The Great Financial Crisis: Causes and Consequences

The Great Financial Crisis: Causes and Consequences

The Great Financial Crisis: Causes and Consequences

The Great Financial Crisis: Causes and Consequences

Synopsis

In the fall of 2008, the United States was plunged into a financial crisis more severe than any since the Great Depression. As banks collapsed and the state scrambled to organize one of the largest transfers of wealth in history, many- including economists and financial experts- were shocked by the speed at which events unfolded.

In this new book, John Bellamy Foster and Fred Magdoff offer a bold analysis of the financial meltdown, how it developed, and the implications for the future. They examine the specifics of the housing bubble and the credit crunch as well as situate current events within a broader crisis of monopoly-finance capitalism- one that has been gestating for several decades. It is the "real" productive economy's tendency toward stagnation, they argue, that creates a need for capital to find ways to profitably invest its surplus. But rather than invest in socially useful projects that would benefit the vast majority, capital has constructed a financialized "casino" economy that neglects social needs and, as has become increasingly clear, is fatally unstable. Written over a two-year period immediately prior to the onset of the crisis, this timely and illuminating book is necessary reading for all those who wish to understand the current situation, how we got here, and where we are heading.

Excerpt

In the profusion of commentaries on the reversals of the U.S. and world economies written over the last few months, perhaps none was more pertinent than the report issued by the U.S. satirical magazine The Onion on July 14, 2008, headlined: “Recession-Plagued Nation Demands New Bubble to Invest In.” As The Onion playfully told its readers, “the U.S. economy cannot survive on sound investments alone…. Demand for a new investment bubble began months ago when the subprime mortgage bubble burst and left the business world without a suitable source of pretend income. But as more and more time has passed with no substitute bubble forthcoming, investors have begun to fear that the worst-case scenario—an outcome known among economists as ‘real-world repercussions’—may be inevitable.” Mockingly raising the question of whether the economy would sink without another financial bubble, The Onion cited a make-believe investor: “‘America needs another bubble,’ said Chicago investor Bob Taiken, ‘At this point, bubbles are the only thing keeping us afloat.’” 1 Indeed, in its own ironic way The Onion hit on the crucial problem of modern monopoly-finance capital—the stagnation of production and the growth of financial bubbles in response, the bursting of which takes us back to where we began: real-world repercussions. This is the story told in this book.

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