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29 January 2008

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End this market madness

THE RECENT white-knuckle ride on world stock markets threatens a world recession. And it will be working-class people who will pay the price for this crazy speculation, when the full effects are eventually felt in the 'real economy'.

Manny Thain

On 21 January, Wall Street recorded the biggest one-day fall since 11 September 2001. Next day, the US Federal Reserve bank panicked with its largest single interest rate cut for 25 years.

Incredibly, the £3.7 billion fraud by a 'rogue trader' at one of France's major banks was greeted with relief in some quarters. Jérôme Kerviel became the scapegoat for the world financial crisis! It was not long before fear reasserted itself.

If Kerviel could make unauthorised trades on shares - worth €50 billion, equivalent to the GDP of Cuba or Slovenia - how many others are doing the same?

Kerviel's gambles are part of the system. He is a 'rogue' trader because he got caught. While profits kept rolling in, traders were given a free hand. Now, financial institutions are running scared at the amount of bad debt they are holding.

The US is sliding into recession. Two million homes will be repossessed because of the subprime crisis which broke last August. Companies lent (and continue to lend) money to people who could not afford to buy a house: subprime mortgages.

They were charged high rates of interest: the 'loan-shark principle'. Those mortgages were repackaged and gambled on financial markets, the debts spreading through the world financial system like a virus.

In Cleveland, Ohio, one in ten houses has been repossessed, making Deutsche Bank Trust the city's biggest landlord. US house sales are down 26% year-on-year.

Prices are falling, with millions of households going into negative equity. This is holding back consumer spending.

It was subprime that did it for Northern Rock. Less than a third of the Rock's funds were savers' deposits; 70% came from gambling their mortgage and other deals on international markets. House prices in Britain fell for the fourth month running in January. New mortgages are at a ten-year low.

This is the result of the neo-liberal, ultra-free-market policies pursued over the past 25 years. Most governments deregulated financial markets, privatised public services, and attacked workers' rights, pay and conditions. Phenomenal amounts of money have been pumped into the speculative market. But it is not backed up in the real economy. Now, some of these bubbles are beginning to deflate, bringing stock exchanges down with them.

De-industrialisation of countries like the US and Britain has made them dependent on the finance sector. So they are less able to weather these financial storms.

Britain is even more dependent on finance than the US. And the housing bubble is greater in terms of house-price to earnings ratios.

What is being exposed is the anarchy of the capitalist system. This global financial crisis will impact on the real economy by affecting mortgage rates, economic investment, etc.

That hits housing, wages, pensions and jobs. Working and middle class people are being made to pay for capitalist crisis.

This market madness has to stop! But that cannot be achieved by tinkering with the system.

Only when the working class controls society, can we move towards a democratically organised, rational and sustainable economic plan. That is what the Socialist Party stands for: socialist change, internationally.

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In The Socialist 29 January 2008:

End this market madness

No more school closures!


Education

Teachers' union calls strike ballot on pay

Anti-war protests save teachers

Labour councillors anger parents and tenants


Socialist Party news and analysis

New Labour attacking our vital benefits

Incapacity benefit cuts hit the sick

Hain resigns but stink of sleaze remains


International socialist news and analysis

Jail break from Gaza

Suharto: "One of the 20th century's biggest killers and greatest thieves"

US elections: The Barak Obama mirage


Socialist Party NHS campaign

NHS in crisis


Debt and Housing Feature

Debt and housing slowdown threaten Britain's time bomb economy


Socialist Students

Student elections: Not just a 'beauty contest'!

College students seek socialist ideas

Reality of London students' debt trap

More foo than fight as rockers agree to cross picket line


Marxist analysis: history

How Hitler came to power


Global Warming

Global warming, climate change and human activities - Part 2


Socialist Party workplace news

Burslem postal workers march back to work

Giving the real facts on Burslem strike

National Shop Stewards Network meetings

Police march for pay

PCS suspends strikes


 

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Related links:

Market:

triangleEnergy market chaos makes the case for nationalisation

triangleStop the Channel 4 sell-off!

triangleNHS white paper: no solution to failed Tory policies

triangleTories admit market failure - we want our NHS back!

triangleGameStop: Billionaires hurt at their own game

Economy:

triangleSocialists and the four-day week

triangleTax fraud could be over £20 billion annually

triangleCumbria Socialist Party: Socialism - from Utopian to Scientific

triangleBiden's policies will not solve underlying US crisis

Britain:

triangleSocialist Party national youth meeting

trianglePreparing for struggle in post-Covid Britain

Pay:

triangleWorkers at 13 colleges to strike over pay

Capitalist:

triangleGerman general election

Housing:

triangleFighting evictions in Cornwall

Socialist:

triangleSocialists and the four-day week

Recession:

triangleWorld capitalism's terrified strategists abandon austerity - for now

Households:

trianglePandemic homeless

Article dated 29 January 2008

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