THE INABILITY of the US economy to recover from its jobs slump, alongside the colossal indebtedness of the EU banks – German, Italian, French and British – in the wake of the Greek, Irish and Portuguese ‘rescue operations’, has qualitatively deepened the world crisis of the capitalist system.
This has now reached the point where all talk of a further printing of trillions of dollars, pounds and euros to try to encourage the semblance of a recovery has given way to a blind terror that the world capitalist system is poised on the edge of the precipice, and that ahead is its disintegration, via the collapse of a chain of major international banks.
This will plunge the entire world economy into the greatest slump in the history of the capitalist system.
Josef Ackermann, the chief executive of Deutsche Bank, said at a conference on Monday that ‘It’s stating the obvious that many European banks would not survive having to revalue sovereign debt held on the banking book at market levels’.
Ackermann also put forward his redefinition of normality. This was that the ‘ “new normality” is characterised by volatility and uncertainty’, adding that ‘All this reminds one of the autumn of 2008.’
As he spoke, Deutsche Bank shares tumbled 8.9% as banks led a stock market collapse all over Europe.
The best that Ackermann could say about the situation was that ‘The costs of supporting weak member states are less than the costs of disintegration.’ He added for good measure that the current situation reminded him of the days that preceded the collapse of Lehman Brothers, and attacked the IMF for its calls for a mandatory recapitalisation of the European banks.
He said that a forced recapitalisation would send the message that the European Union had no confidence in its own strategy for saving the euro.
On Monday the DAX German index plunged, and the price of gold hit $1,900 an ounce as bank shares collapsed.
The European banks last Friday deposited 151 billion euros ($213.3 billion) overnight with the ECB, unwilling to take the risk of depositing money with each other.
Ackermann warned: ‘It is a dangerous illusion to believe that a country could do better should it reclaim the sovereignty it has delegated to the EU.’
Ulrich Schroeder, head of German government-backed KFW commented that ‘The situation for banks is more dramatic than it was in 2008’, when ‘governments were still able to support their banks.
Now this is simply no longer possible.’
Bank lobby group the Institute of International Finance, of which Ackermann is the chairman, has added about the situation: ‘In a pattern echoing that of the 2007-09 financial crisis, there is a growing risk of the real economy and financial conditions being locked into a mutually-reinforcing downward spiral.’
Meanwhile on Friday, the US regulator sued 17 large banks and financial institutions over losses on about $200 billion of subprime bonds, adding to the sector’s woes. Three UK-based banks – Barclays, HSBC and Royal Bank of Scotland – were accused of selling securities worth $41.5bn knowing they were duds.
RBS shares fell more than 12% on Monday, while the cost of insuring the state-backed lender’s debt widened on fears of the bank collapsing.
There is not the slightest doubt that a deepening of the crisis will see a huge further growth in unemployment and further massive attacks on wages, living standards, benefits and basic rights, creating an absolutely unacceptable situation for the working class and the middle class.
The only way out of this capitalist crisis is through a socialist revolution to expropriate the bosses and bankers and bring in socialism.