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Wednesday, March 14, 2007

Is The Sky of Capitalism Falling In?
An Analysis of Recent Stock Market Events
by Coyote

There is not likely anyone out there who, at least known to me, really knows fully what is happening here or its full possible consequences, but clearly the global stock markets and investors in them are suddenly behaving extremely skittish.

Though the warning signs of impending difficulty have been there for awhile. They arise out of especially the highly speculative and super heated economic growth in China, upon which investment and markets growing numbers of US jobs depend, at the same time alongside reports of 10,000… Yes, ten thousand! … major civil unrest events occur annually, and have for a number of years now in China. Largely this civil unrest exists amongst rural, but include urban poor-, those masses of people who are cut out of and disaffected with the new so-called “liberal” capitalism practises of the Communist Party, and the huge differences in class income share between the top and bottom levels of Chinese society. .(Welcome to our world, folks!) At the same time there has also been all the warning signs of a perilous level of consumer (especially mortgaged homeowner) indebtedness and declining real purchasing power within the global engine of the world capitalist economy itself, the United States.

Yet, even major players were caught out, so to speak.

“Mark Headley, portfolio manager of Matthews Pacific Tiger fund, says it's not all about China. "This is more about the vulnerability of the U.S. economy," he says: A 9% decline in an index that was up 44% in 2007 on top of a 110% gain in 2006, was not surprising and, therefore, should not have warranted such a big sell-off here.” (USA Today)
Which quote I include here merely to demonstrate the shallowness of the analysis of many market players themselves. For clearly more is happening here than even this fellow is capable of understanding. (Stock markets reflect the “perceptions” of the players, as to what is happening in the stock market, and may or may not, more or less accurately reflect reality. The evidence of this is seen time and time again in the bubbles and panics such as frequently occur there.)

“Suddenly, the first major crisis facing the Bernanke Fed arrived without much advance warning - a rash of defaults on sub-prime home loans that if unchecked, can drive the US economy into recession in 2007. Shares of many US sub-prime lenders, such as New Century Financial (NEW.N), and NovaStar Financial (NFI.N), have been brutally hammered in recent weeks, as defaults mount among homeowners with poor credit histories, and where there is smoke, there is fire.
Skyrocketing property values during the US housing boom made it easy for homeowners to borrow heavily against their homes with second mortgages and home-equity loans. But if home prices continue to slide amid a glut of unsold homes and foreclosures, many over-extended homeowners will lose their ATM machines.” (By Gary Dorsch Editor Global Money Trends magazine Mar 1, 2007)

Still, the epicentre of this current collapse, which continues, after showing some early stabilization, started out not in the US, but in China.

“But the stock market plunge did not just affect China. It soon spread to the stock markets of Japan, Europe and the US. They fell by 3-4% in a day, not a huge fall but significant after the huge steady rise that these markets have seen since last summer.

That a hiccup in China should ripple throughout the world's stock markets shows how globalised capitalism, particularly its finance sector, has become. Truly, chaos theory applies in the anarchy of world capitalism: when the Beijing butterfly flaps its wings, the snow falls on New York.” (by Michael Roberts, World Socialist Web Site.)
And there, as old Ed Deake from Tyee might immediately recognize, is the nub of it. While there are a number of interplaying elements in this current problem with the financial markets of world capitalism, which now actually includes China, regardless of what flag flies from this or that pole, and local economic drivers in all countries that can add to bubbles and their popping, and compound either in particular ways, wild speculation in China and collapsing consumer/homeowner capacity in the US, it is the complexity of capitalism that is the underlying source of its fragility and vulnerability. It is precisely that very interdependency within its new “globalized” manifestation, thought to be the source of its strength on the one hand; the flow of cheap goods, cheap labour and money, that also sends crisis and collapse around the world in an instant. And it is what makes it difficult to control and contain in any situation for good or ill.

Clearly, capitalism is going through at least another one of its unsettling and periodic global gyrations, made worse in fact by its own increased and fragile global interdependency network system. But what of its significance for capitalism? Does it signal a major crisis ,or more particularly one that may go on and worsen for a very long time, like say the Great Depression of the 1930s?

Certainly I do not know the answers to this question. It might very well signal, given the return of capitalism to its Industrial Revolution roots of a more pure “market determined” rather than regulated/ managed practise, that we may see a more classic “bust” of old as well. Though I would not hang my hat on that possibility just yet though. (Nor would I totally discount it.)

But what is clear, is that even in its new globalized manifestation, there is still much that is familiar and recognizable within the so-called “new capitalism”, as has always been there; growth and development bubbles followed by bust, all the classic wide share disparities between the wealthy capitalist ruling class and the other lower stratas of capitalism’s class system, again asserting itself as well in the new Neocon "de-regulated" period (within and between all societies), laying environmental waste and poverty, and the ever present danger out of its greed and fear profit driven market workings that it will all suddenly go irretrievably south, at least for a very long time.

This latter possibility with which my parent’s generation was much more intimately and tragically familiar, coming out of the Great Depression of the 1930s and the Second Great War as they did, always exists, of course.The greater possibility is though, I really think, that it will finally be brought down by people simply getting irretrievably fully fed up with all of capitalism’s bullshit. Though these periodic economic crises that are a hallmark of capitalism, doubtless serve to hasten that eventuality.



Larry Gambone said...

It is like standing under a huge boulder which could fall at any moment. Some thoughts - I think the US will continue to try propping things up until after the 08 election. A depression now would be a disaster for the Republicans. Once the election is over, if the Democrats get in the financial interests may let it happen, blaming the Democrats for the economic crisis. If the Reps get in, they will also let it happen, but claim the crisis is "an act of nature" and hope they can create some sort of smoke and mirrors "upturn" in 4 years. Of course, the US capitalist class does not have ultimate say over when the crisis comes. There is also Peak Oil and who knows what might happen in China or Mexico. Revolutions or at least serious unrest in either country could pull the whole sucker down. All I can say folks is be prepared to walk a lot and grow your own veggies!

Coyote said...

"Of course, the US capitalist class does not have ultimate say over when the crisis comes." wrote Larry.

And if one thought they did, this markets shake-out from its epicentre in China, which rattled the stock markets of the entire capitalist world, should have demonstrated that. The toothpick global support system, upon which globalized capitalism currently depends, has not strengthened the new neocon system, but in fact weakened it. At home, certainly in the capitalist states of the West themselves, including the United States, and no less Canada,the new neoconazi ideology guiding capitalist economic practise has resulted in reduced income share overall for the working class, and hence reduced purchasing power and growing indebtedness (mortgages etc.) for the majority working class consumer, all dedicated to improving profitability for the capitalist ruling class of course.

But there is inevitably a point at which you draw down working class/consumer share, and the tendency of capitalism to always go too far in this regard is historically well known and understood, you kill their capacity to purchase the goods they produce and thereby complete the market cycle that results in all profitability. You kill the very goose that lays the golden egg for capitalism.

Hope, indeed surety and reliance in the new "Neocon period" had been on these new offshore developing capitalisms, with their plentiful cheap labour to exploit, huge, typically impoverished populations, and expanding production and markets for consumption, to raise all global capitalism's boats. This shockwave out of China has demonstrated however, that there are limits and tenuous underpinnings to this "best laid plan" of mice and men. Many of these "developing capitalism" countries , because of the extreme speculation, small and large frauds, and "share" inequalities that characterize them, have increasingly restive populations, and as a consequence of all the speculative economic practise, there are serious and highly vulnerable distortions in their development profiles.

Not only is the United States not in total control anymore, but it is also deeply indebted at home and abroad, and bogged down in blood and treasure draining imperial wars, which is finally beginning to destabilize it as well, and create restive working class/ consumer populations of its own. (Just as a demonstration of the superiority of their "White" society, I suppose. If we can fool or delude ourselves into thinking that Amerika or anywhere else (England?) for that matter has "purelY" White populations anymore. :-)

As Larry says, while no one can predict exactly the precise outcome path of all this, or when and where what will happen ". All I can say folks is be prepared to walk a lot and grow your own veggies!"

Matters, at any moment here, could suddenly deteriorate very quickly. And throw into there for good measure, peak oil and global warming disruptions. Life lived beneath a great bejeezus mountainside boulder indeed.

apathy_sux said...

In my macroeconomics class we have been watching a PBS series called "Commanding Heights". The influences behind the current market economy is from 1 or two people. It is totally frightening to think that this small group is behind global policy. The series is just now getting into the problems raised by globalization. The equalizing that we were supposed to get through 'economies of scale' has just never happened and never will. Economists seem unable to reconcile the human cost with the numbers. This will be their downfall. Because eventually all those who suffer the 'human cost' of capitalism will rise up against the powers that be. It has already been happeniing such as in Bolivia when they tried to privatize rainwater and in India when it was legislated that farmers could not reproduce their own seeds but had to purchase new seeds every year.


Coyote said...

Good to read the new and "emboldened" apathysux. :-)

I actually recall seeing those two shows, about the attempt to "privatize" water in Bolivia, and the struggle of the largely native citizenry to reverse it, which they did,, as well as the one about the struggle between Big Agribiz, in this case I believe it was the likes of Monsanto and the farm chemical giants, on the one hand, against the farmers of India right to produce their own seed, on the other hand.

The purpose here, of course, transparent enough, being to reduce the self-sufficiency and independence of the real producers, and to render all dependent upon the global Agribiz giants. It's the extension of the phenomenon of extreme "specialization", as an urbanization consequence under capitalism, and agriculture practise, over the course of capitalist development generally, such as we have seen in our own country. (Which has only worked here to the degree it has because of plentiful and cheap energy sources on the one hand, facilitated by ignoring the environmental costs of it all, and passing those on to future generations, and having "secured" through rip-off of the aboriginal peoples, of course, a continent of vast virtually virgin soil and vast unexploited resources as well. This latter which we are rapidly draining down through over-population, bloated economic development, especially in the US, and over exploitation of resources, there and increasingly here.

This "debt" in economic and more strictly environmental terms, though the two are really interconnected, is accumulating and fast coming to a head, exacerbated by "peak oil" realities.

The Sentinel said...
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