SHARE price collapses continued yesterday after the bankrupting of the fourth largest US investment bank, Lehman Brothers, and the ‘rescue’ of Merrill Lynch by the Bank of America.
European stocks fell again; with the the UK’s FTSE falling 210 points by 1pm, below 5,000 points for the first time in three years, while France’s Cac was down 1% and Germany’s Dax down by 1.58%.
Japan’s benchmark Nikkei 225 index dropped 5% to a three-year low, shares in South Korea and Hong Kong shed almost 6% in price, and the Shanghai index fell by about 3%.
The US stock market on Monday had its worst day’s trading since 9/11/2001, with the Dow Jones index ending the day down 504.48 points, or 4.42%, at 10,917.51. It opened on Tuesday 87 pts down.
Central banks around the world were in a state of panic, and carried out emergency measures to supply the banks with working capital. The Bank of England put an extra £20bn into money markets in three-day short-term loans.
The Frankfurt-based European Central Bank said it had provided 70bn euros ($100bn; £56bn) in an emergency operation to keep money markets supplied with liquidity.
The Bank of Japan carried out two injections of a combined 2.5 trillion yen ($24.1bn; £13bn).
However, the British banks were queuing up behind the US insurer AIG, whose share price fell by 67% yesterday, like lemmings on the edge of the abyss.
London HBOS collapsed downwards by 40%, making a 59 per cent fall in its share price in two days, with a run on the bank in the offing.
The Royal Bank of Scotland was down by more than 16%, and Barclays down by 6%.
By midday there were rumours that both the fed and even the B of E were poised to throw the battle against inflation to the four winds, and cut rates in the afternoon, in a desperate effort to ‘restore a little confidence’.
However, Bank of England governor King went to Downing Street yesterday afternoon to tell the Prime Minister that a premature cut in interest rates could send inflation rocketing and cause a giant run on the pound sterling.
It is clear that sooner rather than later both AIG and HBOS are going to go bust, no doubt causing a hysterical panic throughout the worldwide capitalist system.
The world is poised on the edge of a financial collapse that will be deeper and destroy more of the productive forces than did the 1929 Wall Street crash and the political settlement of accounts that came in 1931, with the dole cutting, wage cutting national government headed by Ramsay MacDonald.
There followed the hungry 30s, including the Spanish Civil war, and six years of imperialist war, a period that was brought to an end by the Red Army’s defeat of German fascism, and its march to Berlin in 1945, and the victory of the Chinese revolution in 1949, a revolutionary conclusion to the first half of the 20th century.
History, however, is not repeating itself.
Imperialism and capitalism, especially British imperialism, is qualitatively weaker than ever it was in the 1920s, 30s and 40s. We do not have to go through the 1930s again!
Today’s capitalism is led by a Labour government, headed by Brown, that is already collapsing in the face of the crisis, while in opposition there is a Tory party whose old guard is dead or dying and its current leadership is made up of public school poseurs.
Its state apparatus is also weakened, complete with police chiefs at war with each other, while its military is knee deep in a war in Afghanistan that it knows can only end in disastrous defeat for British imperialism, a defeat that will shatter the morale of the ruling class at home, and encourage revolution.
What the British working class requires is a new and revolutionary leadership to lead the great struggles that are rapidly emerging as the bosses seek to make the workers pay the full bill for the crisis.
These struggles must be led to victory through a socialist revolution that will expropriate the bosses and bankers, smash their state apparatus and bring in socialism.
