LAST Monday, the American Dow Jones Index, which records the share prices of the top US companies and banks, recorded the biggest drop in one day in share prices in history, a massive fall of 1,175 points.
This dramatic plunge was repeated in stock exchanges across Europe, Asia and Australia with an estimated $4 trillion being wiped out of the world’s stock markets as panic-stricken investors rushed to sell off their stock holdings. The financial pages of the bourgeois press used words like ‘carnage’ and ‘bloodbath’ to describe this overnight collapse of Wall Street and the stock exchanges of the world.
By Wednesday, they had changed their tune – out went carnage and bloodbath to be replaced with the reassurance that it was all a ‘necessary correction’, basically a good thing that would correct some of the small excesses in the capitalist financial system.
The word had gone out from the central bankers to their hired scribblers: Don’t cause panic amongst the population.
Perhaps they genuinely believed this rubbish but if so they were in for a massive shock when the temporary minor recovery in the financial markets was completely overturned late on Thursday and when the markets opened on Friday morning to the news that the Dow Jones Index had dropped by more than 1,000 points for the second time in one week. This panic sell-off spread immediately from the US and for the first time hit the massive Chinese markets with about $828 billion wiped from the value of Chinese equities.
The stock market crash that started a week ago is not some temporary adjustment but the start of a full-scale world collapse of the capitalist financial system. The initial cause of the Dow Jones crash a week ago was a report from the Bureau of Labour Statistics that the average wage of American workers had gone up by a derisory 0.09 cents an hour. This minuscule increase was enough to set the panic in motion, as the US Federal Reserve Bank indicated that it would raise interest rates in order to combat this ‘inflationary’ increase.
The same message was delivered this week by the governor of the Bank of England, Mark Carney, that interest rates would be increased in Britain sooner rather than later and by a ‘somewhat greater extent’ than he had previously thought. At the same time, these central banks want to rein in quantitative easing, the pumping of trillions of dollars and pounds into the banks, a desperate attempt to prevent the world banks from collapsing after the 2008 crash.
The crash on the stock markets was caused then by the bankers, speculators and hedge funds suddenly seeing interest rates increasing and all that free money being cut off.
The world stock markets have been inflated with shares valued hundreds of times over the actual value of these companies on the backs of huge debts that can only be sustained with low interest rates and a never-ending supply of free money.
These same companies can only survive by virtue of paying poverty-level wages and even a slight increase in pay by workers threatens their very existence.
This is the reality of capitalism today in its most degenerate and bankrupt stage, only kept alive through debt that can never be repaid and never ending austerity and pay cuts for the working class.
This mountain of debt is now on the point of exploding and bringing on the biggest crash in history with huge companies and the banks they owe collapsing overnight.
To survive, the ruling class will have to confront a working class revolutionised by this crisis and that will not allow their lives to be destroyed to keep a handful of bankers and hedge fund parasites going.
Capitalism cannot be reformed or controlled. The only way forward for the working class is to smash capitalism through socialist revolution.
This demands the building of a revolutionary leadership that is prepared to lead the fight for the working class to take the power and advance to a socialist society that will consign bankrupt capitalism to the pages of history.
