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Posted by: Doug Henwood | July 23, 2009

Christian Parenti interviews me…

…for the Brooklyn Rail – on the bubble, the bust, the state of the American ruling class, and what comes next: Ka-Pow! Bang! Crash!

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Responses

  1. Hey Doug.

    I read this in the Rail and while it was msotly great stuff, I had a problem with this bit:

    “Some sort of bailout was absolutely necessary. We didn’t want a rerun of the bank collapse of 1929-32 when 10,000 banks failed. The implosion of the financial system led, in large part, to the Great Depression.”

    I don’t think that’s right. The collapse of the banking system really came in 1933 — that’s when 4,000 banks failed, far more than in any previous year. Measured by assets of failed banks, I think there were more failures in 1933 than in the whole 1929-32 period together.

    And this isn’t just a historical detail — it’s important because by 1933 the catastrophic fall in output and employment was pretty much complete. So it would be better to say that the Depression led to the implosion of the financial system, not vice versa as you have it.

    And I would argue that something similar might be the case now…

  2. The major reason that 4,000 banks failed in 1933 was Roosevelt’s bank holiday, when they did the final triage on who lived and who died. About half the failures (by assets) were from 1929-32). Going into 1933, though, it was a long tale of asset destruction and contracting credit, which made the Depression a lot worse. I think the relation between the financial and real was mutually reinforcing, which is pretty much Fisher’s point about debt deflations.

  3. Is there really a new Henwood book coming on the overclass? When?

  4. A tad to pessimistic on the U.S. working class. Two of the largest mass protests in US history occurred in the last decade. First the synchronized anti-war protests of March 2003 (worldwide), and then the Immigration Rights protests a few years later – which put a million plus on the streets of L.A. alone and essentially shut the city down. There is definitely something bubbling , something which the Obama candidacy was, and is, entrusted with tamping down.

  5. In the UK, and I suspect elsewhere in Europe also, the anti-war demos were heavily dominated by the middle classes. And the protests didn’t really lead anywhere.

    There is stuff bubbling (boss kidnappings, occupations), but its still pretty low key compared to the size of the crisis.

    Or to put it another way. Where are the riots over the Goldman’s bonuses?

  6. In all the prophecies about “what comes next”–including this one– I have yet to encounter any discussion of the political effects of the economic crisis.

    Assuming, even under the “least worst” economic scenario outlined by Doug in LBO, that unemployment increases over the next few years, world trade fails to revive, and business capital investment remains minimal–i.e. a state of semi-permanent stagnation or worse. Add Obama’s commitment to market ideology and his apparent lack of willingness to pursue new directions. Finally, consider the impotence of the left in American politics.

    This is a formula for a first-magnitude political crisis. Does anyone want to hazard a guess as to the direction it might take?


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