Stock markets around the world nosedived on Monday of this week as more evidence of the dire state of the world economy sent investors into a panic. This will have a dramatic impact on ordinary people’s pensions and jobs.
The Dow Jones share index in the US fell by 4.2 percent and closed at its lowest level since April 1997. In Britain the FTSE 100 closed at a six-year low.
Meanwhile Japan’s stock markets plunged and came close to reaching a 26-year low.
Two revelations sent the markets crashing. The first was news that the AIG US insurance giant made a loss of $62 billion in the final three months of 2008 – the biggest quarterly loss in corporate history.
Barack Obama responded with a fresh bailout of $30 billion for the company.
But AIG had already been given $150 billion by the US government – the biggest bailout of any US company.
The realisation that this was not enough to solve AIG’s problems sent shockwaves across the financial system.
The US government is terrified of allowing AIG to fail. The company holds shares in numerous other firms, which could be pulled down if it went bankrupt.
The second factor hitting the stock markets was the major bank HSBC’s announcement that it would try to raise £12.5 billion from its shareholders – sending its share price spiralling by almost 20 percent.
HSBC is one of the few banks in Britain that has not yet asked the government for a hand out. Its troubles have caused more fear.
The latest shudders in the stock markets reflect the utter panic of the ruling class as the economic recession deepens.
The world’s leaders face huge problems. They can continue to throw money at the banks in a desperate attempt to stop them going under and get them to increase their lending.
But every bailout simply underlines the depth of the crisis – increasing the lack of confidence among the ruling class and compounding the slump.
The bailouts are failing, though they are the only solution on offer from the world leaders.
Just last week central banks gave 24.5 billion euros to central and eastern European economies.
This is on top of stimulus packages already put in place by individual European governments.
US, China, Japan, France, Germany, Britain and Ireland, to name but a few, have all used these methods to try to deal with the crisis. Yet the recession continues to spread.
Millions of people can now see the madness of the system.
Banks stop lending to firms and individuals, not because they don’t have the money but because they are not confident that they will get it back.
Investors and speculators pull their money out of areas they are no longer confident will give them a good return – generating panic among others who then follow suit.
The slump then moves quickly to engulf the entire system.
There are all sorts of things that ordinary people need – housing, hospitals, public transport and services.
Yet if these things are not profitable, capitalists will not invest in them.
Of course, this irrationality exists at all times. But in a crisis, where the bosses are less confident of making money, is it sharpened.
This is not the only way that people come to realise that the way the system works just doesn’t add up.
Governments can afford to throw billions at failing banks and bosses keep their luxury homes, bonuses and massive pensions.
They tell ordinary people, however, that there is no money for their schools and hospitals.
People’s pensions are coming under attack, wages are held down or cut and people who are thrown on the dole are forced to live on poverty benefits.
Our leaders want to force ordinary people to pay for their crisis. But they are playing a dangerous game.
As people see their livelihoods destroyed and things that they once took for granted – a secure home, a pension, healthcare – evaporate, a bitter anger at the system will grow.
This must be directed at the people who are wrecking the world – the bankers, the capitalists and the politicians.
Strikes at 68 universities
Agency workers would be paid more
A racist Tory bill
Many people are already missing bill payments