IN its just-published Global Financial Stability Report, the IMF has found that ‘Confidence remains fragile despite recent policy actions’, and that the ‘Euro area crisis is the principal risk amid internal capital flight’, while the ‘Emerging markets are susceptible to shocks from Europe’, meaning that the United States and Japan ‘need to address fiscal challenges’. It is definitely a world crisis that is deepening by the hour!
The report found that ‘risks to global financial stability have increased and financial markets have been volatile as European policymakers grapple with the ongoing crisis.’
It added that ‘Faltering market confidence has led to capital flight from countries on the “periphery” to the core of the euro area. This has meant higher borrowing costs and a growing wedge between the economic and financial “haves” and “have-nots”.’ Europe is split along these lines.
It noted: ‘The most recent action, in September, was the announcement by the European Central Bank to buy government bonds on a conditional basis.’ It however warned that ‘policymakers need to take additional measures to restore confidence. If they do not, the result will be an acceleration in deleveraging, which raises the risk of a credit crunch as banks make fewer loans, and an ensuing economic recession.’ An even deeper slump is emerging.
Outlining the worsening of the financial crisis the report continues that ‘delays in resolving the crisis have likely increased the amount of asset deleveraging by banks, which may further constrain the supply of bank credit and reinforce financial and economic fragmentation in the euro area.
‘Unless additional, decisive policy measures are taken, urgently mounting pressure on banks in Europe could result in asset shrinkage by as much as $2.8 trillion to $4.5 trillion through the end of 2013, with the largest burden of credit supply contraction falling on the euro area periphery.’
It urges governments that to ‘restore confidence, policymakers in the euro area need to swiftly complete the work they’ve begun’, including: ‘recapitalising or restructuring viable banks and resolving nonviable ones’. Trillions more needs to be poured into bankrupt banking institutions.
It adds: ‘The risks to financial stability are not confined to the euro area. Both Japan and the United States face significant fiscal challenges, which, if unaddressed, can have negative financial stability implications.’ The IMF is here talking about the complete financial collapse of the USA and the capitalist world with it!
It notes that thus far ‘we’ have survived but stresses ‘the need to guard against potential shockwaves from the euro area crisis. . . Many central and eastern European economies are vulnerable as a result of their high direct exposure to banks in the euro area . . . At the same time, several economies in Asia and Latin America are also prone to risks associated with being in the later stages in a credit cycle.’ It warns of ‘increased challenges’.
It is clear that the world crisis is deepening and its political consequences are being seen on the streets of Athens and Madrid. They will shortly be seen in all of the EU capitals as the masses grasp that capitalism is a broken system that cannot be reformed and deserves to perish, through socialist revolutions taking society, on a world scale, forward to socialism.
These masses are certainly not prepared to allow capitalism a few more years of life by sacrificing themselves and their children. Capitalism knows only one way to resolve this crisis and that is through a massive destruction of the productive forces, including hundreds of millions of people, through a series of huge slumps and wars.
This crisis is a world crisis of the capitalist system. There is only one solution. This is humanity going forward to world socialism, replacing bankrupt capitalism through the victory of the world socialist revolution.