Sunday, 22 November 2009

Government of the banks, by the banks and for the banks

Nothing quite explains the current crisis like this graph of the rate of US delinquencies - households in serious arrears (over 3 months) with their mortgage payments.

The graph covers the period between from 1985 to 2009. Until 2006, the delinquency rates never passed 1% of all households. Now it is 4.5% of US households who are at serious risk of losing their homes - and this excludes all those who have already been repossessed. As Graham Turner notes in his new book 'No Way to Run an Economy', more than 1 million US households received foreclosure notices between March and May 2009 alone.

This demonstrates how the economic growth of the latest period of neoliberal capitalism was achieved by the loading of excessive debt onto households - the story is not dissimilar in the UK.

The latest US delinquency figures, which came out last week, show that the Obama Administration's 'Making Home Affordable Program' (MHAP) has been a woeful failure. Serious delinquencies are still rising. This is a structural problem since MHAP does not offer a bailout to those at risk of losing their homes (after all bailouts are for banks with $billion turnovers) simply refinancing.

Just as in the UK, banks and their shareholders are bailed out while hard-pressed people get tea and not much sympathy. Welcome to capitalism, the system that redistributes wealth from poor to rich.

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