LAST Friday, the US Silicon Valley Bank (SVB) was forced to close down and had its assets seized by the US Federal Reserve following a rush by investors to withdraw money that the bank didn’t have.
US president Joe Biden was forced to guarantee the deposits of all the companies and wealthy investors would be paid for by the government – another bail-out of collapsing banks paid for by the American working and middle class.
This collapse of SVB touched off a firestorm in the world banking system despite assurances from central banks and government officials in the US and Europe that SVB was a unique case, a small bank specialising in financing tech startups and its crash posed no danger of contagion to large established banks or the world capitalist financial system.
These confident assurances started to unwind this week when it emerged on Monday that far from it being a one-off, the crisis hitting SVB was spreading like wildfire across the US and Europe hitting bank share prices with millions being wiped off their value overnight.
In the UK, shares in the main banks, including Barclays, HSBC, Lloyds and Nat West crashed as the contagion in the intertwined global banking system spread out.
The Swiss bank, Credit Suisse, saw its share price dive dramatically plunging by as much as 30% in a matter of days.
Credit Suisse is no small time regional US bank but a major European bank with a substantial financial holdings in the US.
Leading economist Nouriel Roubini, known as ‘Dr Doom’ for his predictions of the banking crash in 2008, said that with Credit Suisse on the brink of a default the global capitalist money markets were approaching a ‘Lehman moment’.
This is a reference to the collapse of Lehman Brothers bank that sparked the world bank crash in 2008.
Roubini said: ‘The problem is that Credit Suisse, by some standards, might be too big to fail, but it is also too big to be saved.’
On Wednesday, the head of the international investment company BlackRock warned that the collapse of SVB could be the start of a ‘slow rolling crisis’ with ‘more seizures and shutdowns coming’.
In the event, after a day of panic meetings between the Bank of England and EU bankers late on Wednesday night, Credit Suisse announced that the central Swiss National Bank had agreed to hand it £44.5 billion to prevent it from collapse.
As a headline in the Daily Telegraph on Wednesday succinctly put it: ‘Bailouts are back, and capitalism is crumbling before our eyes,’ adding: ‘The reckless are being protected at the expense of the masses.’
Exactly – the profits of the bankers, hedge fund speculators and mega rich are to be protected, paid for out of the pockets of workers.
At the same time, the central banks will be forced to abandon the policy of trying to end the era of free money as they revert to cutting interest rates and money printing – the very emergency policies that have inflated a massive world debt bubble that is exploding today.
Capitalism internationally is diving headlong into the biggest recession in its history, crumbling before our eyes, as even the right wing press are forced to acknowledge.
Weaker banks will go to the wall, bringing down whole swathes of industry and companies, in the hope that some will survive, propped up by driving the working class into the ground of mass unemployment and starvation wages.
The powerful international working class will not sit idly back and watch as their lives are destroyed by a bankrupt capitalist system that has far outlived any progressive features and can now only survive through a war to impose its crisis on the backs of workers.
The working class is strong enough to bring down the governments and bankers but this requires a leadership that is prepared to go forward to taking the power and establishing the rule of workers governments that will expropriate the bosses and bankers and bring in a socialist planned economy.
This means building up the WRP in the UK and sections of the International Committee of the Fourth International in every country to lead the struggle for the world socialist revolution to victory.
