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The System Isn't Working
THE DEEP gloom in the economy is spreading to the finance sector. Until recently, says the Financial Times, banks shrugged off fears about bad debts and had big profits. No more.
Share prices in the banks have plummeted on stock markets worldwide. In the USA, Bank of New York shares went down 22% while Comerica's fell by 24%.
European banks also suffered in particular Deutsche Bank and Commerzbank from Germany went down heavily.
It's not just gambling fat cats being forced to slim rapidly - these employers will take it out on the working class, both as workers and consumers.
Commerzbank, Germany's third biggest bank, lost a quarter of its value last week. The Observer even compared this to the Credit-anstalt bank in Austria whose collapse in 1931 set off a decade of severe depression worldwide.
Investment bankers Merrill Lynch set off panic when an email to a credit rating agency said: "Again the market is flooded with rumours that Commerzbank amongst all its other problems sustained large trading losses in Credit derivatives. Apparently a number of banks have begun to shut down credit lines."
They didn't give details of what 'derivatives' and how they've been over-exposed, but they all add to fears about the banks' credit ratings, bad loans and worries about whether lower interest rates would hit profit margins.
Commerzbank will add to the 4,300 jobs it has already announced for the next 12 months.
A few years back capitalism's cheerleaders said the boom - particularly in the new technology sphere - would last forever. Now reality is biting back.
Capitalism still suffers from its old problems - over-investment, overproduction, and now collapsing profits.
How many banks will the crisis hit? How many jobs will go? Will banks cut down even further on credit?
Will that hit consumer spending with more knock-on effect on a troubled manufacturing industry?
Capitalism is showing that it doesn't work and the world economy stands on the brink of a double-dip recession.
We are fighting to replace this profit-driven chaos with a democratic socialist system based on rational planning.
In The Socialist 11 October 2002: