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MARIN COUNTY'S NEWS MONTHLY - FREE PRESS
(415)868-1600 - (415)868-0502(fax) - P.O. Box 31, Bolinas, CA, 94924

September, 2007



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Ponzi Capitalism
By Frank Scott

Charles Ponzi was criminalized in the 1920s for using peoples' money to pay interest to themselves as well as others, all of them being invested in something that didn't really exist. Their profit resulted from unprincipled capital accumulation. Just like what the market does when it sells what it calls Derivatives now, Ponzi's investors derived value from other investors, until the number of gullible people declined once the ruling class squelched his small time imitation before their own schemes were seen to be much bolder methods of producing money out of thin air. The credit creation which has supported our consumption binge for many years now is merely an updated, far more vast and dangerous expression of Ponzi's hustle, carried to global extremes.
Purists can deny that the present shakeup in the home mortgage sector is a Ponzi Scheme, because an actual product exists: a home. But rare is the American buyer who sees real estate simply as a procedure to acquire shelter. It has become a money making proposition in which the commodity, and especially the speculative paper that is its tenuous foundation, changes hands often and sees its value fluctuate, all with no more than religious faith in a steady stream of new investors to buy the paper.

Once a mortgage is taken on by a hopeful future home owner, it passes through many financial hands, bundled and rebundled to create greater packages of imaginary money that exists only in the minds of market manipulators who make some people rich, and make most people debtors.

This market division is part of the casino credit scheme that has been propping up capitalism in America for the past generation. It may be in the process of falling apart, and even though many homeowners - mostly debtors who own nothing - won't be immediately affected, all Americans will ultimately pay a price. As is usually the case, when serious contradictions cause chaos in the Ponzi Scheme that goes by the name of contemporary American Capitalism.

The crisis in the mortgage industry is part of the credit colossus, which shows frightening signs of being near collapse. An economy carrying trillions of dollars in global debt can only be maintained by bludgeoning any resistance, as in Iraq and Yugoslavia, while injecting daily doses of liquid funny money into the veins of a monetary monster that is uniting much of the world against empire. This is happening as it sinks deeper into an indebtedness its leaders think can never be collected by less powerful global forces. They don't seem to notice more opposition than their massive but over extended military can hope to subdue without destroying the planet. Of course if that crisis occurs, the more fanatic among them foresee being swept up as brethren, by Jesus, or protected as Chosen, by his dad.

In a two-day period of recent panic, the central bank created some 70 billion dollars and placed a finger in the dike that threatened to burst and flood Wall Street. There will be many more of these emergency transfusions, but we may yet see an even deadlier economic tsunami that will affect all of us, and not just some of us. It's time for people to learn about their economy, not only if they wish to change the future, but also if they hope to have a future at all.

The thousands suffering layoffs when mortgage firms went bankrupt are the usual product of failed enterprise, but though the unemployed are acceptable casualties in capital's war on wages, too many of them means little or no shopping by those new victims of the market. And that could spell disaster for an economy which has been thriving on massive credit spending to consume the wasteful output of a production system that spans the planet, burying some societies in death and debt while it empties wallets and minds in others, all to benefit a global minority gorging itself on profits from the global majority's loss. But increasing social and environmental destruction is creating a backlash to the rule of capital, and not just from outside the USA.

The trillions spent to destroy Iraq and threaten worse for Iran are denied the nation's health and infrastructure, bringing it closer to falling apart at the seams if this military and monetary madness isn't stopped. Major candidates seeking to replace the menacing boob whose term wont expire soon enough inspire no confidence, but growing public disgust with the political and environmental reality does offer some hope.

Ponzi's populist hustle offered ordinary people a chance to get in on the profit making of market capitalism, but the present scourge of the planet needs the intervention of ordinary people in opposition to that system. They will have to act as a real majority, for the first time in U.S. history. Americans would benefit from watching what's going on in some other nations, but only if free from the brain numbing filter of our political media. What we are taught to see as insurrection or terrorism often represents democracy in its infancy, and perhaps better developed than in more materially comfortable places where the illusion of freedom can disguise the reality of a dictatorship of corporate wealth.

If Americans don't take control of their country, they could suffer a much worse fate than Ponzi, who only served a few years in jail. We need to start paying attention to what our economy really is, and stop believing myths about what it's supposed to be. If we don't come to grips with a reality that is destructive of all our futures, we may have to pay the ultimate price of capital's punishment, not as individuals but as a society. We need a political form of crisis intervention, democratically practiced, and very soon.

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