Stock market crashes imminent?

Yes, but that weakness comes froma loss of strenght, it's going to be a return to the use of credit to control the woring class.

Jef, it's obvious you've been smoking.

I know what one of these is now. It’s not as it happens. The position can’t be salvaged by pretending it’s the same as mine. Go and ask your next-door neighbour what’s more important, winning the World Cup or building a “revolutionary” international. You think they choose the World Cup because they’ve been corrupted by capitalism? My foot. Building an international revolutionary party says nothing to working class people about their lives.

Victory? Such glamour. Perhaps you could tell us who needs to be beaten, or maybe it’s an abstract victory like conquering Everest. Ha ha. Don’t tell me, it’s a moral battle against our dirty accumulative natures.

Lazy,

You want the working class to exercise power. So do I. I think that requires building movements capable of exercising power. I think the most efficient way of building movements capable of exercising power without being crushed is to generalise those movements across countries and across continents. I think that level of co-ordination requires an international co-ordination of socialist parties.

Also stop ascribing moral values to my positions, it's patronising. I'm capable of doing that all by my self, thanks. As it stands it appears your position is the more confused. It's all very well saying you want folks to exercise their self-interest and establish a socialist society but in the absence of a real strategy for how to do that it's an intellectual game. You can't rally folks with appeals to personal motivation and expect that's all you need to do. There is a need for an international. That is not going to be something most people in the street give a fuck about, for sure. Equally most people don't spend a lot of time wondering what happens when they seize control of a pile of factories, reorganise production without their bosses and managers and then the marines come and start shooting people in the street. That doesn't mean it's something to avoid thinking about.

I quit smoking ages ago.

Jef, the third and fourth biggest economies in the world don't have access to uranium - you sure? And the idea that nothing has changed over 30 years (in regard to UK debt) is the conservative refrain we so often hear on these boards. Not only has debt (US eg, the largest debtor nation on earth) doubledover the last 30 years (the present "market turmoil" is simply an expression of it) , not only have recessions got longer and deeper than the previous ones over the last 30 years, but imperialist war has become more irrational and more widespread over the last 30 years. It's not sudden collapse, but an eroding, accumulating decomposition. The conservative and reactionary ideas that "nothing changes", "same old thing" is not one you expect from anarchism. On the other hand...
Thanks for the info sphinx. I think that shows the development of the economic crisis and the attacks on workers in Japan, as well as the manoeuvres of Japanese imperialism.

Jef, just read nuclearweaponarchive.org and some quotes regarding Germany and Japan's nuclear capacity:
"Germany has a robust nuclear industry capable of manufacturing reactors, enriching uranium, fuel fabrication and fuel reprocessing"... "Due to reprocessing done elsewhere, Germany will own 48 tonnes of separated reactor grade plutonium by the year 2000"... "As in true of Japan, Germany has an advanced science and technology base capable of supporting an aggressive nuclear program shoudl it be deemed necessary to do so. Although hard information about this is lacking, it is likely that Germany has undertaken advanced design work on a full range of nuclear weapon types"... "... there have been influential proponents of acquiring nuclear arms in the German government..." and such work is likely to have been sponsored.
"It is known that Germany has considered manufacturing fusion bombs for civil engineering purposes", yes, engineering purposes! 213 such bombs were proposed with yields of 1 to 1.5 megatons.
And German rocket science? It's not rocket science is it?, but it is. Germany would have no problem with delivery systems.
"Japan has a very aggressive nuclear power program, and is developing plutonium as a reactor fuel in a big way. Japan is maintaining an active breeder programme and expects to institute a plutonium energy economy with full reprocessing after the year 2000". "Overall Japan has an extremely advanced civilian scientific and engineering infrastructure capable of supporting nuclear weapons development and production. Japan has indigenously developed some uranium enrichment processes (eg, the Ashi chemical exchange process) and has the technical means to deploy other processes if it chooses to do so. As one of the two leading manufacturing nations for computors (especially supercomputors), and has the second most advanced inertial confinement fusion program in the world, Japan is well positioned to quickly develop thermonuclear weapons".
And, "By the year 2000 Japan will have an inventory of about 55 tonnes of separated reactor grade plutonium. It should be noted that this is enough plutonkium to manufacture - 10,000 warheads, more than the combined nominal arsenals of the US and Russia combined under START II".
"Nothing changes -same old thing"?

It already exercises power in handing it over. The power you want the working class to “win”, it already has, but gives up willingly.

The working class is already capable of exercising power. There is no doubt we can overthrow the current order, the “movement’s” problem is how to positively organise the collective, socialised management of production and power.

Tell us why you think this. It’s just setting out the same old principles as if this time, this time, it’ll work out. It won’t. The only way to build large organisations capable of taking action is to provide individual incentives beyond the group objective (Olson, 1965). If you figure out how to be organisationally effective, that is to turn thought into action, you’ll get “internationalism” for nothing. Internationalism as an aim in itself, whilst it may be communist, is really just a way of standing still whilst maintaining an illusion of busyness. As an aside, I’m still thrilled with all this talk of victory and being “crushed”, it’s all a bit boys-own.

The condescension is all in your mind. Nature’s reminder that you’re not advocating revolution in the expectation we’ll expel asylum seekers and sterilise the mentally deficient. It’s not mere insurrection you’re after, but the adoption of a set of humanitarian values.

Uncalled for. I don’t do “positions”, honestly.

Asserting the need for a strategy doesn’t do much to make the game pay off. Having a strategy doesn’t propel the advocacy of this-or-that beyond the imaginations of social justice fanatics. Throughout all of this deliberation on Internationals and strategising, we’re failing to create the kind of social institutions that take effective action and instead propose those which can not.

Our benevolent masters have more concern for the everyday “needs” of their minions than the sum of all the left wing moralists alive and dead.

What those who call for the International Party do avoid thinking about though is “why the majority of starving individuals do not steal, and the majority of exploited individuals do not strike”. It's not because of the lack of an International, that's for sure.

sounds like a position to me

what individual incentives you have in mind ?

On debt, UK consumer debt has officially over taken UK GDP for the first time.

I think you're missing the point. The reason why thousands of consumer debt instruments were created from the 20th century onwards was to expand the working class's ability to consume without actually paying it higher wages. If capitalism is not able to extend credit to these groups, it means a contraction of the market (or at the very least the failure to expand it further relative to capitalism's expanding production) and an intensification of crisis. This has incredibly serious implications for the future.

The whole sub-prime loan mess has evolved from a desperate strategy of pushing loans onto people who never had a hope of paying them back. But without the debt-enabled consumption of these groups where would the last 20 years of economic expansion come from? The use of collatoralised debt obligations and the like, which effectively allowed the bourgeoisie to shift repayment day back and back, has now run into a serious road-block as the current crisis indicates.

This isn't the end of that strategy by any means - the bourgeoisie has and will mobilise gigantic resources to stave off the day of reckoning yet again but it doesn't solve the fundamental problem: when debts aren't repaid, it means production has been given away for nothing. Capitalism cannot function in this way.

Well it looks like I was wrong about the nuclear stuff.

Dem in terms of credit I think there is a world of difference between the turn of the century pawnshop industry and the current use of debt. The earlier form was a method of control, where many in the working class were squeezed because they were effectively buying back their possessions with their pay packet then selling them again.
You are right about the explosion of consumer credit and it is it probably not possible that any adjustment could lead to a return to a 70s access to credit.

It’s private.

I don't think it was a conscious form of control, just a bunch of parasites exploiting the desperate. And in that respect I don't think that has ever gone away. Many estates are still in hock to the loan sharks.

I think we agree here, but do you see the severity of the contradiction at work and what it really means for the future of the system? I'd be interested to see what you think.

Well it's like endlessly signing promissory notes, but generally when they come to a head they are negotiated down, but I'm not sure that will be possible in this case as it is so widespread.

Again, we agree on the immediate circumstances, but does this mean historically?

What do you mean by historically?
If you mean in terms of what happens next it depends.
Well the system could be refloated and debt will keep stacking up until we have another crisis (most likely),
Or a new system could come into place, perhaps a return to a poverty based economy rather than a credit/consuner one, as I have ( poorly) suggested.
Could we say that credit economy was used to buy off working class militancy, now it is weaker something else could come into being.

By historically, I mean how does this situation fit into the history of the development of capitalism. Do you understand (not necessarily agree with) what I mean when I relate this crisis to "decadence"? And, yes, of course, what it means for the future of the system.

The contradiction for the bourgeoisie is this:

- on the one hand, they have to extend credit more and more to create the market for their own products. A reduction of credit contracts the market and brings about crisis because they can't sell anything;

- but, at the same time, the real conditions of the masses haven't changed, they are still an exploited class and cannot consume the full value of their own labour (i.e. they can't buy all that capitalism produces). This is expressed by the fact that sooner or later the debts cannot be repaid and the whole thing blows up in their face as we're seeing at the moment.

So for the health of the system they need to do two contradictory things: extend credit (to maintain the market) and reduce it (because bad loans are effectively giving things away for free). This isn't a temporary blip, it's been a permanent contradiction working at the core of the economy with ever increasing power since the 30s, despite all the different ways it's expressed itself in actual events.

Not entirely off the point, but the nuclear question.
Given the extracts from the nuclear paper above, and given the decisision by the respective states, I would guess that both Japan and Germany could assemble nuclear weapons, with intermediate range, fully armed and operational, within a matter of days. I would also guess that they have both have had several "runs" at this already. It's related to this discussion because the economy, in all probability, will not wind down gradually until capitalism is clearly "in crisis". It is in crisis now and the punctual crises, such as that sparked by the "sub-prime market", are simply indicators of its overall descent. While there's no mechanical link, war and the development of crises are intimately related. They come together in the development of imperialism and the war economy.

To take the development of the economic crisis, imperialism and the war economy further, I humbly suggest the thread on fictitious capital on Thought.
As regards the continuing "turmoil" in the financial spheres: it's becoming clearer that this present development has a long way to run. Listed banks and institutions are only obliged to alert the stock market if their profits are to take a hit of 10% or more, a prospect that could be easily obscured. Billions of dollars of asset-backed securities and derivatives are hard to value. Many securities are held "off balance-sheet" (a la Enron). According to William Goss of Pimco bonds in today's Times: "Defaulting exposure can hibernate for many months before its true value is revealed". In the same article the Finance Editor, P. Hosking, talks of the big risk being the downturn in the US housing market. I agree with this, particularly for the Chinese economy (which revealed on Friday that it had exposure of billions to the US sub-prime market). According to Hosking, Americans are facing the biggest reduction in wealth since 1929 if house prices fall by 10%. My guess is that house prices in the US (and the UK) are 30 to 40% overvalued.

A housing crash (in the UK at least) is likely to hit those who are most overextended with mortgages first.

This would be young couples with reasonably high combined incomes (not necessarily secure, and possibly aided by not all that well off parents) who've bought in the most over-inflated areas. Elderly people who want to take out reverse mortgages or similar. And smaller-scale buy-to-lets. Oh, and holiday home/weekenders.

The first two it'd be devastating for - if you can just about afford to buy a house it usually makes sense to, and although that reverse mortgage stuff looks like a scam anyway and I don't fully understand it, it'd clearly reduce the payout. The latter two, no sympathy whatsoever.

Again, talking about the UK though, a 10% reduction would only mean a return to 2005-ish prices, not all that much of a correction really.

Even a 30% reduction would only hit people who've got new mortagages in the past 5-8 years (6% x 5), and mainly new purchasers since people moving house would have a proportionally much smaller mortgage. Go back 10-15 years and you're looking at a 50% or more crash in prices for them to be valued below purchase price - then 10-15 years of mortgage payments on a 15-25 year mortgage. Obviously it'd have a massive effect, but I don't think it'd take the same shape as the early '90s did.

I don't know if there's been such a big bubble in housing prices in the US, but I do know it's got far lower rates of home ownership than the UK, so we're looking at a relatively small subsection of people there no?. I'll admit to knowing very little about how a housing crash affects private rentals though.

You got a link to the Times article?

hi catch - you should also include interest repayments paid so far in those calculations - then a correction that knocked off 2 years price growth might not be much in terms of lost house price value, but significantly more in terms of 2 years mortgage repayments with nothing to show for it.

Hi Catch

There's a tendency in your post to looking at the changes in housing prices in isolation. The impact is not so much in terms of the prices themselves (which in many respects border on fantasy anyway) but the way the effect ripples through the rest of the economy.

It's main effect is on consumer spending and loans. Because most loans are secured on property a collapse in prices makes loans harder to secure and the collatoral backing previous loans is obviously no longer worth what it was. The impact here is mainly a question of confidence - everyone feels like they're getting poorer so they borrow less and lend less. This tends to reduce consumption, push disposable income into savings, etc. thus causing the whole economy to slow. In Japan, this led to deflation for many years as I'm sure you're aware. It's also one of the factors (the other being rising interest rates) that's causing the current drop in consumer spending in the US. (Recent figures on this caused another round of stock market wobbles yesterday).

The housing bubble in the US was enormous by all accounts. although I don't have comparable figures for it. The bubble there is clearly more speculative there than here though, they don't have the same issues of low supply that is one of the factors underpinning high prices here. However, the property bubble in the UK is now equivalent to the one that shipwrecked Japan in 1990 (Japan has many of the same issues in terms of space and housing supply).

The potential for such a crash in today's economy could be devastating, especially considering the global nature of the property bubble which as well as the US and the UK is also present in China, India and Russia as well as other "emerging economies". US markets have begun to slide and the risk to the Spanish market is well known as a concern to the ECB. What makes the situation all the more dangerous is that, like credit crunches, the unwinding of property bubbles tends to be much more drawn out and painful than simple stock market crashes.

The question now is how much of a grip can the bourgeoisie keep on the evolution of the situation. The reduction of bank interest rates (in order to flood the market with liquidity) and the talk of the Fed lowering the principle interest rate in the near future (if this hasn't already happened!), plus the calls for bail-outs for those hit in the subprime crisis in the US, seems to suggest a determination from the bourgeoisie to aggressively confront the crisis, despite all the worries about "moral hazard" (it always makes me laugh to see bankers talking about morality!). But If, as baboon suggested earlier on this thread, that the central banks are succumbing to "every man from himself" this will make the task much more difficult and opens up the possibility of an even more violent crisis. Perhaps baboon can expand on this aspect?

From today's Guardian:

To be honest though, even the cheerleaders expect the U.S. economy to go into recession by Christmas. The question is, where’s all this cheap U.S. property that should be coming onto the market to snap up? I’m looking to buy up a chain of crack houses.

poor investment - it's the gentrified drug-free zones that will rise in price fastest once the next bubble starts growing

Dem, I've only seen public expressions of differences between the Bank of England on one hand and the Fed and ECB (itself having tensions) on the other. But I think that we can safely assume that, as far as they can, each national bank will defend each national economy. There has to be some cooperation but the extent of this crisis will put this to a test.
As you said earlier, with the amount of UK private debt, the UK is now technically bankrupt. There is a shortfall of private debt against GDP (and GDP includes such parasitic expenditure such as wages for the army, the police and screws - so it's not all "real" production. 85% of private UK debt (over 1.1 trillion pounds) is secured against house prices, so any fall in the latter is very bad news for the economy.
As far as US house prices are concerned; the US consumer boom, based on rising house prices, has been vital for Chinese production. Any slowdown in the former will be very bad news for the latter.

Baboon, any indication what the public expressions of difference where? The only thing I caught was that the Fed and ECB lowered their discount rate (effectively cheapening credit to the banks) while the Bank of England had held firm, last time I checked.

I agree that there is always a pressure for "each man for himself" but the bourgeoisie have done a remarkable job of containing that even after the de facto collapse of the bloc system, even if they can't eliminate it entirely. Some of the statements you made earlier seemed to suggest that this had reached a new level.

That's like saying that because one's mortgage is greater than their annual salary, then one must be technically bankrupt. As if "technically" means anything, or for that matter that "bankruptcy" means anything other than one’s creditors taking all your assets in lieu of payment. We’ve been tightening our belts since 1973, at least. Even an Argentinean-style collapse in the UK would leave little to mark this “crisis” other than a Tory win at the next election, or maybe the one after that. We've already shutdown most of the industry, there's not enough left to wipe out this time around to cause much of a scene.

I would suggest that the crisis of capitalism, as evinced in the present "turmoil" is reaching new depths.
The overall interest of all capitalist nations at present is to support the US economy because it is, by far and away, the strongest economy in the world and a major locomotive for all other economies. It is also, by far and away, the greatest military power in the world and while this doesn't translate mechanically onto the economic level it has a strong effect. The fact that US imperialism is weakening overall, both economically and militarily, is indicative of a deepening crisis of capitalism.
There have been clear differences expressed between the Bank of England and the Fed over whether to intervene to prop up markets. The former, for a large part, represents a powerful tax haven, the latter represents a far greater responsibility. Japan relies on the greenback as much as anyone else, but this didn't stop the Bank of Japan punting out funny money (the yen carry trade) which was used to undermine the US debt market. The fate of the US and Chinese economies are inextricably linked, but this doesn't stop the Bank of China and the Fed being at constant loggerheads over the issues of trade and the value of the riminbi against the the dollar (the US want around a 50% cut). Particularly after the collapse of the Russian bloc, the IMF and the World Bank became even stronger expressions of US imperialism. It is an imperialist free for all and the only thing that has stopped it collapsing is the development of state capitalism but this cannot go on ever piling up contradictions. Capitalism won't collapse tomorrow - and this shows the residual strength of state capitalism, but the developments are there for all to see.