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Daviana Mazzone
Undergraduate Pamphlet Summary  The Good Financial Crisis: Causes and Consequences
Introduction
                  The Good Financial Crisis began in late of summer 2007 that started with the failure of 3 hedge funds from Bear Stearns and then continued to obtain worse when the government tried to stop its failing process.  This crisis is now known as the worse economic crash since the Good Depression.  This crisis depicts a development a huge function within the country's history.  During the years regarding the 1950's and 1960's during the Golden Age, worries about stagnation were not many of a concern when it came to economics.  Keynes's studies and findings were place return into the pre-Keynesian neoclassical-Keynesian synthesis.  Some radical Keynesian and Marxist economists, continued to raise the question of stagnation, arguing that it remained the primary difficulty regarding the monopoly-capitalist economy and that the prosperity regarding the 1960's was dependent on short-term stimuli that should not be continued.  The best-known piece of work to make this argument within the 60's was Paul Baran's pamphlet Monopoly Capital.  This pamphlet was about monopoly capitalism and stagnation.  The pamphlet stated that there was a large difficulty which was the massive productivity regarding the monopoly-capitalist economy, along with oligopolistic pricing, generated a huge and growing surplus, which went beyond the capacity regarding the economy to absorb it through the normal channels of consumption and investment.  Within the following years subsequent to the pamphlet was printed another crisis took location within the United States.  The "golden age" had begun and then into a "leading age".  This stagnation within the economy was going on for years now and as we have seen during this recession, it has gotten distant worse.  For Keynes, the technological finance invited a periodic decoupling regarding the market for assets from production.  The banking system was within the center regarding the crisis and seemed to be place to blame on the economic downturns.  Praise was provided to development and rediscovery of Keynes's good findings on finance, which also had very many to do with Hyman Minsky.  Minsk was a socialist oriented economist that studied and researched all different categories of economists and place all of their views into his findings.  Minsk's ending of his studies was bare: "Capitalism is a flawed system in that, if its development is not constrained, it shall lead to periodic deep depressions and the perpetuation of poverty".  One regarding the biggest concerns of economists was that the government should not be can bail out the financial markets as they kept on getting bigger unless something was done to fix the ballooning.  In order to begin to fix the primary crisis, this difficulty compulsory the removal of all restraints prior to the bubble were to burst.  The greatest intelligent and well-known economists regarding the 1960's to 1990 have been Magdoff and Sweezy.  Magdoff and Sweezy believed that the recognition of reemerging stagnation, already shown by the mid 1960's and getting worse within the 1970's.  Due to the fact that of their findings this started the basis of conditions for a huge this set the conditions for a primary transformation within the function regarding the financial system in US capitalism.  The argument in this book, based from Magdoff and Sweezy is that a realistic view on our country's economic the past that magnifies on the relationship between stagnation of monopoly capital and everything that returns from it. 3 things that should be identified are financialization, that is the growth of debt to GDP that began to increase within the 80's.  Also, the stagnation of products production from GDP got worse over time. Chapter One: Causes
The Household Debt Bubble
                  This chapter focuses on the household debt crisis.  How many is spent on consumption products depends on the income regarding the working class.  Workers normally use up all of their salary and income on what they consume.  This means that households within the bottom 60 percent regarding the distribution of all income, in our place were greater than the pre-tax income in '03.  In difference, the people with the highest no. of income should use a many smaller no. of their income on what they consume.  The huge no. of income of capitalists is used up in investment.  When most investment and what people consume are extremely reliant on the money that is spent from the bottom income spenders, economists should thing that stagnation or a good decline in real wages should beginning a huge financial and economic crisis due to the fact that of overall consumption expenditures.  There is a huge doubt regarding the growing squeeze on wage-based incomes.  The average median family income has tried to deal with this by increasing the no. of working hours and many jobs per house. Through 2004, real income regarding the average household decreased for about 5 years.  The lowest regarding the 95 percent of households that received income had decreasing real average household income in 2003 and 2004.  The highest regarding the six percent definitely had increases in this department. In 2005, real wages fell by 0.8 percent.  During this time there was more consequences then not.  Consumption expenditures have increased all over the place very many quicker than prior to and there was a massive increase in overall consumer debt to disposable income within the United States. Skyrocketing debt in families is the cause for a huge accumulation of bankruptcies and foreclosures. There were an accounted 5 million bankruptcies during the Bush administration that is the highest record ever reported for a President's term within the Clean House.  Due to the fact that regarding the high bankruptcies legislation was passed by Congress in 2005, the many these decreased. The biggest portion of debt is secured by primary residence, the primary asset regarding the vast majority of families.  Homeowner debt has continued to increase drastically.  Between 1998 and 2001 the median no. of home-secured debt rose 3.8 percent; from 2001-04 it rose a drastic 27.3 percent.  The average quantity regarding the extra equity used by people who borrowed it was about $20,000. The average American family also had a stack of debt from credit cards. At present nearly two-thirds of all cardholders carry balances and pay finance fees each month with an average of $4956.  Another well-known item people used to borrow money was the use of installment loans that have fixed payments and terms. In 2001-2004 the average quantity owed on such loans grew by 18.2 percent.  The shock regarding the housing bubble as well as the increase in real-estate prices and increased debt in households that had been increasing for an extended time was one regarding the biggest factors when it came to 2000 economic meltdown and the recession. The strength of consumption expenditures, rising faster than disposable income, was the factor that was most affected to stock market wealth effect. An economist, Pomboy argued, that there is proof to speak that the housing market effect should be considerably larger than the stock regarding the wealth market effect.  The decrease in home equity and the increase in mortgage debt service insinuate how good the underpinning consumption growth definitely is today.  The use of peoples' consumption and the housing bubble are interrelated to each other and have been called "the household debt bubble".  This bubble should of with no problems increased to spot of no return and burst due to the fact that of increasing interest rates and slow growth and decrease in housing prices.  On average when this pamphlet was written, the median cost of an special home has decreased for 4 straight months.  Due to the fact that people's incomes were drastically decreasing and consumption was being squeezed on the working class citizens, this created a huge concern due to the fact that the economy was more dependent on consumption then ever prior to and many people relied on it to live. With declining profits on new investment, new corporations have been responsible for undistributed corporate profits that ended up rising.  Without they are being an increase in business investments and consumption the shock of stagnation within the economy should take place. If this were to happen, which it did, the economy should have extremely slow economic and financial growth, increased debt for Americans and extreme financial meltdowns of all aspects.  There is no growth miracle that a mature capitalist economy prone to high investment opportunities can continue to grow rapidly.  The mess regarding the United States financial system and economy is not only due to the fact that of excess consumption but mostly happened due to the fact that a little very wealthy people were on a procedure to pursuer more wealth at the cost regarding the whole nation.  The only procedure to regain our financial system is with a reconstruction regarding the entire society from ground up. This kind of reconstruction is not achievable during the time this pamphlet was written.  It is time for a renewed class struggle from below and to immediately protect workers from the worst failures regarding the old.  Labor should increase from the ground up. Chapter Two: The Explosion of Debt and Speculation
                  A shortage of profitable investment opportunities is the primary cause of this tendency.  When we invest less, this shall decreased the future growth of our economy. Stagnation does not mean that there is no growth; it just means there is extremely slow growth compared to a flourishing economy.  The economy functions well below its potential with unused productive capacity and significant unemployment and underemployment.  Over the final thirty years an average of 81 percent of non-residential capacity was used, and during the final 5 years the average was only 77 percent.  During the boom years regarding the 1960's the manufacturing sector was producing at close to 85 percent of capacity.  The official rate of unemployment in July 2006 was at a little 4.8 percent.  These figures do not precisely portray the actual no. of people who have dropped out regarding the workforce, just those that definitely have jobs. Today, labor participation rates decreased drastically since 2000. Unemployment has barely increased since this time and was extremely slow moving.  Capitalist economies are based on the profit motive and accumulation of capital without end.  Problems and shocks occur when high growth rates stop or do not continue to expand as such.  As industries mature and products saturate markets at home corporations seeking profitable outlets for their commodities and their capital increasingly attempt to export products and invest abroad.  Neoliberal globalization is the greatest recent manifestation of imperialism: capital rations, creating use of governments, leadership regarding the US government, to exploit the resources regarding the world.  The goal for capitalists within the economy is to be can sell anything wherever and whenever they need and also to be can import and export products to and from any country. An example regarding the importance of profits from investments abroad the total US economy, these represented about seven percent of total business profits within the 1960's, 11 percent within the 70's, 15 to 16 percent within the 80's and 90's and have averaged 18 percent for the fiver year period in 2000 to 2004.  Innovations in cutting edge designs and sure inventions have sometimes increased the economies growth for long periods of time.  The use of automobiles and how this expanded throughout the place and to each household was a huge increase within the suburbanization of housing.  In contrast, due to the fact that regarding the increase within the use of automobiles, public transportation had declined drastically, pollution increased and due to the fact that of this the US foreign policy had to make sure that oil and gas were accessible by huge corporations.  The cutting edge designs regarding the automobile stimulated the economy for decades regarding the 20th century in numerous ways.  Inventions of new cutting edge designs consequently helpful, did not change the method citizens and businesses work but did not stimulate the economy long term. Government spending on physical and person infrastructure, as Keynes pointed out, should possibly fuel the economy.  One regarding the biggest expenditures that stimulate the economy is the spending on military.  The rise regarding the silicon based industries and the World large net are 3 relatively recent examples of how military can make new industries.  Actual warfare for example the US wars against Iraq and Afghanistan stimulates the economy by requiring the replacement of machinery that wears out rapidly below battle conditions as well as the spent missiles, bullets, bombs etc. the category gross private investment includes all investment purposes.  The category gross private investment includes all investment in business structures, business machinery and software, and home construction.  This investment creates most current and future growth within the economy as structures and machinery should be used for many years.  During the 5 years just prior to wars in Afghanistan and Iraq, military expenditures relative to investment were at their lowest spot within the final quarter century, but were still equal to approximately one-quarter of gross private investment and one-third of business involvement.  During the final five-years, with the wars in full force, there was a significant growth in military spending.  The housing boom during the similar to period meant that official military expenditures for 2001 to 2005 averaged 28 percent of gross private investment.  The rate of annual increases in consumer expenditures fall somewhat with recessions and rise as the economy recovers.  The creation of debt in most government and private sectors also boosts the economy.  Deficit spending by the government is one regarding the Keynesian answers to recessions, putting new dollars into circulation to make demand.  Keynesian debt spending does not in it self solve problems of severe economic downturns.  There exists differences between consumers and corporate borrowing.  When citizens borrow money, example credit cards, this almost immediately sends an increase within the stimulus right away.  When corporations borrow to build more physical plant, buy durable machinery, or beginning a business within the services, the effect regarding the spending of borrowed money continues for years as economic activity is expanded.  Magdoff and Sweezy dramatically described the huge expansion of debt within the US economy in their introduction to Stagnation and the Financial Explosion.  These 3 economists researched and watching the beginning fazes within the mid 80's which showed only early stages regarding the debt crisis and the soon to be recession. Within the 1970's outstanding debt was about one and a 1/2 times the volume regarding the country's annual economic activity.  Total debt within the United States is composed of debt owed by households, government, nonfinancial businesses, and financial institutions.  There has always been a continual growth in debt since the late 1970's; there were bursts of debt growth relative to GDP, within the period of 1981-88. During the 2nd burst from 1997-2005, financial business debt grew even more like a percentage regarding the GDP.  During this 2nd period household debt also shot up, from 67 to 92 percent regarding the GDP.  Nonfinancial businesses saw their debt rise 6.3% within the 12 months that ended within first quarter to $5.5 trillion dollars. This was the fastest yearly growth for debt in 5 years.  As the overall debt grows larger and larger it appears to be possessing fewer of a stimulating effect on the economy.  Due to the fact that of studies that was done by Magdoff and Sweezy, there is shown to be most brief and long term caps to rising debt/GDP ration. The dramatic increase of household debt was the cause regarding the Federal Reserve due to the fact that regarding the good Stock Market crash in 2000.  When the Fed reduces interest rates to historically little grades to hold the economy from falling into a deep recession, households increased borrowing on homes, cars, and credit cards which increased debt consumption so many people were burring themselves alive.  Household mortgage debt increased 75 percent from 2000 to 2005 as homeowners refinanced and obtained larger mortgages.  Sequential to survive the United States citizens were purchasing newer and larger homes they should not afford and increased their consumption by going into more debt; neither by buying new mortgages on the homes they already had or bringing on new mortgages on they homes they lived in already. Also, new categories of mortgages have been developed for those that cannot really afford to buy housing.  Since 1980 there was an almost continuous negative balance of trade between the United States and other countries.  For the past 3 years the US current account deficit was about $700 billion.  This means that approximately $2 billion per day should return into the United States to buy US government bonds or other assets for example stocks and real estate sequential to offset the net money the US population and businesses send abroad.  Along with the explosion of debt has return the exceptional growth of finance and financial speculation within the US economy stimulated also by increasing higher grades of debt.  For the greatest component right-wing economists ignored the slow growth and stagnation regarding the economy and also ignored the causes and roots by which this financial mess had happened. The magnitude of speculation in all manner of financial objects for example stocks, futures, derivatives, and currency is truly astonishing.  Magdoff and Sweezy were clearly shocked by this tendency when they first started investigating the causes and dangers regarding the economic crisis.  Within the present day, financial analysts know that consequently the financial system regarding the economy is drastically stagnated, they know finance can continue to grow with possessing the base regarding the system extremely slow.  One regarding the greatest different futures markets was created in 2003 by the US government's Department of Defense along with a private business that was betting on the likelihood of terrorist attacks and assassinations.  Derivatives and hedge funds also played a critical role within the explosion of financial speculation.  The daily turnover of foreign exchange and interest rate derivate contracts between April 2001 and April 2004 increased by an estimated 74 percent to $2.4 trillion.  The notional amounts regarding the over the counter derivates at the end of June 2006 was $283 trillion.  US based hedge funds, currently with assets of approximately $1.2 trillion; quickly move huge amounts of capital into and out of investments.  Currency and futures speculation, trading in complex derivates, the emergence and growth of hedge funds, and the stunning increase in debt are all responses to similar to phenomenon.  As the economy of production of products and services stagnates, failing to generate the rate of return from MGM that capital desires an special kind of investment has emerged.  The huge expansion of debt and speculation give ways to extract more surpluses from the general population are component of capital's exploitation of workers and the decreased middle class.  An plan of how many the public has to pay for the about insurance problems that capital starts is indicated by the US government bailout regarding the savings and loan sector within the 1990's which cost somewhere around $175 billion, adding to current and future personal tax obligations.  Due to the fact that of this there was an increase in questioning regarding the dangers and negative possibilities of an increase of debt and changes throughout our economy and financial system. Numerous sources of fragility are introduced within the US economy by the different techniques capital uses to try to overcome the obstacles to profitable opportunities caused by stagnation.  These have created trends that cannot continue without generating bigger contradictions the future. 







Chapter 3: Monopoly-Finance Capital
                  When Magdoff & Sweezy started researching and writing this pamphlet their primary focus was to release multiple explanations and plans regarding the monopoly stage of capitalism, along with historical, political, corporate events regarding the monopoly stage of capitalism.  Within the new monopoly capitalist order firms behaved not has the freely competitive enterprises of textbook economics but as what is called co respective.  Such monopolistic firms abandoned mutually destructive cost competition, which was called "price warfare".  This means that the general difficulty regarding the financial system was to retrieve ways to take the enormous actual and economic surplus. The greatest important issue for monopoly capital was to retrieve more outlets for surplus, beyond capitalist consumption and investment that should deliver to hold the system from sinking into an economic malaise.  Within the pamphlet Monopoly Capital, Sweezy described 3 features of financialization regarding the economy.  First, the chapter on the giant corporation stated that they thought the structure and base of corporate capitalism was for the greatest component had assumed that the firm structure of corporate capitalism was more or fewer constant with little known problems.  He also stated that during the 1980's there was a "leveraged buy-out mania" which was fueled by junk bonds and some regarding the greatest powerful corporations were in danger of being bought out by independent entrepreneurs.  Second, Sweezy observed that in its failure to anticipate the explosion of finance within the 1970's and 80's was to have far-reaching effects on the laws of motion of monopoly capital.  This ballooning of finance produced new outlets for surplus within the finance, insurances and real estate sector of GDP within the shape of good bulk regarding the money capital devoted to finance was used for speculation in securities, real estate and commodities.   Third, Sweezy researched and located that he did not look within the future a shift that should be happening within the overall direction of investment.  The financialization of monopoly capital, during the time this pamphlet was written represented a done original historical time.  Currently we now realize that we are extremely surprised by how early Magdoff and Sweezy saw the huge changes in capitalism receiving place, for the worse for that matter.  The increase in monopoly capitalism within the late 1900's to 2000's also increased when the markets for non-residential securities did as well.  Usually, the accumulation of stocks and bonds and other financial instruments was viewed like a shape regarding the grouping of savings for investment in sure orders of production.  Magdoff and Sweezy explained within the "Production of Finance" that corporate securities became a component of with the aspect of liquidity instantaneously converting into cash, which the substantial resources of corporations should have not ever had.  Once this element had been reached, an abundance of financial instruments and markets portrayed themselves to be infinite.  Within the late 1950's and 60's when "Monopoly Capital" was being written, non-residential capital was in control, financing its investment through its very lone funds, and it was normal to look the structure regarding the system barely hanging on or thought about stable.  The changes that emerged with the resurfacing of stagnation changed all of that.  "The golden age" within the 60's was past up by a leaden age that continued to increase, while there was no end in sight, just getting worse.  The autonomy of finance from production is of a relative rather than an absolute kind. Financial euphoria's during which speculative finance seems to be breaking distant from its moorings in production, inevitable lead to widespread notions of an special economy.  Such financial bubbles always should burst within the end when everything was stretched to its limit, just like the stock market crashes of 1987 and 2000.  When reviewing our events in history, the final 3 decades since 1987 stock market crash is that the 3 financial meltdowns that took location did not do anything to stop the long-run increase of debt of GDP in America, which still increased with only mini stoppage points subsequent to the crashes.  Very many depends on the conditions and economic factors regarding the United States alone not paying close attention to global financial system. If a global debt meltdown and debt-deflation is certainly one possibility during this time, another is that stagnation and a huge financial crash should be happening for an extended time.  The Federal Reserve and the central banks of other leading capitalist states are organized to boast liquidity fast into our economy at any sign of a primary financial meltdown in our economic system, which should be the lenders if all else fails lastly.  Huge amounts of additions of debt seem to be extremely wanted to stimulate and grow GDP. A system that specials to speculation below conditions of increasing financial fragility wants constant new infusion of cash, many of that is obtained from the working population through drastic increases exploitation.  Real wages for most workers have been stagnant for a generation or more.  An important issue that wants to be addressed is the specific relation regarding the new phase of monopoly finance capital to imperialism.  The present decade has seen the emergence of an special naked imperialism, marked globally, and a large jump in US military spending.  This new naked imperialism is an extension of tendencies already visible in neoliberal globalization that arose in response to spread of stagnation within the 1970's and 80's and took a particularly virulent shape with the onset regarding the third world debt crisis within the early 1980's.  4 decades subsequent to the publication of "Monopoly Capital" the contradictions of capitalism depicted there have metamorphosed into altogether more destructive forms.  There is no existing economic theory that adequately explains the phase of monopoly finance capital.  "We now can recognize our moral obligation to devote ourselves to fighting against an evil and destructive system which maims, oppresses, and dishonors those that live below it, and which threatens devastation and death to millions, around the globe".  Chapter Four: The Financialization of Capitalism
                  Changes in capitalism over the final 3 decades have been commonly spoke about by creating use of many different terms: neoliberalism, globalization, and financialization.  Very many of studies was done on first two; financialization has not had many studies and analyst done on it.  Financialization of capitalism, or the shift in gravity of economic activity from production to finance, is one regarding the key issues of our time.  People can argue that due to the fact that of financialization is howcome the system has changed, but it is due to the fact that capitalism like an entire since the structure remains the same. Instead, financialization has resulted in an special hybrid phase regarding the monopoly stage of capitalism that may be termed "monopoly finance capital".  Rather than advancing in a fundamental way, capital is trapped in a seemingly endless cycle of stagnation and financial explosion.  These new economic plans of monopoly finance capital have their basis within the United States, still the greatest dominant capitalist economy, but have increasingly took a hit into the global system.  The the past regarding the term "financialization" is not very in detail, the term started to display with increasing frequency within the early 1990's.  The issue of a gravitational shift toward finance in capitalism like an entire was around since the late 60's.  In researching the financialization of capitalism, Magdoff and Sweezy did not do the similar to things other economists did and did not follow the global trend of others.  They viewed this through the lens of historical analysis of capitalist development.  Sweezy referred to what he called "the 3 most important underlying trends within the recent the past of capitalism, the period beginning with the recession of 1974-75, the slowing below the of overall rate of growth, the worldwide proliferation of monopolistic multination corporations, and what should be called the financialization regarding the capital accumulation process.  For Sweezy these trends were intricately interrelated.  Monopolization tends to swell profits for the primary corporation while also reducing "the demand for more investment in increasingly controlled markets".  The resulting "double process of faltering real investment and burgeoning financialization" as capital was a method to retrieve a method to utilize its economic surplus, first appeared with the waning regarding the "golden age" regarding the post 2nd World War decades and has persisted" Sweezy observed, "with increasing intensity to present".  For the owners of capital the dilemma is what to do with the intensely increasing surpluses at during huge investment purposes.  Their primary solution from the 70's on was to expand their demand for financial products like a means of maintaining and expanding their money capital.  It took the rise of monopoly capitalism within the late nineteenth and early twentieth centuries and the development of an economy for non-residential securities prior to finance should take center state, and prior to the contradiction between production and finance should mature.  When the decade of The Good Depression hit, the financial base of our financial system regarding the monopoly capitalist economy collapsed, marked by the 1929 stock market crash.  Finance capital had greatly disappeared within the Depression and did not really help out in dealing with the re-growth regarding the system.  The reemergence of economic stagnation within the 1970's Sweezy, known writing with Magdoff, focused increasingly on the growth of finance.  The role regarding the capitalist state was transformed to meet the new imperatives of financialization.  The state's role as lender of final resort, responsible for providing liquidity at brief notice, was fully incorporated into the system. Following the 1987 stock market crash the Federal Reserve adopted an explicit" too large to fail" policy toward the entire equity market, which did not, however, prevent a decline within the stock market in 2000.  If the base and structure of financialization are clean from the others, it shall also be compulsory to determine the issue regarding the concrete class and imperial class. Magdoff and Sweezy then went on to explain eight brief observations.  "One, financialization should be regarded as an ongoing process of financial bubbles.  Two, monopoly finance capital is an alternate plan from what others described as the early twentieth century era of finance capital.  Three, ownership of very substantial financial assets is clearly the primary determinant of membership within the capitalist class.  Four, a central aspect regarding the stagnation financialization dynamic was speculation in housing.  Five, a thesis currently accepted on the left radical side is that financial globalization has so transformed the earth economy that states are no detailed important. Six, what we have return to call "neoliberalism" should be seen as the ideological counterpart of monopoly finance capital, as Keynesianism was the earlier phase of classical monopoly capital. Seven, the growing financialization regarding the earth economy has resulted in greater imperial penetration into underdeveloped economies and increased financial dependence, marked by policies of neoliberal globalization.  Eight, the financialization of capitalism has resulted in a more uncontrollable system." In September 2006 "Global Financial Stability Report" the IMF executive board directors expressed good concern that the rapid increase of hedge funds and credit derivatives should hold a huge impact and hit on the stability regarding the financial system, and that a stagnation regarding the US economy and a cooling of its housing market should lead to a huge increase in financial trouble for the country.  The whole plan is that a financialization so out of manage that unexpected contagions are looked upon as inevitable.  Causes
Chapter Five: The Financialization of Capital and the Crisis
                  The bursting regarding the US housing bubble set off a domino affect of a stagnant and falling home prices, many defaults, and a global economic crisis due to financial contagion and a drop of US consumption.  Banks, hedge funds, and money markets are all below assault.  Due to the fact that regarding the already weak condition regarding the US production, it did not take long for this effect to hit the whole economy, and people felt it in all aspects of their financial life.  Most business and economic analysts now know that a full-blown recession is ahead most for the United States and the earth economy, and shall have already begun, which it has.  Consequently the massive stock market decline in 2000 seemed to beginning a serious economic decline, businesses losses were bounced return and an actual estate bubble started wider economic disruptions.  An expansion of credit, which means people or corporations are receiving on more debt, is compulsory to feed any asset cost bubble, and this got people in that many more financial trouble.  Within the housing bubble extremely little interest rates following downfall regarding the stock market bubble and changes in reserve requirements of banks increased and grew larger the credit available to borrowers throughout the place regardless of their credit the past and debt they already had.  Beginning in January 2001, the Federal Reserve Board lowered interest rates in twelve successive rate cuts, reducing the key federal funds rate from seven percent below to a post 2nd World War little of two percent in 2003.  Within the resulting housing bubble cost effective financing expanded the many mortgage borrowers despite the increasing prices of houses.  The combination if little interest rates and detailed mortgages resulted in affordable monthly payments, even while prices were rapidly increasing.  Homebuyers were readily pulled in by the overpowering real estate boom euphoria, and were told to understand that the continual rise within the prices of their homes should let them to refinance their mortgages when the little rates expired.  The originators regarding the subprime loans had every incentive to generate and bundle together as many of these loans as likely since the repackaged loans were quickly sold off to others.  Speculative mania is characterized by rapid increase within the quantity of debt and an equally rapid decrease in its quality.  Heavy borrowing is used to buy up financial assets, not based on the income streams they shall generate but on the assumption of increasing prices for these assets.  Distress marks an abrupt change within the direction regarding the financial market often resulting from some external event.  The housing bubble was first started in 2006 due to rising interest rates, which caused a reversal within the direction of housing prices within the subprime regions, primarily California, Arizona, and Florida.  Borrowers that depended on their increase in their homes they owned and the ability to have very little interest rates to sell their homes were faced with falling home prices and high mortgage rates. The final state in a financial bubble is known as crash and panic, marked by a rapid selling off of assets in flight to quality.  The initial crash that shook the market occurred in July 2007 when 3 Bear Stearns hedge funds that held nearly $10 billion in mortgage backed securities imploded.  The financial panic quickly spread around the globe, reflecting the fact that worldwide investors were also heavily tied into assumption on US mortgage backed securities.  By January 19. 2008 the Wall Street Journal openly confirmed that the financial system had entered "The Panic Stage".  Not many more should be spoke about at the downturn itself.  From a long-term historical spot of view, these events should be seen as suggestive of a more general crisis of financialization, beyond which lurks the presence of stagnation.  Historically, stagnation created its authority felt most noticeably within the Good Depression within the 1930's.  The 2nd World War started during this time.  The classical role of net investment within the theory of capitalist maturity is understandable. At a firm level, it is only then investment that absorbs investment-seeking excess corresponding to undistributed profits of firms.  This whole difficulty has gotten worse over time.  Nine out of ten years with the lowest net non-residential fixed investment like a percentage of GDP over the final half-century were within the 1990's and 2000's.  Between 1986 and 2006, just prior to the stock market crash, the percentage of GDP represented by net private non-residential fixed investment reach the average for 1960 to 1979.  The general argument currently leads to finale that stagnation creates financialization, that is the primary means by which the system continues to limp along at present.  This should be seen in a November 2007 working cardboard regarding the Political Economy Studies Institute.  There is no doubt that a profound stagnation should well return forward at the end of a financial bubble.  The difficulty is that the financialization process has stopped and with it the growth has stopped as well.  As an important factor as financialization has grow to in our economy, this should not lie to our place to fact that the real difficulty lies somewhere else: within the whole system of class misuse rooted in production, underlying disease affecting capital accumulation itself.  The only thing that should be done to system to steady the economy should be to expand civilian state spending in ways that genuinely benefited the population; and to carry out a truly radical redistribution of income and wealth regarding the kind. The command of monopoly finance capital is drafted to benefit a team of oligopolies that take over most production and finance.  A mini many individuals and corporations manage huge groups of capital and locate no other method to continue to make money on the compulsory quantity than through a heavy reliance on finance and assumption.  Chapter 6: Return to Real Economy
                  In our government's attempt to place money return into the system to affect the greatest simple strategy of credit, the economy located it stuck, which then was in receiving loads of cash and a massive no. of inter-bank loans as many too risky for the banks in comparison to just keeping the money for itself.  The financial meltdown has continued to increase extremely rapidly, while contractions within the real economy are everywhere to shortfalls.  There exists now huge nation-wide businesses that have been affected by the meltdown, even if stabilized enough to permit the settlement regarding the multiple insolvencies.  Within the worsening crisis, the full volume regarding the loss of mortgage, consumer and corporate debts, and the different instruments that attempted to combine such debts with forms of insurance against their default, that is still unidentified.  Following the 2000 stock market crash an argument started in central bank about "preemptive attacks" and whether they should be created against future asset bubbles to prevent such economic catastrophes.  At the very top regarding the bubble was Bernanke, who was then the chairmen of Bush's council of Economic Advisors, who spoke about home prices have risen by nearly 25 percent over the past 3 years.  The housing bubble then began to decrease in early 2006 at the similar to time the Fed was raising interest rates in an attempt to contain cost increases.  The result was a primary collapse regarding the housing sector and mortgage-backed securities.  Economists and many people within the journalists have provided a many other reasons howcome the crisis of our economy within the United States was receiving place. These explanations include: the lessening of regulations on the financial system; very little interest rates introduced by the Fed to counter the effects regarding the 2000 crash, and the selling of huge amounts of sub-prime mortgages to many people who should not afford to buy a home and did not fully understand the terms regarding the mortgages.  The rise within the cumulative debt load like a percentage of GDP greatly stimulated the economy, particularly within the financial sector, giving strength to huge financial profits and marking the growing financialization of capitalism.  Within the late 1990's, finance seemed to take on a life of its own with the profits of US financial corporations heading off into the unknown, seemingly unrelated to growth of local income, which was for the greatest component stagnant.  By the late 1980's the seriousness regarding the situation was becoming clean to those not who were not economists or analysts but to majority of American civilians.  It was only with the onset regarding the financial crisis in 2007 and its pushiness into 2008 that we locate financial analysts in unpredicted locations openly receiving on the opposite outlook.  Some mainstream analysts were forced to respond by the summer of 2008 that a massive devaluation regarding the system may be between our country.  The plan of a mean decline of financial profits to their long-term trend line within the economy like an entire was basically meant to be evocative regarding the extent regarding the approaching transform.  The reality of stagnation shows real growth rates regarding the US economy decade by decade over the final decades decline.  The little growth rate within the 30's reflects the stagnation of The Good Depression. This was followed by the rise regarding the US economy within the late 40's during the 2nd World War. During the 50's and late 60's the US was can achieve growth during "peace-time" regarding the economy.  It was during the beginning regarding the 1070's economist Riccardo Bellofiore and Joseph Halevi emphasized the new financialized capitalist rule.  This was the leading role regarding the US in generating such bubbles.  A key element in explaining this whole concept is to retrieve the falling ratio of wages and salaries like a percentage of local income within the United States.  Stagnation within the 1970's led capital to launch a class war against workers to raise profits by pushing labor costs down.  The result was decades of increasing inequality.  This was component of a massive redistribution of income and wealth to top.  Over the years 1950 to 1970, for each more dollar created by those within the bottom 90 percent of income earners, those within the top 0.01 percent received an addition $162.  In contrast, from 1990 to 2002, for each added dollar created by those within the bottom 90 percent, those within the uppermost 0.01 percent created an more $18,000. The housing bubble was based on a sharp increase in household mortgage based debt, while real wages had been frozen for many many years.  During the final thirty years or so the economic surplus controlled by corporations and within the hands of institutional investors had poured into an ever-increasing flow of financial instruments.  Financialization should be viewed as the response of capital to stagnation tendency within the real economy; a crisis of financialization inevitably means a resurfacing regarding the underlying stagnation endemic to advanced capitalist economy.  The outcome is that the economy shall at greatest be characterized for some time by minimal growth and by high unemployment, underemployment and excess capacity.  There is no doubt that the present growing economic bankruptcy and political shock have produced a break within the historical process.  It is important to discount any attempts to present the serious economic problems that now face us the world.