ON FRIDAY the global stock markets reached a record increase with shares values shooting up by over £5 billion in what is being hailed as the best results for shareholders in decades.
The MSCI Index, which measures stock market performance, increased by 16% in 2019, the biggest increase since 1998.
However, the massive increase in share values in 1998 was almost immediately followed by the ‘dot-com’ bubble burst of 2000 which saw the values of grossly inflated hi-tech companies in the US crash in what was to be a foretaste of the worldwide 2008 banking crash brought on by the massive speculation in the US sub-prime mortgage industry.
Driving the euphoria gripping the stock markets are the signals from the central banks in the US and Europe that once again they are going to turn on the money taps and pump out trillions of paper money in an attempt to prevent a crash bringing down the entire world capitalist financial system and industry.
The US Federal Reserve Bank last Wednesday vowed it would ‘act appropriately’ to prevent the US economy from recession, a clear sign that the Fed was prepared to reverse its policy of steadily increasing interest rates and instead cut them.
One European investor had predicted that the US ‘will plunge into the red next year as global conflicts worsen’.
Interest rates dictate the amount the speculators have to repay on their massive debts, taken out to speculate on the world stock markets and by companies to keep from bankruptcy and pay inflated dividends to their shareholders.
But the move to cut interest rates has caused panic amongst economists at the German Deutsche Bank, who have first hand experience of the dangers of massive debts, who warn that this attempt by the Fed to stave off recession in the US risks a full-blown financial crisis saying it will lead to: ‘Increasing debt, more money printing, and increasing financial market instability.’
The economists added that the central banks have created a ‘financial system that is prone to crisis’ and ‘an environment where recessions are a global systemic risk’.
A recent article in The Guardian newspaper revealed that in the UK despite the fact that company profits across the board are falling – and entire industries like car and steel are closing down along with huge construction companies – record levels of dividend payments to shareholders have been reached.
None of the ‘free’ or cheap money handed to the banks through QE has gone into investing in industry as it was claimed but into the pockets of the voracious shareholders.
Companies like Vodafone paid out a dividend to shareholders despite making a whopping £7.65 billion loss.
British Gas owner Centrica paid out 10% more to shareholders than it actually made in profit.
These are not isolated cases, the same thing is happening in companies across Europe and the US – companies that make little profit or even a loss are running up huge debts to pay inflated dividends to the corporations and speculators who own their shares.
The rise of ‘zombie’ companies that produce no profit and who only exist through debt and who when the debt becomes due will collapse devastating the lives of workers and their families has become epidemic under capitalism.
The bankers and bosses will naturally demand that when the entire debt time-bomb explodes they will be bailed-out as they were after the 2008 crash by the working class, with governments taking over their debts and making workers pay through the most savage austerity cuts.
The ‘global conflicts’ cited by the Fed as the reason for the economic crash that is coming may be fuelling capitalism’s crisis but they themselves are being driven by the historic crisis of a capitalist system collapsing under the weight of trillions of dollars in debt and that can only seek to survive by wars to seize the oil of countries like Iran, and bankrupt its rivals through trade war, while simultaneously waging war against its own working class.
This war on all fronts by capitalism can only be resolved by the powerful international working class taking power and putting an end to this bankrupt collapsing capitalist system once and for all through socialist revolution.