What'd I say?

The so-called bailout of those struggling--or about to struggle--with steep increases in their mortgage payments announced by the Bush administration today--I'd post a link here, but why bother?--seems to me to follow the pattern I outlined in my last post. Save the predators from gorging on their prey.

Let me look at it another way.

They are dealing with it as a public health problem in the food supply. If the swine flu (remember the swine flu scare of the 70's?) breaks out among the swine in Akron, Ohio, well, the sooner Akron swine are slaughtered, the better; we're not going to try to save them. But if the swine in Columbus are perfectly healthy, we need to protect those swine for later consumption. And there's no point in worrying about the swine in Maine, who have sensible 30 year notes. (Remember the punch line to the old joke: "A pig that good you eat one leg at a time." )

The Bush administration is trying to innoculate the swine in Harrisburg and Erie and Columbus to protect the midwest vampires from the swine flu.

Only it won't work. The midwest vampire capitalists are going to see those sick little piggies in Akron and think, they can't run fast, why shouldn't I eat them? --Because that's how capital thinks. The flu will spread--has spread--throughout the real estate market, and they'll find themselves unable to eat--or even feed--many of the healthy swine.

To drop the metaphor, I'm implying that a tightening of credit and a glut of subprime repossessed homes on the market will spoil the market for good homes.

This will lead to homeowners whose credit could be salvaged losing their homes.

We've seen these cycles before, in the 80's, and less dramatically in the 90's. It'll take years for the market to fully recover. It will take The Motley Fool pointing out that over a 30 year period, the SP 500 outperforms real estate by 120% (or some crap like that), and Real Estate becoming the dirty word that "tech stock" was in 2002. And then the recovery will only have begun.

As Marvin the Robot might have said, I'm depressed just talking about it.

Life, don't talk to me about life.

"Capital is dead labour, that vampire-like, only lives by sucking living labour"

This quote is famously from Karl Marx, Capital, Vol I, part iii, Chapt 10. Let me quote a bit more:

"Capital is dead labour, that vampire-like, only lives by sucking living labour, and lives the more, the more labour it sucks. The time during which the labourer works, is the time during which the capitalist consumes the labour-power he has purchased of him. If the labourer consumes his disposable time for himself, he robs the capitalist The capitalist then takes his stand on the law of the exchange of commodities. He, like all other buyers, seeks to get the greatest possible benefit out of the use-value of his commodity. Suddenly the voice of the labourer, which had been stifled in the storm and stress of the process of production, rises"

I was thinking about this in regard to the mortgage crisis. Mortgage foreclosures were up again October, 2007, doubling from 2006, up a bit from September, down a smidge from August 2007, but on pace to produce economic devastation in hundreds of thousands of lives (see http://www.msnbc.msn.com/id/22011114/). What I find interesting is the way Marx elides smoothly from "capital" to "capitalist," a shift which no doubt made complete sense at the time. Here's what Marx could have completey anticipated: our governments response to this crisis has been to try to find ways of saving of saving the predators from the prey.

I remember years ago an ecologist at UC Santa Cruz claiming that it was a myth that predators control prey; it is much more true that a population of prey control the growth of predators. Predators, living high on the food chain, occupy an ecologically fragile niche. If something happens to the rabbits the fox feeds on--or to the vegies the rabbits feed on--the foxes die off because the rabbits become fewer and harder to find. The rabbits will recover; the foxes may not.

I remember thinking, sure, fine, except those rabbits who get starved and eaten.

This seems to be the creed behind the Federal Government's response to this problem: we need to protect the banks from being poisoned by the bad blood they've been feeding on. The poor will always be with us; protect those ecologically sensitive vampire capitalists!

The fed is cutting rates. The treasury wants to give the holder's of ARM's the option to not reset those rates. Why not let them continue to foreclose on the poor bastards? Because banks and other financial institutions are getting stuck with houses they can't sell.

Lowering interest rates eases up credit. What does this lead to? Inflation. In essence, a falling dollar and higher interest rates are a hidden tax paid by everyone (which will be paid in higher gasoline prices, for a starter; we know what that leads to) to protect bankers from bad loans.

Is another approach possible? Sure! Federally insured low interest loans made directly to homeowners. Forget about Fannie Mae and Freddie Mac, the accounting challenged federally mandated corporations which buy and sell these loans. They got us into this mess, and they can deal with their own problems. They people we need to help first are homeowners.