The Socialist 4 October 2007

Support postal workers: decisive action can win

"We've had the battle - now this is war!"

Protests make bosses ditch closure plan

Iraq: end the occupation nightmare

Stop the War Coalition (STWC) national demonstration

Tory party fears an autumn election

Banking turmoil continues

Corporate Labour

Come to the NHS demo!

Swansea meeting

Classroom assistants on strike

Supermarket price-fixing scandal

Success! Double whammy for nursery campaign

EU's anti-working class 'reforms'

Fighting nuclear power

Students want to fight back

Che Guevara - revolutionary fighter

Socialism 2007: Ideas for our future

Socialism 2007.net

Burma: Dictatorship under threat

QPR buy-out - Reclaim the game!

It's a free world, a film by Ken Loach

Anno 1701 - Dawn of Discovery

Local government pay offer: It's time for action

Remploy workers win partial victory

Care workers on strike

National Shop Stewards Network makes plans

Previous issues, etc

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Banking turmoil continues

The governments's effective nationalisation of the deposits in the stricken Northern Rock bank and guarantee of deposits up to £35,000 in all banks, have not ended the financial turmoil. This is because the run on Northern Rock was only one early consequence of the financial sector crisis.

Judy Beishon

Switzerland-based finance multinational UBS has now declared a write-off of over a billion pounds of its 'assets' and a resulting overall loss in its July to September quarter performance. This is no minor player; UBS is one of the largest global asset managers, operating in over 50 countries and employing 80,000 people – 1,500 of whom are about to be made redundant.

The bank rushed to replace its head of investment and its chief financial officer and announce "structural improvements" in an attempt to maintain the confidence of its clients. Its chief executive blamed continuing "turbulent conditions" following the onset of the US subprime mortgage crisis in August, as the reason behind these decisions.

UBS is not on its own. US multinational Citygroup has written off $6 billion. The current-year profits of all City of London banks from asset-backed financial products are expected to be several hundred million pounds lower than originally predicted.

London will be hit harder than other financial centres in Europe because it has been a key player in the complex money dealings that have been based on spiralling debt. The change is sharp and sudden; Barclays Capital has reported that since July not a single deal has been sold by any bank in asset backed securities (loans or bonds backed by mortgages, loans, credit card debt etc).

The banks are trying to pull back rapidly from their own recklessness. In the year 2000, they tended to have balanced books. But just six years later - by the end of 2006 – the amount they had loaned out was £530 billion more than their deposits held.

The financial turbulence is leading to lower economic growth forecasts. In the UK, business services are a third of all economic output, so the impact of the turmoil will be very significant.

And the government has no quick fix available. The Bank of England is now expected to copy the US Federal Reserve and reduce interest rates to ease the present inter-bank loan and housing mortgage crisis, but with oil and commodity prices rising, they fear stoking inflation.

The crisis has not yet impacted heavily on ordinary people, but unfortunately it will. Nearly a quarter of home owners with fixed rate mortgages face an end to their fixed-rate period in the next 15 months. It is estimated that on average they will then have to pay between £167 and £415 a month more than they are at present! New mortgage seekers face potentially prohibitive terms, such as deposits as high as 25% of house value.

The levels of mortgage arrears, other debt, house repossession, insolvencies and homelessness are clearly set to rise. This is from a starting point where household debt has already trebled over the last decade.

Some capitalist economists are still in denial over the approaching recession, but as the socialist has warned – basing our analysis on the cyclical nature of capitalism as explained by Karl Marx – at some stage soon, it is inevitable.

In this issue

Support postal workers: decisive action can win