La vida es sueño or the present financial crisis of global markets (Second Part of You will never make it...)

In every debate Barack Obama and John Mc Cain have been asked what sacrifices they will require from the American people in order to sort the present financial crisis. Neither Obama nor Mc Cain had answered this question. Mc Cain vaguely talked about saving two or three millions dollars on research on Grizzlie bears and Obama mentioned all things he is NOT going to cut.

Perhaps both candidates believe that the exorbitant size of the American economy makes this crisis easy to surmount. The US can still laugh at 700 billion dollars…and to more than that too.

My concern is not related to the size of the crisis, but to the label of crisis itself. A crisis is a fleeting accident that happens to a more or less established structure. There are reasons, however, to believe that the present financial crisis is not a temporary upheaval of a normal economic cycle, but rather than the economic boom of the 1990’s was the real anomaly that is now being corrected. The illusion lasted the last 13 years. What we suffer now is life outside the Matrix. However, as in the matrix, our deeply inscribed neo-liberal self crave that dream from which we don't want to wake up.

Obama hinted to the rudeness of this awakening in the second debate when he said "we have been living beyond our means.” It was Bill Clinton with his absurd re-appointment of Allan Greenspan as Chairman of the Federal Reserve who inaugurated this style of living "beyond our means." Under Greenspan, the Federal Reserve injected tons of money into the economy at ridiculously low rates. The banks lent that money at equally ridiculously low rates and since money kept coming through the pipeline (uncle Mao was happy to subsidize the American economy so Americans can go shopping for Chinese products) an extended but also deeply false feeling of economic well-being spilled through most of urban and suburban America.

Clinton's idea was to use cheap credit to buy Al Gore into the presidency; but the master plan finally sank in the ashtray of his famous cigar and the costly beer that some American voters decided to have with their pal from Texas. Bush took good note of the example. When the time of his second election came around, America was literally flooded with cheap money. The availability of cheap money affected all the areas of American life: from sports to the real state market, from CEO bonuses to advances for unwritten manuscripts of future best-sellers.

Bush's solution to the current financial crisis (inject 700 billion into the system) ignores that this crisis is as much a crisis of credit as it is a crisis of debt. And since this crisis happens in the middle of a recession it is very likely that the interest services of this debt will outgrowth its potential indirect benefits. Even the argument that the size of American economy is so big that 700 billion is an important but small intervention is partly flawed: this gigantic GDP includes consumer spending and retail performances as one of its main components. Both will be reduced in the next years by the absence of easy and cheap credit.


If seems clear that it is no longer possible to return to the previous levels of liquidity. A mirage that lasted fifteen years is coming to an end. The problem is that fifteen years is a long time; enough time to trick us into believing that what we are living is just a dream from which we will wake up and not the harsh reality that we had escaped for too long already.