Mariam Mariam
Just like other observers around the world, I have been glued to the television in the past few days watching the response in the American Congress to the $700 billion bailout money proposed by the Bush Aministration to prevent the collapse of the financial backbone of American capitalism. Eventually, the Congress rejected the bailout plan due to a combination of cirucumstances. But it is clear that the worldwide system of capitalist exploitation is going through a very deep-seated crisis, which will affect the economies of countries in both the advanced and neo-colonial worlds.
Unfortunately, the mainstream media have obfuscated the issues far more than they have exploaned the roots of the meltdown; after all, most of the media in the “free world” are owned by the monopolies that control the economy in crisis and they will not provide platforms for alternative currents of thought to contest the hegemony of imperialism. The abridged material here has been taken from axis of logic dot com to present an alternative look at the crisis of Americal capitalism.
The end of Lehman Brothers and Merrill Lynch, two of the largest Wall Stree investment banks one week after the government takeover of the mortgage finance giants Fannie Mae and Freddie Mac, marks a new stage in the convulsive crisis of American capitalism…. Global markets fell sharply in a sign of mounting panic and doubt over the stability of the entire US banking system. Throughout Europe, stock markets plunged by as much as 4 percent. The fall on Wall Street was even steeper, with the Dow Jones Industrial Average losing 504 points, or 4.42 percent….
The sudden demise of Lehman Brothers and Merrill Lynch […] removed a huge amount of liquidity from the economy, as paper values build up over decades of speculation [went] crashing down… Capital … needed to fiannce business operations and its elimination will inevitably depress economic activity, fuelling unemployment and recession, further undermining home prices and consumer spending and further weakening the balance sheets of already financially-shaken banks.
A sea change is unfolding in the US and world economy that portends a catastrophe of dimensions not seen since the Great Depression of the 1930s. the fall of icons of American capitalism such as 1158-year-old Lehman Brothers and 94-year-old Merrill Lynch can only lead to the further discrediting of the “free market” ideology of the US ruling elite, as well as its political and economic system. The spectacle of giants of capitalism drowning in debt piled up over decades of reckless speculation must inevitably discredit the social class-the American capitalist class-which is responsible for the debacle.
The bromides that have been uttered by the official spokesmen for the government, the media, Wall Street, and the political parties over the past year of mounting financial crisis have lost all credibility. The assurances that the latest government bailout will stabilize the situation, that the US banking system is “fundamentally sound”, that the housing and credit markets are about to “turn the corner,” etc., reassure no one.
“fundamentally sound,” that the housing and credit markets are about to “turn the corner,” etc., reassure no one. […] President Bush mouthed such phrases in a [recent] White House appearance. Treasury Secretary Henry Paulson at a White House press conference evaded questions about who was responsible for the financial disaster and instead declared that he was “focused on the future”.
The presidential candidates, Republican John McCain and Democrat Barack Obama made perfunctory statements that were remarkable only for their brevity and vacuity. What is widely acknowledged, even in ruling class circles, as the greatest financial crisis since the Great Depression is unfolding in the midst of a president election. But it barely rates a mention by either the Republican or Democratic candidate. Both parties and their candidates tiptoe around a financial scandal of world-historic proportions because they are equally implicated. They are both bound hand and foot to Wall Street and single-mindedly dedicated to the defense of American capitalism.
McCain issued a statement demanding “reform” in Washington and on Wall Street and pledging to bring ”accountability” to Wall Street. This from a multi-millionaire whose campaign is being run by a bevy of lobbyists for Wall Street and other sections of big business. His Democratic counterpart, Barack Obama, issued a predictably mealy-mouthed statement complaining that “too many folks in Washington and on Wall Street weren’t minding the store.” While attempting to pin the blame for the crisis entirely on the Bush administration-ignoring the “free market,” and deregulatory policies of Democrats Jimmy Carter and Bill Clinton – he offered a mutual amnesty between himself and McCain, saying, “I certainly don’t fault Senator McCain for these problems…”
These events are signposts in the historic failure of American and world capitalism. For the working clas, they mean a rapid growth of unemployment, poverty, homelessness and social misery. The government, Wall Street and both political parties will seek to burden for the for the consequences of their own greed and incompetence squarely on the backs of working people. The collapse is devasting every wider layers of the population, including those who have worked on Wall Street and received some of the financial benefits of the speculative boon.
Some 26,000 Lehman employees are not only out of a job, with few prospects of finding similar employment elsewhere, but as owners of 25 percent of the company’s stock, they have lost a combined $10 billion, wiping out their savings and retirement funds, tens of thousands of employees at Merril Lynch and Bank of America will lose their jobs in the merger of the two firms, adding to the 110,000 jobs slashed in the US financial services industry over the past year. The broader implications of the mounting financial crisis were signaled by Hewlett-Packard’s announcement […] that it was cutting 25, 000 jobs.
Many of those who precipitated this economic disaster, on the other hand, will profit handsomely from the debris they have left behind. Hedge funds and other short sellers who bet on the collapse of corporations are even now speculating furiously on the demise of the remaining Wall Street firms, Morgan Stanley and Goldman Sachs, as well as big commercial banks such as Bank of America. William Groas of the nation’s largest bond fund, Pimco, took in $1.7 billion […] by betting on- and publicly agitating for-a government takeover of Fannie Mae and Freddie Mac.
The emergency talks [recently] involving the heads of the major commercial and investment banks and led by Treasury Secretary Paulson and top Federal Reserve officials centred on rescuing Merrill Lynch and orchestrating an orderly liquidation of Lehman. Under pressure from Paulson and the Fed, Merrill agreed to sell itself to Bank of America, the largest consumer commercial bank in the US. At the same time, there were frantic negotiations over the fate of AIG, which faced bankruptcy unless it can raise tens of billions of dollars in capital… A failure of AIG threatened to bring down the entire credit system both in the US and internationally because the company holds a large stake in the multi-trillion-dollar unregulated market in so-called “credit default swaps”.
AIG has sold CDS contracts to banks, hedge funds and high investors all over the world under which it guarantees the mortgage-backed debt of a wide range of companies in the event that they default. If AIG should go under, the value of the debt which it insures would fall to an unknown level, destabilizing the credit markets and threatening a chain reaction of defaults and bankruptcies. The events of the past few weeks demonstrate that the American financial aristocracy is plunging the entire country into bankruptcy. These events are themselves climatic moments in a protracted process.
