If by some strand of imagination you are under the impression our financial crisis is getting better and we'll be able to get out of it i have bad news for you.
This economic downturn is not a usual economic downturn i think we are on the verge of something big. Very big. The talk now is very much of a double dip recession even leading to a even longer deep depression.
It is no exageration that the rate in which our cost of living and standard of living are rising and falling just as sharply. It is no doubt we are heading backwards from where we have come from i believe.
But is this ia big surprise ? to us marxists no it isnt. Capitalism is full of contradictions and is always just a few steps away from another major international economic crisis.
This is just the ne xt in its long history. Yet still it doesnt learn its lessons if indeed it can. I explain.
In Europe where i think will be where a major shift will occur. We may even see the brak up of the Euro as we know it if a country like Greece, Portugal, Ireland or even Spain which god forbid will send huge shockwaves around the Euro zone as Spain is a big economy. But this is entirely possible.
The Greek economy was one of the fastest growing in the eurozone during the 2000s from 2000 to 2007 it grew at an annual rate of 4.2% as foreign capital flooded the country.] A strong economy and falling bond yields allowed the government of Greece to run large structural deficits. According to an editorial published by the Greek newspaper Kathimerini, large public deficits are one of the features that have marked the Greek social model since the restoration of democracy in 1974. After the removal of the right leaning military junta, the government wanted to bring disenfranchised left leaning portions of the population into the economic mainstream. In order to do so, successive Greek governments have, among other things, run large deficits to finance public sector jobs, pensions, and other social benefits. Since 1993 debt to GDP has remained above 100%.
On 27 April 2010, the Greek debt rating was decreased to the first levels of 'junk' status by Standard & Poor's amidst fears of default by the Greek government. Yields on Greek government two-year bonds rose to 15.3% following the downgrading.] Some analysts question Greece's ability to refinance its debt. Standard & Poor's estimates that in the event of default investors would lose 30–50% of their money.] Stock markets worldwide declined in response to this announcement.
Following downgradings by Fitch, Moody's and S&P,] Greek bond yields rose in 2010, both in absolute terms and relative to German government bonds. Yields have risen, particularly in the wake of successive ratings downgrading. According to The Wall Street Journal, "with only a handful of bonds changing hands, the meaning of the bond move isn't so clear.
On 3 May 2010, the European Central Bank suspended its minimum threshold for Greek debt "until further notice",] meaning the bonds will remain eligible as collateral even with junk status. The decision will guarantee Greek banks' access to cheap central bank funding, and analysts said it should also help increase Greek bonds' attractiveness to investors. Following the introduction of these measures the yield on Greek 10-year bonds fell to 8.5%, 550 basis points above German yields, down from 800 basis points earlier.
On 5 March 2010, the Greek parliament passed the Economy Protection Bill, expected to save €4.8 billion through a number of measures including public sector wage reductions. On 23 April 2010, the Greek government requested that the EU/IMF bailout package be activated.] The IMF had said it was "prepared to move expeditiously on this request".] Greece needed money before 19 May, or it would face a debt roll over of $11.3bn.
Without a bailout agreement, there was a possibility that Greece would have been forced to default on some of its debt. The premiums on Greek debt had risen to a level that reflected a high chance of a default or restructuring. Analysts gave a 25% to 90% chance of a default or restructuring.] A default would most likely have taken the form of a restructuring where Greece would pay creditors only a portion of what they were owed, perhaps 50 or 25 percent.] This would effectively remove Greece from the euro, as it would no longer have collateral with the European Central Bank.
Greece has already had 9 general strikes across the country and there is a great distrust of the government and the EU as a whole there now.
One of the central concerns prior to the bailout was that the crisis could spread beyond Greece. The crisis has reduced confidence in other European economies. Ireland, with a government deficit of 14.3% of GDP, the U.K. with 12.6%, Spain with 11.2%, and Portugal at 9.4% are most at risk.
On the positive side, The Economist acknowledged on 27 May 2010 that while Europe's "profligate economies will struggle ... as austerity kicks in," it also pointed out that "waning confidence will be mitigated by the boost that exports receive from the euro’s plunge."
But this may not be enough to save the tumbling Euro. There is smimply no fat there to absorb this next wave of the crisis. I think we stand on the edge of another banking crisis where several big banks require bailing out again. I do think this can and will happen. I hope it doesnt obviosly but another banking cris that could make 2008 look like a drop in the ocean compared to the next banking crash could effectively end the Euro as we know it today. there is simply nothing to absorb the crash coming up it seems.
As further bailouts will have to happen as the governments of these countries look to prop up their failing battered capitalist system with fear growing across Europe further austerity cuts will be forced on the working class to pay for more and more of this.
I really dont think we have even seen the start of this crisis yet only just the tip of the iceberg there is still plenty time to go and i feel we will get worse before we improve.
Even a labour party who you would think would regain power in 2015 at the next general electionw ill be forced into making cuts by the markets who will be wanting them to carry on with the project of cuts to restore confidence in the financial markets.
So if we think labour will be any better we will be sorely mistaken. This is a global crisisa nd no one government will be able to solve this alone i feel.
Only a changing of the whole system, a over throw of capitalism thrown on to the scrap heap for good with a socialist planned economy will be able to bring the world back to a even keel i feel.
Will any country try going down that route ? i really do hope so.
Only socialism can provide for the many not just the few. It is time to rid ourselves of this blood sucking system that capitalism has forced upon us.