MORE than $170 billion (£87 billion) has been wiped off the balance sheets of companies worldwide as a result of the collapse of the US ‘sub-prime’ mortgage market.
The bad news is that the $170 billion of debt is just the tip of the iceberg of the mortgage based bankruptcy that is gripping the world capitalist system. This debt is now estimated as being in excess of $1.4 trillion.
The centre of the capitalist crisis is the United States. There, whole sections of industry have been closed down or exported, workers’ wages have been slashed and over a million mortgages have gone unpaid. The US economy, once renowned for the creation of new jobs, has dried up.
The policy of the Federal Reserve bank could not be cruder. It is to crash the dollar by slashing interest rates to try and avoid a slump, but paying a heavy inflationary price for the process.
However, when the size of the US and UK economies is taken into account, it is the UK that is the most exposed to the developing storm.
It is no accident that a sub prime mortgage crash in the US led to a run, not on a US bank, but on a British bank, the Northern Rock.
The historical crisis of British capitalism has reduced it to being, after the disappearance of most of its productive forces, the world’s biggest parasite, and the most indebted capitalist state on the planet.
Stripped of its productive forces from Thatcher onwards, the British economy is centred on the City of London. Its role has been to blood-suck the rest of the world dry.
The British middle class has been encouraged, by the Labour government and the bankers in the last 10 years, to maintain what there is of a British economy by borrowing massively in order to spend.
Credit cards flooded through people’s doors in the post, many of them uninvited. This was the credit boom that was never going to end!
The domestic debt has now reached £1.4 trillion, and is unrepayable.
Cheaper and cheaper credit has led to a massive inflation of house prices which is now beginning to turn into its opposite, a catastrophic collapse of house prices and home ownership for mortgage holders.
This, combined with the US-UK military adventures in Iraq and Afghanistan, and their product, a huge inflation of oil, gas, gold, and all metal prices, has led capitalism, and in particular, British capitalism to the edge of the abyss.
The reality is that the US economy is still huge while the British economy is vanishing on a daily basis with Jaguar and Land Rover the next to exit.
The end result is that the pound is actually collapsing quicker than the dollar, and is falling even against the euro.
The ‘danger’ is that the much sought after next cut in UK interest rates will lead to a major run on sterling, and to a massive pressure on the UK’s dodgy banks, leading to depositors ‘acting intelligently’ and rushing to the banks to get their money out, while there is still time.
The issue of the crisis is therefore much bigger than whether Labour is going to nationalise the Northern Rock bank in order to pump cash into it before it hands it back to its shareholders.
Capitalism is breaking down. Attempting to bail out a bank, or the banks, is the most direct road to state bankruptcy.
Brown and Darling’s sticking plaster will not work, the wound is too deep for that. Propping up Northern Rock bank will have to be accompanied by massive attacks on workers’ jobs, wages and rights, going much further than the three year wage cutting deals that Brown is seeking to force on workers.
What is required is a programme to resolve the capitalist crisis on behalf of the working class. This requires the nationalisation of all banks, not just Northern Rock, and the nationalisation of major industries, and putting them all under workers’ control, in order to develop a planned, socialist economy.
The expropriation of the bankers and the bosses will save millions of jobs and homes by abolishing mortgage debt and bringing about a reorganisation and development of industry and production.
A socialist revolution is the only way out of the crisis.