Monday, 13 August 2012
5 years into the crisis any signs of improvement ?
Some date the crisis to August 9 2007, the day it became clear that Europe’s banks were up to their necks in US housing debt. The ECB flooded markets with €95bn of liquidity. It seemed a lot of money then. We have since seen a lot lot more money pumped into the banking system to plug the huge gaps that will not go away. 5 years into one of the biggest capitalist crisis’s ever possibly eclipsing the great depression in the 30’s industrial output has still not picked up. There is no country in the world that this crisis has not affected in some shape or form, Be they strikes, demonstrations, cuts, austerity tax hikes everywhere is being affected to some extent. China is sufficiently alarmed by the flint hardness of its "soft-landing" to talk up trillions of fresh stimulus. The European Central Bank is preparing to print “whatever it takes” to save Spain and Italy. Markets are pricing in an 80pc chance of yet more printing by the US Federal Reserve in September or soon after. The world remains in barely contained slump. Industrial output is still below earlier peaks in Germany (-2), US (-3), Canada (-8) France (-9), Sweden (-10), Britain (-11), Belgium (-12), Japan (-15), Hungary (-15) Italy (-17), Spain (-22), Greece (-27), according to St Louis Fed data. By that gauge this is proving more intractable than the Great Depression. Investors were pulling money out of America’s $2.5 trillion money market industry in panic. This was the long-feared heart attack in the credit system, even if the economic malaise behind it did not become clear for another year. The original trigger for the Great Recession has since faded into insignificance. America’s house price bubble -- modest by European or Chinese standards -- has by now entirely deflated. Warren Buffett is betting on a rebound. Fannie and Freddie are making money again. Five years on it is clear that subprime was merely the first bubble to pop, a symptom not a cause. Europe had its own parallel follies. Britons were extracting almost 5pc of GDP each year in home equity by the end. Spain built 800,00 homes in 2007 for a market of 250,000. Iceland ran amok, so did Latvia and Hungary. The credit debacle was global. If there was an epicenter, it was Europe’s €35 trillion banking nexus. Stephen Cecchetti at the Bank for International Settlements concludes that debt turns “bad” at roughly 85pc of GDP for public debt, 85pc for household debt, and 90pc corporate debt. If all three break the limit together, the system loses its shock absorbers. “Debt is a two-edged sword. Used wisely and in moderation, it clearly improves welfare. Used imprudently and in excess, the result can be disaster,” he said. Right now it’s the working class that is being saddled with this mountain of debt and being forced to pay through what seems like endless austerity. This what we are living through now austerity is the norm now before the crisis it was a debt field credit boom which was unsustainable and many knew this but were unprepared to speak out. Marxists knew this as we understand the fundamental workings of capitalism. Karl Marx uncovered this in the 1800’s. Many modern economists turned to Marx when the financial crash happened saying ah ha Marx was right. They are no longer saying that as his analysis of capitalism was far greater than they can imagine and get their pro capitalist heads around. Their system is bankrupt and has no life left in it. It will continue but at the expense of the 99% the workers. It will drag itself with its claws to life again sucking the life out of workers for life. We must not let it bring itself back to life. As Marx correctly pointed out there is no “final crisis” in capitalism it will not collapse on its own it‘ll find a way to recover most likely at the expense of us, ordinary working people. It must be over thrown and only the working class has the power to do this. I read in the Telegraph today that even one of their writers is suggesting debt needs to be written off. We can fully support that that is one of the things we’re calling for. Make the rich pay, cancel the debt, Nationalise the banks and the commanding heights of the economy, and put controls on capital flows in and out of the nation as first steps towards changing society towards a socialist world... With extracts and references from http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9471018/Five-years-on-the-Great-Recession-is-turning-into-a-life-sentence.html