Shares Crash As Debt Crisis Explodes


IN London yesterday, the FTSE 100 rebounded momentarily, but then fell back into the red, down by 48.5 points by 1pm after a 200 points plus fall knocked 3.2 per cent, that is £40 billion, off share prices on Thursday.

On Thursday night the circuit breakers came into effect on Wall Street to stop the exchange melting down after a 311.5 points and 2.3 per cent collapse in shares prices.

In Asia, the Wall Street slump on Thursday led to Japan’s Nikkei average closing down 418.28 points, or 2.4 per cent, at 17,283.81, while Hong Kong’s index ended 2.7 per cent lower.

The law of value is now working overtime destroying the pieces of paper credit of all kinds that has been able to masquerade as value, that is as money, which under capitalism is gold.

Gold is now expected to move rapidly upwards from its current price of $668.15 an ounce (21 times the dollar price of gold in 1971, when the dollar was as good as gold, at $32 an ounce.

US production is gripped by a slump with its huge engines (GM, Ford, Chrysler) stalled and being broken up, and with the US economy importing over $500 billion more commodities than it is exporting.

US bosses are savagely lashing out at industrial workers, demanding huge cuts in wages and an ending of their responsibilities to provide health care and pensions as part of union contracts.

US car sales are down and the massive inflation of oil, along with many other raw material prices has seen the cost of living being driven up in the US, where the minimum wage is less than £3 an hour.

The rise of poverty has undermined the dodgy sub prime mortgage market. This has now collapsed, along with a number of banks and mortgage companies creating the conditions for Thursday night’s huge falls in share prices.

The US being bogged down in Iraq and the colossal expenditures, risks and dangers involved, guarantees a continuing rise in gas and oil prices and worldwide inflation.

The response is rising interest rates and the end of cheap credit, bringing with it bankruptcies, financial collapses, and the beginning of the end for the equity capitalists, as their cheap credit bubble explodes in their faces.

In the US investors are bruised by their losses in the mortgage markets, and are now refusing to buy risky loans from the banks, torpedoing the credit mechanism needed for the speculative and inflationary take-overs which has been behind the huge rise in share prices.

Huge rises are now about to be replaced by even bigger share collapses.

Within the stock markets, bonds have rallied, with investors looking for assets that could guarantee them steady, and relatively safe returns.

However, Cadbury Schweppes has extended the deadline for offers for its US drinks business because of turbulence in the debt market.

Earlier in the week, banks involved in the buyout of Chrysler also could not find buyers for the $12 billion of debt involved.

Apax Partners and Permira have also had to scrap their plans to refinance the High Street fashion retailer New Look.

Paul Maloney, GMB National Secretary for GMB members working for the AA said: ‘Today’s report that the AA/SAGA merger is under threat, as the banks fail to find additional underwriters for the £4.8 billion debt, will come as no surprise to GMB members.

‘GMB has been pointing out that each of the 11,000 members of staff would have to carry borrowing of almost £400,000 per person and that the interest payments per annum per employee would be almost £30,000.’

Boom is leading to a classic bust of mammoth proportions, where capitalism is unable to develop the productive forces and moves to destroy them through slump and wars.

The only answer to this crisis is the organisation of the socialist revolution to expropriate the bosses and bankers and replace the capitalist law of the jungle with planned production for people’s needs, based on the nationalisation of the means of production.