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Proletarian issue 22 (February 2008)
Editorial: Global stock market crash
The suppurating sores of decaying capitalism have once again seeped through the thin cloth woven of propaganda which keeps them semi-obscured most of the time. In the week beginning 21 January 2008, stock markets crashed all over the world and the appalling rottenness of the system was lit up in a glare of publicity. On the Monday alone, £77bn was wiped off the value of the FTSE 100 companies quoted on the London Stock Exchange – more than £1,000 for every man, woman and child in this country.

The trigger for the crash appears to have been the creditworthiness downgrading in the US of a top insurance underwriter, Ambac, a company that insured the value of bonds based on loans to consumers (this activity apparently being known as ‘monoline’ insurance), including the dreaded subprime loans. Having had to pay out unprecedented amounts as a result of the subprime crisis, it was itself in some trouble, but, even worse, all the bonds it had insured were necessarily downgraded in value too!

Tim Price, writing in the Financial Times, pointed out: “A deterioration in corporate credit quality, and in particular the credit quality of the monoline insurers, now raises the likelihood of institutional defaults, counterparty failure and some sizeable dominoes toppling – possibly several hundred billion dollars’ worth of them.” It is no wonder that the Ambac downgrade led market speculators to rush to sell their shares on the day the news broke – Friday 18 January, while the New York stock exchange was still open but after the London Stock Exchange had closed – bringing prices tumbling down.

The weekend intervened and then it was the turn of Europe and the East to suffer two days of spectacular market turbulence. This eased for the time being on the US Federal Reserve holding an emergency meeting on the 23rd to decide on “an unprecedented 0.75 per cent interest rate cut”, the idea being that this would give Americans more money to spend, thereby easing the general crisis of overproduction, reducing the (considerable) risks of debt default, and generally giving the American economy a boost to help it out of the doldrums.

However, it was very low US interest rates that caused the general crisis of overproduction to express itself as the subprime crisis in the first place. The Federal Reserve would appear to take the unscientific view that the best cure for a hangover is the proverbial ‘hair of the dog’!

The underlying crisis of overproduction caused by the fact that the vast masses of the world’s people are too impoverished to purchase the ever increasing volume of products resulting from the incessant economic ‘growth’ of capitalism remains, whether or not the stock markets stabilise. Because of this, a huge number of the world’s business enterprises will be forced to close, impoverishing the working masses even further.

This will be the underlying reality regardless whether businesses appear to collapse because of inflation wiping out their profits or because of inability to recapitalise through loans to continue in production.

The impoverishment takes the form of lost jobs, lost careers, decimated pensions, lost opportunities, in fact, loss of access to everything necessary for a fulfilling life – even, for many, sufficiency of the most basic essentials. To use the expression of Anthony Hilton, the Financial Editor of the Evening Standard, “That is the price you pay for capitalism.”

The question is: How much longer? How long will the world proletariat and peasantry be prepared to go on suffering?
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