An Analysis of Recent Stock Market Events
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)
“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.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.
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.)
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.