Converging Crises: Reality, Fear and Hope

Abstract

Click to increase image sizeClick to decrease image size Notes Total foreclosures in 2008 were 2.3 million, rising to 2.8 million in the first three quarters of 2009. The 2009 total is expected to reach 3.5 million. Because of mounting unemployment, according to the American Mortgage Bankers Association (http://www.mbaa.org), about four million more home-owner loans are ‘delinquent’ (no payments for 90 days) or in the first stages of foreclosure. See also the site of http://www.realtytrac.com for a commercial source on foreclosed properties for sale. In the 1950s, outstanding loans in the United States were evenly divided between the financial sector and the real economy. By 2007, over 80% of loans from US banks were going to the US financial sector. See Dirk Bezemer (2009) Bezemer, D. 2009. Lending must support the real economy. Financial Times, 5 November [Google Scholar], Fellow at the Research School, Economics and Business Department, University of Groningen. Worldwide bailouts are notoriously difficult to quantify. Factors to consider are whether sums have been committed or actually invested by governments; the great number of government agencies undertaking the disbursements; whether or not recipient banks are paying them back or intend to do so; differences in national reporting systems and the like. The CNN Money Page ‘Bailout Tracker’ (http://www.cnnmoney.com) in November 2009 gave for the United States alone the figures of three trillion dollars invested and 11 trillion committed. At the Treasury Department, the Special Inspector General for the government rescue ‘Troubled Assets Relief Program’, or SIGTARP, Neil Barofsky, caused a stir when he published his office's July 2009 quarterly report announcing total US government guarantees to financial institutions of $23.7 trillion. Secretary Geithner was not amused; the SIGTARP replied that all his office had done was to add up the numbers (http://www.sigtarp.gov). From Percy Bysshe Shelley's poem Ozymandias: I met a traveller from an antique land Who said: ‘Two vast and trunkless legs of stone Stand in the desert. Near them on the sand, Half sunk, a shattered visage lies, whose frown And wrinkled lip and sneer of cold command Tell that its sculptor well those passions read Which yet survive, stamped on these lifeless things, The hand that mocked them and the heart that fed. And on the pedestal these words appear: ‘My name is Ozymandias, King of Kings: Look on my works, ye mighty, and despair!’ Nothing beside remains. Round the decay Of that colossal wreck, boundless and bare, The lone and level sands stretch far away.