Financial Collapse Shows Depth of Economic Crisis

Fannie Mae and Freddie Mac, two of the country’s largest mortgage companies, are together, $5.3 trillion in debt. They made headlines when their stock tumbled to one-half its value amid fears they would not survive rising mortgage defaults. Congress is now debating a taxpayer bail out to the tune of $25 billion, and an open line of credit for the companies. There is speculation that the companies will eventually be nationalized, i.e. taken over and put under government ownership or control. If the U.S. ever had to take on the full debt of these companies, the U.S. public debt, which already exceeds $9.4 trillion, would almost double at a stroke.

A chorus of appeals to reign in the two monster companies circulated for years. Government officials turned a blind eye to their questionable accounting errors of around $5.5 billion. A politician trying to look into their books was told to stop holding hearings. “Fan and Fred have been protected by an alliance of Capital Hill and Wall Street,” says Paul A. Gigot of the Wall Street Journal. “They have been able to purchase political immunity by disguising [their] vast profit-making machine in the cloak of ‘affordable housing.’
What’s behind the “rescue” plan is fear that the collapse of these companies will threaten the stability of the global economy — and ultimately the capitalist system itself. The U.S. relies on borrowed money to keep the economy functioning. Asia, Europe and Russia have hundreds of billions of dollars invested in Fannie and Freddie. The U.S. fears that investors will perceive that their money is unsafe, spurring a global selling spree of these securities, with all of the dire consequences. Yet the U.S. capitalists are between a rock and a hard place. They could raise interest rates to encourage bond sales. But this would spur inflation. One thing is clear: while millions of families suffer foreclosures and join the ranks of the already homeless, our tax dollars are going to the corporations.

SOLUTIONS

We must get at the root cause of the economic crisis or we will continue to be subject to the capitalist’s “solutions.” Today, robots and computers are eliminating human labor, the source of all wealth under capitalism. Thus we see mountains of wealth evaporating while the value of human life, as evidenced by the sheer number of people living in the streets, is driven to zero. The bottom line is that workers are steadily losing their jobs to new technology. With little or no money, workers cannot consume what the robots produce. This destroys the market for what is produced, and the market economy begins to collapse. We can’t continue to have a market economy when there is no market. Under these conditions, only a cooperative economy will allow people to survive. Replacing the capitalist system with a new society based on a cooperative economy is the only way out.

If we continue to follow capitalist leadership we are headed for war and fascism. Ultimately, war is the way they will attempt to resolve the crisis. We, the people, must fight for a new society where the marvelous technology is used to guarantee that everyone has the necessities of life. Such a society enlists the social contribution of everyone. It is a world worth fighting for.

What can we do right now? Eventually the government will be forced to nationalize the big financial institutions to attempt to stabilize the economy. This provides opportunities to force the government to nationalize them in the public’s interests rather than in the interests of the corporations. Ultimately, society must take over these giant corporations. It is the only way a new society can be built.

From the Editors
We are sometimes asked “Why do revolutionaries need a press?” The answer has to do with this moment in history. Historical and economic forces beyond anyone's control have set the stage for a new society to be built, but from this point on, how things turn out depends on what people think—because what they think shapes what they do. This means that those of us who are seeking fundamental change are engaged in a battle of ideas, a struggle to win the hearts and minds of the people. If we don't raise the consciousness of the people and unite them around a vision of a better world and a strategy to achieve it, then we'll fail in our effort to build a just and free society. To raise consciousness and win the battle of ideas, we need a press.