Carnage: Seven days that shook the world

Old certainties lie in pieces as markets hover on the brink of uncharted territory – and all trust has evaporated. Margareta Pagano and David Randall report

October 12 2008

It took centuries to build sophisticated free-market economies, but this weekend, it looks like it may have only taken one week for it all to unwind. Not only have stock markets fallen to their lowest levels for decades, but, more than that, the assumptions that have underpinned commercial life for years are now threatened, some possibly doomed. Banker is not trusting banker, savers can trust no one, share traders do not trust governments, leaders (including conservative ones) suddenly discovered the virtues of public ownership; and there is the very real prospect of a country in the developed world actually going bankrupt.

Today the world’s leading politicians and central bankers are working around the clock to flesh out a rescue package to prevent the crumbling financial system from cracking further. But they are now praying that the emergency package announced late on Friday night in Washington by the US Treasury Secretary, Hank Paulson, together with leaders from all the leading seven industrialised nations, will stabilise the world’s financial markets when they open again tomorrow. In an unprecedented move, the world’s heads of state have agreed to work together to buy shares in their banks and mortgages to prevent further systemic collapse.

Back in March, forecasters who said we were heading for the worst crash since the Wall Street crash of the 1930s were dismissed as doomsters. Today JK Galbraith’s book, The Great Crash 1929 is flying off the shelves, as everyone, from governments to financiers, seeks a template for the new commercial world, whatever that will be. But, for now, we can only try to understand what has been, not what is to come. This is how the week’s events unfolded:

Sunday

On a day that nearly everyone hoped would be confined to rest, recreation and a certain amount of sober reflection by traders around the world, German Chancellor Angela Merkel throws a pebble into hitherto calm Sabbath waters. Just 24 hours after a meeting between the four main EU economies in Paris concluded with President Nicolas Sarkozy declaring “European leaders acknowledge the need for close co-ordination and co-operation”, she follows Ireland’s example and guarantees all private deposits. It is a unilateral move that could see EU nations competing like fairground barkers to offer the best safety net for savers.

Words of a more elliptical nature come from the Chancellor Alistair Darling on The Andrew Marr Show. Asked if he was prepared to put public money into recapitalising banks, he says: “We are ready to do whatever it takes, and that is we’ve put money into the system to help banks generally. There are other measures that we will be taking too, and I’ll announce them when we’re ready to do that.” Mr Darling knows that his officials are preparing plans to recapitalise banks for some time, but couldn’t say so because the details are not yet ready, and the banks are not yet on board. But trading the next day will show that in the present febrile atmosphere, even cautious words can do damage.

And, in what was regarded by most media as a mere footnote, news comes from Iceland that the government and central bank are engaged in increasingly frantic efforts to prop up the country’s swooning banking system with an injection of £7.78bn. As the world goes to bed, the problems of a small northern island with a population about the size of Coventry’s seem the least of all our worries. Like so many of the experts’ assumptions, how wrong that would prove to be.

Monday

After Mr Darling’s comments the day before, the markets smell blood in the water. The FTSE opens at 4980.25 and within three hours it is down 300 points. Not a single firm in the FTSE 100 is rising, and, by 11am, there are only two stocks on the entire exchange that have gained. Mid-morning the price of oil falls to its lowest mark for eight months, the sort of tidings that, normally, would produce a bounce. Not today. Despite, or even because of, Mr Darling’s assurances that he is assembling a cavalry to ride to the rescue of the banks, the plunge continues. By the merciful close, the index is down 391 points, a fall of 7.8 per cent (its biggest one-day collapse), and the lowest total for four years: 4589.2.

The issues of yesterday – which, at the pace things are moving, instantly seems like yesteryear – are picked at by Mr Darling, who chips at Ms Merkel for her unilateral personal savings guarantee (by now mimicked by Sweden, Austria, Denmark and Portugal). And, as the FTSE continues its descent, the Dow takes up the theme. It ends the day 3.9 per cent down, all part of a global fall that sees $2.5 trillion wiped off world shares.

In Washington, Congress begins investigating the murky roots of the banking crisis. Before them is Richard S Fuld Jr, chief executive officer of Lehman Brothers, the largest bankruptcy in US history. Asked if it was true that he took home some £275m in compensation since 2000, Mr Fuld took off his glasses, held them, and looked uncomfortable. It’s not quite that much, he said. “We had a compensation committee that spent a tremendous amount of time making sure that the interests of the executives and the employees were aligned with shareholders,” he waffled, before admitting that he took home £172m in those years. Democrat Henry Waxman could not resist the obvious conclusion: “Even as Mr Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation.” It is an issue that may yet keep American lawyers employed for years.

Tuesday

An upbeat start on the London markets, but, ultimately, a day of portents and rumours, and the growing tremors of a deeper, seismic events to come. The FTSE opens 2 per cent up, just about the time that Moscow is suspending trading on its market for an hour. By 9am the FTSE is already retreating from that early optimism.

Half an hour later comes the first of a series of shudders from Iceland. Icesave, the internet subsidiary of Landsbanki, is stopping customers – 300,000 in the UK – withdrawing their funds. And there’s soon more: Iceland, a country whose banks had swept across Europe over the past few years in a tide of acquisitions, is so short of funds that the government is having to borrow from Russia to help in the nationalisation of Landsbanki, its second-largest bank, and its currency, the krona, is being pegged. Then figures are released showing UK manufacturing output fell for the sixth month in a row, something that has not happened since Margaret Thatcher’s first year of office.

And the rumours fly. Royal Bank of Scotland has asked the Treasury for a capital injection (strenuously denied, but the firm’s shares still fall by a quarter), the Government is soon to unveil a rescue package for the banks, and, according to the BBC, they had done so in response to pressure from leading bankers. But some in Europe are not happy at the prospect of such state aid. At a meeting in Luxembourg, Czech finance minister Miroslav Kalousek says: “Politicians in Europe are going crazy. We didn’t live through 40 years of real socialism only to return to it.” He talks, but no one’s listening. The FTSE closes a hesitant 16.03 points up, and, in New York, the Dow takes a further dive by 508 points, not helped by the announcement from the International Monetary Fund (IMF) that US bank losses could reach £1.4 trillion.

At 5pm, Gordon Brown and Alistair Darling meet the governor of the Bank of England, Mervyn King, and the chairman of the Financial Services Authority, Lord Turner. A No 10 spokesman denies it is an emergency meeting, but, in the present climate, what else could it be? At 7.30 comes the news from Mr Darling that he will announce a comprehensive rescue package for the banks before trading opens tomorrow. Treasury officials and bankers will spend much of the night in talks. At 8.30pm, they ring Gandhi’s, a fashionable eaterie, and order take-aways – £245 worth. It’s going to be a long night.

Wednesday

A day that could be scripted by Lewis Carroll. Before the day is even fully light, Alistair Darling announces his £500bn rescue plan: £50bn for recapitalisation of the eight participating banks, a guarantee of £250bn of new short and medium-term bank debt, and an extra £200bn to allow banks to swap mortgage-backed securities for cash. Preferential shares, probably, for the Government (ie taxpayers) in return, and, says Mr Brown, we might even make a profit. We’ve been working on this for weeks, says Mr Darling. The market’s response? Opening 2 per cent lower, it embarks on a bipolar course through the day that has moments of manic highs, but more lasting depressions. It ends more than 5 per cent down at 4367, concluding the worst three-day run in more than 20 years.

The half-point interest-rate cut (soon seen as part of a co-ordinated trim around the world) makes a difference for a while, but an afternoon IMF warning that Britain is on the brink of a recession pushes stocks towards a gloomy day’s end. Helping them on their way was the news from Iceland: more large sums heading the way of its banks (this time from Sweden), and emergency powers to take over companies, limit directors’ authority, and call shareholders meetings. The Icelandic boom, which saw the average family’s wealth rise 45 per cent in five years, is over. It, and especially the roaring expansion of its banks (which hold liabilities eight times the nation’s GDP), was all built on foreign debt. But why, apart from those adventurous private savers in Icesave, should we care?

That becomes obvious during the Chancellor’s statement to the Commons. In response to a question from George Osborne, Mr Darling confirms that British local authorities had large sums invested in what was now the world’s shakiest banking system. Within hours, the Local Government Association is calling for government help, and, in the course of an evening in which council after council coughed to savings in Icelandic banks, it seems as much as £1bn is at risk. And thus a day in which the rate cut is going to save a £150,000 mortgage payer £570 a year ends with many more people not knowing whether to call their bank manager or the Samaritans.

Thursday

Not every country is in turmoil. In China, the nation’s ruling Communists open a four-day conference relatively unscathed by the panics and financial implosions. Their economy will grow by 9 per cent this year.

Back in the parallel universe, the Dow Jones has its worst one-day fall since 1987, down 7.3 per cent to 8579, its lowest for five years. The FTSE perks up in the morning, and is still up in mid-afternoon, but it can’t resist the siren call from across the Atlantic and ends the day 52.9 down at 4313.8. Iceland takes control of another one of its banks, and closes its stock exchange. And, according to the Halifax, UK house prices are falling at a record rate, down by 13.2 per cent in the year to September. The record of the day, however, is set by Britain’s trade gap in goods – the largest deficit since 1697. Small wonder that the Church of England says that more than 8,000 have logged on to an online prayer asking for divine intervention.

And maybe they’re being answered. Not only is nationalisation (partial or otherwise) now acceptable on both sides of the Commons, there is a bidding war on which party could be most punitive on executive bonuses. The Tories, calling for a complete ban, won. Mr Brown’s strongest words were reserved for Iceland. As more councils and charities discover they could lose major funds, he fumes: “We are holding the Icelandic authorities responsible. We are demanding that the money be paid back to the local authorities. We are prepared to consider all forms of action, including to freeze assets.”

Friday

In Russia, the government offers its banks a £51bn bailout; in Japan, the sub-prime crisis claims the scalp of Yamato Life Insurance, which files for bankruptcy with $2.7bn liabilities; Germany is preparing a rescue scheme for banks; Iceland (the country) seems to be heading into liquidation; and in the US, the Standard & Poor’s credit rating agency says General Motors, Ford and Chrysler could all be forced into liquidation. The FTSE closes 8.85 per cent down on the day at 3932, ending the second-worst week in its history, having lost 21 per cent since Monday. The Dow finishes a further 1.49 per cent down. Henk Potts, director of investment strategy at Barclays Stockbrokers, said the markets were “very close to panic”.

And from Washington comes the spectacle of the most right-wing president in generations embracing the policy of near-nationalisation. His Treasury Secretary says that part of the already-announced $700bn bailout would be used to take stakes in wobbly banks. Mr Bush now finds himself in the role assumed 73 years ago, with rather more grace, by President Franklin D Roosevelt. Ahead of Saturday’s G7 meeting, Mr Bush says: “The world is sending an unmistakable signal: we’re in this together and we’ll come through this together.” Hardly poetry, but the right message to the flapping traders who continue to discount billions of government commitment.

Yesterday

London lawyers are on their way to Iceland to retrieve our money, traders are stuck to their screens adjusting their positions, bankers are huddled in their offices working out how the Government’s bailout will work, while our political leaders use up a year’s worth of carbon footprint as they criss-cross the globe flying between the emergency IMF-G7 rescue talks in Washington to those in Paris tomorrow.

The world financial system is “on the brink of systemic meltdown,” IMF chief Dominique Strauss-Kahn warns, as G7 finance ministers meeting in Washington agree to follow the British lead in part-nationalising their banks. British treasury officials, meanwhile, pledge to take majority stakes in banks should this be necessary to prevent the system’s collapse.

But what everyone wants to know now is when will this crisis be over? What the world needs is some kind of sign; some indication that the fat lady is ready to get up and sing. But, this weekend, there’s no sign she’s even in the theatre, let alone in the wings.

Research by Jesse Loncraine

The digested analysis. Digested…

* Starting with New Century in April 2007, a series of US institutions filed for Chapter 11 bankruptcy protection, as risks of sub-prime lending finally emerged.

* Bear Stearns revealed in June that it was spending $3.2bn to bail out two of its funds that invested heavily in sub-prime loans. Nine months later, the Fed loaned JP Morgan $29bn to rescue Bear Stearns.

* Banks revealed as making “covenant-lite” loans with very relaxed borrowing terms. Private equity groups used this easy money until the loans disappeared in July.

* 9 August 2007: the official start of the credit crunch. BNP Paribas froze three funds that had difficulties with its sub-prime lending.

* Northern Rock involved in bank run in September 2007, the first in the UK since 19th century. Customers were frightened by the Rock’s need for emergency funding. Nationalised in February 2008.

* Banks turned to petro-dollar-fueled, government-backed sovereign wealth funds. In November 2007, Abu Dhabi gave Citigroup $7.5bn for a 4.9% stake; Kuwait took a $2bn stake in Merrill Lynch.

* Most major UK banks issued new shares or tapped investors for capital in March and April 2008. Shareholders’ stakes diluted as a result.

* Nationalisation of US mortgage backers Fannie Mae and Freddie Mac in September 2008. They had $5.4 trillion of mortgages guaranteed, but were worth $40bn combined.

* Attempts failed to sell US bank Lehman Brothers. It ended up in administration.

* The joke was that Iceland (pop: 320,000) was the world’s biggest hedge fund, with all its investments overseas. But the fund’s investment gambles didn’t come off.

The Crash by numbers

£250bn wiped off the FTSE last week

21% drop in value of Britain’s 100 top companies last week

111 profits warnings issued by British firms between July and September

8.9% fall in the FTSE on Friday, to end its worst week since Black Monday in 1987

£1bn losses by more than 100 local authorities with investments in Iceland banks

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Capitalism at it finest hour.

I might be going out on a limb here, but it seems, it doesn’t work all that well.

Seems the side affects of it are, just a major disaster to all involved.

Who will pay the price?

Well the tax payer.

The American way is, as we all may notice, the worst way.

Mark my words, there are those who are getting rich from this disaster.

World Bank director claims Federal Reserve is ‘part of government already’

By aaron

October 10th, 2008

You Tube | October 10, 2008

A caller on C-Span’s Washington Journal asserts that Congressman Ron Paul and Infowars.com are better sources to understand the current financial crisis than the dominant mainstream media and typical go-along political figures.

The caller also brings up the Federal Reserve as being the main issue that Washington needs to address.

Uri Dadush, Economic Department Director of the World Bank, seems stumped by the mention of the Federal Reserve, which he claims is ‘part of the system of U.S. government already’, before redirecting the conversation towards liquidity efforts in the private banking sector.

Dadush misses the point– perhaps out of confusion, and perhaps out of reluctance to discuss– that the Federal Reserve (which is private, but given power [unconstitutionally] by Congress) controls the money supply and can print at will.

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Seems he certainly was confused by the caller. If this is how well educated he is I would be skeptical of letting him anywhere near the World Bank, let alone be a Director of it. The Federal Reserve is privately owned and operated.

I guess the World Bank Director is OH misinformed. The Federal Reserve owns 54% of the Government one could say. Yes one could say that, as the Government owes them, that much money in comparison to what they owe the rest of the planet. Now lets see 54% of ten -elleven trillion = “yup they own the Government”. How comforting?

The caller is correct in a few of his comments.

The world Bank and IMF do put stipulations in when lending money to anyone.  They want countries to open their doors to Privatization and Capitalism.  Of course as we all now well know  Capitalism is a false foundation to stand upon. In view of the stock markets and bank failures of late.

They are rather forceful in wanting their natural resources to be used and abused.

Do they actually help or do they just help the corporations? Well seems they help the corporations exploit the countries. This of course leads to their natural resources being pillaged, plundered also polluting of the water and air.

From the original Canada-US free trade agreement and NAFTA to the WTO agreements and the proposed Free Trade Area of the Americas, these international treaties are about making it easier for the world’s largest corporations to lower their costs. It allows them to seek out the cheapest workers, the most lax environmental laws and to use the threat of relocation to get what they want. The notion that any country, its workers or consumers benefit from such agreements is a myth.

There are numerous organizations that could enlighten one on this issue. Of course it might take a bit of time to investigate.

The World Bank and the International Monetary Fund Encourage Free Trade agreements and opening up countries to Capitalism.  Neither is good for anyone in said countries however.

Seems they are not actually there to help ordinary people just the corporations, they just pretend to help the poor.

Headquarters

International Monetary Fund,

700 19th Street, N.W.,

Washington, D.C. 20431

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Headquarters

The World Bank

1818 H Street, NW

Washington, DC 20433 USA

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Should we all be a bit suspicious? Well yes.

When the rights of any group of people are removed, you too loose the very same rights.

A little problem with Capitalism

The financial crisis gripping the U.S. isn’t an anomaly. We just have short memories

By Thomas Walkom

What’s happening now on Wall Street is seen as a new story. It is not. It is a very old one.

Karl Marx wrote about it; so did John Maynard Keynes. More recently, tycoon George Soros has pronounced on it, as has the redoubtable Economist, a decidedly pro-free market financial magazine.

This old story is quite simple: Capitalism is unstable. It is an economic system that can be ruthlessly productive. But is also one of wheels within wheels – internal contradictions Marx called them – that can, and regularly do, spin out of control.

Marx, a German philosopher suffering from boils, saw these contradictions as opportunities; he figured that capitalism’s self-destruction would lead to a better world.

Keynes, a British economist who liked to speculate in foreign currency over his morning tea and toast, saw them as problems that could destroy a world he rather liked. The welfare state edifice that bears his name was designed in the post-1945 period to, literally, save capitalism from itself.

Banks would be regulated to keep financiers from scamming the economy into the ground. Labour unions would be encouraged, in order to give workers a stake in the status quo and inoculate them against radical politics.

The rich would agree to government tax-and-spend policies, knowing that – in the end – it’s always better to feed the poor than have them slit your throat.

It was a giant, unspoken bargain – forced by the Depression of the `30s, tempered by war and hammered into shape under the threat of Communism.

For a long time, it worked.

But the great bargain could never resolve those inconsistencies inherent in the world economy. Over time, new forces came into play.

The very foreign investment that allowed U.S.-based firms to prosper in the post-1945 world encouraged rivals to develop: first West Germany and Japan, latterly China and the European Union.

Throughout the industrial West, unionized workers cushioned by the full-employment policies of the welfare state demanded and won pay hikes that exceeded their productivity gains. Which is why, in the `70s, inflation took off.

Meanwhile, the collapse of Communism and the discrediting of revolutionary politics removed pressure from employers. Why bother forging a great bargain with your workers if they don’t pose a threat?

And so came phase one of the retrenchment – the destruction of the welfare state. In England, it began as Thatcherism, in the U.S. Reaganomics. Both leaders set out to limit trade union power in their respective countries. Both did so, Thatcher by facing down the miners, Reagan by firing unionized air controllers.

Their aim was not traditional fiscal conservatism. Indeed, under Reagan, U.S. federal finances spiralled into deficit.

Rather it was to alter the balance of forces within society. Reagan’s tax cuts were designed to help the rich; Thatcher’s monetarism focused on squeezing wages.

In Canada, we had Paul Martin and Mike Harris – similar policies but on a different scale.

As a result, the income gap widened throughout much of the industrial world. The rich got richer; the middling classes lagged; the poor got poorer.

Phase two involved the dismantling of the very financial safeguards erected after the debacle of the `30s. The specifics varied from country to country, but the aim was the same: Deregulate financial industries so they would centralize and focus their tremendous resources into new, more profitable areas.

In the U.S., financial deregulation involved scrapping laws that had protected small depositors – which led in the late `80s to the collapse of so-called savings and loans banks.

This in turn caused the U.S. government to engineer its first big post-1945 bailout.

In Canada, deregulation led to the scrapping of a system that had kept various portions of the financial industry isolated from one another. Under the new regime, insurers, trust companies and investment dealers merged and melded. Lending restrictions were eased.

Phase three was sparked, ironically, by the industrial world’s very success in fighting inflation. As inflation went down so did returns offered through standard investment channels. Investors seeking higher returns began to search out riskier – and better-paying – options.

And so came the fascination with so-called new financial instruments. Many households were satisfied with nothing more exotic than mutual funds. But for well-heeled individuals and firms, the new frontier was far more exotic: derivatives, hedge funds, index funds, collateralized debt obligations.

All worked on the venerable principle of leverage: Putting in a little in order to earn a lot. Alas, as we should have remembered from the `30s, leverage only works when the economy is going up. When things start to falter, a leveraged asset can become an intolerable millstone.

In the end, the private equity companies and sub-prime mortgage buyers were doing much the same thing: borrowing money they couldn’t afford to repay, in the hope that whatever assets they purchased would keep rising in value.

It was a gigantic ponzi scheme that couldn’t possibly last. And it didn’t.

So, now we’re back at square one. The system is near collapse. U.S. Federal Reserve chief Ben Bernanke may remember his history (he’s an authority on the depression of the `30s). But few others do.

On television, a baffled U.S. President George W. Bush resembles the proverbial deer caught in the headlights. Here in Canada, Prime Minister Stephen Harper insists that this country’s fundamentals are fine, a sentiment that, while true, is largely irrelevant in the context of a potential world collapse.

American taxpayers are understandably miffed at being asked to bail out the entire global capitalist system. Right now, their ire is aimed at Wall Street tycoons. But in their hearts, they recognize that this isn’t much of a deal.

The $700-billion (U.S.) bailout may save the financial system. But after ordinary people have anted up the cash, will their reward be nothing more than a return to the way things were? Even politicians are beginning to recognize that any lasting solution must deal with more than the barebones economics of the crisis.

Ironically, what they are groping for is the kind of solution that we’ve spent the past 40 years dismantling. It’s time for another grand bargain – not necessarily the one that gave us the post-war welfare state, but one that delivers a similar quid pro quo. And it will go something like this: We’ll save your damned old capitalism; we’ll let you have the big houses and big salaries (although not necessarily quite as big as they were). But in return, you’ll have to give us something back – on jobs, on wages, on the things that we need to live a civilized life. Nor will we let you destroy everything we hold dear just so you can make a buck.

And don’t give us all that free-market guff. Because we know, just as you know, that at times of great stress, the free market doesn’t work. This crisis has reminded us of that.

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We haven’t reached bottom yet

Think the current financial crisis is bad? A first-hand account reminds us just what `Depression’ meant

Serious people – economists and historians and investment analysts – say the U.S. financial crisis has parallels to the crisis that precipitated the Great Depression.

Many other serious people, of course, reject the comparison. And even the pessimists do not claim that bread lines and mass destitution are imminent. But even if only for the sake of education, it is instructive to remember what the 1930s were like.

In this partial excerpt from the January 1932 edition of The New Masses, a Marxist publication, writer Meridel Le Sueur describes the wretchedness of the existences of women in Minneapolis.

I am sitting in the city free employment bureau. It’s the woman’s section. We have been sitting here now for four hours. We sit here every day, waiting for a job. There are no jobs. Most of us have had no breakfast. Some have had scant rations for over a year. Hunger makes a human being lapse into a state of lethargy, especially city hunger. Is there any place else in the world where a human being is supposed to go amidst plenty without an outcry, without protest, where the boldest steal or kill for bread, and the timid crawl the streets, hunger like the beak of a terrible bird at the vitals?

We sit looking at the floor. No one dares think of the coming winter. There are only a few more days of summer. Everyone is anxious to get work to lay up something for that long siege of bitter cold. But there is no work. Sitting in the room we all know it. That is why we don’t talk much. We look at the floor dreading to see that knowledge in each other’s eyes. There is a kind of humiliation in it. We look away from each other. We look at the floor. It’s too terrible to see this animal terror in each other’s eyes …

Most of the women who come here are middle-aged, some have families, some have raised their families and are now alone, some have men who are out of work. Hard times and the man leaves to hunt for work. He doesn’t find it. He drifts on. The woman probably doesn’t hear from him for a long time. She expects it. She isn’t surprised. She struggles alone to feed the many mouths. Sometimes she gets help from the charities. If she’s clever she can get herself a good living from the charities … if she’s proud then she starves silently, leaving her children to find work, coming home after a day’s searching to wrestle with her house, her children …

She has lost all her furniture now along with the dream. A married friend whose husband is gone gives her a bed for which she pays by doing a great deal of work for the woman. She comes here every day now sitting bewildered, her pudgy hands folded in her lap. She is hungry. Her great flesh has begun to hang in folds. She has been living on crackers. Sometimes a box of crackers lasts a week. She has a friend who’s a baker and he sometimes steals the stale loaves and brings them to her.

A girl we have seen every day all summer went crazy yesterday at the YW. She went into hysterics, stamping her feet and screaming.

She hadn’t had work for eight months. “You’ve got to give me something,” she kept saying. The woman in charge flew into a rage that probably came from days and days of suffering on her part, because she is unable to give jobs, having none …

“We can’t recommend you like that,” the harnessed YWCA woman said, knowing she was starving, unable to do anything …

A scrub woman whose hips are bent forward from stooping with hands gnarled like water-soaked branches clicks her tongue in disgust. No one saves their money, she says, a little money and these foolish young things buy a hat, a dollar for breakfast, a bright scarf. And they do. If you’ve ever been without money, or food, something very strange happens when you get a bit of money, a kind of madness. You don’t care. You can’t remember that you had no money before, that the money will be gone. You can remember nothing but that there is the money for which you have been suffering. Now here it is. A lust takes hold of you. You see food in the windows. In imagination you eat hugely; you taste a thousand meals. You look in windows. Colours are brighter; you buy something to dress up in. An excitement takes hold of you. You know it is suicide but you can’t help it. You must have food, dainty, splendid food and a bright hat so once again you feel blithe, rid of that ratty gnawing shame.

“I guess she’ll go on the street now,” a thin woman says faintly and no one takes the trouble to comment further. Like every commodity now the body is difficult to sell and the girls say you’re lucky if you get 50 cents.

It’s very difficult and humiliating to sell one’s body …

I’ve lived in cities for many months broke, without help, too timid to get in bread lines. I’ve known many women to live like this until they simply faint on the street from privations, without saying a word to anyone. A woman will shut herself up in a room until it is taken away from her, and eat a cracker a day and be as quiet as a mouse so there are no social statistics concerning her.

I don’t know why it is, but a woman will do this unless she has dependents, will go for weeks verging on starvation, crawling in some hole, going through the streets ashamed, sitting in libraries, parks, going for days without speaking to a living soul like some exiled beast, keeping the runs mended in her stockings, shut up in terror in her own misery, until she becomes too supersensitive and timid to even ask for a job …

Not one of them but looks forward to starvation, for the coming winter. We are in a jungle and know it. We are beaten, entrapped. There is no way out. Even if there were a job, even if that thin acrid woman came and gave everyone in the room a job for a few days, a few hours, at 30 cents an hour, this would all be repeated tomorrow, the next day and the next. Not one of these women but knows, that despite years of labour there is only starvation, humiliation in front of them.

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