The Great Unwind has begun

Note the word "begun." For all the talk of bulls and bears, when you get warnings like this from the biggest bank in the world, you can bet your life that the market has not bottomed, no matter what CNNfn and the host of TV idiots have to say about it.

If you are lucky enough to actually have a retirement account I have one word for you: TIPS. In other words, move your savings into an inflation-linked bond vehicle.

In an article characterized by Marketwatch as a "death-bed confession", Citibank warns on coming recession and massive shakeups in the financial world:

As markets and economies de-leverage across the globe, investors should avoid companies and countries that have grown to rely too much on borrowed money, they said.

That means favoring public-equity markets over hedge funds, private-equity and real estate, while leaning toward emerging market countries and away from developed nations like the U.S., the bank's global equity strategy team advised.

Within equity markets, the financial-services should be avoided because it's still over-leveraged, while other companies have stronger balance sheets, the strategists said.

"Steady growth, low inflation and rock-bottom interest rates encouraged economic and financial participants across the world economy to gear up over the past few years," Robert Buckland and his colleagues on Citi's global strategy team wrote in a note to clients. "Easy money encouraged many to buy a bigger house, a bigger car or a bigger speculative position."

"But now, any behavior that relied upon continued access to easy money is being dramatically reassessed," they added. "Leveraged banks must lend less, leveraged consumers must consume less, leveraged companies must acquire or invest less, and leveraged speculators must speculate less."

Financial-services companies are the most vulnerable to this reduction of borrowed money across the globe, they said.

During the last credit crisis in 1998, European banks were leveraged 26 to 1. In the early part of this decade, leverage grew to 32 to 1. Now the sector is geared 40 to 1 on average, according to Citi's European bank research team.

"The banks have a long way to go," the strategists said. "We would continue to avoid the sector while they are de-leveraging."

Other companies are in much better shape, having rebuilt cash from strong earnings since 2003. Emerging market companies have developed particularly strong balance sheets, having learnt hard lessons from the Asian financial crisis a decade ago.

However, even though some companies may not have much debt themselves, they may be exposed to over-leveraged customers or highly leveraged investors, Citigroup warned.

Automakers, home builders and electronics retailers benefited as customers borrowed money cheaply in recent years to buy cars, houses and flat-screen TVs. That attractive financing is now being withdrawn.

"There will be plenty of companies that have strong balance sheets, so may not be most immediately vulnerable to the credit crunch," Citi said. "But they may find that their leveraged customers are vulnerable."

The difference, or spread, between interest rates on investment-grade corporate bonds and Treasury bonds has jumped in recent months, even though most companies aren't very leveraged.

This widening may be caused by leveraged investors such as hedge funds having to sell good quality assets to meet margin calls, or requests for more cash or collateral.

"It is the leverage of the investors who hold these bonds that is now being brutally exposed," Matt King, a Citigroup credit strategist, said.

"We are now confronted by a broad bloodbath in the credit markets," Citigroup said. " The most leveraged paper is falling in value because it is leveraged, and now the least leveraged paper is also falling in value because it is owned by leveraged investors."

Investors should also avoid hedge funds themselves, along with private equity, Citi added. Both types of investment rely at least partly on borrowed money to generate returns.

"Private equity returns have been especially strong. Without leverage it will be much harder to meet excessive investor expectations [most surveys suggest 20% annual returns are expected from the asset class]," Citi warned. "Similarly, many hedge funds have generated healthy uncorrelated returns by adopting cautious underlying strategies, but applying significant leverage. Again, that looks unsustainable in the current environment."

Leveraged economies, like the U.S., should also be avoided, in favor of emerging market countries, which have reduced borrowing, the bank advised.

With less capital sloshing around the world, and the dollar falling, the U.S. may have to compete more to finance its deficits.

"The U.S. shows up as the world's greatest consumer of external capital," Citi noted. So it "has the most to lose as this capital becomes less freely available."

The Credit Bubble and the Crisis of Capital

Today in the WSJ:

California, Ohio and Florida had more than two-thirds of the 25 cities with the nation's highest foreclosure rates during the third quarter, as the credit crunch and falling home values hit homeowners, a foreclosure-listing service said.

James J. Saccacio, chief executive of RealtyTrac Inc., said the number of filings at 77 of the 100 largest metro areas rose from the second quarter. There continue, however, to be "pockets of the country -- most noticeably metro areas in the Carolinas, Virginia and Texas -- that have thus far dodged the foreclosure bullet," the CEO noted.

Higher interest rates and weaker home values have hit many homeowners hard, especially those with higher-risk subprime mortgages. Lenders, in turn, have tightened standards, making it tougher for individuals and companies to obtain credit.

Early this month, RealtyTrac of Irvine, Calif., said third-quarter foreclosure filings surged 30% nationally from the second quarter and nearly doubled from a year earlier, with one foreclosure filing for every 196 U.S. households. Third-quarter filings were up from a year ago in 45 states. Mr. Saccacio said at the time that "given the number of loans due to reset through the middle of 2008, and the continuing weakness in home sales, we would expect foreclosure activity to remain high and even increase over the next year in many markets."

[...]

Barris, Mike. California, Ohio, Florida Lead in Foreclosure Rates. Wall Street Journal. 14-Nov-2007.

And from Justice:

[...]

It wasn’t too long ago that capitalist pundits proclaimed the end of sharp economic crises. The reality, however, is that capitalism is a crisis-ridden system. At the end of the ‘90s, the Federal Reserve moved to contain the collapse of the dot-com boom by lowering interest rates, which combined with an abundant supply of cheap credit and rising home values to trigger the housing bubble.

This led to a feeling of invincibility and incredibly risky investments for casino financial capitalism, which further detached it from the real economy. The current crisis shows that it can only remain suspended in air for a while before the “reality-based” economic laws have an effect.

The current boom has been defined by the increasing chasm between the ultra-rich and the rest of the population. While a few roll in money, wages for the majority have stagnated. Wages and salaries now make up the lowest share of gross domestic product in the U.S. since 1947. Ultimately the falling share of wages in national income is restricting the market for capitalism and increasing the tendency towards crisis.

Enormous anger has built up during the boom years at the unequal nature of society. A job (albeit often low paid and insecure) and the availability of relatively cheap credit, have softened the blows that have rained down on working-class people.

However, the onset of a world recession, when it comes, will profoundly alter the political situation as billions of working-class people will be expected to pay for the crisis. There is not a mechanical connection between economic developments and the consciousness and combativity of the working class, but, whether sooner or later, the coming economic upheavals will lay the basis for a massive increase in radicalization in the U.S. and internationally.

Shibabaw, Theodros. The Credit Bubble Bursts. Justice. 08-Sep-2007.

Inevitable Inflation?

The new inflation goes beyond all markets, turning them into art forms or play grounds for economic playboys. - Marshall McLuhan, 1974

If food, fuel and housing are all increasing in price, why isn't it called inflation?

The Consumer Price Index (CPI) compiled by the US Bureau of Labor Statistics (BLS) measures these things, but inflation figures are usually reported as excluding costs of essentials, such as food and fuel.

The CPI uses a fixed-weight Laspeyres index to determine prices changes over time, with the base period reseting every two years (more on the CPI index). The scope the CPI measures is the price of a "basket" of goods purchased by a typical "urban" consumer. Items included in the CPI fall into a number of categories including food, housing appeal, transportation, and medical, among others (CPI Q&A).

We know that fuel, education and medical costs have been skyrocketing in recent decades, at the same time that inflation is supposedly staying at 2-3% per year. This has justified keeping wages stagnant for the majority of workers. Why the statistical disconnect?

The answer is that, since 2000, the Federal Reserve system (the Fed) consistently focuses on something called the core-CPI or the CPIX (also core inflation, core index, or core rate). CPIX is a price index which excludes certain items, such as food and fuel.

According to the Federal Reserve Bank of Cleveland, core-CPI is measured as:

CPI excluding food and energy. The most commonly used measure of core inflation is the CPI excluding food and energy, published by the BLS. [The term "core CPI" is often used to refer to this measure.] This measure of core inflation systematically excludes food and energy prices because, historically, they have been highly volatile. More specifically, food and energy prices are widely thought to be subject to large changes that often fail to persist and frequently represent relative price changes.

Cleveland Fed

So the idea is that, there are many ways to measure CPI, and the Fed has picked one that paints the rosiest picture for capitalists. The problem is that it is an incomplete picture which does not reflect reality. Even worse, this neoliberal econometric mechanism has been foisted onto all of the other major economies, including China and the Eurozone, in recent years.

The net effect has been a distortion of the money supply at an unprecedented level in history, which has led to the biggest credit bubble, in terms of capital and breadth, of all time.

What are the results?

In China, consumer price inflation in October reached 6.5%, matching the 11-year highs tapped in August, as the cost of staples foods such as pork and vegetables vaulted.

Pork prices jumped 55%, and vegetable prices surged 30% after a 12% gain during September.

The data are expected to spur further action from Beijing to rein in spiraling prices.

Analysts speculated a further tightening could be imminent, with Beijing poised to lift interest rates for a sixth time this year after the data's release. China's central bank lifted the reserve-requirement ratio for banks for a ninth time this year on Saturday in an attempt to cool lending growth.

"Today's CPI release is likely to persuade the government to closely monitor prices and, in our view, supports our forecast that the PBoC will raise the benchmark one-year lending and deposit rates in the near term," said Yan Zheng, an economist at Barclays Capital, in a note to clients.

Credit Suisse economist Dong Tao added persistently high food prices were a particular worry for the authorities because they signaled broad-based inflationary pressures may be taking hold throughout the economy.

"If the cost of food at the dinner table continues to hold at high levels, people will demand higher wages," Tao added.

English breakfast, mou-shou, baguette prices rise. Market Watch. 13-Nov-2007.

From Marxists.org:

Inflation is the situation wherein the prices of all commodities of whatever kind are subject to a steady and more or less uniform increase in price over time. The term dates from 1838.

Given that price expresses the ratio between a given quantity of a commodity and its equivalent in money, it is self-evident that inflation manifests the falling value of money, rather than the increasing value of all other commodities. Thus, the reasons underlying inflation need to be sought in factors which may be undermining the value of money.

In Capital (Vol I, Chapter 25) Marx discusses inflation and its relationship to the crisis of capital.

Thus, when the industrial cycle is in the phase of crisis, a general fall in the price of commodities is expressed as a rise in the value of money, and, in the phase of prosperity, a general rise in the price of commodities, as a fall in the value of money. The so-called currency school concludes from this that with high prices too much, with low prices too little money is in circulation. Their ignorance and complete misunderstanding of facts are worthily paralleled by the economists, who interpret the above phenomena of accumulation by saying that there are now too few, now too many wage-labourers. Marx, Karl. Capital, Volume I, Chapter 25. 1867.

Inflation has always been blamed by classical economics on the increase of workers wages. The logic being that, the more workers get paid, the more money is in the system, and therefore the less value the currency has vis-a-vis goods and services.

However, history has shown that in fact repeated financial bubbles lead to crisis in capital through boom-and-bust cycles which are the prime drivers of inflation. Again, from Marxists.org:

The most common cause of the loss of value of money is the creation of “Fictitious capital”, i.e., the creation of money or credit exchangeable for money without the creation of commensurate value in the form of goods and services, thus undermining the value of all forms of money and credit: for example, the excessive printing of paper money by the government to finance public works, the creation of fictitious value by banks through unsecured loans, the declining exchange rate of a country's currency, causing prices of all imports to increase, and so forth.

Does this sound familiar? Does this sound like a good description of what has been happening in our economy? First the dot.com fueled stock market bubble, then the housing fueled mortgage crisis credit bubble, both examples of "fictitious capital."

Clearly workers wage increases are not to blame for inflationary economic cycles. It is inherent in the crisis prone capitalist system. The increasing financialization of capital only exacerbates and intensifies the crises.

The greed based capitalist economic system must be replaced by a rational system based on sound principles designed to meet human needs. A move towards 21st century socialism is required to face the challenges of the future and to reverse the ravages of capital.

What other bloggers are saying about core-CPI:

• Inflation: CPI, Core Rate, Inflation ex-Inflation. The Big Picture. 04-Oct-2007.
• What is the core for? Economics and... 01-Oct-2007.
• Pro-forma CPI, or let's pretend there's no inflation. Gold Eagle. 18-May-2005.
• Speechless on Core Inflation. The Big Picture. 27-Sep-2007.
  

IMF Warns of Serious Crisis

Kevin Depew of Minyanville, quoting from the Financial Times, today offers:

1. IMF Warns of "Serious Crisis"

Rodrigo Rato, outgoing managing director of the International Monetary Fund, warned that the credit squeeze was a “serious crisis” that was not over yet and would curtail growth worldwide, the Financial Times reported.

• “Policymakers should not think that the problems will stay at the desk of the bankers,” Rato told the FT.
• “Problems are going to come to the real sector, come to the budgets – that is something we keep telling people.”
• The outgoing IMF chief said many of the big emerging markets are growing rapidly, but “to what extent they will keep that momentum will depend on how long the slowdown is in the US and Europe."
• Wait a minute, did we say, "outgoing" IMF director?
• Indeed we did, which admittedly takes some of the sting out of Rato's warnings.
• It's a bit like when you take a new job, get drunk at your celebratory party, and blab to everyone about how your old firm is horrible and will probably collapse into bankruptcy without your genius to rely on anymore.

2. But Wait, There's More

Outgoing IMF Director Rodrigo Rato also told the Financial Times the U.S. dollar is now “undervalued” on many measures, a statement which the FT gushed is "an unusually bold assessment."

• Is it? Is it really an "unusually bold assessment"?
• We're not so sure.
• First, the U.S. dollar index is down more than 2% in the past 30 days alone, and down nearly 6.5% year-to-date.
• Over the past 18 months it's down 14%.
• And now we're seeing the inevitable stories rushing to embrace the decline as positive for business.
• Bloomberg boasts "Weak Dollar Boosts Growth Without Fueling Inflation."
• "The dollar is in a quasi-sweet spot,'' Joseph Quinlan, chief market strategist at Bank of America (BAC), told Bloomberg.
• "It's dropped enough that it's creating an earnings upside for U.S. multinationals, while I expect many foreign companies to hold the line on prices they charge U.S. consumers.''
• Too bad those those are two different and unrelated things: earnings upside for multinationals, and domestic pricing power.
  

Meanwhile, I'm reading Sweezy & Magdoff's "The Irreversible Crisis" (Monthly Review Press). They offer an incredibly compelling framework for understanding exactly what the heck is going on in the world economy. Best 10-bucks you'll ever spend, irregardless of your politics.

Real-Estate Meltdown, Just the Beginning?

Yesterday I posted on the mortgage crisis and the effect on the credit market and homeowners. The other side of the finance equation is of course real estate values. Today the Wall Street Journal reported that real-estate mutual funds (or 'REITs' in the finance world parlance) are posting huge losses with no end in sight.

From a Wall Street Journal article by Tom Lauricella:

Mutual funds specializing in real estate are getting clobbered, hit by a one-two punch of woes in the property markets and the tumult in the debt markets.

Although real-estate stocks staged a late rally yesterday, their recent troubles were highlighted this week by a 31% one-day drop in the stock of KKR Financial Holdings LLC Wednesday, a real-estate investment trust, after the company reported financing problems.

The result is that after seven years of spectacular gains, funds investing in real-estate investment trusts are posting huge losses -- some with losses topping 15% over just the past month. That is particularly bad news for investors who poured nearly $18 billion into these funds in the past year and a half.

Meeting Redemptions

As some investors sell, fund managers are forced to sell holdings to meet those redemptions.

The average real-estate fund investing primarily in the U.S. has lost 17.2% over the past three months and is down 16.5% so far this year, according to Morningstar Inc. In contrast, the average diversified U.S. stock fund is up 0.7% so far this year and down 5.9% over the past three months.

[...]

The average global real estate fund -- which will invest both in and outside the U.S. -- has shed 15.2% over the past three months and is down 10.3% since the start of 2007.

Wall Street Journal: Real-Estate Funds Are Hit Hard

Lets face it folks, we are at the beginning of a serious crisis in capital. Where will the bailout come from this time?

The end of the 90s saw the 'dot com' bubble burst which affected millions but was relatively isolated to a specific sector (information technology) and confined to specific urban markets, such as San Fransisco. This was a stage in the increasing finanicialization of capital.

Now capital needed a new outlet for reinvestment and real-estate provided the perfect opportunity. Combined with the massive boost given by investments in the war sector, the real-estate boom provided the much needed new outlet for capital investment.

It was clear from the outset, however, that with real wages decreasing and job growth static, that the real-estate investment strategy required cheap credit and lots of it. This, as we have seen, has been achieved through a combination of extremely low interest rates with increasingly aggressive (until recently) lending practices.

The current crisis is huge. Nearly every financial institution will be affected. Nearly every country will be affected. Consumer demand will be affected on a global scale. Real estate prices will deflate on a global scale.

It seems increasingly likely this very irresponsible and unsustainable run-up will lead to a global depression with dire consequences for all.

The financial capital sector must be reigned in. A socialist program for managing and regulating the financial sector is the only way to prevent such irresponsible behavior and prevent the cyclical boom and bust pattern that is inherent to capitalism, and which has (as we have seen) and will continue to, become increasingly painful with each subsequent cycle.

Subprime Capitalism

" All contradictions of bourgeois production collectively come into eruption in the general crises on the world market." (Marx, Theories on Surplus-value, Vol. II, Part II, P. 318.)

Today CountryWide Financial Corp, one of the largest mortgage lenders in the United States, announced that it is tapping a $11.5 billion loan to stay out of bankruptcy due to overextending itself in the sub-prime lending market (full story). The stock of this company slid 13% on the news, after shedding nearly 50% of its value already this year.

CountryWide is one example of many mortgage companies which are teetering close to failure because of overextending themselves with sub-prime loans which fueled the "housing bubble."

This had been widely reported as a looming disaster by progressive socialist publications, because housing prices were forcing low and middle income people out of cities, because people were being saddled with unmanageable debt, and because the cyclical nature of capitalism naturally produces crises (see below) which disproportionately affect the working and under-classes.

The Wall Street Journal ran a story today describing the plight for one couple which reflects the stark reality for tens of millions of Americans:

Nearly two years ago, Mario and Leticia Montes found a home they loved, a gray stucco bungalow with a hot tub in the backyard in a middle-class neighborhood of Orange County.

The price was a major stretch at $567,000. But the couple, who had sold a home a few years earlier to move to a better area, was tired of renting. Mr. and Mrs. Montes convened a meeting with their two teenage daughters around the kitchen table to hash out the implications. "We agreed we wanted to be homeowners again," says Mr. Montes, "even if it meant the end of vacations and not eating out as often."

[...]

With a December "reset" on their loan looming, however, the refinancing option now looks impossible. A friend who works as a loan officer called with some bad news this week: Similar homes in their area have been selling for $535,000 to $565,000 recently. That means the Monteses' loan balance may exceed the value of their home.

[...]

"We have a disaster on our hands," says Mr. Montes, a 48-year-old warehouse manager. He fears he won't be able to handle the payments after the December reset and wonders whether the family can avert foreclosure. "At this point," he says, "we really don't have a plan."

Wall Street Journal: One Family's Journey Into a Subprime Trap

The Montes annual income is $90K whereas their yearly mortgage loan payments (sans-taxes) are nearly $40K. They are in terrible shape, have no equity in their home and have very difficult decisions ahead of them. However, their plight could be considered relatively good news in the sub-prime market. Why?

A large percentage of sub-prime loans are "refis" - refinancing an existing home with a second mortgage against the "equity" in the house due to increased property values.

Alexander Gourse describes the practice in a recent In These Times article:

When the housing market began its rapid ascent in the mid-’90s, many observers waxed rhapsodic about the potential of high-interest, subprime loans to merge the financial interests of investors and low income and minority communities.

[...]

Industry representatives typically cite the poor credit histories of most subprime borrowers to explain increasing foreclosure rates. Consumer and community advocates, however, paint a darker picture. “Predatory lending is definitely a systemic problem within the subprime mortgage industry,” says Al Hofeld Jr., a litigation attorney and chair of the South Side Community Federal Credit Union in Chicago (SSCFU). “There are very few subprime lenders who will make a subprime loan where the interest rate actually reflects the risk involved.”

According to Smith, predatory lenders put borrowers into loans that they cannot afford. While blatant fraud, such as the falsification of a borrower’s income to justify a larger loan, is becoming less common, the misrepresentation of a loan’s characteristics, like the concealment of a fixed rate “teaser” period that adjusts upward after two years, is a growing problem.

Hofeld says subprime mortgage companies routinely use bait-and-switch tactics to lure in potential borrowers and maximize the amount of money loaned out. At closing, borrowers are often presented with terms that do not match those previously offered by the company, and then pressured into signing documents which they have not had time to review. Ameriquest Mortgage Company is currently facing hundreds of lawsuits which allege that they routinely baited potential customers by promising fixed interest rates, low or no fees, lower monthly payments, no prepayment penalties, or by representing to borrowers that they qualify for a particular set of terms.

[...]

As they later discovered, however, the terms of the loan were not as they expected. Not only did the loan have an adjustable rate that can go as high as 13.4 percent, but the Walkers allege that Ameriquest falsely told them that their home had doubled in value since they had bought it a few years earlier, thus qualifying them for a larger loan amount. Ameriquest didn’t give them copies of their loan documents at closing, and as a result the Walkers did not realize that the terms had been changed until well after the three-day period during which they could legally cancel the loan. They have since tried to refinance, but have been unable to find another lender willing to lend them the amount currently owed to Ameriquest; the artificially inflated appraisal value has in effect trapped them in a loan with a rising interest rate.

[...]

“The problems in the subprime mortgage industry should be framed as an affordable housing issue,” says Hofeld. “We often compartmentalize the way we think about issues, but I really think that predatory lending is something that is decreasing the supply of affordable housing. And the lack of access to mortgage credit on fair terms is something that prevents people from getting into homes.”

In These Times: The Subprime Bait and Switch

The cyclical nature of the capitalist system is designed to concentrate wealth into the hands of the few. This latest cycle is an example of that process writ large. Real estate values will rebound eventually but only after many people loose their homes as foreclosures and bankruptcies commence. Capitalist enterprises and wealthy individuals will swoop in to buy up the properties and do with them as they please.

To close, an excerpt from a political economy course:

The general possibility of crises which is inherent in the commodity form of social production, attains its further development in the expansion of credit and the functioning of money as a means of payment (i.e., goods are sold but the money for it is paid only after the lapse of a certain time, and it is then only that the business is concluded; money thus exercises the function of credit).

During the space of time which lies between the moment of inception of the credit operation and that of the actual payment of the money, the value of the commodity may change. The payment might, besides this, not be made in time. The separation between purchase and sale and the independence of one from the other then again become revealed. The [consumer] for instance buys 20 yards of linen at the price of $40. He does not, however, pay this money immediately, as he has not yet sold his wheat, the value of which is similarly $40. The weaver, on his part, buys machinery which he promises to pay after he will have received the money from the [consumer]. But if the value of the wheat changes at the time when the [consumer] can sell it and he can realize for it less than $40 or if the [consumer] cannot sell it at all, he can of course make no final settlement with the weaver. The result of this is that the weaver is also unable to pay the manufacturer of the machinery, etc.

Credit ties up in this way all commodity producers who participate in credit operations by a chain of reciprocal dependence. The consequence of the break of any link of financial obligations may result in a shock to the whole chain, i.e., a crisis might break out.

Political Economy: The Marxian Crises Theory

Clearly, not the borrowers, but the capitalist system itself is subprime, unable to meet the basic needs of housing in a fair, equitable and sustainable fashion for the vast majority of citizens who labor under its dominion. A bold new direction is needed which can guarantee fair and affordable housing standards for all people. This can only be accomplished by breaking with the capitalist profit model through adoption of a democratic socialist program.

Predatory Lending: Subprime Pt I

Excerpts from an article in Justice newspaper by Theodros Shibabaw:

You’ve heard the commercials. “Want to own your own home, want to buy a car? Bad Credit? No Credit? No problem!” The past decade has seen the immense growth of “subprime” loans made to millions of people with bad credit histories.

Mortgage loan companies and banks have made hundred of billions of dollars in profit by preying on people who would otherwise be shut out of the market. These days, it’s hard to even pay for basic necessities without going into debt, as stagnating wages fail to keep pace with the fast-rising cost of living.

[...]

In the first quarter of 2007 almost 19 percent of all subprime loans, or 1.1 million mortgages, were either delinquent by more than 30 days or in foreclosure, an increase from 16.4 percent six months earlier (Mortgage Bankers Association, 6/14/07). Dozens of companies have either quit the subprime business or gone bankrupt.

[...]

Defending ourselves against these [capitalist] attacks will take a broad mobilization of the affected working-class communities. Working-class homeowners need to organize community committees to demand an end to foreclosures and zero tolerance to throwing families out of their homes. We need to demand state and federal funding for debt relief and fight for the cancellation of debts with no payment to the super-rich predatory lenders.

[...]

In the long term, however, it’s important to see the subprime lending crisis as just one expression of what big business can get away with in the absence of a strong working-class movement. Our economy is controlled by a tiny elite that glibly chases profits without the slightest regard to the livelihoods it destroys. It’s more urgent than ever to build a mass movement that consciously aims to replace the rule of profit with a rational, democratically-planned, socialist economy.

Predatory Lending: Cheating Workers Out of House and Home