the Voice of
The Communist League of Revolutionary Workers–Internationalist
“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx
Feb 15, 2016
The world price of oil is now at an 11-year low, after a 69% fall over the past year. In fact the slump in world prices has hit just about every commodity. Iron ore is at a 10-year low, following an 80% fall. The metal palladium, which is mostly used in cars and electronics, has fallen by 47% over the past year. Meat and cereal prices fell by 15% over the same period, sugar by 21%, dairy products by 28%, etc.
For consumers, falling prices may sound like good news – that is, assuming retail prices follow, which is far from always being the case.
But due to the perverse operation of the capitalist economy, “good news” may well spell disaster. It already does in the poor producing countries. Not only have their governments responded to this drop in income by slashing already grossly inadequate social budgets, but companies are announcing massive job cuts – like mining giant Anglo-American, which plans to cut 85,000 jobs, out of a total workforce of 135,000.
In addition, there may be another catastrophe in the making. This is because, in order to finance their investment while maximizing dividends, the big commodity companies raised funds by selling bonds representing a share in the value of their future production. This is similar to how, before the crisis, mortgage lenders sold bonds whose value depended on the future repayment of dubious mortgages. Just as mortgage-backed bonds collapsed in 2007 when the real estate bubble burst, today commodity bonds are in free-fall as the commodity bubble bursts. The question is whether, as happened in 2008, this will cause another financial meltdown.