Calling the Problem Early

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By Dave Lindorff

Both Joe Biden and Sarah Palin tried to claim Thursday evening that
their presidential-candidate runniing mates, Barack Obama and John
McCain had been prescient about spotting the looming financial disaster
facing the US--Biden saying Obama had warned Treasury Secretary Hank
Paulson and Fed Chairman Ben Bernanke several years ago that subprime
mortgages would become a serious problem, and Palin saying McCain had
called for reform of mortgage backing firms Fannie Mae and Freddie Mac
(he actually simply co-sponsored reform legislation by Sen. Chuck
Hagel).

But there is someone who called this crisis much earlier, explaining it in astonishing clarity. Here's what he wrote:

"In a system...where the entire continuity of the...process
rests upon credit, a crisis must obviously occur -- a tremendous rush
for means of payment -- when credit suddenly ceases and only cash
payments have validity. At first glance, therefore, the whole crisis
seems to be merely a credit and money crisis. And in fact it is only a
question of the convertibility of bills of exchange into money. But the
majority of these bills represent actual sales and purchases, whose
extension far beyond the needs of society is, after all, the basis of
the whole crisis. At the same time, an enormous quantity of these bills
of exchange represents plain swindle, which now reaches the light of
day and collapses; furthermore, unsuccessful speculation with the
capital of other people; finally, commodity-capital which has
depreciated or is completely unsaleable, or returns that can never more
be realized again. The entire artificial system of forced expansion of
the [ecomony] cannot, of course, be remedied by having some bank, like
the [Federal Reserve], give to all the swindlers the deficient capital
by means of its paper and having it buy up all the depreciated
commodities at their old nominal values. Incidentally, everything here
appears distorted, since in this paper world, the real price and its
real basis appear nowhere, but only bullion, metal coin, notes, bills
of exchange, securities. Particularly in centers where the entire money
business of the country is concentrated, like London [or New
York]...the entire process becomes incomprehensible."

Note: Except for my updated insertion of the term Federal Reserve
for the original reference to the Bank of England, this is a verbatim
quote.

(Thanks to writer, trade union activist and Marx scholar Bert Schultz of Philadelphia, who found this passage in Karl Marx's Capital, Volume 3, Chapter 30, "Money-Capital and Real Capital")
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DAVE LINDORFF is a Philadelphia-based journalist and columnist. His
latest book is "The Case for Impeachment" (St. Martin's Press, 2006 and
now available in paperback). His work is available at