LAST week the Federal Reserve Bank of New York published a whole series of blogs on its website warning that the entire US banking system is at risk from unregulated non-banks, or ‘shadow banks’ as they are called.
The growth of the unregulated shadow banks ballooned across the world following the international banking collapse in 2008. The banks were bailed out with the working class subjected to savage austerity measures to pay for saving the bankers.
Immediately after the crisis broke the central banks attempted to assure workers that all the sacrifices demanded of them to keep capitalism from collapse would be accompanied by reining in the excesses of bankers.
Banks would be restricted to only loaning money that they had sufficient assets to cover in the event of defaults.
But the capitalist financial world and companies that rely on debt to pay vast sums to their CEOs and shareholders were not going to be restricted by any regulations.
Instead, they turned to non-bank institutions, a disparate group that includes insurers, hedge funds, pension funds and other asset managers, to organise the loans and manage the debts that keep corporations and entire countries from sinking into bankruptcy.
Since 2008 the shadow bank sector, unregulated and out of sight, has grown to the point where it now holds over 50% of the world’s financial assets.
What is frightening the NY Fed is that while these non-banks may have displaced normal banks in high risk loans, the banks have acquired direct exposure to all the risks by actually funding the shadow banks.
The core concept of the central banks after 2008 was that while the large banks were too big to fail, non-banks could, and would be allowed to collapse without any bail-outs by governments.
This is patently false – the collapse of shadow banks with their mountain of risky loans numbered in the trillions will bring down large banks across the world, and again the working class will be expected to pay.
Far from being tamed, the excesses of the capitalist world financial system have been steadily increased, and no amount of ‘regulations’ can hold back the crisis that has been building up since 2008, as the US, UK and Europe pile up mammoth amounts of national debt.
This week the US Congressional Budget Office estimated that another $1.9 trillion will be added to the US national debt by December, with the national debt hitting a massive $36 trillion by the end of the year.
Helping drive this debt is the spending on the military, with the US defence budget increasing by over 2% last year to $916 billion.
In the UK defence spending is over £50 billion annually – an average of £370 spent on war preparations for each person living in the UK.
While the capitalist banking system is on the verge of collapsing again unlimited billions of dollars, pounds and euros are churned out to provide for war against Russia to keep the fascist-supported regime of Zelensky from total defeat. In fact, plans to put NATO troops on the ground in an all-out war with Russia are being openly discussed.
At the same time, US president Joe Biden is pledging even more arms and money to the Israeli murder machine.
This week Israeli prime minister Benjamin Netanyahu, reeling from the failure to crush Hamas in Gaza, announced he was expanding the war to Lebanon by moving troops out of Gaza and to the border in preparation for an all-out war with Hezbollah.
Biden, despite insisting he didn’t want war throughout the region, has given his iron-clad military support to this new explosive stage that will set the Middle East aflame. Economic collapse at home and murderous wars abroad to try to reimpose imperialist domination of the world is the only future capitalism holds for humanity.
With no way out of this crisis, except through wars on workers at home and the masses of the world, the time has come for the working class to take action and put an end to capitalism in its final imperialist death agony.
The powerful international working class must unite with the masses of the world to put an end to war by disarming imperialism and advancing humanity with the victory of the world socialist revolution.
Sections of the International Committee of the Fourth International must now be urgently built in every country to lead the developing world socialist revolution to its victory. This is the only way forward!