|The News Line: Editorial
Thursday, 1 March 2007
After China sneezes Wall Street drops like a stone
A NINE per cent fall on the small Chinese stock market, after rumours that the Stalinist bureaucracy was about to tax shares, and slightly curb business, led on Tuesday to a 149 point fall in the FTSE 100 index, lopping some £30 billion off of British share prices, while Wall Street saw a 416 point collapse, the biggest fall since September 11, 2001.
The saying used to be that when the US caught cold the rest of the world would catch influenza. But that was when the US was a solid citizen.
The fact that a fall in the small Shanghai exchange was enough to trigger a major collapse in Wall Street and then all over the world, signifies that the US capitalist economy and the capitalist world economy is ready for a major fall.
The US ex-Federal Reserve chief, Greenspan has already suggested that America is heading for a full recession.
Already, in the US, the sub-prime mortgage market (made up of high risk mortgages that were popular during the boom) is in meltdown, with 22 lenders going broke in the last two months, spreading panic throughout the system.
Already giants of American capitalism, such as GM, Ford and Chrysler are also in meltdown, shutting plants and shedding over a hundred thousand jobs.
Already the US bosses have declared that they can no longer finance workers’ health care and pensions through union contracts.
And despite the continually falling dollar the US has just achieved an $800 billion trade deficit, the largest in its history, while also running a government spending deficit of hundreds of billions.
The US administration is meanwhile raiding the poor’s Medicare and Medicaid programmes to grab almost $200 billion dollars to finance the war drive of US imperialism in the Middle East and the Gulf, while the price of oil is back to $61 a barrel and that of gold to $679 an oz.
The impact of this developing crisis on the UK will be enormous.
The next Bank of England rate rise, will crush what is left of any manufacturing industry, the loss of 1,600 Airbus jobs in Britain yesterday is just the taste of things to come.
With domestic debt at £1.3 trillion, whole sections of the middle class will be sentenced to homelessness as mortgage interest rates rise along with personal bankruptcies, when the banks call in all the huge credit card debts.
The prospect is that just as it did at the time when Britain’s pound sterling was forced out of the ERM, the developing crisis will place huge pressure onto the pound, which is grossly over priced, and bring it down to earth with a crash of a third or more of its price.
A currency crisis will see sky high interest rates, and ruination spread on a scale far greater than the early 1990s.
The response of the government can only be to rush in a number of crisis measures to place the whole burden of this crisis onto the working class.
There will be massive wage cuts and benefit cuts, part of a slashing of government expenditure. There will also be an acute sharpening of class tensions, leading to clashes between the working class and the capitalist state.
The logic of the situation is that the developing crisis of capitalism drove the US and the UK to invade Iraq and to begin the redivision of the world, with special emphasis on grabbing oil and gas resources.
The resistance of the Iraqi masses has led to major increases in oil, gas, and other basic commodity prices, qualitatively deepening the economic collapse, which is now heading into a situation of new imperialist wars, and working class revolutions.
The message of the WRP is that in this developing revolutionary situation, the key issue is the building up of the revolutionary leadership, to intervene in the critical situation to mobilise the working class and the masses for a socialist revolution that will expropriate the bosses and to put an end to capitalism and imperialism.
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