On 2012-01-19, at 5:41 AM, Michael Pollak wrote:
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> On Tue, 17 Jan 2012, Doug Henwood wrote:
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>> You know, I suspect that one reason that debt jubilees and the like are not spoken of now as compared with earlier periods might have something to do with the greater economic importance of debt. If debts are not central to the functioning of the real economy, they can be wiped away with little impact. Not so today.
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> ...nowadays we have this vast complicated sticky web where every large scale write off sets off several huge and not entirely transparent chains of consequences. And where getting banks to make large scale social write offs immediately creates a new problem of how to solve the problem of massive bank failures and attendant economic freeze-up. Which is not a problem the ancients had to solve.
Modern capitalist economies are infinitely larger and more integrated, but is state-directed public and private restructuring of the financial industry - with corresponding losses to creditors and shareholders - now truly off the table? There are plenty of examples from as recently as the 2007-08 financial crisis to suggest otherwise - Royal Bank of Scotland, Lloyd's/HBOS, Northern Rock in the UK; the Anglo Irish Bank in Ireland; Dexia and Fortis in Europe; Landsbanki and Kaupthing in Finland; and, in the US, Fanny and Freddy, AIG, Bear Stearns, Merrill Lynch, WaMu, and Wachovia, among others.
Of course, state takeovers are only a last desperate measure in the midst of a contagious financial crisis which threatens to precipitate a catastrophic depression. Until then, states will resort to all manner of clumsy expedients and half-measures to save creditors from default which frequently serve only to aggravate the crisis, as today in Europe. The Germans and their north European proxies are still hoping to squeeze the working classes of the highly indebted states to save their banks, but when austerity makes debtors less rather than more capable of servicing their debts and disorderly mass protest approaches insurrectionary levels, as in Greece, the riskiest private investors are finally made to take their haircut while the state and supranational authorities step in to stem the panic and restructure the industry.