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Title: Hundreds of Billions of Dollars Author: CrimethInc. Date: September 24, 2008 Language: en Topics: 2008, financial crisis, Read All About It, economics, economy Source: Retrieved on 9th November 2020 from https://crimethinc.com/2008/09/24/hundreds-of-billions-of-dollars Notes: Report courtesy of the Center for Strategic Anarchy, in cooperation with the CrimethInc. Free Marketeers.
What the hell is going on with the economy? As part of our commitment to
serve all the investors, bankers, and realty agents who rely on this
site, we’ve solicited a brief introductory analysis.
Capitalism without failure is like religion without sin—it just doesn’t
work. Far from abnormal, the boom/bust cycle is as predictable as the
furious scapegoating and wild-eyed cheerleading that accompany it. But
every situation, even the most predictable, presents unique
opportunities. We present this analysis in the interest of deriving
strategic advantages from our enemies’ temporary imbalance.
So what exactly is going on with the economy right now? The only honest
answer is that no one is exactly sure. The American financial system
operates on a variety of levels of transparency, making it impossible to
know with certainty who has what and how much it is worth. The system
also relies upon a high level of interconnectedness between different
institutions and industries, making it difficult to predict the
implications of failure.
But we can identify a few things that may give us the beginnings of a
coherent answer.
The basic outline of the situation is this: starting in the mid-1990’s,
the American government began deregulating the banking industry,
repealing laws that had governed the terms of credit and investment
since the Great Depression, due in large part to the money-soaked
lobbying of commercial banks. Simultaneously, it created institutional
and consumer incentives for home buying, motivated in part by
statistical evidence that home ownership was the single greatest
determinate of a family’s financial success. At the same time, the
dot-com boom was putting (fake) money into consumers’ and bankers’
pockets, and although that bubble burst in 2001, it was quickly replaced
by a new bubble in real estate.
Thus began a massive surge in home buying. Part of this up-tick in
buying was made possible by “sub-prime mortgages”: loans with adjustable
interest rates given to people who probably can’t afford to buy a house
in the first place. They function much like credit cards: if homebuyers
miss a payment, which they are likely to do, the interest rate doubles
or even triples, dramatically increasing the cost of their monthly
payments. These were attractive loans for banks to make since they
assumed that all but a few homeowners would continue making payments
after the upward adjustment of their interest rates.
The scheme seems idiotic in hindsight. A huge rise in demand for homes
led to rapidly rising real estate values. To keep the market booming,
less qualified buyers were found and given sub-prime mortgages to buy
houses at inflated prices. Because prices were rising and wages were
stagnant, lots of people with sub-prime mortgages were unable to keep up
with payments. Their interest rates rose, but instead of paying banks a
premium, many of them had to stop paying entirely. Now, at least two
million of the seven million sub-prime mortgages used to buy homes since
1998 are expected to default.
What exactly led to the failures of Lehman Brothers, AIG, Morgan
Stanley, Fannie Mae, and Freddie Mac, the news of which has cable news
anchors on the verge of tears? The precise answer is more complicated
than space allows. To put it in very general terms, the trading of
sub-prime loans became a market unto itself, a market that was almost
completely unregulated and pushed to wildly unrealistic heights by
mountains of debt. When the loans themselves started going bad, the
obscure little financial products based on them—which had been virtually
printing money for investment banks—turned to shit. All of a sudden
banks had a lot less money, making it impossible for some of them to pay
for everything else they do.
Now, the U.S government is planning to buy most of those bad loans for
$700 billion. This will take them off the balance sheets of banks and
put them on the balance sheet of the Federal government. Naturally, Wall
Street is ecstatic, for the moment.
Where things go from here is difficult to predict, but we can safely
assume that there will be a lot less money floating around for loans, at
least for a while. This means businesses will have a harder time
expanding and fewer people will be able to afford homes, cars, and
higher educations. This will have broad negative implications for the
economy and growth will almost definitely slow; whether that will be an
apocalyptic recession or a brief lull is up for debate. And if the
federal government ends up spending upward of $1 trillion bailing out
failing businesses, we can expect less government spending for a good
long while.
What does all of this mean for anarchists and our projects? It means
that our context is about to change. As if the change in presidential
administration weren’t enough of a game-changer, this will shift the
terrain even more. Here’s some highly subjective advice for taking
advantage of the new circumstances:
1) This is going to sound insane, but if you have been thinking about
buying a house or land, try to do it in the next 18 months, especially
if you won’t need a mortgage. Reasonable mortgages will be hard to come
by, even if you have good credit, but real estate prices are going to
continue to drop. Looking at a house priced in the low five figures or
less in some dying Rust Belt city? Negotiate downward as much as
possible—which you’ll likely have the leverage to do—and pull the
trigger.
In places like Greece, anarchist neighborhoods—yes, neighborhoods—are
the foundation from which much anarchist resistance, from community
meals to bank robberies, is launched. This could be our generation’s
chance to establish something similar.
2) Be the wrecking ball to gentrification’s fragile edifice. The housing
bubble facilitated the rapid gentrification that has transformed many
neglected inner-city neighborhoods into atrocious playgrounds for young
affluent types. During that process, anarchists weren’t exactly the sand
in gentrification’s proverbial diesel engine. Now we have the chance to
make up some ground.
The credit crunch will make it temporarily more difficult to expand or
even maintain the current reach of gentrification, leaving gentrifying
areas more vulnerable to resistance. The recent RNC solidarity actions
in Pittsburgh have been an inspiration to many, but keep in mind that
going on the offensive also means establishing alternatives that allow
more and more of us to survive and resist outside of the labor market.
If mutual aid can effectively substitute for spending money, that can be
just as damaging to business as a broken window.
3) Propagandize. The contraction of the economy and the change in
presidential administration both provide powerful propaganda
opportunities. We can offer a unique economic analysis by providing a
total critique of capitalism—prominently explaining the natural role
played by the boom/bust cycle—and offer the immediate, tangible
alternative of mutual aid, unlike authoritarian Leftists who can offer
only ineffectual protest and a dystopian vision of the future.
Anti-capitalist and anti-political propaganda that is intelligible and
relevant to non-anarchists will play better over the next year or two.
That said, you can’t fire a cannon from a canoe. Propaganda alone is
just more useless paper. It should function as a component of direct
action, whether that means Really Really Free Markets or riots. When it
appears as part of an amazing experience or a useful gift, what
otherwise would have appeared to be extremist claptrap is suddenly worth
reading.