The drop in median house prices portends a major crisis for the US economy as it becomes increasingly financialized. Once again "Bonddad" Stewart gives us a brilliant analysis of the coming crisis.

I have always believed that what is going on in the housing market currently is the growing financialization of an economy that is experiencing chronic stagnation due to its tendencies to concentrate wealth more intensely than ever in history on a global scale and thereby constrict demand while there is a shift from manufacturing to finance in the global GDP as a means of sustaining an overall average rate of profit in the midst of the chronic stagnation inherent in late capitalism.

Overall declines in average annual GDP growth rates in the US from above 4.5% before 1973 to below 3% since that time have trended unmistakeably with intense concentrations of wealth and income. A recently published Congressional Budget Office study revealed that the mere increase of the income of the top 1% of earners from 2003 to 2005 was far greater than the total combined income of the bottom 20% of the US population. The income of the upper 1% rose from just under $1.3 trillion to about $1.8 trillion, a nearly $525 billion increase!! The total income of the poorest fifth of all Americans, just over $383 billion, totals a mere three quarters of just the increase of the total income of the upper 1% of US earners in just two years of the early part of the post 2001 recovery.

Obviously, the increased financialization of the US economy and the growing outsourcing of high paying jobs and their replacement with lower paying ones plays a great role in this trend. Private equity funds play a great role in the merger movement in recent times. Such funds buy out leveraged firms and break them up shedding jobs and reducing remaining workers' pay and benefits. Then they relist the company's stock as an IPO. Usually the stock prices have soared by this time and the Equity firm makes a big profit. This is a major source of wealth and income concentration and unemployment. Private equity firms in 2006 accounted for about a fifth of the $4 trillion worth of global acquisitions up from only 12% in 2005!! Such acquisitions are increasingly done with borrowed funds adding instability to the financial system and debt to the newly created companies that are going public.

Workers and investors have paid the price for this kind of casino economy that has emerged with growing stagnation. Unemployment is still low but the main contradiction is not a growing reserve army of unemployed but of underemployed with wages to paltry to spur massive per capital economic growth. So increasing profits more and more depend on wealth concentration, low wages and financialization, all mutually re-enforcing features of our current economic system. As effective demand slows financialization intensifies as the only means of keeping profit rates up.

The real core of the current crisis of late capitalism is growing, not falling, profits amid a slowing, not growing, economy. The means to sustain these mutual trends is growing financialization which portends greater instability and a greater inability to reproduce the conditions of its survival. Financial crisis is the consequence of both lower real incomes for the middle and working classes and growing debt, something on which sustained profits depend. All the while average rates of real economic growth increasingly slows. This is the core contraction of the system. Late capitalism has here created the very conditions of its own demise.

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Take Notice:

A western Pennsylvania woman discharged a 1.3 million federal tax debt with her own privately created credit in the form of a two party instrument entitled "Public Office Money Certificate".

She tendered her instrument to the Secretary of the Treasury Mr. John Snow who not long there after resigned as secretary.

The note contained a condition that he make the "Official Determination as to the Substance of the Money as required by law at Title 31 U.S.C. sec.371."

It is no secret that the federal reserve is a privately owned bank and that their circulating notes are meerly evidence of debt ie, credit or fiat money not gold or silver coin as the constitution requires.

The forgoing fact that debt can be discharged with some thing other than federal reserve notes is verified and confirmed in the official court records in the United States District Court in Pittsburgh, Pennsylvania at 2007-cv-0331; the official court record speaks for itself.

The Truth Will Set You Free.. and solve your credit problems.

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