THE U.S. economy is currently experiencing its worst since the Great Depression. The crisis started in the home mortgage market , especially the market for so-called “sub prime” mortgages, and is now spreading beyond sub prime to prime mortgages, commercial real estate, corporate junk bonds, and other forms of debt. Total losses of U .S. banks could reach as high as one-third of the total bank capital. The crisis has led to a sharp reduction in bank lending, which in turn is causing a severe recession in the U.S. economy.


In the U.S. economy, the last three decades have been characterized above all else by attempts by capitalists to bring the rate of profit back up to its earlier, higher levels. Another widespread strategy has been to cut back on health insurance and retirement pension benefits. Workers have to pay higher and higher premiums for health insurance, and many workers who thought that they would have a comfortable retirement are in for a rude awakening: having to work until an older age and leaving fewer jobs for younger workers. Another very common strategy to increase the rate of profit has been to make workers work harder and faster on the job. Such a speedup in the intensity of labour increases the value produced by workers and therefore increases profit and the rate of profit. A more recent strategy has been to use bankruptcy as a way to cut wages and benefits drastically.
The basic root of the financial crisis is instability in the financial sector including the firms , institutions and markets which comprise it. It relates to provide capital, as equity and debt , to the goods and services economy to allow it to thrive and grow. A second is to provide a stable repository for our collective savings. And a third is to responsibly provide appropriate credit to individuals. These legitimate functions have been ruined by speculative behaviour that was unchecked by regulatory structures. The result is disrupt the productive efforts of millions of ordinary people who go to work every day to make stuff and provide services to one another. So, we need to understand how and why the crisis happened and why warnings over the last years were not comprehended. We need to use this knowledge to stop this crisis and get the economy functioning again.
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