Economic crisis: It won’t be over by Christmas

‘Everything is going well - it's not serious'. ‘There's no need to be disturbed'. These are the lying and hypocritical speeches of the bourgeoisie. In the last months, when the new phase of the acceleration of the world economic crisis of capitalism broke out, the so-called ‘sub-prime crisis', the bourgeoisie wanted at all costs to reassure us with ideological mystifications. ‘The crisis won't last long'. Ben Bernanke, new US Federal Reserve Bank chairman, suggested that the crisis would be over by next March - a bit like the First World War being over by Christmas. And the bourgeoisie were even saying that the crisis was welcome and salutary, so as to correct certain excessive speculations and reign in some bad intentioned financial sharks. Only a few weeks later reality has swept away all the words of these kidders appointed by the bourgeoisie.

In fact we haven't had to wait long to see this crisis of credit and debt propagate throughout the whole economy. And it was also foreseeable that the American economy would very quickly go into recession. This is already a fact. In the US, the economy is losing 100,000 jobs per month. Bank workers are strongly hit and massive job cuts rain down daily. In Britain the banking sector is also hit with job losses, as is the Ministry of Defence and the public sector overall; in the ‘privatised' gas, water and electricity industries job cuts are a continual process. Thousands of relatively well-paid and full-time jobs are going every week in the manufacturing sector: Cadbury, Pfizer, AstraZeneca and B.P. to name a recent few. Even in Switzerland, the symbol of the comfortable life in a capitalist regime, job cuts are the order of the day. In the USA, in the construction industry alone, redundancies are already counted in tens of thousands. This sector is, without any doubt at the moment, the hardest hit by the crisis. The construction of buildings and new houses faced with a growing stock has just undergone a violent slowdown, whereas the sector was one of the major pillars of growth. The inhumanity and indifference of the bourgeoisie has no limits when it's a question of its interests and there are nearly 500,000 immigrant workers in this sector who have seen their jobs disappear. These workers, mostly of Mexican nationality, and the families that have joined them, have been taken to the border without any form of process. Many of those who have lost their homes and deposits are immigrant workers who have just settled and been conned into outrageous debt. These foul practices of the bourgeoisie show just what this class of exploiters is capable of when they have no need for workers. But the price the working class has to pay doesn't end there.

In capitalism, there are no guarantees for the working class

Who could have imagined a couple of months ago seeing queues of workers and savers in the streets in front of building societies, coming at dawn trying to rescue their life savings from catastrophe? This is what happened at Northern Rock, the third largest borrower on the housing market in Britain. Incapable of repaying its mountain of debt, this financial institution appealed to the Bank of England to rescue it from immediate bankruptcy. The latter straightaway provided ‘support' (over 20 billion pounds so far and continuing), guarantees and public assurances that all those with deposits would be fully reimbursed. In fact, all these capitalists care not one whit that after a life of work and saving, thousands of workers would find themselves without a penny from one day to the next. Their fear lies elsewhere. Northern Rock is the first major victim, after Countrywide in the US and several German banks, of this generalised crisis of credit and debt. What the bourgeoisie fear is the effect of contagion. All banks throughout the world have, more or less, been using deposits so as to gamble them shamelessly, taking still more risks in order to heap up their profits. Worse still, they have pushed more and more working class families with low incomes into taking on more debt or making more credit available. What would happen if everyone who had savings in building societies or banks wanted to withdraw their money? Despite the promises of the bourgeoisie they would not get their money back. It's for that reason that the queues formed in front of the doors of Northern Rock.

It is faced with the fear of the collapse of the whole banking system that the bourgeoisie has reacted. In Britain, in the image of the USA, household debt is more than 100% of Gross Domestic Product and is made up of more than 80% borrowed against rising house prices. In other words, all the accumulated labour in one year, without the workers consuming anything, would not be enough to pay off this debt! After the explosion of the speculative housing bubble in the United States last August, just starting to burst in other developed countries, it is now the turn of Britain to suffer the same fate.

In fact, moving away from its reassuring mantras, the Bank of England in its ‘Financial Stability Report', published on October 25 (The Times, the same day), recognises this fact. The Report warns on credit, the vulnerability of the British economy to further shocks and can, of course, offer no solutions. The Policy Exchange think-tank (linked to the mainstream Conservative element) in its report two days earlier is more forthright: Britain's growth and low inflation is "more mirage than miracle" it says. "We need to find more sustainable foundations for our future economic prosperity than house prices and debt". And it points out that the vast increase in personal debt is matched by the public sector with the national debt more than doubling since 1992.

Capitalism's flight into debt is accelerating

The principal banks in the world and notably the US Federal Reserve as well as the Central European Bank have, throughout August, September and into October, injected colossal sums in order to support their economies and prevent as much as possible a chain reaction of bankruptcies.

But all that isn't sufficient. During the last months stock markets are still volatile and US activity has clearly slowed down. The US central bank has lowered its credit charge to lend monies to other banks and institutions by half-a-percent. As if by magic (‘the alchemy of the printing press') it has just artificially created a colossal sum of new money that has come out of nowhere. In an immediate manner and in the very short term, this will certainly have an impact on the economy and further rate cuts are predicted for the end of October in the USA. But that will not prevent the crisis continuing and developing. Much more, this policy of a still deeper generalised indebtedness, which is at the base of the present acceleration of the crisis, can only prepare for still more violent and deeper catastrophes tomorrow.   Tino/B.