*One of those problems may be a spill over into the productive economy as US workers bear the burden of the Wall St madness and further reduce consumption. *

The biggest burden of course will be carried by those suckers who
lent the US, all those trillions of $. That includes the Chinese,
Japanese, Middle East etc.

Governments don't go broke and as the debt is in US$, no doubt
Bernanke will print his way out of his problems, meaning that anyone
who holds US $, is losing. The real value of the US $ will fall.

The price they will pay is that lenders might not be so keen to
lend them large amounts of money at bargain basement rates, as in
the past.

There is a big difference when it comes to Australia, the way that
I see it. I don't know if its a US regulation or just tradition,
but I gather that if people hand in the keys to their house to the
bank, thats it, the bank has no further comeback. In Australia,
you still owe the debt, so can lose your car, furniture, basically
go bankrupt.

Now lets say I overpaid for my US house and housing values dropped
by 25%. It would make perfect sense for me to hand in the keys
and buy another, cheaper house, down the street. In a declining
housing market, if a number of people do that, bingo, your banks
soon start collapsing. How big an effect this is having in the
present crisis, I am not sure.

There is a serious misunderstanding in some replies here.

The world is not interconnected (in the economic sense). This is a fallacy.

There are many restrictions on trade which block interconnection and in particular, labour cannot move freely. If the world was interconnected labour at the same level of productivity would be paid at the same rate. This does not apply. Workers would move where their labour earns more - but immigration policies block this.

Movements in minimum wages in one country do not follow trends in others because local politics interferes. This also blocks interconnection.

The are "connections" but not as suggested in this forum.

A truely interconnected world economy would wipe out Australian living and social standards.

Chris Warren

"In Australia unemployment remains low, the resources boom continues and housing prices have not yet fallen much. But for how much longer?" Well John, while the green,left,labor states statutory instruments continue to restrict sustainable land supply to their chosen gullies of opportunity and thereby keep rents rising, prices will reflect the supply demand discrepancy. No this does not include the lack of confidence which family producers place in their own chance to advance their individual private lot without further unnecessary and costly regulations.

Passy,

"Capitalism is a system of exploitation; crisis is built into it."

So, you're saying that there was no exploitation or crisis in communist societies, or socialist ones, or despotic ones, or every other system of government? One wonders what the people of North Korea, China and other countries would say to a statement like that?

Another one of your poorly thought out, logically inconsistent statements.

"the abuse starts once again"

Passy, the reason you get 'abused' is because of statements like the one above. Attacking an entire system of government/economic principals is pretty much impossible even when using logically flawless arguments (if they even exist), but to do it with the poorly thought out arguments that you regularly use (not just in this article), you leave yourself open for abuse.

If I was a year 5 teacher and you were my student, I would commend you for for effort and say (without a hint of sarcasm) that you should be recommended for your spirit. However we're adults here, and a year 5 argument won't cut it.

"So, BN, should we all bow to the banks and be grateful to them for making profit by transferring the surplus value workers create to others?"

I'm not saying that at all. In ordinary circumstances, I'm an advocate of people bearing the consequences of their own actions, so I'm not chuffed at all with the US system where some people can walk away from their mortgages without the encumbrance following them. Equally, if a CEO makes a bad business decision which costs the company a significant amount of money then they should be shown the door. That's also why I'm in favour of CEOs having a heavy weighting of their remuneration being tied to KPAs.

However, these are not ordinary circumstances. And as you rightly say, the potential consequences are horrendous and can ripple around the world

T.B.C

In the current crisis watch for McCain's proposal.

It will resonate with the vast majority of the electorate, will leave Obama a figure of ridicule, and deliver rather decisively the Presidential election to McCain.

Basically after working all weekend, doing the work the US taxpayers pay and expect him to do, he'll propose lending the bank's the US$700 billion.

Obama will be the bloke who supported giving away US$700 billion, and who told everyone to call him if he's needed.

The Congress will support McCain's proposal because giving away $700 billion is just to much for the US taxpayers to swallow.

BN

You quote me:

"Capitalism is a system of exploitation; crisis is built into it."

Then you say:

'So, you're saying that there was no exploitation or crisis in communist societies, or socialist ones, or despotic ones, or every other system of government? One wonders what the people of North Korea, China and other countries would say to a statement like that?

You suppositions about my views are sophistry. Where do I say there is or was no exploitation or crisis in "communist" (ie Stalinist) countries? This springs from your own imagination and has no basis in fact.

Marx described socialism as the self-emancipation of the working class. Socialism is the democratic control of society through truly democratic vehicles so that production occurs to satisfy human need, not make a profit.

I have consistently supported thsoe who rose up against the Stalinist dictatorships, from East Berlin in 1953, to Hungary in 1956, to Czechoslovakia in 1968, to Poland in 1970, 1980 and beyond and the revolutions with overthrew the Stalinist regimes in eastern Europe and the USSR in 1989-1991 to name a few. I have written on OLO predicting the working class overthrow of the Chines dictatorship in the coming years.

I view these Stalinist abominations not as socialism but as its opposite, state capitalism. The state exploits workers, accumulates and reinvests their surplus in heavy industry and does so through the prism of competition - military competition with the West. The revolutions of 1989 to 91 were classic examples of economic crisis in Stalinism - the exact same economic crises that periodically grip so called neo-liberal capitalism. Here are two articles on Russia and state capitalism:

1. Chris Harman "Russia: how the revolution was lost" http://www.marxists.de/statecap/harman/revlost.htm

2. Peter Binns "The Theory of State Capitalism" http://www.marxistsfr.org/history/etol/writers/binns/1975/01/statecap.htm

Workers played no role as workers in the expansion of stalinism in Eastern Europe, China, Cuba, Vietnam, Laos etc.

BN, why not try to rebut the labour theory of value or the tendency of the rate of profit to fall which I mention in the article instead of falsely painting me as a stalinist?