Panic Sell-off on Wall Street
reposted from World Socilaist Web Site
By Barry Grey
18 September 2008
Credit markets in the US and around the world have seized up in the wake of the government bailout of AIG and the demise of Lehman and Merrill Lynch. Banks and financial firms have all but ceased lending to one another, and the cost of short-term credit upon which the financial system depends has skyrocketed.
Big investors are bailing out of stocks and other securities and rushing to buy Treasury securities, which are considered relatively safe. As a result, the yield on Treasury bills has plummeted, at one point on Wednesday falling below zero.
Other signs of a collapse of confidence in the financial markets were in evidence. Crude oil jumped by $6 a barrel and gold and silver futures soared, as investors scrambled to move their money out of stocks and bonds and into commodities and precious metals.
The financial turmoil was exacerbated by the release of a Commerce Department report showing that US housing starts fell in August by 6.2 percent, marking the slowest home building pace since January 1991. The decline was far higher than had been projected.
What is involved in the crisis is not simply the failure of certain large finance houses, but rather the bankruptcy of American capitalism itself.
The US central bank, the Federal Reserve Board, is heading toward insolvency.
Massive US deficit spells austerity policy for next administration
reposted from World Socialist Web Site
By Jerry White
30 July 2008
The Bush administration this week predicted that the US budget deficit will hit a record $482 billion in 2009. This means that the next president, whether Democrat Barack Obama or Republican John McCain, will follow a policy of unprecedented austerity, including gutting entitlement programs, such as Medicare and Social Security.
Although the deficit figure is $74 billion higher than what the White House predicted just two months ago, it is widely acknowledged that it severely underestimates the real scope of the coming shortfall. The amount announced by White House budget director Jim Nussle includes only $70 billion for the wars in Iraq and Afghanistan—which could cost at least three times as much.
Moreover, the estimate ignores the $100 billion—or hundreds of billions, which could be the eventual cost—being allocated for the Treasury Department’s rescue of the mortgage finance companies, Fannie Mae and Freddie Mac.