Propping up the economy

Estimates are that banks and other financers have written off about $300 billion so far. While not insignificant this capital destruction is not major on a global scale.

Of course the Bush rescue of Wall Street is an attempt to save capital, not destroy it, and then pass on the cost to US taxpayers (in the main US workers). So the system is not renewing itself, and this creates the conditions for further hardening of the arteries.

The bail-out may work in the short term, although nationalising debt doesn’t abolish it. It merely transfers it, creating further problems. One of those problems may be a spill over into the productive economy as US workers bear the burden of the Wall St madness and further reduce consumption. Already the US building sector is in the doldrums and this will multiply through the economy.

Even more directly productive companies (like General Motors) which also have major finance businesses will be under pressure. And who knows where the hidden risks lurking in the bowels of financiers around the world - the unknown unknowns in Rumsfeldian oratory - are?

As the spectre of wages cuts and unemployment haunts the working class, I think it is clear we are a long way from the end of the crisis.