79 years from the greatest economic crisis of the modern era, that El Economista did not hesitate to call
a macabre tribute, history repeats itself with the sinking of the U.S., an aircraft in flames that will burn for a long time. Data of the U.S. economy for the third quarter of this year show the declaration of 40 states going into a deep recession and the remaining ten joining them soon, in a long journey through the desert for at least a couple of years. Like in a catastrophe film, the gigantic mass, paradigm of Capitalism, carry out a decline more uproarious than the one of the twin towers, the fall of the Wall of Berlin and the collapse of the Soviet block. Its figures are comparable only to the fall of the Roman Empire.
The question we will have time to respond, is could it have been avoided? For now, we are involved in a systemic hurricane that will cause a brutal breakdown in the global economy. The problem is no longer the crisis of high-risk mortgages, but of a high risk structure and global financial system whose tidal wave begins to wipe out the
real economy. Commodity prices have begun its descent, which can extend to next year. Oil prices are 30% lower than a year ago and 50% lower than three months ago. A similar path is followed by other raw materials. Copper has plummeted to US $ 1.59 a pound, and nothing can prevent it to reach US $ 1.00.
The
financial bubble that started in 1995 with the Dow Jones, that tripled its value in 12 years (from 4000 to 14300 points) was clearly unsustainable, and despite the warnings, nobody did anything. Sooner or later the bubble had to burst because the system could not heal their own internal wounds, and the miracle of sanitation promised by Friedman's theory and his apostasy to Keynesian thesis, that markets are not self regulated, literally squashed this economic theory that had the answer.
Though an exact replica of the Japanese crisis, the current crisis is interwoven throughout all arteries of the system. The channels of transmission of the cycle now operate at the speed of light, 24 hours, every second. When Japan had its crisis in the 90s (its "lost decade"), as Latin America had in the 80s, these channels were not so developed. And these financial crisis via bubble (Japan) or debt (Latin America), suffered its long agony. The Asian crisis was also monetary following the devaluation of the Thai Baht currency by 50% by trade tensions. Same thing in Russia, Brazil, Mexico, Argentina.
The difference of this crisis with the recent crisis in developing countries, is that while strong recessionary forces thoroughly undermined their domestic economies, failed to cause damage to the developed countries, so allowing the relative stability of the system. So it was during the last crisis. Industrialized countries pushed the so-called locomotive of the market and the system distributed the losses by encouraging the mass concentration of capital and widening the gap between rich and poor.
This structure, established as a hegemony in the world, favored monetary policy and financial system over employment, sustainable development, quality of life, real growth. The shift of the central concern of economy to a pure utility equation, ended betting for speculation easy gain. The so-called monetarist counterrevolution led by Friedman’s absolutist quest for "the only money matters" and "the market is the best allocator of resources", achieved the gradual dismantling of the very pillars that had lifted the system.
This happened with the phasing out (since early 70s with Nixon and the 80s under Reagan and Friedman) of
the Glass-Steagall Act, created in May 1933 by Franklin Delano Roosevelt for the banking supervision and regulation. The fact, minimized until today, left the system without the very axes that permitted its operation, taking the locomotive to run over a glazed and brittle surface that would soon show its internal fragility. And the belief that an autopilot would correct any deviation, has led the world to these most bitter hours.
The “neo-liberal road roller” trend to social Darwinism and to the concept of a rational consumer seeking only monetary value, this time will mean to the economy a global stagnation: growth of 0%. Because this time, is not just a small country that succumbs. It's the economy that consumes most of the planet and its high debt accuses negative savings. It is inevitable that his drag causes the collapse of several European countries, many of which (the United Kingdom, Ireland, Denmark) are already in recession, to be followed in the next days by Latin American countries like Mexico and Brazil, spreading to other economies like wildfire. This collapse will drag millionaire world-wide bankruptcies with its increasing spiral of unemployment and deepening of the crisis, which will force the countries to take part massively in the economic activity to avoid the paralysis, rescuing the strategic companies that they manage to cushion the impact of a stagnation that is forecasted for a minimum of two years. The hour
of the bifurcation, according to the sociologist Immanuel Wallerstein, has arrived.
Note: this text was originally published in El Blog Salmon. See the original version
in SpanishNota: este texto fue publicado originalmente en El Blog Salmón. Vea la versión original
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Origins of Business
Es gratificante saber que no se está solo en el mundo. Brad Delong, en el hemisferio norte, concuerda con mi frontal crítica a Milton Friedman y la falacia de la autorregulación de los mercados. Delong dice que el tío Friedman cerró los caminos de la investigación económica con estas teorías:
