Here Comes The ‘R’ Word

The Eurozone is now officially in a state of recession. Germany has declared that it has officially entered a state of recession, and more nations around the world are sure to follow. The implications of the financial crisis in the Third World will be overlooked and, of course, completely under reported, but it is there that the hammer blow will fall the hardest.

The Canadian dollar has also taken a nose dive, primarily because of the liquidation of foreign investments in Canadian industry and the decreasing price of oil. The process used to exploit the Albertan oil sands is an expensive one, and one that benefited from high oil prices, making the process itself more economically realistic.

Beyond that, Canwest suffered a 1 billion dollar loss in the fourth quarter. And while that is sure to affect the lives of its employees, you can bet your bottom dollar that it won’t affect the lives of the Asper family all that much.

And finally, real estate sales dropped 14% nationally in October alone, the most significant drop since 1994. Here in Vancouver, sales have fallen some 50% over the last year, while property prices have only fallen slightly. Take a look on Craigslist and you’ll find a plethora of owners that bought on margin trying to rent postage stamp real estate in the downtown core for astronomical prices in an attempt to cover their mortgages. It would seem the days of the buy and flip have come to a painful end.

With regards to the situation in the United States, where the financial crisis began, it looks as if golden parachutes aren’t going to be needed. As Naomi Klein explains, it seems that the package itself was built with a silver lining already in place…

“The more details emerge, the clearer it becomes that Washington’s handling of the Wall Street bailout is not merely incompetent. It is borderline criminal.

In a moment of high panic in late September, the US Treasury unilaterally pushed through a radical change in how bank mergers are taxed—a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140 billion in tax revenue, lawmakers found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that “Treasury had no authority to issue the [tax change] notice.”

Of equally dubious legality are the equity deals Treasury has negotiated with many of the country’s banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals, “Any use of these funds for any purpose other than lending—for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.—is a violation of the act.” Yet this is exactly how the funds are being used.

Then there is the nearly $2 trillion the Federal Reserve has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg News believes that this secrecy violates the law and has filed a federal suit demanding full disclosure.”

Meanwhile, President Bush has defended the free market system, claiming that it is not responsible for the crisis. He’s right, it isn’t. Greed is.