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Economic crisis

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baboon
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Dec 18 2007 15:41
Economic crisis

It's getting worse isn't it?
The recent "co-operation" announced between the Fed/ECB and Bank of England to "provide liquidity" is being done through gritted teeth. To some extent the US has protected itself (and China to some extent) by cheapening the dollar. This has the effect of dumping the worse effects of the crisis on Europe and Japan. But there's trouble ahead - solve the crisis of credit and debt by making more credit and debt available - how long can they do this for?

In The Times yesterday there's some financial wizard talking about the crisis: "There's a leak in the fuel pipe" he says, "so we need to put our foot down harder on the gas".
It reminded me of years ago when I was on holiday in Cornwall. I picked up my mate's inflatable boat in Hayle, put it on top of the car and drove back to Helston. I had a petrol leak in the pipe and drove about 15 miles with my wife and kids in the car. It only needed a spark - static will create a spark as will two stones clashing together and we were history. It was a stupid thing to do but I'm glad to get it off my chest. We had great fun in the boat.
But the analogy stands; the more they increase the supply of credit the more, degree by degree, the situation becomes more potentially combustible.

Carousel
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Dec 18 2007 15:45
Quote:
It's getting worse isn't it?

Suits you sir. Not for me as it happens, I'm flush. Knee deep in charlie and ho's.

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It reminded me of years ago when I was on holiday in Cornwall. I picked up my mate's inflatable boat in Hayle, put it on top of the car and drove back to Helston.

Ha ha. It's all glamour this left communist malarkey.

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Joseph Kay
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Dec 18 2007 16:22

i've nearly finished a book (which is interesting, but i've yet to form an opinion of) which deals with this, although quite differently to the ICC (Giovanni Arrighi, 'The Long Twentieth Century'). he identifies four 'systemic cycles of accumulation' centred on genoa, the dutch provinces, britain and then america, and argues each has gone through a similar cycle, first investing in trade and material production ('M-C phase'), then experiencing a flight into finance and speculation as accumulated capital exceeds what can be profitably re-invested ('C-M phase'). on his analysis, the US systemic cycle went into crisis in around 1970, (and extrapolating) china looks set to be the centre of a new cycle of accumulation as its expansion of material production is well under way. so in this framework the massive extensions of credit currently being advanced have historical parallels in the decline of specific centres of capitalist power, but by no means signify a crisis for capital per se.

the epilogue, which i haven't read yet, is titled 'can capitalism survive success?' and may be more to the ICC's taste as it deals with the fact the crisis of each successive cycle was only superseeded by widening the geographic reach of the new regime - but the US-centred one is already global.

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jef costello
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Dec 18 2007 17:56

Isn't this crisis stuff the basic problem of capital though? Not sure if I can express this clearly but the problem is that rather than being assets that produce assets assets produce money, and this money has to also produce more money and the money that it accumulates needs to produce more money and so on. So basically to avoid meltdown we need a drastic devaluation or redistribution of money.

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oisleep
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Dec 18 2007 18:35
Joseph K. wrote:
i've nearly finished a book (which is interesting, but i've yet to form an opinion of) which deals with this, although quite differently to the ICC (Giovanni Arrighi, 'The Long Twentieth Century'). he identifies four 'systemic cycles of accumulation' centred on genoa, the dutch provinces, britain and then america, and argues each has gone through a similar cycle, first investing in trade and material production ('M-C phase'), then experiencing a flight into finance and speculation as accumulated capital exceeds what can be profitably re-invested ('C-M phase'). on his analysis, the US systemic cycle went into crisis in around 1970, (and extrapolating) china looks set to be the centre of a new cycle of accumulation as its expansion of material production is well under way. so in this framework the massive extensions of credit currently being advanced have historical parallels in the decline of specific centres of capitalist power, but by no means signify a crisis for capital per se.l.

that's the interesting thing about that analysis, at each of those stages of capital accumulation (across space & time), that accumulation was seen to be and had to be backed by an increasingly larger and more powerful traditional fixed political-territorial power (contrary to what the rhetoric of neo-liberalism always bleats on about), i think any doubt that this was the case has been put to rest given the massive state intervention in financial markets over the last couple of months and more generally the various state activities that tried to make neo-liberalism work in the frst place

but these two logics of power are not necessary always complementary their symbiotic but also antagonistic, it does beg the question though of what political-territorial logic of power or arrangement will be there to back up the dynamic of endless capital accumulation now that it's clear that the US is not large or powerful enough to do so, if the theory is right then it points towards either some kind of world government or tits up

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Alf
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Dec 18 2007 22:00

And what about global capital?

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oisleep
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Dec 18 2007 22:30

that's one of the two logics of power i was referring to

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Alf
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Dec 19 2007 09:01

What I mean is that once you have a world economy - and capitalism is the first mode of production to achieve that - then the crises of the economy are always essentially world crises. China's growth today is a very clear expressiion of this - its rapid industrialisation is the other side of the coin of the deindustrialisation of the western economies, and its massive export boom is dependent on the debt-fuelled, artificial markets in the west. The whole system stands or falls together, and the 'fall' is clearly underway.

If it's a choice between world government and tits up, it's the latter, because despite the global nature of capital, it can never overcome its imperialist antagonisms.

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Joseph Kay
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Dec 19 2007 09:08
Alf wrote:
The whole system stands or falls together, and the 'fall' is clearly underway.

this is why i mentioned arrighi, because he seems to debunk this fallacy pretty well. the decline of any one centre of capitalist accumulation does not imply the decline of capitalism itself any more than the collapse of a civilisation implies the collapse of civilisation per se. as he would have it, the financialisation and indebtedness of the current 'core' countries is indeed a signifier of their decline as centres of accumulation, but also signifies the rise of a new phase of material production centred elsewhere (looks like china, in '94 arrighi predicted japan).

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Alf
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Dec 19 2007 15:32

The collapse of capitalist civilisatiion is rather different from the collapse of previous civilisations which could co-exist with other modes of production, and relatively unconnected to them. Capitalism is the first global civilisation and its collapse either entails the destruction of human culture or the passage to a new form and higher form of civilisation.

China has not 'arisen' independently of the crisis in the old centres, but as a direct result of it; and the world bourgeoisie is getting increasingly jittery about the dependence of the Chinese boom on bad debts in Europe and America. China's growth is not the expression of a healthy and youthful capitalism but a tumour in a body that is very sick indeed.

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the button
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Dec 19 2007 15:46

If only there was a single word which could sum up the particular way in which capitalism is collapsing. cry

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oisleep
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Dec 19 2007 16:25

flange?

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Dec 19 2007 16:58

China seems to have taken on a similar role to Japan in bourgeois mythology at the end of the 80s. Much was made of Japanese manufacturing, their ability to escape recession, the fact that they held vast amounts of US currency and Treasury Bonds (which worried the US bourgeoisie greatly), etc. Of course, this hid a gigantic property bubble which then left Japan with a decade of stagnation from which it has never recovered.

China is talked about in exactly the same way today. And, in a farcical repeat of history it also has a big property bubble, a stockmarket bubble, etc. For all the growth and shift to a market system, profitability of Chinese companies remains staggeringly low (one figure I've read says only 10% of Chinese companies actually make a profit).

Despite this, the banking system in China is shaky unable to escape fully from the bloated Stalinist model which has been forced to keep credit lines open to unprofitable businesses which would otherwise collapse. This, of course, has allowed them to avoid the disastrous "shock therapy" effect that became infamous in Russia. How long this can go on is anyone's guess but the Chinese bourgeoisie is still feaful of the social explosion that would result if they carried out the necessary amputations.

However, having said that, it's interesting to see big American capitalists like Citigroup have to go cap-in-hand to Chinese and other Far Eastern capitalists to beg for cash to ease their liquidity crisis. China is kinda like Gordon Brown to the US's Tony Blair - they're finally moving into a position of power only to see everything go tits up around it.

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oisleep
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Dec 19 2007 17:13

i'm sure they've got a wee bit to go yet though, once their domestic consumer market takes off it will dwarf anything like america ever had, and look what that did/is still doing for america

citigroup got money from Abu Dhabi, UBS from singapore, was barclays, fortis and bear stearns i think that got money from china (and it wasn't for liquidity reasons but for capital adequacy reasons), and i think to an extent these soverign wealth funds who provided the money were chapping at the bit to invest given the fact that until now they'd been stuck having to invest in low yielding us treasury bonds

afraser
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Dec 19 2007 18:18

Joseph K. - I've not read Giovanni Arrighi yet, but his fellow world-systems theorists Immanuel Wallerstein, Andre Gunder Frank, Janet Abu Lughod are all good. Frank's "ReOrient: Global Economy in the Asian Age" argues that capitalism has been operating for 5000 years and has been centred in Asia for most of that time. The forward to the Korean Edition is good at http://www.rrojasdatabank.org/agfrank/korean_foreword.html

yoshomon
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Dec 19 2007 19:40

http://news.yahoo.com/s/ap/20071219/ap_on_bi_ge/fed_credit_crunch

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Alf
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Dec 19 2007 20:16

capitalism around for only 5,000 years? Why stop there? It's human nature innit?

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Joseph Kay
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Dec 19 2007 22:34

world-systems theorists define capitalism quite differently to communists (following braudel as the third tier in a hierarchy of spheres: material life < the market < political-financial nexus, or something like that, i'm open to correction), but arrighi at least is not without his insights, mainly (from braudel again) in taking a longue durée perspective so as to discern cyclical movements from novelty.

baboon
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Dec 21 2007 12:08

China the new dynamo of the world economy? In the 70s, 80s and 90s it was Keyna, Brazil and then the Asian "dragons", and China will go the same way.
There can't be any predictions about the exact way that the economic crisis will pan out and we can't exclude the possibility of a sudden, catastrophic failure of state capitalism. But what is certain is that the economic situation will decline, become increasingly unstable and attacks on the working class will rain down remorselessly.
To pose China as a new "workshop of the world" a new "locomotive" for the world economy, must be something of a laugh to the working class in that country. What we'd expect to see if such were the case would be a general amelioration of the conditions of the working class and the foundations of longer-term structures tending to favour the proletariat. In fact we'd have to support the appearance and maintenance of such structures in a progressive, expanding entity. But the opposite is the case.
The Chinese economic "miracle" is largely predicated on very cheap labour in that country and a credit and housing bubble in the west. As wages increase from next to nothing in the former and the bubbles burst in the latter, so too will the Chinese economy be hit, exacerbating the effects of the crisis overall.
Credit says Marx in Capital, can serve to develop the forces of production in a rising capitalism, but it also "accelerates the violent outbreaks of this contradiction, crises and with these elements of dissolution of the old mode of production".

Spikymike
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Jan 5 2008 15:44

The last two articles on China in 'Aufheben' are worth a read, especially the last which concentrates on the specifics of the class struggle in recent history;

www.libcom.org/aufheben

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Jan 5 2008 15:55

Apparently Singapore has recorded negative growth this quarter and there are fears it may go into recession. There are also worries about South Korea. No time to give more detail, but this could be a sign that the crisis is beginning to spread.

Carousel
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Jan 5 2008 17:20

There is a real 70’s style UK currency crisis looming, as demonstrated by the 27% rise in the price of gas in some parts of the UK and concomitant hikes in electricity.

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Jan 21 2008 19:56

Are we approaching a new and dangerous phase in this unfolding drama? I'm not talking about the 5% drops on the stock exchanges today, although this is certainly indicative of the worries of the bourgeoisie. Nor am I talking about the stampede out of commercial property funds which has been gathering pace for months but has only now just hit the financial headlines as the funds in question begin to close the exit doors.

Instead I'm talking about the threat to the big bond insurers - recent losses have prompted fears of a revaluation of their credit ratings. These institutions underwrite large portions of the debt market and any revaluation would inevitably spread to large portions of commercial paper that they support. This will reinforce the credit crunch and threaten a crisis at a far more systemic level than we've seen so far.

This could also be a direct vector from the bizarre alchemy of the financial world into "real world" production. Such a development will make it more difficult for these firms to insure new bonds: "The worry is that these downgrades will reduce these companies' ability to insure further bonds, making it more expensive for local authorities to raise cash to support projects. In the UK, for instance, this could mean that building projects such as hospitals and schools being paid for under the government's private finance initiative will become prohibitively expensive."

Considering that Government spending through PFI has been one of the main methods of pump-priming the economy in the UK over the past few years a slow down here could be serious in terms of jobs and employment. An increase in pressure on the public finances is the last thing the British bourgeoisie needs with its budget deficit ballooning out of control.

This will mean an inevitable assault on public sector workers and the working class as a whole in forms of drastic cuts to the social wage. Already the political parties are positioning themselves for new attacks on benefits and it seems the worst is yet to come.

baboon
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Jan 22 2008 16:26

When Joseph K opened the original thread on the economic crisis in August last year there were many posts suggesting the eternal nature of capitalism and the propagation of the idea that the bourgeoisie could always get out of trouble. The above post, on top of the indications of the money markets, indicate that this "timelessness" of capitalism (above it's suggested it's five thousand years old!) must be increasingly called into question.
This latest episode (from last August) is the worst of a series of economic crises that began in the late 1960s with the end of the post war reconstruction and Japan and Germany, instead of being importer countries became net exporters demonstrating that the relative saturation of the market is the fundamental problem of capitalism.
The crisis in the bond market mentioned above is another powerful indicator of the crisis of state capitalism, the latter a mechanism put in place by all factions of the bourgeoisie in order to phase in, regulate and attempt to control the worst expressions of the crisis. These mechanisms, of which bond underwriting is one, are becoming weaker and weaker. Local authorities in the USA, directly from much lower credit ratings from bond insurers, are threatened with immediate bankruptcy.

Carousel
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Jan 22 2008 16:47
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The above post, on top of the indications of the money markets, indicate that this "timelessness" of capitalism (above it's suggested it's five thousand years old!) must be increasingly called into question.

Ha ha. Perhaps capitalism ended with WWII and we just call what we have “capitalism” as a kind of convenient shorthand. Regardless, the oncoming crisis, which is really the costly but inevitable transition away from fossil energy, will only become a crisis-for-capitalism if the reaction to austerity cannot be contained. Far from inevitable. Indeed, even if the grand communist prophecy should materialise, there’s every likelihood that we’d take our chances with barbarism rather than suffer the “harmonisation” of the conflict between the individual and society, that is to say, the social historic creative force.

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jef costello
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Jan 22 2008 17:41

Was my post bollocks then?
I've got a bit of cash in the bank should I go out and spend it on something? Or transfer it to lazy riser for proper decadence.

MalFunction
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Jan 22 2008 18:02
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I've got a bit of cash in the bank should I go out and spend it on something? Or transfer it to lazy riser for proper decadence.

i understand gold is becoming popular again.

only useful while there's still money to transfer back into though.

(been reading naomi klein's "the shock doctrine - the rise of disaster capitalism" apart from suggesting that capitalism could be nicer, there's a lot of information about how economic crises were engineered for political purposes and to institute attacks on working class power and standards of living. not finished the book yet - it's a long read - but worth getting in paperback when it comers out in that format.)

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Durruti
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Jan 22 2008 21:12

theres always a recesion before a good (world) war, lets hope we can get out onthe streets this time, let the proletariat (that doesnt excist in these times of materialism) get onthere knees, and realise, anarchy is the way to go.

Vaneigemappreci...
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Jan 23 2008 10:47

Well i dont know much about the intricacies of economic crisis (says in a angelic, deep south accent) but what i do know is that its getting more expensive to go to work and that my wages are barely covering my very modest cost of living!

Quote:
i understand gold is becoming popular again.

Popular maybe, but certainly not more expensive, not on the sovereign front anyhow. Someone in my family sold some sovereigns a little while ago and most of them went for less than what they fetched in the 1980s. I have no idea whether this is an indication of the depression of world gold markets or just an indication of the effect of internet trading!

MalFunction
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Jan 23 2008 12:21
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Bullion's back in the new bear market

As financial markets suffer in the credit crunch, investors are turning back to the safety, and rising price, of yellow metal, writes Tim Webb

* Tim Webb
* The Observer,
* Sunday January 20 2008

This article appeared in the Observer on Sunday January 20 2008 on p6 of the Business news & features section. It was last updated at 23:38 on January 19 2008.

A decade ago, pundits forecast the 'death of gold'. Banks started closing their gold trading desks as prices seemed to be on a downward spiral. Investors were swept up in the dotcom craze. Putting money into a yellow metal that had few practical uses and didn't promise massive gains didn't make sense.

The glory days were over. The fascination and desire for gold, which had inspired films such as Goldfinger and The Italian Job, would, it seemed, become a thing of the past. Yet today, the glamour of - and clamour for - gold is well and truly back. Since September, prices have increased by more than a quarter. At the start of the year, they broke through the previous record, set in 1980, of $850 an ounce (there are 400 ounces in a bar). And last Monday, prices soared above $900 an ounce, though they fell later in the week.

continues...

http://www.guardian.co.uk/business/2008/jan/20/2

price of gold goes up and down depending on other economic factors. if you get it right you can make money trading in it, if you get it wrong you can lose just as much.

ernie
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Jan 23 2008 19:21

Radio 4 had an interesting program on Monday morning (9.00) about the City and the Credit Crunch. There was the usual froth about this being no different to the other recessions etc. However behind this there were some interesting comments, a couple of people said that this was the worst financial crisis since the 1930's and one said we had come close to another 1929. Funnily enough, when it was repeated in the evening (in a shorter version) all of these comments had been edited out!!
This financial crisis of great importance to all workers. Not only does it cut through all the rubbish about the end of boom and burst etc but it also will have a direct impact on workers living and working conditions. It is workers' pensions that are going down the swanny in this crisis: this will mean the collapse of even more pension funds and yet more attacks on pensions. Then there will be the lay offs as the open recession develops. Inflation is already increasing at a time when many workers are being asked to sacrifice themselves for the good of the economy. Also tens of thousands of workers are going to lose their homes in Britain and possibly millions in the US..
There is another point that is carefully played down in the media: the huge cost of Northern Rock. This cost is approaching the same amounts as the US government are pouring into the US economy. This shows how terrified the bourgeoisie were and are of the collapse of this bank. Not only because of this bank but because they know all of the others are in a similar situation.
This is not a recession before another world war, the conditions do not exist for this, but one which will take place in a very fragile world situation. The two "miracle" economies; China and India, despite all of the jigger pokery of bourgeois propaganda about them being immune to the recession, are dependent upon the US and the Wests debt fueled spending so are going to be placed in a very difficult situation. Their decent into recession would punch a massive whole in all the ideology about the 'real' health of the world economy etc.
The coming months and years are going to be very interesting and are going to lead to even deeper attacks on the working class, especially upon those parts of the social wage that have appeared to justify the capitalist system: pensions, health and housing. The attacks on these are going to play an important role in the proletariat's questioning of the whole system.
As will the worsening of imperialist tensions. The US is going to be caught in a double bind: recession and increasing demands to impose its imperialist domination. A situation which will pose many questions to the working class around the world.