Saturday, September 27, 2008
Andrew Mellon and US Banking System - The Past as Present - Paulson amd Mellon
Andrew William Mellon (March 24, 1855 — August 27, 1937) was an American banker, industrialist, philanthropist, art collector and Secretary of the Treasury from March 4, 1921 until February 12, 1932. He is the only Secretary of the Treasury to have served under three United States Presidents (Harding, Coolidge and Hoover).
Mellon became unpopular with the onset of the Great Depression. Many economists today partially attribute the collapse of the American banking industry to the popularity among Federal Reserve leadership of Mellon's infamous "liquidationist" thesis: weeding out "weak" banks was seen as a harsh but necessary prerequisite to the recovery of the banking system.
This "weeding out" was accomplished through refusing to lend cash to banks (taking loans and other investments as collateral), and by refusing to put more cash in circulation. He advocated spending cuts to keep the Federal budget balanced, and opposed measures for relief of public suffering.
In 1929-31, he spent much of the time overseas, negotiating for repayment of European war debts from World War I. In February 1932, Mellon left the Treasury Department and accepted the post of U.S. Ambassador to the United Kingdom. He served for one year and then retired to private life.
Source : Wikipedia
History never literally repeats itself has every crisis or event bring something new to the fore. This current crisis like the one in the 1930's is still dominated at this stage by embedded market neo liberals except they have learned how to ultilise the capitalist state despite their ideology, something which escaped a free marketeer like Andrew Mellon, but was vigourously taken up by Roosevelt in the New Deal to salvage the US capitalism of the 1930's .
The re-adjustment of the United States Economy not just the financial sector to the reality of real value and not fictitious value/capital will be painful has the total amount of credit/debt in society far exceeds the real productive value created by United States. Has Brendan M Cooney points out in his video on Credit:
Government debt is another source of credit and therefore of fictitious value. When the government sells bonds it is borrows money in return for an IOU. Now, where does the value come from to pay back that fictitious value? Government don’t engage in capitalist production- they aren’t part of the circuit of capital. So how do they get value to pay debts? Government revenue comes from taxes. Tax revenue comes from taxing wages and profit- that is, they are deductions out of the circuit of capital.
The further increase of credit by the Federal Reserve of $700 Billion in fictitious credit to Wall Street will not solve the problem only an increase in real value by the society can do that or a wiping out of the debts like Japan did after its Banking Crisis.
We want any money used to help those struggling with their mortgages and refinancing normal commercial banking and not investment banking.The big three banks, Bank of America, J P Morgan and Citibank which are now too big to fail should be taken into public ownership as they are essentially now publically funded utilities for the commercial and financial system
How the US responds to the questions of wiping out debts or creating a new economy which creates the new values it requires will shape not just US but Global politics in the 21st Century.
Has the crisis deepens the veil lifts on the capitalist system and reveals what has been there all along a dictatorship of the bourgeoisie dressed up in Congressional or Parliamentary Rhetoric.
Political Economy Research
Posted by nickglais at 4:25 AM