Sep 24, 2001
The headlines in the papers said, “A Body Blow to the Economy: A Gradual Slowdown Becomes a Wrenching Halt” and “Some See Recession as Imminent After Terrorist Assaults.” By Friday, September 21, the major stock indexes seemed to bare this out, as they dropped 14% for the week, one of the steepest stock market drops in this country in history.
Yes, certainly economic activity was crippled for a few days, and the airline industry has been hit. But why should that make the capitalists, the captains of industry and finance, worry? After all, won’t the reconstruction effort mean a lot more fat contracts, with fat profits built in? The worries about war, haven’t they always cynically told us that war is supposedly good for the economy, trying to make us think it is a great big festival of death that we should welcome with open arms because it creates demand for goods, jobs, etc.?
So, why are the capitalists suddenly turning around and saying the exact opposite? Because they have to blame someone for all the job cuts that they had already been carrying out. They have to blame someone for the fact that the financial bubble they created is bursting.
It’s true that events outside the economy can sometimes trigger an economic collapse – this has certainly happened in other countries. But when this happened, it was because the economy was already on the brink.
For nine years the capitalists and their friends in the U.S. government, media and academia trumpeted what they called an era of unprecedented growth. Never mind that most working people never saw any of this growth, only insecurity and speed-up. But leaving that aside, what was all that supposed growth based on, but a financial bubble, concentrated largely in the stock market, bond market and real estate prices. As the prices on these markets rose, they not only attracted more money, they also created a mountain of credit and debt – especially among the capitalists themselves. Over and over, the capitalists borrowed heavily, in order to multiply their profits by speculation. This mass of fictitious money existed only in the computers of banks, brokerages, etc. Built into the financial structure is something more explosive and destructive than anything any terrorist could detonate: trillions of dollars in debt.
Everyone knew that this couldn’t go on forever, even if no one wanted to admit it publicly. Over the past year and a half, that is well before the terrorists struck, the stock market, led by the once beloved high tech sector, turned down.
In the first week of stock trading following the terrorist attacks, one of those little financial explosions publicly hit the headlines. The Bass brothers, sons of Texas oil millionaires, were forced to sell two billion dollars in Disney stock in order to cover margin loans on other stocks that were being called in by the lenders. This, in turn, caused Disney’s stock to plummet. In the financial world, where most of what happens goes on in secret, behind the scenes, this little publicly exposed episode should be taken as a warning that there are a lot more of these loans secretly going bad, as the stock market drops. Speculation – the very mechanism that drove stock prices higher, leading to untold riches in the financial sector – could be in the process of going into reverse – with a vengeance.
Could we be heading into a financial collapse? If we are, it’s because the capitalists prepared the way for it.