Wishing my readers a most Happy New Year!! I hope 2016 brings you love, happiness and inner peace, and that your goals include compassion. My personal focus this year will be on empathy and work to broaden my intellectual experiences and develop avenues for creative passions. Much love, Apollo.

The Big Short: The criminality of Wall Street and the crash of 2008

By Joanne Laurier
31 December 2015

Directed by Adam McKay; screenplay by McKay and Charles Randolph, based on the book by Michael Lewis

Adam McKay’s new film The Big Short is a hard-hitting comedy-drama about the historic collapse of the US housing bubble in 2008.

Based on Michael Lewis’s book, The Big Short: Inside The Doomsday Machine(2010), the film offers a picture of rampant criminality on the part of the financial establishment and its government co-conspirators who, while systematically looting the American economy, created a financial disaster.

The calamity was further deepened by the use of hundreds of billions of dollars in taxpayer money to bail out the biggest Wall Street firms. For millions of people in the US and around the world, the 2008 collapse was a social tragedy from which there has been no meaningful recovery. Yet, as The Big Shortpoints out, the bankers and speculators––who ought to be sitting in prison––are richer and more powerful today than ever.

McKay’s The Big Short centers on a number of Wall Street “outliers” who, despite the efforts of the banks, government regulators and media lackeys, uncover the truth about the explosive market for bonds based on subprime mortgages: that the latter are “junk” and a rotten foundation for an economic boom.

The Big Short

The film takes the form of a series of vignettes involving these figures, a number of whose paths cross at critical moments.

Bankers, The Big Short’s narrator (Ryan Gosling) explains at the outset, were once perceived as staid and conservative. Now, as the trade in mortgage-backed securities mushrooms and a vast housing bubble develops, they have gone “from the country club to the strip club,” a function of the degree of parasitism and degeneracy in the system.

Christian Bale plays the real-life San Jose, California neurosurgeon-turned-money manager Michael Burry, who sports a glass eye and has a penchant for heavy metal. With a manic focus, he spends the end of 2004 and early 2005 scanning hundreds of home loans that are packaged into mortgage bonds, eventually discovering an alarming pattern. As opposed to the prevailing wisdom that “the housing market is rock solid,” Burry comes to believe it is a flimsy house of cards.

Burry approaches Goldman Sachs, seeking to purchase hundreds of millions of dollars in credit default swaps (a form of insurance against a loan default or other credit event) that amount to a bet against the housing market. His hedge fund’s owners and investors are apoplectic, but the eccentric, anti-social Burry is convinced that patience is the key as he waits for the bottom to drop out and his assumptions to pay off. (According to Lewis’s book, Burry explained, “I’m not making a bet against a bond, I’m making a bet against a system.”)

He admonishes his skeptics: “[Federal Reserve Chairman] Alan Greenspan assures us that home prices are not prone to bubbles––or major deflations––on any national scale. This is ridiculous, of course…. In 1933, during the fourth year of the Great Depression, the United States found itself in the midst of a housing crisis that put housing starts at 10 percent of the level of 1925. Roughly half of all mortgage debt was in default. During the 1930s, housing prices collapsed nationwide by roughly 80 percent.”

Jared “Chicken Little” Vennett (Gosling, playing a fictionalized Greg Lippman), a Deutsche Bank subprime mortgage bond manager, gets wind of Burry’s astonishing gamble. Vennett, slick, sleazy and smart, crunches the numbers and sees a potential gold mine.

Vennett solicits financial backing from Wall Street-bashing Mark Baum (Steve Carell, based on Steve Eisman), head of FrontPoint Partners, a unit of Morgan Stanley. Vennett explains the certainty of a housing catastrophe. The irascible Baum, who continues to suffer from his brother’s suicide, is chronically appalled by the banks’ shenanigans.

The Big Short

To investigate Vennett’s claims, Baum sends his colleagues to a subdivision in Florida, where they discover homes in foreclosure, delinquent mortgages that were purchased in the name of family pets, and a stripper who owns several properties—all with adjustable rate mortgages (ARMs)—and was told that continuous refinancing would always work in her favor. In one abandoned south Florida home, an alligator has taken over the swimming pool. One of Baum’s associates says, “It’s like Chernobyl.”

Baum also talks to cocky young mortgage brokers who inform him, with a laugh, that they have made millions selling subprime mortgages to poor people and immigrants. He subsequently meets with a Standard & Poor’s representative (Melissa Leo), who tells Baum she has to rate all the banks’ financial vehicles at AAA (the top rate) to keep their business.

Another of The Big Shor t’s plot strands involves young, inexperienced money managers, Jamie Shipley (Finn Wittrock) and Charlie Geller (John Magaro), who parlay $110,000 of their own money into a $30 million fund. Also seeing the writing on the wall for the housing market, they enlist the help of retired guru/trader and drop-out Ben Rickert (Brad Pitt, based on Ben Hockett), whose connections help them secure an agreement enabling them to work directly with the banks.

The filmmakers intersperse the narrative with comic interludes featuring what they call “celebrity explainers,” brought in to help make the complicated terminology comprehensible. In the movie’s production notes, director McKay elaborates: “Bankers do everything they can to make these transactions seem really complicated, so we came up with the idea of having celebrities pop up on the screen throughout the movie and explain things directly to the audience.”

Sipping champagne in a bubble bath, actress Margot Robbie discusses mortgage-backed securities, while chef Anthony Bourdain compares a “toxic financial asset” to a seafood stew. (McKay recruited Bourdain after reading the latter’s recommendation that no one should “order seafood stew because it’s where cooks put all the crap they couldn’t sell.”

The director goes on, “I thought, ‘Oh my God that’s a perfect metaphor for a collateralized debt obligation, where the banks bundle a bunch of bad mortgages and sell it as a triple-A rated financial product.’”)

Economist Dr. Richard Thaler and actress Selena Gomez take part in a casino sequence to demonstrate how synthetic Credit Default Obligations (CDOs)––essentially groups of bad mortgages bundled together to hide the real likelihood of default––are the means of arranging numerous layers of speculation. Says McKay: “It was investors making those kinds of side bets on mortgage-backed securities through CDOs that drove the whole world economy to where it was poised to crash.”

The film’s tipping point comes when Vennett convinces Baum to attend the American Securities Forum in Las Vegas, an event whose out of control goings-on prove to the latter that the housing market is a gigantic Ponzi scheme.

The vindication of the nay-sayers is delayed when the housing market begins to collapse, but the value of the CDOs remains steady. Only then do the protagonists realize that the banks are concealing the toxicity of their holdings on a massive scale.

As the meltdown approaches, the mood of The Big Short markedly darkens. Baum starts to believe the “party’s over” and that “the world economy will collapse.” He is convinced the bankers “are crooks and should be in jail.”

This is effectively highlighted by a scene where Baum debates a representative of Bear Stearns. The latter sings the praises of the housing market even as the firm’s stock price falls off the cliff.

The Big Short’s approach to the run-up to one of the greatest financial crises in history, despite its comic-absurdist mode, is a serious one. The filmmakers do their best to bring this crisis and its human dimensions to life.

The film touches upon the systemic and far-reaching character of the 2008 crash. McKay and his collaborators are obviously appalled by its outcome and consequences, and even invent an alternative scenario in which the bankers responsible for the crash are jailed and the banks become regulated. They point the finger at not only those who issued the mortgages, but those who sliced and diced them into rotten products and the credit agencies that gave them top ratings. They conclude that the financial establishment made super profits through the immiseration of the population. The various actors, as clearly demonstrated by their performances, were fully committed to the project.

Of course, dramatizing something as complex as the 2008 financial collapse is an immense undertaking, involving a mass of historical and social questions.The Big Short’s makers have chosen one means of treating it. This film is clearly not the final word. While McKay and the others involved obviously feel sympathy for those devastated by the crisis, the mass of the population is largely absent. Their attitude to capitalism is a critical one, but they are not opponents of the profit system.

However, at a time when most filmmakers seem obsessed with gender, sexuality and race (and themselves), McKay and the others have chosen to treat—and treat trenchantly—one of the critical events in recent times. Genuine credit is due them.



On the threshold of the New Year


31 December 2015

As the year 2015 ends, a general mood of fear and foreboding predominates in ruling circles. It is hard to find a trace of optimism. Commentators in the bourgeois media look back on the past year and recognize that it has been a year of deepening crisis. They look forward to 2016 with apprehension. The general sense in government offices and corporate boardrooms is that the coming year will be one of deep shocks, with unexpected consequences.

The Financial Times’ Gideon Rachman gives expression to this pervasive feeling in his end-of-the-year assessment published on Tuesday. “In 2015, a sense of unease and foreboding seemed to settle on all the world’s power centers,” he writes. “All the big players seem uncertain—even fearful.” China “feels much less stable.” In Europe, the mood is “bleak.” In the US, public sentiment is “sour.”

Significantly, Rachman singles out as the “biggest common factor” in the world situation “a bubbling anti-elite sentiment, combining anxiety about inequality and rage about corruption that is visible in countries as different as France, Brazil, China and the US.” This observation reflects a growing recognition within the corporate media that the coming period will be one of immense social upheavals.

Rachman’s comment and others like it that have appeared in recent days confirm the assessment made by the WSWS during the first week of 2015. The intervals between the eruption of major geopolitical, economic and social crises have “become so short that they can hardly be described as intervals,” we wrote. Crises “appear not as isolated ‘episodes,’ but as more or less permanent features of contemporary reality. The pattern of perpetual crisis that characterized 2014—an essential indicator of the advanced state of global capitalist disequilibrium—will continue with even greater intensity in 2015.”

In defending its rule, the ruling class seeks to cover over the reality of capitalism beneath a mass of lies and hypocrisy. War is cloaked in the language of freedom and democracy; antisocial domestic policy is portrayed as the pursuit of equality and freedom. But—and this is characteristic of a period of crisis—more and more, the essential nature of capitalism—a system of exploitation, inequality, war and repression—comes into alignment with the everyday experiences of broad masses of people. Illusions are dispelled; the essence appears.

In the sphere of world economy, any expectation of an upturn has given way to the reality of permanent crisis. In the United States, six years into the so-called economic “recovery,” real unemployment remains at near-record highs, wages are under attack, and health care and pensions for millions of Americans are being wiped out. Europe is growing at less than 2 percent a year, and large parts of the European economy—including Greece, the target of brutal austerity measures demanded by the European banks—are in deep recession. China, presented as a possible engine of world economic growth, is slowing sharply. Brazil and much of Latin America are in deep slump. Russia is in recession.

Meanwhile, the easy-money policy of the world’s central banks has produced a new wave of speculative investment, centered in junk bonds and other forms of debt, which is beginning to unravel in a process that parallels the crisis in subprime mortgages prior to 2008.

The essential and intended consequence of government policy over the past seven years has been to vastly increase social inequality. During the past year, the wealth of the world’s billionaires surged past $7 trillion and the top 1 percent now controls half of the world’s wealth. In the US, the scale of social inequality—and therefore political inequality—is so great that one recent scientific study concluded that “the preferences of the vast majority of Americans appear to have essentially no impact on which policies the government does or doesn’t adopt.”

The economic crisis intersects with and intensifies geopolitical conflicts, which in 2015 brought the globe closer to world war than at any time in the past half-century. Virtually every part of the world has either become a battlefield or is assuming the character of a potential battlefield. The Middle East has been propelled into a regional civil war stoked by the imperialist powers, with Syria now the target of an intensified war drive waged under the guise of a new “war on terror.” Eastern Europe is being remilitarized as part of the US and NATO’s campaign against Russia. In East Asia, the US is staging provocations against China over the South China Sea. In Africa, US and European forces are planning operations in Libya, Cameroon, Nigeria and other countries.

Imperialism operates with a level of ruthlessness and criminality that can be compared only to the period of the first half of the 20th century. Entire countries are being torn apart. Atrocities—like the deliberate bombing of a Doctors Without Borders hospital in Afghanistan in October—are carried out with no consequences. Wars are launched without even the pretense of international legality.

Great power conflict—which produced two devastating wars in the 20th century—is again emerging as the basic dynamic of global relations. The relentless war drive of American imperialism is bringing it into conflict not only with Russia and China, but increasingly with other imperialist powers. The past year has seen a major effort by Germany to reassert itself as the principal European power, with calls from politicians, media commentators and academics for the establishment of a “strong state” to enable Germany to fill the role of “taskmaster” of Europe. Once again, the German ruling class is developing plans to “control Europe in order to control the world.”

For masses of people, the essential character of the state as a “body of armed men” dedicated to the defense of class rule is becoming evident. The “war on terror”—intensified following the attacks in Paris and San Bernardino toward the end of the year—is used to justify the abrogation of the formal procedures of bourgeois democracy. France has been placed under a permanent “state of emergency.” The European powers, in response to a massive refugee crisis produced by the military devastation of the Middle East, are erecting barriers and expelling migrants. Under conditions of unending war, fascistic and neo-fascistic forces (the National Front in France, Pegida in Germany, the candidacy of Donald Trump in the US) are growing.

The American ruling class, which employs torture and drone assassination in pursuit of its global ambitions, has built up a colossal apparatus of repression at home. Every day brings new reports of unarmed workers and youth being gunned down in cold blood by police officers who operate, with impunity, as self-appointed executioners.

As in every period of intense crisis, the real class interests represented by different tendencies are exposed. This goes not only for the established bourgeois parties, but also for the “left” parties of the petty bourgeoisie. The central strategic experience for the working class in 2015 was the election in Greece of Syriza, the “Coalition of the Radical Left,” whose coming to power in January was presented as a major turning point in world politics. Over the course of the year, however, Syriza betrayed every one of its election promises and is now implementing the very policies it claimed to oppose. As the year came to a close, elections in Spain showed a significant growth in support for Syriza’s ally, Podemos, with new claims that the era of austerity is over.

In fact, as the experience in Greece demonstrated, parties like Podemos, Syriza and many others internationally are thoroughly hostile to the working class. Politically and theoretically, they are rooted in the anti-Marxist conceptions of postmodernism, obsessed with race, sex and gender. The past year has not only exposed the political bankruptcy of the pseudo-left, but contributed to a growing realization that what has been called “left” is, in fact, only one expression of the general rightward movement of bourgeois politics as a whole.

What these experiences prove is that there is no alternative except the revolutionary mobilization of the working class in opposition to the capitalist system.

Against this background, the final and most decisive expression of the capitalist crisis is the intensification of class struggle and the growing signs of the emergence of the working class as an independent force. There is deep and profound anger and opposition that is continually erupting in different forms—strikes, protests, demonstrations—which the ruling class seeks to isolate and suppress through a combination of violence and the mobilization of its auxiliary agencies in the pseudo-left and the trade unions.

In the final months of the past year, opposition among US autoworkers brought them into conflict with both the auto companies and the corporatist United Auto Workers union. The efforts of American workers, paralleled in countries throughout the world, to break through the barriers erected by the reactionary unions are entering a new stage. This process, though in its initial stages, will become increasingly pronounced. The period in which the class struggle has been artificially suppressed, in which opposition to war, inequality and dictatorship has been excluded from political life, is coming to an end.

The past year was not lived in vain. Workers all over the world are beginning to draw the lessons, to acquire a greater consciousness of the social and political forces they confront. In this regard, it is significant that the struggle of autoworkers corresponded to a sharp growth in the readership of the World Socialist Web Site, as thousands of workers turned to the WSWS as a source of truth and perspective. This can and will be repeated on an ever-larger scale in countless forms in the coming period.

Political problems are posed with enormous sharpness. That capitalism confronts an existential crisis is now self-evident. The question raised is: How will this crisis be resolved?

Joseph Kishore



Obama, Trump and the working class


By Niles Williamson
30 December 2015

US President Barack Obama, speaking to NPR’s Steve Inskeep earlier this month in the White House, blamed the misdirected anger, frustration and fear of “blue-collar men” for the rise of the billionaire real estate mogul and media figure Donald Trump to the top of the Republican presidential primary field.

Without even a cursory acknowledgement of the consequences of the policies pursued by his administration over the last six years, Obama dispassionately listed the sources of workers’ frustrations including, “all the economic stresses that people have been going through because of the financial crisis, because of technology, because of globalization, the fact that wages and incomes have been flatlining for some time.”

He continued by noting that “particularly blue-collar men have had a lot of trouble in this new economy, where they are no longer getting the same bargain that they got when they were going to a factory and able to support their families on a single paycheck.”

From the combination of stagnant wages and a decline in industrial employment, the president concluded “that there is going to be potential anger, frustration, fear. Some of it justified, but just misdirected. I think somebody like Mr. Trump is taking advantage of that. That’s what he’s exploiting during the course of his campaign.”

As is always the case when he makes any references to the devastating conditions facing the bulk of the population, Obama speaks as if neither he nor the party that he presently leads has anything to do with it. But what is most striking is that the president accepts entirely the racial stereotypes that characterize bourgeois politics, and particularly the identity politics in which he embedded himself during his days in Chicago, namely that white workers are hopelessly backward and racist and are looking to be led by a demagogue.

The reality is that there is not in fact a mass racist movement among American workers, and polls show widespread disgust for Trump among all sections of the population. But to the extent that they fail to respond to those identity issues presented as “left” by the bourgeoisie and the more affluent middle class, such as gay marriage and affirmative action for women and racial minorities, white workers are denounced as reactionary.

Any ability that Trump has to exploit grievances and deep anger and focus them in a reactionary direction is due above all to what passes for “left” in official American politics. This is an expression of the social interests of privileged layers of the middle class, who have nothing but hostility and contempt for the working class.

It was only a matter of time before a demagogue like Trump stepped in to take advantage of the political vacuum created by the absence of any outlet within the official political set up for the mass grievances of the working class to find expression.

Not only does Obama propose nothing to ameliorate the dire situation faced by millions of people, he expects the American people to forget that his administration has overseen an immense assault on the working class that has resulted in the greatest transfer of wealth from the poor to the rich in world history.

Social and economic inequality has soared as the top one percent has monopolized the overwhelming majority of income gains since 2009. Through Obama’s program of quantitative easing, trillions of dollars of virtually free money have been injected into the stock market. The implementation of Obamacare, presented as a major domestic “reform,” has involved a massive attack on health care services.

As for “blue-collar men [who] have had a lot of trouble in this new economy,” it is the Obama administration that set the mold for lower living standards through the government-backed bankruptcies of General Motors and Chrysler in 2009, during which the wages of new autoworkers were cut in half and health care and retirement benefits were decimated.

Far from being a racially determined process, vast portions of the industrial working class of every race, gender and sexual identity have been subjected to the fate of declining living standards over the last period. Under the terms of the most recent contracts enforced by the UAW at the Big Three, workers will continue to make wages that do not even allow them to buy the vehicles they produce.

The Obama administration is the culmination of a longer historical process, during which the Democratic Party has abandoned the program of social reform with which it had previously been associated. For much of the 20th century, the Democrats advocated certain social programs as a means of containing the class struggle and warding off the danger of socialism: Franklin Roosevelt’s New Deal (including Social Security), Harry Truman’s Fair Deal, and Lyndon B. Johnson’s “war on poverty” (including Medicare and Medicaid).

Over the past four decades, the Democratic Party has moved sharply to the right, as the ruling class as a whole responded to the decline in American capitalism by dismantling all the gains won by the working class in an earlier period. While the economic demands of the working class have been dismissed by the existing political structure, great effort has been made to channel popular energy into secondary cultural and identity issues.

The trade unions, for their part, abandoned the working class, including many white workers who reside in what are now Republican-dominated states. The unions worked closely with the companies and the Democratic Party in dismantling entire industries, wiping out hundreds of thousands of jobs.

The more the Democratic Party abandoned and repudiated a program of significant socioeconomic reform, the more it allied itself and made itself the champion of the interests pursued by the affluent middle class as they emerged out of the politics of the New Left in the 1960s and 1970s. The Democratic Party and its hangers-on worked to redefine “left” politics to focus entirely on issues of identity, gender, race and sexuality.

This process reached a certain culmination in Obama, presented as a “transformational” candidate who, because of his race, would permanently alter the trajectory of American politics. Many workers, including white workers, supported Obama in 2008 on this basis. Illusions, however, were quickly shattered. The Democratic Party is now associated even more directly with Wall Street and hedge fund operators than the Republicans, the traditional party of the banks and big business.

The Republicans pursued a different strategy during this period, intensifying efforts to use religion and cultivate various forms of backwardness to develop a broader political foundation, while working with the Democrats to implement the demands of the corporate and financial aristocracy. Their ability to win a base of support was facilitated by the rightward shift of the Democrats.

For his part Trump seeks to exploit the hypocrisy and absurdity of so much of what underlies identity politics. More generally the Republicans benefit from the widely perceived insincerity of official “left” politics.

The real danger is that a demagogue such as Trump working on the same axis of racial politics as the Democrats could turn the anger of white workers in a reactionary direction. Indeed, the neo-fascistic ravings and increasingly open racism of Trump have their political counterpart in the obsessive focus on race by the Democratic Party and those in its orbit. In both cases, the function is to divide and misdirect the working class.

The self-absorbed preoccupation of the pseudo-left with various forms of identity and their complete indifference to the issues facing the working classas a class only facilitate Trump’s exploitation of deep-rooted and largely ignored social grievances.

The more basic dynamic in the United States is the deep anger and hostility of the vast majority of the working class toward both political parties. However, what is ultimately required for this sentiment to find progressive expression—creating the conditions for dealing with the likes of Trump—is the building of an independent political movement of the working class, irreconcilably opposed to the Democratic Party and its “left” periphery, and to the Republicans and their ultra-right demagogy.