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Friday, January 4, 2013

Looking Back at the Beginning of the Long Recession

Posted by on Fri, Jan 4, 2013 at 10:11 AM

Back in 2007, the famous economist Joseph Stiglitz posted:

The story goes back to the recession of 2001. With the support of Federal Reserve Chairman Alan Greenspan, President George W. Bush pushed through a tax cut designed to benefit the richest Americans but not to lift the economy out of the recession that followed the collapse of the Internet bubble. Given that mistake, the Fed had little choice if it was to fulfill its mandate to maintain growth and employment: it had to lower interest rates, which it did in an unprecedented way— all the way down to 1%.
It worked, but in a way fundamentally different from how monetary policy normally works. Usually, low interest rates lead firms to borrow more to invest more, and greater indebtedness is matched by more productive assets.

But, given that overinvestment in the 1990’s was part of the problem underpinning the recession, lower interest rates did not stimulate much investment. The economy grew, but mainly because American families were persuaded take on more debt, refinancing their mortgages and spending some of the proceeds. And, as long as housing prices rose as a result of lower interest rates, Americans could ignore their growing indebtedness...

The success of GM has been presented as a kind of return to the real economy, the economy of actual objects, products, use-values. But the truth is that the financialization of the American economy (which is concomitant with the rise of Wall Street, a rise that began properly in the 1980s and accelerated in the ’90s) is deep and hard to disconnect from other older and seemingly more understandable capitalist modes. We cannot separate finance capital from industrial capital as easily as we can separate a word from the thing it represents. Finance capital is not a dream. It is real and gets to the heart of our kind of sociality. What this means is we need more than a biopolicital reading of financialization; we need a species-specific (that is to say, a deeply anthropological) one. And what makes us human is not so much our bodies but how our bodies have evolved to interact with other bodies—our sociality (our manner and mode of being together). A new economics and urbanism cannot be established without a recognition of this particular kind of metazoan sociality.

 

Comments (6) RSS

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Will in Seattle 1
Historically, when any society devotes more than about 5 percent of its GDP to Finance, it will suffer tremendously.

The reasons why matter little, but when Finance was 20% of the GDP, you knew things were out of whack.
Posted by Will in Seattle http://www.facebook.com/WillSeattle on January 4, 2013 at 10:57 AM
2
Whuuut?
Posted by firewalkwithme on January 4, 2013 at 12:22 PM
WFM 3
Dammit. Once again I was about to post the exact same thing but Chuck beat me to it.
Posted by WFM on January 4, 2013 at 1:26 PM
treacle 4
Actually, David Graeber points out that, anthropological history-wise, it appears that financialization preceded industrialization by a fair stretch. The common economist myth is that "industry" came first, and "finance" came after.

And yes, we need to look at how humans interact with humans using money... it would appear that our current money-type encourages short-term thinking, selfishness, and greed. How to create a new money that encourages giving, community, and long-term thinking?
Posted by treacle on January 4, 2013 at 2:35 PM
5
Graeber's a fool who thinks that capitalism prevented warp drive from being invented.

That's not a joke. And what Mudede wrote makes no sense, it's as if if it was generated by a random sentence program.
Posted by ryanmm on January 4, 2013 at 3:25 PM
6
How does metazoan sociality wise an approval? New economics and urbanism heels metazoan sociality beside our mechanism. Finance capital imports biopolicital reading of financialization. Finance capital thinks. Industrial capital migrates over the spiritual. A variant issues from species-specific financialization in a slag. A supreme intervenes in a rock. Gangnam style dictates past mambo dogface banana patch.
Posted by thalia on January 5, 2013 at 8:35 AM

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