Stock market crashes imminent?

This “collapse” is really just another word for the destitution and murder of great swathes of workers. It’s no more a crisis for capitalism than berries are a crisis for a holly bush.

haha

Barclays Bank, reportedly , has gone to the BofE's emergency fund for a loan (hefty cash deposit, 7% interest and penalty clauses). If Barclay's are in trouble then that would be a blow to British capital. Barclays particularly has been useful to the British state, bankrolling Saddam during the 80s (some part of our taxes are still paying that debt) and backing the Milosovitch regime in Serbia, Britain's imperialist one time ally also.

They took £1.6 billion in fact. Later they claimed they were "awash" with liquidity and the problems had been caused by "internal technical difficulties".

They've been heavily exposed to the subprime fiasco and one of the heads of Barclays Capital, the group's investment bank, resigned when the crisis broke for unspecified reasons. However, he is the "inventor" of the debt instruments (namely so-called SIV-lites) that have come under pressure recently.

Although the situation is certainly worrying, I can't see Barclays being allowed to fail at the moment unless there was a complete financial melt-down. Nevertheless, it certainly offers a foretaste of the future evolution of the crisis.

guys, just take a look at the stock marcket in china

What do you want us to look at exactly?

Despite the economic difficulties apparently being dropped from the news headlines, an article in todays Guardian is describing the current credit crunch as the "worst lending crisis since 1998", i.e. the time following the Asian Crisis which broke Russia and seriously threatened the American financial system with the collapse of LTCM. The article goes on to say that the scale of the losses could reach anything from £50bn to £250bn. Although the scale is worrying in itself, the real problem is that nobody really knows just how far the trouble reaches and it's this uncertainty that is paralysing the financial markets.

Last week, the president of the credit ratings agency, Standard & Poor's, resigned over savage criticism of the way that the various debt instruments have been rated and the beady eye of the Senate Banking Committee is being turned towards other agencies such as Moody's.

The housing bubble deflation in the US is now raising the spectre of negative equity for the first time in US history: "This week, for the first time since records began, it was reported that the median price of homes had gone down year on year. Forecasts in California suggest a fall of 16% in the next two years."

Despite the turmoil, the UK manufacturing sector is enjoying its fastest rate of growth since 1992! The reason for this seems obvious - consumption is always highest at the peak of a bubble, with credit-fuelled excess sucking up production. Now the bubble is beginning to burst, it remains to be seen if this good fortune can contiune. A "triple-whammy" of banking, retail and industrial gloom could mean disaster for the British economy.

Jesus. With prophetic abilities like that you should be a millionaire by now. Tell us, do, what odds will you give me on a food shortage within the next 10 years. This “could” of yours, it’s as vacuous as the Guardian analyses you cite.

Food shortage where? I can give you odds on food shortages in Somalia, Kenya, Djibouti and Ethiopia occuring right now at 100%. Food shortages were common in Russia during various phases of the crisis that have unfolded since the end of the 60s, not to mention the famines of Stalin's time. All these famines take place in a world ever more awash with food and thus spring as much from economic causes specific to capitalism, not simply natural problems.

As for food shortages in Western countries, I haven't claimed we're likely to experience them ... yet. But one can certainly point to rather serious problems in modern agriculture either caused directly by capitalist farming methods or exacerbated by them, BSE being one. But the most serious problem is the nutritional contents of the food being sold to the masses. It's in capitalism's interests to degrade food more and more to cover shrinking profit margins and to pump it full of salt, fat and sugar because humans have a natural tendency to crave these substances. Not to mention the fact that they manufacture flavour molecules that dissolve quickly to leave you craving more, so you eat more and therefore buy more.

The crises of capitalism, in contradistinction to all previous modes of production, are not ones of shortage but ones of overproduction and this is nowhere more clear in the sphere of agriculture.

Yeah well. Tell us when the UK's food shortage is going to hit or stop banging on about the "economic disaster" like you’ve got a clue. It’s a poor job when communists rely on the Guardian for their insights.

i'm reading Jared Diamond's take on the Rwanda genocide at the moment, he seems to think it was the poorly developed lo-tech agriculture there which created a lot of tensions leading up to the genocide (he's particularly looking for material reasons why hutus killed each other in hutu-only areas if it was simply an ethnic genocide). apparently agriculture was based on self-sufficient family small-holdings as opposed to capitalist forms per se, although there was a process of polarisation going on as the largest (but still small) farms could support workers elsewhere with food, thus bringing in income to buy land of the smaller farmers.

i'm not sure how representative this is of african agriculture per se, i'm sure i've read stuff showing the ethiopian famine wasn't for lack of food, but lack of effective demand and ethiopia was exporting grain to feed cattle during the famine etc, though i can't remember the source.

Joseph, some interesting points, but there's another aspect that needs to be considered. The bourgeoisie presents famine in a purely national framework. But all through these "famines", world production was more than adequate to feed everyone. It was capitalism and its division into nation states, some rich, some poor that prevented this from happening (unless it happens to suit the interests of this or that bourgeois clique).

Lazy, do you have to have a food shortage for it to be a genuine economic crisis? There were no food shortages per se during the Great Depression, it was simply the fact that no-one could afford to buy it.

You may dislike the term "disaster", fair enough, it's subjective. There are disasters and then there are disasters! This doesn't change the fact that there is something serious going on under the surface of the capitalist economy and it's not simply in the imagination of the Guardian.

good point about world food production, which takes us back to the 'effective demand' issue, i.e. people starve for lack of money not lack of food, although Diamond sees Rwanda as an affirmation of Malthus, he's looking solely at local food production/population dynamics too.

Can't remember who said it, but the phrase "capitalism is only interested in hungry mouths when they are connected to deep pockets" springs to mind.

My "take" on the war in Rwanda, is the imperialist manoeuvres of Britain, Belgium, America and especially France in using the local bourgeois factions to stir up and stoke tensions and war to their own advantages.

without a doubt that's present, but Diamond's view is that it doesn't explain the material basis of those tensions. He's an interesting one to read, definitely not a communist but then also very non-eurocentric and materialist for a bourgeois historian (he was criticised for leaving out social factors from Guns Germs & Steel and has incoporated more discussion of internal social dynamics in Collapse, like Greenland Norse society sufferring food shortages while sending scarce hunting resources north to catch polar bears to trade for luxury goods for the elite - probably a book ICCers should read, given your eschatological leanings ).

And if we forego this “need”, what then?

That’s the very definition of a shortage.

Usual mystification. What matters is happening on the surface, not under it. As for the Guardian, it prints what those who take it seriously want to read.

It’s neither as it happens. They starve because they beg (or “lobby” as Dundee calls it) rather than act.

the bourgeoisie have found a solution - God!

http://news.bbc.co.uk/2/hi/business/6977798.stm

As we were talking about food yesterday, people may find this article of interest. Except Lazy, of course, because it's from the Guardian and is therefore irrelevent.

According to today's Times, the ECB has pumped another E42 billion into the banking system, the day after the BofE finally took some action and offered £4.4 billion extra funding for British banks.

In the meantime the OECD has warned of "ominous" downside risks to the world economy and has slashed its growth predictions.

Meanwhile, last week, Mark Ernst, chief executive of H&R Block, one of the biggest "sub-prime" mortgage providers, claimed that the dislocation was the worst since the Great Depression.

What does that mean though? Lent the clearing banks more money at discounted interest rates?

Yes, exactly. It increases the flow of broad money in the system. Incidentally, the Fed have decided to stop collecting data on M3 because they don't think it's significant. Not surprising, the last time I checked the M3 increases (a while ago, I admit) they were in double figures!

The three month average of M3 growth in the EU was running at over 11% (annualised) in July, just before the current crisis broke.

The official job totals in the US fell for the first time in four years, according to the Times today. The Guardian reports that the dollar fell to a 15 year low on the news. Hardly a surprise considering the enormous lay-offs that are currently underway in the US!

The collapse of the dollar could have serious implications for the "yen carry trade", which has been identified by some commentators earlier this year as another serious risk to the world economy. There were already signs of this occuring in mid-August. Combined with the ongoing credit freeze, the implications for the world economy are ominous.

Meanwhile, the Fed put another $30 billion worth of liquidity in the markets, following actions from the ECB and the BoE yesterday. Another day, another mass of funds thrown onto the market with little or no apparent effect.

What is becoming clear is that this is not simply a short term crisis but the unfolding of something potentially quite nasty that has the potential to envelop the entire global financial apparatus. Commodity markets are also fluctuating wildly, with several sharp falls that appear to run in contradiction to the otherwise inflationary pressures hitting certain items. Wheat has become a particular victim of this, as an article I cited previously on this thread reported, and yesterday the UN issued a warning saying that food prices could destabilise some developing countries. In a truly worrying development, Russia is said to be considering banning wheat exports, following a move by the Ukraine to limit exports back in June.

The growth of such "beggar thy neighbour" policies in the economic sphere demonstrate the severity of the current situation and the bourgeoisie's much reduced margin of manouvre. Paradoxically, the "look out for number one" approach can only make it harder for the bourgeoisie to control the evolution of the crisis and thus make the situation even worse.

Countrywide, a US lending bank has, like many other banks in this field, announced that 12 thousand jobs are to go, one fifth of its workforce.
I agree with Demo above about the danger of inflation. This scourge of capitalism is reappearing in every major country (China included). Inflation+debt\credit crisis=trouble ahead.

Trouble for communism. What outcomes will you generate baboon? Or is it every communist's duty to be carried along by "crisis" like spit in the wind?

So I should have cashed in that ISA and gone on holiday then?

According to the Telegraph today, the credit crisis has started to filter down to the financial equivalent of the High Street in Britain. If this situation is prolonged the contraction of credit will add to the impact of rising interest rates and reduce consumption, creating a dangerous feedback loop that could further damage the economy.

Have you lost money jef?

A new phase in the turmoil could be starting tomorrow accord to The Times. Last August, the current crisis gained momentum when numerous credit agreements came up for refinancing - and failed to get it. The numbers then were in the region of $100 billion. This month another $113 billion worth comes up for reviews and leading bankers, no doubt casting an eye back to the stock market crash in 1987, are talking about the worst conditions for 20 years.

The Telegraph claims British banks are going to have to find £70 billion over the next 10 days to ride out the crisis.

I'd imagine so, I put about 1000 in over about six months at the beginning of last year. It wasn't up by much last time I got a statement, can't imagine it's got better since then. Why did I listen to that bloody financial advisor, telling me how responsible I was

Not quite as much money as was lost on the Japanese stock exchange today, apparently. News that Japanese GDP has contracted by 1.2% for the April June quarter. All Japan needs now is another quarter of negative growth and the economy is officially back in recession.

All this adds up to yet another blow to a global financial system already reeling. Worries about the Yen carry trade are also continuing, which can only add to extreme volatility in the currency markets.

There's a suspicion that China is beginning to desert US bonds. Already in August, China had threatened to dump dollars if the US continued [/url]its effort to attack the Chinese trade surplus. This would be an incredibly dangerous escalation of economic tensions. As the US Treasure Secretary put it, such actions "could trigger a global cycle of protectionist legislation".

This seems to confirm that the development of the economic crisis on all fronts is pushing the capitalist states more and more into headlong collision with each other. As room for manouvre declines, each attempts to push the effects of the crisis onto its rivals, and worsening the crisis still further.

Despite the turmoil, house prices in the UK, posted their highest annual rise in two years! But this is far from the case in parts of Europe, where countries experiencing property booms are now experiencing falling prices.

The head of the IMF has tried to put a brave face on things. With touching faith in the "invisible hand", he thinks the crisis will strengthen the economy in the long-run. Of course, this episode, no matter how serious is not capitalism's "final crisis". There will a recovery in some form or other but this cannot overcome the fundamental contradictions that faces the system on global scale - contradictions that promise even more spectacular convulsions to come.