Economic crisis deepens

Economic update for July 11, 2008:

The Fannie Mae & Freddie Mac collapses are very serious for the U.S. government and the entire U.S. parasitic capitalist economy. Fannie and Freddie are U.S. government backed institutions falling under the Office of Federal Housing Enterprise Oversight. Together they have provided over half of all mortgages in the U.S. They were caught up in the same subprime mortgage investment scam as Bear Stearns and all of the Wall Street investment banks. They used subprime mortgages (primarily targeting African people) as bonds to reinvest and make billions of dollars.

When the subprime mortgage defaults skyrocketed last year and the subprime industry collapsed, Fannie Mae and Freddie Mac were also affected and lost billions of dollars. In August of last year their shares were $70 for Fannie Mae and $67 for Freddie Mac. Today their shares are $4.70 and $8.54 respectively. They have lost billions of dollars and as the subprime mortgages continue to default in massive numbers, Fannie and Freddie are broke and getting more insolvent every minute! The collapse of these institutions would bring down the entire Wall Street financial sector!

The U.S. government is saying it would bail out these corporations–effectively buying them and putting them into “conservatorship” meaning they would be taken off Wall Street and their debts would be paid for by the U.S. tax payers. Their debts are estimated to be at least 11 trillion dollars! This would more than double the U.S. public debt which is already close to $10 trillion.

This is a very serious blow to the U.S. government and the Bush Administration. The bail-out is a measure of absolute desperation and is no solution. For one thing every other major Wall Street firm is right behind Fannie and Freddie and are also in complete insolvency: Lehman Brothers, etc., etc. If one of these come down, all of them will come down because their investments and debts are so intertwined and interconnected with all the other firms, as opposed to 20 years ago when the government would let banks with bad investments fail. Today if one goes they all will go. Needless to say, the government cannot bail out the entirety of Wall Street! But also $20 trillion in government debt–I don’t know what all that will mean–except to say that it is profound crisis for the U.S. government and capitalist system.

Also note that oil and gold are up again today-with oil flirting with $150 a barrel. The stated reasons given by Wall Street for the upswing today are: threat of oil field strike in Brazil, continued “tensions” in Nigeria and the possible threat of an Israeli strike on Iran. Wall Street and overall parasitic capitalist speculation, parasitic greed and frenzy are responsible for the skyrocketing food prices and the deepening immiseration of oppressed and colonized peoples on the planet. Wall Street/U.S. government are responsible for the war and starvation of African people and the majority of the planet. Resistance to this is deepening as oppressed peoples struggle to control their resources and to even survive.

Rising prices are still making some individuals of the ruling class richer and richer. Exxon-Mobile just made the largest profits in the history of capitalism– $40 billion in 2007. But the resistance of colonized peoples and the implosion of the parasitic system threaten to bring this system down overall.

In fact, this is becoming an accepted probability.

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