Public Debt	$11,153.0 billion (11.2 trillion deficit)	03/12/2008
Federal Funds Rate	2.97% for 03/13/2008	03/14/2008
30 Year Treasury Bond	4.56% for 03/13/2008	03/12/2008
Money Supply (M1)	-0.6% (12 months ending 01/2008) 1364.6 billion for 1/1/2008	03/01/2008
Money Supply (M2)	5.8% (12 months ending 01/2008) 7498.3 billion for 1/1/2008	03/01/2008
Balance of Trade	-59233.45 Millions of dollars 3/1/2008 ($59 billion deficit)	03/10/2008
Canadian Dollar	$1 US= $0.9632 Canadian	03/17/2008
Japanese Yen	$1 US = 100.43 Yen	03/17/2008
Mexican Peso	$1 US = 10.233 Pesos	03/17/2008
EU Euro	$1 US = 0.631 Euros	03/17/2008

Today greater and greater surplus value is extracted from fewer and fewer workers on a global scale. The worker today is competing with a robot that is not paid wages, cannot buy back what it produces, does not need health care or vacation, does not need retirement or a pension, and does not need to be retrained. Then there are the Mexican workers, fleeing poverty in Mexico, but taking any below market/sub-minimum wage in America, thus putting other American workers out of work. It is not their fault; the capitalists use the Mexicans as scab workers, paying them $6-$8 per hour to do construction jobs that American workers in the past were paid $25-$35 per hour to do. As always, Black workers are the hardest hit because of the degenerate history of race, class, and culture domination on the part of the whites. Even the working class white generally sides with the ruling class white in scapegoating Blacks as drains on the economy during recession/depression periods.

But when labor saving technology is replaced in production with labor replacing technology such as computerized robots, millions (both black and white) are left without any means of employment. So the tendency is for the value of labor power, the value of the worker's ability to work, and hence, the value of human life, to fall below the cost of reproduction or to the level of hunger, evictions, foreclosures, then starvation, homelessness, and exposure to the elements. Wages are driven down, people are laid off, many are forced to work several part time jobs, benefits are being cut, workers are being forced to pay their own health care, full time work is being made part time and temporary, contracts are being bought out, safety nets are being destroyed, regulatory oversight is being eliminated, social services are being eliminated, tax systems dismantled and rebuilt around new priorities, and civil and criminal law systems are being transformed toward removing any government responsibility for the welfare of society and its citizens, especially populations that are nonwhite.

The economy is moving through the definite stages of capitalism's cyclic crisis. The stages of the crisis are the ending of the expansion of the market, an agricultural crisis, a financial crisis and a industrial crisis. This means that there is widespread weakness in production, a growing credit/debt crisis, foreclosures, car repossessions, bank failures, and the coming stockmarket crash.

This results in net labor displacement that pushes society to the brink of financial, then economic collapse, then social degeneration and rebellion, then a political and military response by the capitalist ruling class via its nazi movement.

In all post-World War II recessions, you could be sure if the Fed injected cheaper money market rates, the economy would turn around.
Since last September 2007, the US central bank is guaranteeing loans, taking questionable loans off the books of banks, and dropping interest rates at a near-record pace.
Despite the Fed's efforts, the credit markets remain in collapse mode---credit is not more available, but less.
The market is not up but down.
To slow the fall, the Fed dropped interest rates by another three-quarters of a percentage point, after two days earlier lowering the discount rate, the rate it charges banks to borrow directly from the Fed, by one-quarter of a percentage point.
In sum, here are more brokerage houses, investment banks, and commercial banks with significant problems today then at anytime since the great depression.
With banks continuing to tighten credit standards, the housing market will sink further.
Foreclosures will continue to rise, and home prices will be further depressed, and since homes are the underlying collateral for many loans, the problem becomes worse.
Currently there is widespread weakness in production, a growing credit/debt crisis, foreclosures, car repossessions, bank failures, and the coming stockmarket crash.
The economy is in the latter phases of a financial crisis. It is setting the stage for industrial collapse and depression unlike any ever experienced in this country.
The junk bond market is now collapsing, the investment banks will collapse in their wake, bringing down the commercial banks and the Federal reserve---which is going to try to finance this collapse on the backs of the taxpayers.

In the 1980s and 1990s, over 1,200 savings and loans failed and their assets were taken over by the Resolution Trust Co. Now the Federal Reserve putting is the taxpayer on the books for at least potentially 2750 small banks and 10-13 large banks which hold many loans that must be paid, but cannot be paid.

Over 2.3 million sub-prime loans are slated to recycle/rise in 2008 to nearly double their cost value. Most of those loans will not be paid, and the families will lose their homes to foreclosure. President Bush, who has been opposed to taxpayer bailouts of individuals in danger of foreclosure, applauded the Bank bail outs using $30 billion in taxpayer monies, and another $200 billion to be loaned to troubled banks when they too begin their inevitable final freefalls.

In short, more is being done for Bear Stearns than homeowners---the sub-prime loan sharks are getting paid while the homeowner who was cheated is facing the streets/eviction/foreclosures. There were 1. 3 million foreclosures in 2006, 1.6 million in 2007, and a projected 2.1 million in 2008. This means that at least 5.1 million families will have been foreclosed in a little over three years.

If each family had it's average 2.1 children in each household, this means nearly 11 million people were forced out of housing in less than four years---evictions, forecloses, or just put out.

Fundamentals of US Debt Crisis

Consumer Debt, and the Crisis in Commodity Circulation

The economy is in the latter phases of a financial crisis. This crisis is setting the stage for industrial collapse and depression unlike any ever experienced in this country. The junk bond market is now collapsing, the investment banks will collapse in their wake, bringing down the commercial banks and the Federal reserve---which is going to try to finance this collapse on the backs of the taxpayers

From June to December 2007, Moody's Investors Service downgraded an unprecedented 4.7 corporate bonds for every one it up graded. The old record was -2.8 to 1 was set in the recession of 1982. Firms that accumulated massive debt in "leveraged-buyouts" will be wiped out. Never has the US entered a recession so steeply leveraged. Never has the US entered a global depression with three times the world' debt. As a result, large, mid-range and small companies will be forced to cut back even more on employment and capital spending to meet interest payments. Debt-buyouts are at an all time high. At the same time, business failures are on the increase nationwide.

Some states with the highest rates of business failures are the states with some of the most advanced computer automated machine production and expensive real estate ties. There will be an even more severe increase in bankruptcies especially with office buildings not leasing up. Why would businesses lease building if they are unable to expand the distribution of their commodities because of a glutted homemarket? Capitalist markets are in contraction. As a result of mounting bankruptcies, the banking system will be forced to bear the burden of waves of business failures. They too will continue to fail at a rate reflective of the failures in the business and consumer loan areas. Next the FDIC, FSLIC, Federal Treasury, and federal government will then be forced to bail-out banks, even though each institution is going into further inorder to state in business.

Debt has been the major solution to capitalist market contraction. The real wages of workers have been declining since 1973. They spend less, in real money terms, because they have less to spend. The concept is that if their consumers cannot afford to buy the excess industrial capacity with their current levels of income, capitalists should loan them money to buy on credit. By loaning money to consumers, the capitalists keep commodities circulating; that is consumers can continue to buy what industry produces. Industry thereby keeps making a profit and production continues. By 2008, there were at least 817 million Visa credit card holders in the world. They used their debt-cards at over 14.7 million mall, schools, colleges, bookstores, on-line agencies, gas stations, retail outlets, hotels, restaurants, fast-food outlets, fitness centers, airports, and other sales outlets. They spent approximately $1.8 billion per day. Visa is only one credit card out of hundreds of major cards.

1. In 2007, the US alone totals $21.5 trillion of total debt. It consists of foreign, domestic, corporate, federal, state, business, consumer, and personal debt, each of which has reach its crisis proportions. Outstanding consumer credit has increased from $131.6 billion dollars in 1970 to an estimated $3.4 trillion in 2008.
2. In sum, workers have borrowed and now owe, in a 40 year period, enough money to fuel the entire Chinese economy.
3. Since the recession ended in 1982, consumer debt has risen more than four times as fast as either total consumption or disposable income. It grew425 percent more rapidly than in either of the last two recoveries. In just three years (2004-2007), home mortgage debt increased by 79 percent to $2.5 trillion and installment debt surged by91 percent to $948.7 billion.
4. Since 1982 the household debt burden as a percentage of disposable income has risen from about 59 percent to 41 percent of disposable income. Credit is based on confidence. In many ways , it is fictitious money. The glut on the world market indicates a severe over-accumulation of capital. The crisis is world wide. The recent drop in the stock market indicates that the point of world depression is quite near.

Wages did not keep pace with the rapidly increasing volume of commodity produced by CAMP. This has led to over-production. Only credit circulation carry the life sustaining commodity-money-commodity' and money-commodity-money' cycle on each day. As a result, an estimated 41 million households are financially overextended.

Commodity-Money-Commodity = Commodity-Credit-Commodity

As CAMP replaces unskilled, semi-skilled, then skilled workers wage labor is reduced in social and economic value. The reduction of wage labor value also reduces the material basis for human social consumption via the wage-to-purchase process. This can be observed in Census Bureau statistics for the manufacturing sector in the United States that employed 13.1 million production workers in 1980, but had decreased to 8.9 million in 2007. This reduction of nearly 4 million workers translates into 4.7 billion fewer hours of work. Despite this reduction in labor between 1982 and 2002, the total value of manufacturing output increased over this period by 13 percent to $5.8 trillion.

Thus production expanded as the market for goods represented by wages contracted due to workers not being paid. Technological elimination of labor in the context of expanding production reduces the rate of profit and accelerates corporate consolidation and financial centralization. It further fuels a scramble for new sources of profitability including financial speculation (stock markets, "hedge funds," currencies, and real estate), military production and war profiteering, and attempts to monopolize strategic commodity groups such as energy, software, investment banking, airlines, and even car manufacturers. Attempts by capitalism to maintain profitability. The ultimate negation of wage labor negates the material basis for mass commodity circulation in a capitalist and socialist society. The higher the organic composition of capital (i.e., the technological composition of the production process), the higher the volume and rate of credit required to circulated the mass of CAMP manufactured commodities.

Thus, the two standard formulas for capitalist industrial production in the US must be modified to reflect the emerging transition in the basis of domestic commodity circulation. The first formula summarizes the content of capitalist production, distribution, exchange and consumption form the view of the capitalist owner of a specific means of production.

M---C---M' becomes CR---C---CR'

In sum, the initial and overriding form of capital is its monetary form, and the general formula of capital is M---C---M', where M is money, C, a commodity, and M' is a sum of money plus a certain increment. In the past, the circuits of capital started with money capital because every employer must have, first of all, monetary funds to buy the necessary components for producing surplus value, theses being labor power and means of production. With money capital capitalists purchase labor power.

1. In the past, capitalist invested money into the purchase of labor power and technology required to produce a certain commodity. That commodity was produced. After its manufacture, it was then sold at a profit by the capitalist for even more money than was invested in producing it.
2. In 2007, this standard operating procedure has been altered. The transitional formula merely means that the capitalist today depends exclusively on credit or debt spending in-order to purchase raw materials and CAMP technology.
3. With this capital a commodity is produced by CAMP which will be sold on credit in the distributive spheres of the society.

Credit or debt spending is the only means of circulating CAMP commodities in capitalist and socialist societies. In the second formula, we see the emergence of the same characteristic processes of production, distribution, exchange and consumption. However this time we document its expression from the viewpoint of the worker:

C---M---C' becomes C---CR---C'

Traditionally, in the workers' formula, the worker sold his or her labor power (their ability to work, their energy/know-how) as a commodity in the capitalist production process. In return that worker was paid a subsistence wage. That subsistence wage was used to purchase commodities in the marketplace. The workers create new value that exceeds the value of their labor power by the amount of surplus value, which is appropriated without indemnity by the capitalists. By selling the commodities created by the wage workers, money-capital acquires the original money form, while the initially advanced money capital grows by a quantity equal to the surplus value.

In 2008, this formula has been altered due to the introduction of Computer Automated Machine Production into the capitalist production process. Such and introduction reduces the value of wage labor in the production process. In addition many levels of unskilled, semi-skilled and skilled labor are replaced altogether.

1. Reduction of wage labor value and worker purchasing power leads to commodity gluts. Commodity gluts necessitate debt spending.
2. This means that the worker produces a commodity in the wage-labor process but needs credit supports in-order to purchase the necessities of life such as food, clothing, shelter, health care, education, etc.
3. This credit takes the form of MasterCharge, VISA, Discovery Card, American Express and other less publicized standard credit arrangements which allow workers to purchase automobiles, houses, jewelry, furniture, gas, and other commodities.
4. These credit arrangements are necessary supplements to a wage and salary allotment which does not allow for the purchasing of the necessities of life without extended credit supports.

When the worker's labor power is reduced in value by the introduction of CAMP, the wage that he or she is paid is also reduced, sometimes below the cost of reproducing the laborer. For example, today we have full time workers who are at the same time living in poverty and in many cases are homeless. Moreover, their is the phenomena of full time employees who cannot afford to go to the hospital if they get sick because they have no medical insurance and no means of paying medical bills.

Fundamentals of Financial Crisis in Circulation

In another sign of troubles in housing, construction of new homes fell by a larger-than-expected 0.6 percent in February to an annual rate of 1.065 million units. Wholesale prices were up 0.3 percent last month, following an even bigger 1 percent jump in January. Outside of food and energy, the rise in inflation was a troubling 0.5 percent, the biggest increase for core inflation since a rise since 2001. In addition, building permits, plunged by 7.8 percent in February to an annual rate of 978,000 units, the slowest pace in 16 years.

1. Housing developers are defaulting on loans because people are not buying houses
2. In Las Vegas, NV, a development partnership is in debt for $765 million; it cannot pay the interest on its loans. Only 167 of the planned 13,500 homes have been sold.
3. The principal lenders for this housing project are J.P. Morgan Chase and Wachovia Corp. They lend developers money from the accounts of clients-people who are account-holders at the bank.
4. If mortgages aren't being paid, then it is certain that other loans are not being paid either.

The 0.3 percent rise in wholesale prices reflected a 0.8 percent jump in energy costs, driven higher by 2.9 percent jump in gasoline prices and 5.7 percent increase in residential natural gas prices, the biggest jump in this price in more than seven years. For the past 12 months, wholesale prices have risen by 6.4 percent while excluding food and energy, inflation is up 2.6 percent, the biggest 12-month change for core inflation since the period ending last October.

The major increase in core inflation raises concerns that relentless increases in energy costs over the past two years are beginning to spread to other areas of the economy. With inflation set loose, anything the Federal Reserve does by cutting interest rates to jump-start economic growth is negated causing stagnant degeneration of the economy occurring at the same time that inflation is rising. The February rise in wholesale prices reflected higher costs not only for energy but also for cars and light trucks as well as a 1.3 percent jump in prescription drug prices with the overall figure being certainly worst in the future given that energy prices have been soaring. Crude oil prices hit new records above $111 per barrel.

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Fundamentals of Banking, and Bankruptcy Crisis

The banking process is a simple one. You work, get your wage or salary, put your money in a savings account of some type, the banks gives you a very low interest rate on your money, then loans your money to commercial businesses at a much higher interest rate than they paid you. The difference between what they paid in interest to you and what they force others to pay for using your money is the banks margin of profit. The problem is that it is your money they are loaning and losing in hedge funds, sub-primes, stock options, junk bonds, and other capitalist loan shark schemes. You lose your money in the process, then they (the ruling class, through its federal government) takes your future tax money and pays for their losses. This is capitalism.

In sum, banks go out of business en masse because they cannot get profitable returns on the money and capital they sold. When the borrowers, whether they be nations or individuals, cannot sell what they produce, they therefore become unable to repay their financiers. Machines do not buy commodities. This is capitalism's death-knell: This aggravates the plight of larger and larger banks which are saddled with huge real-estate loan portfolios. Add to this condition the fact that home-buying is decelerating even more each day and one has the makings of the incipient stages of an impending collapse of US banking structure. This will continue to evolve, given that workers are being fired from jobs, forced into labor concessions, having real wage earnings reduced due to inflation, etc.

1. Banks are in a greater crisis in 2008 than at any time since the Great Depression of the 1930's. As a direct result, a total of over 1700 banks all banks have bad loans and repossessed property that exceed their capital and loan-loss reserves at the beginning of 1995. These banks have no cushion, no reserves. In process of this emerging global depression, thousands of banks in the US will not have assets of capital and reserves which would allow them to remain in business.
2. Debt spending pervades all six major sectors of money circulation in the society's spheres of exchange. International, federal, state, municipal, consumer, and corporate debt are the final means of circulating CAMP manufactured commodities and services in capitalist and socialist societies. In the US this problem is extremely acute.
3. Finally, bankruptcies are at an all time high, even eclipsing the rate and number during the Great Depression. The savings rate is also is at an all time low. Banks, insurance companies, brokerage firms, savings and loans, and investment firms head the list of failing financial institutions which are a direct result of the inability of the businesses that they have loan money to repay long-term loans because they themselves cannot sell what they produce.

Bank losses in the past year have been unprecedented. Bank failures have grown steadily nationwide since the mid-2001 period. Objectively, in the late 1990's, these numbers can only increase given the increases in labor replacing technology. Businesses cannot repay loans if workers cannot purchase the commodity that the business borrowed money to produce and sell at a profit. As a direct result, this only exacerbated the crisis and further forces the concentration of capital, money and wealth in lesser and lesser hand. At the same time, more and more Americans are being driven out of any means of attaining the necessaries of life.

On an international scale, banks have lent hundreds of billions of dollars over the past 20 years to neo-colonial Asian capitalist countries to build their industries so that they might produce cheap commodities for US consumption and profit. Due to the glut of the world markets theses countries are no longer able to sell what they produce at a price above the cost of production. They are losing money, therefore they are unable to repay their debt. This has caused an international debt crisis wherein American banks have to loan countries money merely to pay the interest on the loan that they loaned them earlier. But most lending institutions in the US, themselves, are teetering on the brink of bankruptcy.

Recent Major Bank Losses (as of March 2008)

Citigroup: $21bn

Merrill Lynch: $16.5bn

UBS: $14.6bn

Morgan Stanley $11.3bn

HSBC: $3.7bn

Bear Stearns: $30.1bn (bought out for $2 per share)

Deutsche Bank: $3.2bn

Bank of America: $3bn

Barclays: $2.6bn

Royal Bank of Scotland: $8.8bn

Freddie Mac: $7bn

JP Morgan Chase: $5.4bn

Credit Suisse: $2bn

Wachovia: $3.2bn

IKB: $2.9bn

Paribas: $321m

Mountains of products can be produced with Computer Automated Machine Production and very little human labor, but people without jobs or income cannot buy them. The result? Perfectly new houses sit empty while homeless, unemployed, nonconsuming nonproducers, sleep in the streets because machines have replaced thin in the labor process.

Meanwhile, the number of foreclosed properties that didn't sell at auction and ended up going back to lenders soared more than 110 percent last month versus February 2007.
Last month, some 46,508 properties were repossessed by lenders, up from 22,114 a year earlier.
The company follows default notices, auction sale notices and bank repossessions. Lenders typically consider borrowers delinquent after they fall three months behind on mortgage payments.
In the 12-month period ended in February, 45 states saw an increase in the number of homes that had received at least one filing.
Rounding out the top 10 states with the highest foreclosure rates were Arizona, Colorado, Michigan, Ohio, Georgia, Indiana and Tennessee.

Commodities are produced by workers, then are sold by capitalists at a profit. Today almost every industry is characterized by an excess industrial capacity, in other words, a glut of commodities which cannot be sold, given the amount of disposable income in the hands of the bottom 83 percent of the population. Furthermore, this is not just a US problem, but it is a world problem. In essence, most industries today are unable to produce more than can be sold profitably. It is important to recognize that this does not mean that these global industries can produce more than is needed for human consumption. We mean that with CAMP they can produce more than can be sold profitably on the world market.

The world glut is a feature of almost every industry. Consumer industries such as electronic, clothing, food processing, furniture, leather, automobile, housing, and even computers have excess industrial capacity. If supply exceeds effective demand then some supply is not going to get sold. In general that which is not going to get sold is what is sold at the highest price. What is sold at the highest price is what costs most to produce. Even so called economic growth is illusionary because it must be financed by larger deficits internationally and nationally. Even military spending has lost its power to stimulate the economy as it once did. It is downsizing, closing bases, firing career soldiers, and sending stable families to the streets---jobless. Expensive CAMP is now used to manufacture the technologically advanced means of military destruction. This is obvious given the huge deficits which are necessary to invest in military weapons of mass destruction.

Therefore, only the cost effective producers are going to remain in businesses. The cost effective producers have to utilize Computer Automated Machine Production (CAMP).

1. First, they must be able to afford it.
2. Second, after garnering the necessary capital, they must utilize a revolutionary means of production which increases productivity, and lowers cost, but at the same time replaces the worker who could have purchased the commodity with wages accumulated in the labor process.
3. Thus, more is produced at a faster rate by less well paid workers.
4. Step by step, the capitalist domestic market is being undercut. Competition has increased.
5. Smaller, less profitable, companies are swept aside in the process of bankruptcies, defaults, mergers, sell-outs, leveraged-buyouts, self-inflicted arson, and simple failures.
6. The commodities build up; debt builds up; business go bankrupt.
7. Banks are strained to attract deposits and recover loses. How can they? They cannot. Increasingly, there is no material basis for their existence.

As this process unfolds the banks which had invested good loans in good companies now are left with bad loans which they say come form bad investments in bad companies. But those investments were not bad when they made them. They became bad as the material basis for their repayment was eroded by the revolution in the means of production of the society. With their earnings decreasing, banks must respond by making riskier loans for which they hope to collect higher interest and fees.

Both the Federal Savings and Loan Insurance Corporation (FSLIC), which insures loans to Savings and Loan banks, and the Federal Deposit Insurance Corporation (FDIC) which insures member commercial banks are themselves on major investment bank/commercial bank collapse away from being broke. The government is giving them money to tide them over but the federal government itself is $11.8 trillion dollars in debt. Its interest payments alone have reached over $376 billion per year. The debt is in the form of U.S. Treasury bills, notes and bonds. This debt in turn is being placed squarely on the backs of American workers who still have jobs via taxes.

During the US housing boom, the sub-prime market expanded significantly. As US interest rate rose over three years, sub-prime borrowers could no longer afford their monthly payments, causing them to default on loans. Millions of others lost their jobs. Banks had packaged up these loans into financial instruments known as collateralised debt obligations (CDO) and sold them on to investors. Demand for CDOs collapsed as the scale of defaults emerged, leaving banks nursing huge losses.

A Federal Reserve for the Rich

The Feds stepped in with interest rate cuts, and bailouts for bankrupt hedge fund gamblers who happened to be betting with billions of what are now taxpayer dollars who are now responsible for the bill. The investment bank, Bear Stearns, was forced to seek emergency funding from the US Federal Reserve last week and was sold over the weekend to JP Morgan Chase for a tiny fraction of its earlier value. In short, the Fed has agreed to take over up to $30bn of Bear Stearns' assets, removing the risk for JP Morgan and putting it on the taxpayer to foot the bill.

Even with the Fed's aggressive moves, economic and financial conditions keep deteriorating. The Fed in recent days has taken extraordinary steps to help banks and Wall Street investment firms survive the stresses of the credit crisis. It has not worked. Why. Understand the fundamentals.

The method of producing profit in a capitalist economy is to garner land, labor, money/capital and technology and use it to produce a commodity for sale on the open market where a buyer has money and the seller has a commodity. For the worker, the process is simply exchange labor power for money, money for necessaries, necessaries in the form of food, clothing, shelter, transportation, education, health care, housing, and recreation/exercise to recreate labor power or the ability to go to work. This was ok before robots, globalism, and computer automated machine production. Today greater and greater surplus value is extracted from fewer and fewer workers on a global scale. The worker today is competing with a robot that is not paid wages, cannot buy back what it produces, does not need health care or vacation, does not need retirement or a pension, and does not need to be retrained.

1. Since last August 2007, the desperate Fed has used both rate cuts and creative steps to infuse cash into the banking system.
2. The banks are then supposed to identify what are essentially billion dollar loan sharks, isolate profitable investment opportunities, make loans, finance projects, and expand markets.
3. The Fed this past week also said it would pour as much as $200 billion into big Wall Street banks and investment houses and allow them to put up risky home-loan packages as collateral.
4. This maneuver was intended to bring sorely needed relief in the market for mortgage securities.
5. The Fed also has offered as much as $200 billion in short-term loans to banks and large financial institutions.
6. They even opened up a discount window for other loan shark investment bankers who are soon to be drowning in hedge fund defaults and risk failures.

High energy prices accelerate certain economic degeneration because people have less money to spend elsewhere and they can aggravate inflation by forcing companies to boost prices. Today, crude oil prices hovers around $111 per barrel. Gasoline surged to a record national average of $3.38 a gallon. At a few stations in California and Hawaii, the pump price has hit $4.31 a gallon. The Fed's rate cuts have added to the downward pressure on the value of the dollar, which recently plunged to a record low against the euro and has fallen sharply against the Japanese yen. The drooping dollar is stoking fears that inflation might take off. The weaker dollar could raise the cost of imported goods entering the U.S. and lead American companies to raise prices as foreign-made products become more expensive.

So a $40 an hour job will be going for $10- $12 per hour---with no benefits. The bankruptcy of the nation's largest auto supplier, Delphi Corp., forced its 31,000 hourly U.S. workers have their pay cut from $27 an hour to less than $13 per hour. Workers also have to pay health care deductibles for the first time and lose their dental and vision care coverage. Unskilled manufacturing is going to be done in China, India. Basic parts from South Korea, Taiwan, Canada and China plants rival modern manufacturing plants in the U.S.

As wages and benefits drop, it's the working class that's paying the price. Over 25 years ago had some 18 million workers were employed in some manufacturing industry related job, today barely 4 million production workers are left on the job. Anybody who works in automated factory manufacturing has no future in this country, unless you want to work for wages they get in China. Workers once believed that if they accepted pay cuts and shunned strikes, they would keep their jobs. Not anymore. There are only guarantees that you will ultimately lose that job to a robot or a Mexican, Indian, or Asian. No pensions. No health care. No job security. For some, it will make it harder to send their children to college or be able to retire when they want. The outlook is changing for workers who moved from high school to good-paying factory jobs two and three decades ago are grim. It was possible for people with a high school education to get a job that paid $65,000 to $85,000 and six weeks of paid vacation. Because profit drives these parasitic capitalists, even as their system crumbles, those good paying jobs are gone.

Business Failures

Business failures in the United States are increasing at an unprecedented pace. In a period dating from March 2007 to January 2008, business failures surged. States with the largest percentage increases in business failures were Michigan, Ohio, Florida, Nevada, California, Rhode Island, South Carolina, New York, and Massachusetts. Six of the 10 largest bankruptcy filings in history have occurred in the last three years.

The number of companies that failed or filed for bankruptcy court protection increased 34% in 2007, while the total liabilities of such companies increased 97%. Finally 7 of the top 10 losses of banks in United States history occured in the past 20 years. This trend will increase.

Although the process is simple, the consequences are unparalleled in American history. Corporations continually take out short term bank loans to make payroll, get materials for production, and even to buy other companies, in what are called leverage buy-outs (i.e., buying a business with credit and loans). They are actually borrowing money to pay off earlier loans. They make payments on this debt by selling their products. Missed bank payments in the context of falling profits and gluts on the market lead to credit being withheld and the collapse of the company. With nonpayment of its loans, then the lending institutions face bankruptcy. The entire banking and finance system will collapse as a result of the crisis between commodity production based on CAMP and a moribund distribution system which demands a profit.

In the guaranteed student loan program, the default cost to the government was $200 million in 1990 it is an estimated $5.8 billion today. In sum, the Federal Savings Loan Insurance Corporation (FSLIC) is bankrupt. It will require over $870 billion in taxes to bail out the Savings and Loan Industry as loans are called in. Banks are in serious trouble, they are saddled with bad real-estate loans, Third World loans and takeovers loans. Real estate loan problems which were once concentrated in specific regional areas are now national problems.

Decline in Personal Savings; Increase in Consumer Bankruptcy

Household debt as a percentage of income after taxes, pension contributions and interest increased from 1988 to 2007 over 300 percent. Even personal savings as a percent of personal disposable income has been on the decline for the past 20 years. The 20 year decline is more remarkable because it occurred during a period when real per-capita disposable personal income rose 31 percent.

The table below charts the methodical decline in U.S. net savings as a percentage of GNP since 1953. It illustrates graphically how savings a percentage of GNP has plunged from a high of 7.9% in the eleven year period dating 1962-1973 to a low of 2.2% in the period 1985-1989. Such a steady savings loss has cost the US economy over 16 percent of its capital stock. It also has decreased the nation's growth potential by at least five percent. In 2008, the estimate has the savings's rate in negative numbers, meaning most house holds are in debt.

U.S. Net Savings as a Percentage of GNP

____________________________________________________

Years Net National Savings %

____________________________________________________

1953-61 6.9%

1962-73 7.9%

1974-79 6.8%

1980-84 3.8%

1985-89 2.2%

1990-95 2.0%

1996-2006 -1.3%

2007-2008 -1.7% est`

____________________________________________________

Basic Data Source: Federal Reserve Bank of New York

In 1985, the savings rate plunged to an all-time low of 1.9 percent. In most of 1985, interest payments on debts actually exceeded savings. The US personal savings rate is the lowest of any major industrial economy.

High borrowing and low saving is extremely problematic to a capitalist mode of production. Not only is household debt increasing at a time when personal, corporate, and government savings are decreasing at an accelerated rate, consumer bankruptcy filings have reached an all time high. Nationwide, personal bankruptcy fillings rose 39% over the past 4 years, repossessions are at record levels, as are foreclosures. Federal judicial circuits in the Northeast had the biggest increases:

These failings represent a national trend indicating that consumers are over-extending themselves and their credit limits, small businesses are unable to compete with their larger counterparts. The combination of increasing consumer debt loads, unemployment, decreased wages, forced concessions, foreclosures, repossessions, devaluating dollar, increased oil prices, and and inflation have pushed personal bankruptcy filings to a record over the past three years. These were all record filings during a comparable 12 month period.

Specifically, in Ohio, Nevada, Michigan, Florida, Louisiana, and Mississippi foreclosure and bankruptcy filings have reached record highs for the third consecutive year according to court records. The filings, which reflect a national trend, indicate consumers are over-extending their credit limits, small businesses are unable to compete with their larger counterparts and the concentration of technology, money, and skills has accelerated.

Deflation and Financial Collapse

Before there can be a total financial collapse in the US, there will be less credit, and a decline in borrowing. Deflation is the key process for total financial collapse.

Given that these tendencies have already begun to materialize themselves in the fourth quarter of 2006, it will become impossible to sell CAMP created commodities to American workers who increasing are without disposable income. Therefore, commodity gluts will lead to an inevitable deflation in prices. In a word, inflation, thus gives way to deflation. Deflation means falling prices for everything. Deflations means smaller wages, decreased salaries, lower real estate prices, lower car prices, lower shoe prices, lower food prices, lower clothing price. All of these combined decreases employment, and as a result, accelerate the decay of the economy. It also means widespread poverty, homelessness, hunger, and starvation in a society able to produce an abundance of commodities on an unparalleled scale in human history.

Summary Deductions

The wage-labor system is becoming obsolete. Today, American workers are being relegated from (1) producing consumers to (2) producing nonconsumers to (3) nonproducing consumers and finally to (4) nonconsuming nonproducers. The last category makes human labor useless, thus the human being's life becomes worthless. The forcing of permanently unemployable workers to the street is a gradual process for most. It may include: part-time labor, low paying service jobs, temporary jobs, layoffs, concessions, overtime of the remaining workforce, freezing of wages and salaries, intensification of labor, breaking of unions, cut health care benefits, cut AFDC, cut education, cut entitlements, cut set asides, and cut housing subsidies. People end up destitute in the streets with no future legal means of putting shoes on their feet, clothes on their backs, food in their mouths, and a roof over their heads.

These actions, essentially amounting to the reconstruction of society according to a new social order, remove any restraint on capitalism's ability to profit. As the economic process develops through its quantitative stages, it becomes more and more out of sync with the social institutions created to protect and develop it. Political instability is the disconnecting of the economic process from it s social institutions. It is this disheveling creates social destruction/degeneration and finally political revolution to create institutions compatible with the new stage of the economy.

As credit contracts, unemployment, bankruptcies, mergers and business failures will continue to increase. Everywhere unemployment is increasing, consumer purchasing power is decreasing, and commodities are going unsold or sold on credit. Their is no material basis for its continued circulatory functions once credit begins to contract. The coming depression will be unlike any thing anyone has lived through to date. Protectionism will lead to trade wars; trade wars and markets wars will lead to world war. It will not mirror the 1930's and 1940's, however. Given the epoch, and the technological instruments of destruction in its womb, this period will be much more severe. Computer Automated Machine Production is making capitalism ans socialism impossible. What is next? What will happen?

This is important because the developing social revolution is historical and inevitable given the changes in science and technology and its application to computers, microchips, and robotic automation. The revolutionary process intensifies within social production. The mode of expropriation is the purchase of labor power. The process is simply exchange labor power for money, money for necessaries, necessaries in the form of food, clothing, shelter, transportation, education, health care, housing, and recreation/exercise to recreate labor power or the ability to go to work. When you buy, the capitalist profits; no purchase no capitalist profit given that nearly 70% of the US economy is consumer driven. The means of production have developed past, and come into conflict with, the productive relations, i.e., the technology is labor replacing as opposed to being labor enhancing---workers are forced out onto the streets without a job because the robots have taken their jobs. They cannot pay their house notes so they are foreclosed and evicted, they cannot pay their car notes so they are repossessed, they cannot pay for education so they default on student loans, they cannot pay for food so many of them steal. Larger and larger sections of the population become unemployed. They will soon begin to identify who and what caused their suffering. Their direction will determine whether their is progress or regression, revolution or counter revolution, forward mass movement or backward mass movement.

A social revolution does not guarantee a move toward progress, or a higher society. The social revolution only guarantees change; the political revolutionary process could go either way, forward or backward, higher or lower, progression or regression. People forced out into the streets by the millions can become counter revolutionary Nazis/fascists or freedom fighting revolutionaries. White workers and middle classes have historically taken the ultra-white nationalist fascist/holocaust route of mass murder, extermination, and genocide in order to save their own skins and provide for themselves stealing from others. They have ganged up and mass murdered hundreds of millions of nonwhites. Black populations all over the world sit squarely in the path of white and arab destruction. As their societies collapse, and they will, their civilizations will also come undone. Expect the worst thrusts at genocide against Africans in human history---even worst than the waste of human life due to white, jew, and arab enslavement of Africans for nearly 1700 years. This is a period that does not need human labor, labor is the basis of earning a living and a life. Without labor life can be made expendable. This is what Black people face in Australia, Africa, South America, Canada, North America, Europe and the Arab world.

Study the transition from feudalism to capitalism. Nothing is promised. The fascists are moving to use the dynamics of the social revolution to bring about fascism, kuklux kklan terror, nazi final solutions, and holocaust of nonwhites. Black destruction has historically been their target. They are prepared. The Black population is not, and are essentially lambs mystically/religiouslyb crawling to slaughter led in tow by Black misleaders pimping a capitalist system already in its final stages of collapse.

In sum, the move toward something progressive change can only come through a mass movement that operates consciously toward a new higher social system.

The political movement does not simply quantitatively grow without the economic crisis intensifying and coming to head. The process unfolds as the disposed turn on the state, then they see who is behind the state, the capitalist.

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