Reply #13: Newsweek International editor's ''Capitalist Manifesto'' -- A desperate attempt at reassurance

[Octafish]

Here's the antidote to the Zakabubble:

Newsweek International editor's "Capitalist Manifesto"

A desperate attempt at reassurance

By Nick Beams
World Socialist Web Site
4 July 2009

Fareed Zakaria, editor of Newsweek International, has written an essay entitled “The Capitalist Manifesto: Greed is Good (To a point)”, which is intended to express relief that the panic engendered by the global financial crisis is easing, and to offer reassurances that, for all its faults, capitalism is still “the most productive economic engine we have yet invented.”

The problem with this claim that all is, again, for the best in the best of all possible worlds, is that far from the crisis having ended, it is only just beginning to unfold.

Zakaria begins by drawing comfort from the fact that the financial crises of the past 20 years were all overcome, leading to further economic growth. The stock market crash of 1987 defied predictions of a return to the Great Depression and “turned out to be a blip on the way to an even bigger, longer boom.” The 1997 Asian financial crisis did not lead to a global slump. Instead, the Asian economies “rebounded within two years”. The collapse of Long Term Capital Management in 1998, described by then US Treasury secretary Robert Rubin as “the worst financial crisis in 50 years”, did not result in the end of hedge funds. Rather they have “massively expanded” since then.

How were these earlier crises overcome? As Zakaria notes, US Federal Reserve chairman Alan Greenspan always advanced the same solution: cut interest rates and provide easy money, creating a series of asset bubbles.

When the subprime crisis developed in 2007, Fed chairman Ben Bernanke followed the same procedure. However, on this occasion, interest rate cuts failed to alleviate the crisis. The Fed initiated its injections of liquidity in August 2007, but the situation only worsened. The investment bank Bear Stearns went under in March 2008, followed by the collapse of Lehman Brothers in September and, by the end of 2008, notwithstanding massive injections of liquidity, all five Wall Street investment banks had either collapsed or been forced to restructure. The global financial system was on the brink of a meltdown.

This alone demonstrates that, far from the happy scenario painted by Zakaria—this crisis is just like the others since 1987—the collapse that began in 2007 marked a qualitative turn in an ongoing process.

CONTINUED...

http://www.wsws.org/articles/2009/jul2009/zaka-j04.shtml

My buddy loaned me a boxed CD-set of his "History of the United States." It was a total load of garbage.