Capitalism”s Global Financial Ice Age

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THIS week saw a series of announcements from banks and economists about impending doom for capitalism.

On Wednesday, the RBS bank advised all its clients to ‘sell everything’ to avoid being wiped out by a stock market crash of epic proportions in 2016. This was followed yesterday by a warning from Albert Edwards, chief analyst at the French bank Societe Generale, that the global recession was inevitably leading to a ‘global financial ice age’, predicting that stock markets around the world would crash, wiping out 75% of the value of shares overnight.

Edwards blamed this upcoming ‘carnage’ on the American central bank, the Fed, and its counterparts in the UK and Europe, for pursuing their policy of printing trillions of worthless paper money through the Quantitative Easing programmes. Edwards said: ‘I believe the Fed and its promiscuous fraternity of central banks have created the conditions for another debacle every bit as large as the 2008 Global Financial Crisis.’

He added: ‘Why can’t these incompetents understand that they are, once again, the midwife to yet another global unfolding economic crisis?’ Edwards is correct in his prognosis of an impending global crash but he is wrong in implying that it is due just to incompetence.

After the collapse of the Lehman Brothers bank in 2008 as a result of the US sub-prime mortgage crisis, the central banks faced the choice of either letting the entire world capitalist banking system collapse or bailing out the banks by making the state take over their debt, a debt that they were determined would be paid for by the working class through vicious austerity measures.

At the same time, the banks were on their knees and desperately needed to be re-capitalised, which was achieved by pumping vast quantities of money at near-zero rates of interest into them. The alternative for capitalism was to let the banks collapse, a course that would have brought the carnage on earlier and created revolutionary upheavals across the world as workers and the middle class found their jobs and savings destroyed overnight.

By opting for QE, the central banks have merely put off the evil day and built up the pressure of inflated bubbles in the stock exchanges while piling up trillions of debt, all inevitably leading to the explosion Edwards knows is coming. The one thing that is certain is that the ruling class and bankers are determined that in this carnage it will be the working class that pays the price, not the banks.

This was clear from two other things that emerged in the last week. On Thursday, Goldman Sachs, the world’s largest and most influential bank and financial services operator, was fined a derisory $5.1 billion, a drop in the ocean to a company that counts its profits in hundreds of billions, to settle the claim of mortgage bond fraud.

The claim arises out of the central part played by the banker in the sub-prime mortgage scandal that caused the banks to crash in 2008. They were instrumental in packaging these worthless mortgages up as real ‘assets’, and making a fortune in profits as a result. While the banks get a slap on the wrist for what is basically defrauding billions of dollars, a report from an influential think-tank points the way capitalism intends to dump the full weight of its crisis on the backs of workers.

The Centre for Policy Studies (CPS) is demanding the Tories scrap the guarantee that the first £75,000 of savings are protected in the event of a bank crisis. In other words, every penny held by banks would be seized when the bank runs into trouble. This is the carnage that capitalism holds out in the immediate future for the working class; seeing every last penny of their wages, benefits and any savings held in accounts seized to keep banks from crashing.

With no way out of its crisis except to smash up the working class, capitalism has reached the end of the road historically. The only way forward for the working class in every country is in organising for its overthrow through the socialist revolution.