Even the briefest of tallies of the economic crisis causes one to stare in disbelief at the casualties as the wreckage is registered. It amounted to the worst recession in the core advanced capitalist countries since the Great Depression, involving an overall decline in world output, with over 15 million people — or 10 percent of the labor force — officially unemployed in the United States at the beginning of 2010. Following 1.3 million home foreclosures in 2007 in the U.S., there were 2.3 million more in 2008, and the numbers continued to rise all the way through to 2010. Apart from the massive bailouts of the banks, the crisis was punctuated by the collapse the $65 billion Ponzi scheme, the largest in history, run by Bernard L. Madoff, the former head of the NASDAQ stock exchange; the takeover by the U.S. government of AIG, the biggest insurance company in the world; and the largest filing ever for Chapter 11 bankruptcy protection by General Motors in the summer of 2009. The Obama Administration's $787 billion emergency economic stabilization package was the most colossal stimulus measure in history. The U.S. budget deficit that same year, at over 12 percent of GDP, was not only the highest since World War II, but is expected to remain at this historic level for years to come.
Given how central the American economy is to global capitalism, the financial crisis that erupted in the U.S. housing market in 2007 spread around the world with lightning speed. The ensuing "Great Recession" sent one economy after another crashing down. The satirical broadsheet The Onion captured this perverse example of the imperial relationship between the U.S. and the rest of the world with a headline in November 2007: "Bush Proud the U.S. Can Cause Markets around the World to Collapse." Even the surging economies of East Asia, notably China, could not escape the economic storm brewed in the U.S. financial system. The depth and global scope of the downturn left states with little choice initially but to introduce massive public expenditures, not only to save the banks but to try to stimulate the economy. Working families, experiencing the frightening erosion of their effective savings — their pensions and home values — cut back on consumption in order to rebuild some future security. Private investors, seeing few opportunities and reacting with caution and uncertainty toward the future, were no longer investing in anything except safe government bonds.
At least in the so-called efficient markets theory guiding financial regulators, none of this was supposed to occur.
