In between the maddening begs for money, just about all I could hear on NPR was news of the bailout bill and it's failure. (or at least, it's failure on Monday
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When you take out a mortgage on a house, your monthly payments cover principal, interest and escrow, which includes insurance and property tax. The way lenders "qualify" borrowers with middle to high risk factors is to underestimate that escrow. After your first year, they recalculate your payments to cover what you didn't pay the previous year, plus the new "correct" amount. It means increases of 25 to 60 percent - a big hit to anybody's budget. As to getting something for nothing, mortgage contracts are quite clear that if you don't pay, you don't stay. Rather than stupidity or greed it would be more useful to look at the underlying economic trend that has led investment away from production (involving job creation) towards speculation in "paper values." Manufacturing in the US has been on the decline since the late '70s, to the point where an article in today's business pages was headlined: "Manufacturing near collpase, analyst says." The reason is a falling rate of profit. In production, new value is created through the application of labor to raw materials. This value is then divided into wages for the workers and profits for the employers. If costs for raw materials, machinery, transportation, etc. rise, the capitalist compensates by lowering labor costs. For 30 years we've seen wage cuts, layoffs, job combination, benefit cuts, automation, speed up, etc. But there's a point below which these costs cannot be lowered (the physical and sociocultural minimum for workers' life maintenance). Once that wall has been hit, those increased costs of production have to come out of the profit side of the equation. That leads to a diminishing rate of return on investment. And that leads to a search for a quicker, easier, cheaper way to turn a profit. This is what led to the speculative frenzy on Wall Street in the '80s ("The Greed Decade") and "Black Monday." And to the S&L scandal/bailout, the "dot com" boom and bust, and our current problem. What's scary though, is that the long term trend of the declining rate of profit is making itself felt as a financial disaster at the same time that we've hit the down side of the "normal" boom/bust business cycle with its rising unemployment. Then there's plunging house prices, a weak dollar, and an unfavorable balance of trade. Throw in yo-yoing oil prices, and a couple of wars, and we have the makings of the perfect economic storm.
As to getting something for nothing, mortgage contracts are quite clear that if you don't pay, you don't stay.
Rather than stupidity or greed it would be more useful to look at the underlying economic trend that has led investment away from production (involving job creation) towards speculation in "paper values." Manufacturing in the US has been on the decline since the late '70s, to the point where an article in today's business pages was headlined: "Manufacturing near collpase, analyst says."
The reason is a falling rate of profit. In production, new value is created through the application of labor to raw materials. This value is then divided into wages for the workers and profits for the employers. If costs for raw materials, machinery, transportation, etc. rise, the capitalist compensates by lowering labor costs. For 30 years we've seen wage cuts, layoffs, job combination, benefit cuts, automation, speed up, etc. But there's a point below which these costs cannot be lowered (the physical and sociocultural minimum for workers' life maintenance). Once that wall has been hit, those increased costs of production have to come out of the profit side of the equation. That leads to a diminishing rate of return on investment.
And that leads to a search for a quicker, easier, cheaper way to turn a profit.
This is what led to the speculative frenzy on Wall Street in the '80s ("The Greed Decade") and "Black Monday." And to the S&L scandal/bailout, the "dot com" boom and bust, and our current problem.
What's scary though, is that the long term trend of the declining rate of profit is making itself felt as a financial disaster at the same time that we've hit the down side of the "normal" boom/bust business cycle with its rising unemployment. Then there's plunging house prices, a weak dollar, and an unfavorable balance of trade. Throw in yo-yoing oil prices, and a couple of wars, and we have the makings of the perfect economic storm.
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