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The financial crisis and the real economy

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Leo Panitch: The death of the US trade union and Great Society have left the real economy vulnerable. Part 2

In part two of our series of interviews with Leo Panitch, he gives his explanation of the causes of the financial crisis. According to Leo, the powering of the domestic economy on credit withdrawals instead of wage increases in recent US history is in large part to blame for the current crisis, a situation that Leo blames in large part on the devolution of the American trade union. Finally, Leo explains how the credit freezes affect the real economy.

Leo Panitch is the Canada Research Chair in Comparative Political Economy and a Distinguished Research Professor of Political Science at York University in Toronto. Panitch is also the author of "Global Capitalism and American Empire" and his most recent release "American Empire and the Political Economy of International Finance".

See Part 1 at: http://current.com/items/89378166_free_markets_depend_on_state_intervention

See Part 3 at: http://current.com/items/89386959_the_financial_crisis_at_the_local_level
Vierotchka

1 responses // The financial crisis and the real economy

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    I have a suggestion to help calm the economy without using other people’s money. It would be a form of downsizing and a shuffling of the deck. It goes as follows:

    Take two types of homes:
    a) Homes that have already been foreclosed
    b) Homes headed for certain foreclosure

    A new government regulated process, with accountability and transparency, oversees the transference of a current homeowner facing foreclosure into a smaller home that is vacant due to foreclosure. This would be done only if both parties are in agreement. The homeowner’s equities would be transferred accordingly to this foreclosed property. However, said property would have to be re-appraised to current values. The homeowner would have to be re-qualified based on their abilities to meet their current debt load and the new loan payment on said foreclosed property.

    The new loan should be a (proposed) 30 year loan equivalent to the current interest rate (approximately 6%), but should be fixed so there can be no surprises later. No ARMS! This allows the current homeowners to retain their credit, their assets, and their will to continue making payments on all of their debts. The loaning institutions would benefit by slowing down this tremendous foreclosure rate and by eliminating some of their foreclosed properties as well as freeing up loaning monies.

    This would bolster the economy in many ways. Debtors would continue to make good on their current debts and loaning institutions would be able to continue to make new loans. Maybe with this change and a few others this $700 billion bail out would not be so large or as necessary. The tax payers would be freed from incurring this burden and our economy might be able to rebound.
    Thank you, Byron

    JuliusBC

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