From Each According to His Liability, to Each According to His Greed

So I turned on NPR this morning and heard a story about tainted baby formula in China, but what struck me was the closing:

It's a question many others are asking here, where so many unscrupulous traders put profit before human lives.

Unlike here in the Socialist Worker's Paradise of the United States. Good Dog, remember when it was a big deal that Hugo Chavez nationalized Venezualen petroindustry? Physician, heal thyself!

Even John McCain's been catching up on his dialectical materialism, or whatever.

We’re going to put an end to the reckless conduct, corruption and greed that have caused a crisis on Wall Street.

Yeah! Down with the capitalist vultures! Arise ye workers from your slumbers! At last ends the age of cant!

People, particularly those who write and yabble about economics in the media, seem desperately confused about what, precisely, led to the "crisis in the market." In fact, the line from A-to-Z is straight and easy to follow. The complexity of the various investment vehicles and insurance schemes that are now collapsing like so many card houses, their oft-lamented opacity, and the labyrinthine undertakings of the failing financial institutions are all baroque detail, fancy scrolling, and gold leaf on the stolid edifice of our failures. American "capitalism" abandoned capital for debt. I mean, rather than investing money, it invested obligation. I mean, it "collateralized debt." It paid its IOUs with IOUs.

At its most essential, our economy rested not on a foundation of production, but of consumption. Remember. The Consumer Economy. But an economy built on consumption, producing nothing of value, has no means or mechanism to drive up general wages. Wages in the United States have stagnated for three decades, at least. Since this would naturally lead to a situation where consumption would likewise stagnate, some alternative means of producing spendable income had to be created. The United States government and the Federal reserve embarked upon a deliberate project to remove restraints on home-ownership (such as being able to afford to buy a home) and then to allow--to encourage--these new "homeowners" to collateralize their own mortgage obligations in the form of loans, which they would use to buy TVs and new bathrooms and Hummers and brand-name purses and so on and so forth. No one worried that this constituted a liability backed by a liability, because Home Prices Were Going to Go Up Forever! Of course, what drove rising home prices was not an increase in quality, nor an increase in actual personal wealth, but rather the fact that buyers on the housing market were afforded increasingly large mortgages with decreasing obligations to make down payments or to, you know, pay the fuckers back.

The financial institutions then took these mountains of liability and treated them as assets. On the proposition that one ah dese days folks would pay back what they owed, which on the scale of rationality is right up there with The Rapture, they leveraged money which they in fact had already spent purchasing houses for America's vast herd of impecunious private citizens into investment capital. Needless to say, it's all going to hell.

Fortunately, Who Is IOZ? is Too Big to Fail, and we shall continue our color commentary from the sidelines until the plebs set fire to the stadium.