THE CAPITALIST world banking system hurtled even deeper into a massive crash this weekend when the central banks of Europe, UK and US forced through a takeover of the Swiss bank Credit Suisse.
Late on Sunday, it was announced that Credit Suisse had been bought by its Swiss rival UBS for a knockdown price in an emergency deal.
Under this deal, UBS paid £2.65 billion for Credit Suisse – far below the £6.5 billion the bank was valued at last Friday.
This deal followed the failure of a previous ‘lifeline’ last week from the Swiss National Bank which handed Credit Suisse an emergency bailout of £44.5 billion.
Credit Suisse is one of the group of 30 banks ranked as having a global ‘systemic’ importance for the world banking system.
The bank was crashing into insolvency, unable to pay out investors who were queuing up to withdraw their cash before it collapsed with investors withdrawing millions of francs a day last week.
To force through the fire sale to UBS the Swiss government overturned the laws that require shareholders to vote on any takeover, driven by the recognition that if Credit Suisse collapsed it would bring down the whole world banking system.
This was admitted by the Swiss Finance Minister Karin Keller-Sutter who said the collapse of the ‘too big to fail’ bank would have caused ‘irreparable economic turmoil’ around the world, and insisting the takeover has ‘laid the foundations for greater stability’.
She also insisted this was a commercial solution ‘not a bailout’, conveniently forgetting that the Swiss government has guaranteed over $9 billion for UBS to cover any losses it incurs as a result of this ‘solution’ – a solution forced on them by the failure of last week’s bailout to save Credit Suisse from collapse.
Rushing through this forced takeover on Sunday night was designed to soothe the money markets when they reopened on Monday morning, but in the event shares in all the major banks continued to slide when the stock markets opened while shares in UBS dropped by 13%.
Despite all the assurances from the central banks and governments that the crisis has been contained it is clear that the contagion that broke out with the collapse into bankruptcy of the US Silicon Valley Bank (SVB) last week has spread like wildfire throughout the world capitalist banking system.
The immediate underlying cause of the crisis is shared by all the banks.
After the banking crash of 2008, the US, UK and European central banks launched an unprecedented campaign of money printing and near zero interest rates.
Vast amounts of free, worthless money was handed to the banks to stop them from going bust with the inevitable result that inflation started to spiral out of control.
In an effort to hold down inflation the central banks, led by the US Federal Reserve and faithfully followed by the Bank of England, have embarked on an aggressive campaign to increase interest rates and cut back on money printing.
This in turn has exposed all the so-called ‘assets’ held by the banks as being only a fraction of their inflated value.
When the finance capitalists panic and rush to withdraw their money, in the hopes of finding safer places to put their wealth, then the banks are forced to sell these assets to cover the withdrawals and they find their value is actually a fraction of the inflated price they paid for them.
The result is a run on the banks, and the entire world banking system is revealed to be nothing more than a house of cards that is fast collapsing under the weight of a vast asset bubble inflated by free money and debt.
Capitalism is on the brink of a huge global banking crash and a massive economic recession, with the working class expected to pay the cost through mass unemployment and starvation levels of pay.
This historic crisis of capitalism will not be resolved through economic measures but in the class struggle as tens of millions of workers will not passively accept being driven into the ground by a bankrupt capitalist system.
The only answer to the world crisis of capitalism is to put an end to it through the victory of the world socialist revolution.
