THE US banks are now having to declare their indebtedness.
Citigroup has lost $6 billion in a third quarter of this year write down, as the US sub-prime mortgage crisis gathers even more speed. Merryl Lynch, meanwhile is expected to declare even bigger losses.
Outside the US, Swiss bank UBS also went public on its crisis, forecasting a $3.7 billion write down.
Crisis hit British banks are meanwhile shunning the £10bn Bank of England money auction, because they can get much cheaper credit from the European Central Bank than the 6.7 per cent interest rates that the B of E is offering.
Moreover, they can do it without the massive publicity that could start a major run on the banks. British banks were responsible for most of the £132bn lent last week by the European Central Bank.
While banking indebtedness is developing apace, and is being further fuelled by the central banks, US manufacturing growth is slowing.
It slowed in September as production and new orders decelerated, official US figures just issued show.
The Institute for Supply Management index of national factory activity fell to 52.0 from 52.9 in August.
The slowdown in the direction of a major slump has however raised hopes of further US interest rate cuts and even cheaper credit.
The impact on Wall Street has been to see shares rocketing upwards with the Dow Jones Industrial Average rising to the record breaking heights of 14,087.6 points, as the illusion takes hold that the debt crisis can be resolved by simply increasing the size of the debt mountain.
Conversely the dollar is weakening by the hour. It has fallen to record lows against the euro in recent days, while real money, gold has been boosted to a 28 year old record high of $745 an ounce.
The dollar has been sliding since the Federal Reserve cut rates from 5.25 per cent to 4.75 per cent in September but banking and industrial capital is convinced that the Federal Reserve Bank, and the other central banks will bail them out come what may, for ever.
In the same vein the London stockmarket was at 6,526 points yesterday and heading close to a record high, while mortgage approvals fell in the UK from 115,000 to 109,000 in August.
While Wall Street argues that the Federal Reserve will be forced to make further cuts in interest rates to try to prevent further banking and industrial collapses, the ‘next’ US interest rate cut could well lead to a major run on the US dollar, and to states that prop up the US federal government debt, by purchasing dollar denominated US Treasury bonds, selling them for gold.
This will start a major run on the US banks and on other currencies such as the pound sterling, forcing British interest rates up and crashing the housing market, crucifying millions of mortgage holders, as Britain is driven towards state bankruptcy, after Brown’s pledge to guarantee the deposits of British banks.
The greater the attempts that are being made to cheat the law of value by further expansions of ‘commercial paper’ and promises to pay, the greater the crash that is to come.
There is only one way out of this massive and developing capitalist crisis.
This is the organisation of a socialist revolution that will expropriate the bosses and the bankers and bring in a planned socialist economy.
This will replace a system that lives off of the surplus value created by the working class, and whose elite is the gangs of speculators and parasites of the city who gamble with the future of the productive forces and blight the lives of millions of people.
Central to the resolving of the developing capitalist crisis is the building up of the revolutionary leadership of the WRP and the Young Socialists, to provide the leadership for the socialist revolution whose necessity cannot be seriously questioned as the capitalist crisis unfolds.