THE JOINT annual meeting of the International Monetary Fund (IMF) and the World Bank is taking place in Washington this week under conditions of the most acute crisis of the capitalist system in history.
On Friday, they received a brutal shock when Donald Trump announced he had been ‘blindsided’ by China’s new rules requiring companies to obtain licences for the export of rare earth metals and the products made from them.
Rare earth metals are a vital component in the production of a vast range of technological goods from computer chips to cars and aircraft.
Trump reacted with fury, even though these restrictions are the same as the strict restrictions the US applies to anything made in China. He immediately announced a 100% of additional tariffs on China making the total tariffs applied to Chinese imports over 140%.
While Trump made his announcement late on Friday night, after most stock markets across the world had closed for the weekend, the effect on markets dealing in cryptocurrencies (which trade seven days a week) was catastrophic, triggering the biggest crash in history.
Around £300 billion was wiped off the value of the crypto market in less than 24 hours, with traders using borrowed money to bet on Bitcoin and other digital currencies losing a record $19 billion on Friday night.
The US stock market before closure on Friday dropped dramatically with tech companies Nvidia and Tesla losing around 2% of their value in hours.
There was a slight recovery yesterday morning after Trump performed a U-turn and announced that the US would not break off negotiations with China.
However, if the world bankers are breathing a sigh of relief at this about-turn, they have other financial time bombs ticking away.
Last week both the Bank of England and the head of the IMF, Kristalina Georgieva, warned of a ‘growing risk’ of a crash on the world stock markets caused by the collapse of the massive Artificial Intelligence (AI) bubble responsible for driving Wall Street to unprecedented high levels.
The seven giant US tech companies have been responsible for driving around 37% of the stock valuation on Wall Street and it was these companies that saw their value plummet on Friday.
Into this mix of capitalist financial crisis is the murky world of ‘shadow banking’ which, according to an article in the Daily Telegraph by Matthew Lynn, is starting to exhibit ‘hallmarks of a bubble’ that is cracking up.
Beneath the surface of the traditional global financial system of regulated banks a vast complex network of ‘non-banking’ lenders operating outside the traditional regulatory system has grown into a multi-trillion-dollar system.
As Lynn explains in his article: ‘At its core, shadow banking is basically all about lending lots of cash to businesses that have weak balance sheets.’
Lynn cites as the most recent example of ‘excessive lending hidden somewhere within the financial system’ the 2008 banking crash, sparked by the ‘sub-prime lending on mortgages that were repackaged to make them appear a lot safer than they really were.’
To rescue the world capitalist financial system from collapse, the bankers and bosses demanded that the working class in the US, UK and Europe pay for bailing out the banks through a savage austerity war.
But the savagery of this war on workers will pale into insignificance in comparison to the scale demanded as multiple crises are on the point of eruption today.
After the 2008 crash the working class were held back by their trade union and labour leaders who insisted that capitalism could be reformed and tamed through regulations and controls.
Capitalism cannot be reformed but has reached the end of the road and can only offer a future of recession and economic collapse.
The only future for workers and youth is to use the strength of the working class to put an end to bankrupt capitalism by consigning it to the dustbin of history with the victory of the world socialist revolution.
This demands building revolutionary sections of the International Committee of the Fourth International in every country to provide the leadership required for victory.
