The Red Menace: COME BACK Karl Marx, all is forgiven.

[Hannah Bell]

By Iain MacWhirter

The irony, though, is that this time it isn't the working classes who are demanding that the state should take over, but the banks. The capitalists are throwing themselves on the mercy of government, demanding subsidies and protection from the capitalist market - it's socialism for the banks. Hedge fund managers of the world unite, you have nothing to lose but your bonuses.

On Friday, the heads of the big five British banks demanded - and got - another £5 billion in "emergency liquidity" from the Bank of England to add to the £5bn they received earlier in the week. But like militant shop stewards they complained it wasn't enough. "Look how much the banks are getting in Europe and America," they whinged. Hundreds of billions of dollars and euros are being thrown at banks in an attempt to save them from themselves....

Which takes us back to Marx. The crisis that is rocking the world is a classic example of the kind of shocks and dislocations that Marx said were an essential feature of a competitive capitalist economy. The falling rate of profit that results from too much investment piling into new technologies and commodities forces capital to engage in a constant search for profit.

As it becomes harder and harder to make money out of making things - just look at the collapse in prices of computers over the last decade - so exotic financial derivatives have been created to boost wealth without engaging in recognisable economic activity. Speculation takes over. British manufacturing has collapsed to a fraction of what it was 20 years ago, and a vast financial services sector has grown up in its place making money largely out of inflation in house prices, ie debt.

Moreover, with globalisation, trillions of dollars have been washing around the world markets looking for a home. This has created a monster: the market in financial derivatives; a Pandora's box of inscrutable financial instruments governed by supposedly failsafe mathematical formulae. Collateralised debt obligations - implicated in the subprime mortgage crisis - are at least rooted in nominal house prices, but they have been detached from the actual mortgages and sold as commodities in the securities market.

Credit default swaps have created a $45 trillion global industry based on nothing at all, merely speculating on the movements of currencies and commodity prices. A credit default swap is a kind of insurance contract taken out between two bankers who bet on the price of an asset. They don't need to own the asset, and there is no actual loss if the default happens. But the contracts can be traded, allowing the swappers to create value out of nothing but their own agreement.

According to the Bank for International Settlement in Basel, the global derivatives market is worth some $516 trillion - 10 times the value of all the world's stock markets put together. And much of it is based on very little but leveraged optimism; pieces of paper theoretically based on the price of an empty house in Cleveland, Ohio.

Billions have been magicked out of nothing by this financial alchemy, but in the end, there is no way of turning dross into gold, and the reckoning had to come. And someone had to pay - which is where we, the people, come in.

As happened in the 1930s, the whole system is collapsing. We are faced with the choice of colossal bank defaults or hyper inflation: saving the banks or saving our savings. The central bankers decided that they would rather save the banks. So our governments are using public money to bolster banking balance sheets and allowing inflation to rip so that the banks' losses will be devalued, along with the pound in your pocket.

http://www.sundayherald.com/news/heraldnews/display.var.2140424.0.the_red_menace.php

[malaise]

1. Great post

We face the same problem. Governments are locked into this neo-liberal madness while subsidizing a tourist industry that has virtually run the unions out.

Marx is laughing from his grave. He knows that when the time is right, the people will rise up.

[blindpig]

2. When is the time right?

We make it so.

[malaise]

3. It's that simple

When enough people have had enough

[blindpig]

4. kick n/t

[blindpig]

5. Bourgeoisie illusions

The American economy has been growing at an annual rate of about 5 percent until recently, that is an impressive rate. Yet not all bourgeois economists are happy with this situation. Under normal circumstances they would already be thinking about applying the brakes. But these are not normal times! The President of the US Federal reserve Alan Greenspan has been praised for not raising interest rates. Here we can permit ourselves to make a little prediction: the same people who are praising Alan Greenspan today will be kicking him tomorrow! As the Economist correctly points out, the chairman of the Fed is behaving in an irresponsible manner. It is clear that the present frantic rate of growth cannot be sustained indefinitely. Nor can the breathtaking rise in stock exchange values. The Economist can afford to be objective in giving advice since it is several thousand miles distant from the scene of the action. It is always easy to be objective about one's neighbour's marital or financial difficulties than one's own. Unfortunately, neighbours do not usually take much notice of even the most friendly advice.

The American bourgeoisie appears to have taken leave of its senses. Like the Roman priests and soothsayers consulting the entrails of dead animals, they look for any augury that suggests that the US economy is cooling down to the point that it reaches some hypothetical rate of growth that (they imagine) can be sustained indefinitely. They have about as much chance of finding this non-existent point as the alchemists had of turning base metal into gold. In the meantime, by taking no action to detain the mad rise of share prices and slow down the rate of growth, the Fed is acting as an accomplice to the economic equivalent of a head-on car-crash. It is a bad case of drunken driving, and will involve a large number of victims who were not looking where they were going.

Sooner or later this American Stock Market bubble boom is going to burst with serious consequences - and not only for America. That is why The Economist has been pleading with the Fed for the past two years to put the brakes on, to take a little bit of air out of the bubble before it bursts. But the problem is that in every boom in history the bourgeois are afflicted with the self-same illusions: "capitalism has solved it problems, something radical has changed, everything is different, there won't be another slump". And as a corollary, "class struggle is off the agenda, there will no more revolutions". And always it ends in tears�

http://www.marxist.com/Economy/class_struggle_and_econ.html

[Callie857]

7. "Bourgeousie" economists are Marxist theorists

Face it, the globalization, promoted by the same economists you want to dismiss as somehow representing capitalism, et al.. are by and large shaped by Marxist theories. It also has to be stated that what they are doing is what Marx advocated. Destroying the economies of the West, so as to create one large poverty stricken class, that can be exploited by a smaller elite. They rationalize the erosion of civil and human rights, as an important step to squash self determinaition, to silence and oppress.

Their desire is to play both sides against the other. Both political extremes have allied in globalization and both feel their own side will win the day. It allows the corporate elites to take over and control economies with the help of governments, both right and left wings. Both extremes feel that they can then bring the corporate elites to their knees. What matters most is the fact that both extremes are corrupt and wrong. There is no freedom gained, no rights, no liberty. It is slavery.

[blindpig]

9. Huh?

What are you saying that Marx advocated?

"Both political extremes have allied in globalization..."

Care to provide some specific examples?

[whistle]

6. Credit defaults from derivatives and SIVs will go beyond $850 trillion

...and there is not that much money in the world now nor will there be over the next twenty-five generations

[formercia]

8. Throwing worthless paper money at insolvent banks

I'm glad I planned for a big garden this year.

I feel sorry for folks that live in the cities.

I have plenty of ammo, so leave my tomatoes alone.

[Hannah Bell]

10. Plenty of "money".

Not enough stuff.

[emperor124]

11. Don't leave us Karl, we still love you! n/t

[blindpig]

12. And that ain't all

We reject all euphemisms or propagandistic softening of the brutality of this regime: all greenwashing of its ecological costs, all mystification of the human costs under the names of democracy and human rights. We insist instead upon looking at capital from the standpoint of what it has really done. Acting on nature and its ecological balance, the regime, with its imperative to constantly expand profitability, exposes ecosystems to destabilizing pollutants, fragments habitats that have evolved over aeons to allow the flourishing of organisms, squanders resources, and reduces the sensuous vitality of nature to the cold exchangeability required for the accumulation of capital. From the side of humanity, with its requirements for self-determination, community, and a meaningful existence, capital reduces the majority of the world's people to a mere reservoir of labor power while discarding much of the remainder as useless nuisances. It has invaded and undermined the integrity of communities through its global mass culture of consumerism and depoliticization. It has expanded disparities in wealth and power to levels unprecedented in human history. It has worked hand in glove with a network of corrupt and subservient client states whose local elites carry out the work of repression while sparing the center of its opprobrium. And it has set going a network of transtatal organizations under the overall supervision of the Western powers and the superpower United States, to undermine the autonomy of the periphery and bind it into indebtedness while maintaining a huge military apparatus to enforce compliance to the capitalist center We believe that the present capitalist system cannot regulate, much less overcome, the crises it has set going. It cannot solve the ecological crisis because to do so requires setting limits upon accumulation—an unacceptable option for a system predicated upon the rule: Grow or Die! And it cannot solve the crisis posed by terror and other forms of violent rebellion because to do so would mean abandoning the logic of empire, which would impose unacceptable limits on growth and the whole “way of life” sustained by empire. Its only remaining option is to resort to brutal force, thereby increasing alienation and sowing the seed of further terrorism . . . and further counter-terrorism, evolving into a new and malignant variation of fascism. In sum, the capitalist world system is historically bankrupt. It has become an empire unable to adapt, whose very gigantism exposes its underlying weakness. It is, in the language of ecology, profoundly unsustainable, and must be changed fundamentally, nay, replaced, if there is to be a future worth living. Thus the stark choice once posed by Rosa Luxemburg returns: Socialism or Barbarism!, where the face of the latter now reflects the imprint of the intervening century and assumes the countenance of ecocatastrophe, terror counterterror, and their fascist degeneration.

From the Ecosocialist Manifesto