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
Apr 20, 2009
Several big investment banks are reporting profits for the first time in months. Stock prices are rebounding – markets jumped over 25% in March. Politicians and the banks are practically telling us the economy has turned a corner.
Not in the real world where we live. There, the situation has only gotten worse. Foreclosures jumped 44% in March to reach a new record high. Pre-closure filings also jumped up. People are still losing their homes in record number. New housing construction dropped sharply in March, after rising briefly in February. Industrial production is at a ten-year low. Commercial real estate is plunging, and credit card losses are jumping up.
Unemployment continued to rise, from 8.1% in February to 8.5% in March. Michigan is at 12.6%. And of course, that’s the official unemployment rate, which is fewer than half the real jobless rate.
For the banks, though, things ARE getting better. For one thing, they’ve been allowed to create their own reality. “Creative accounting” plays a big role in the profits these institutions are reporting. Goldman Sachs, which reported a first quarter profit of 1.8 billion dollars, conveniently ignored December, when it lost over a billion dollars.
Citigroup’s reported profits of 1.6 billion dollars in the first quarter are based on what’s called a “credit value adjustment,” which basically allowed it to report 2.7 billion in LOST value as gains. JP Morgan added 638 million to its revenues in the same way; Bank of America is expected to use the same trick when it makes its profit announcement.
Thanks to changes made in the accounting rules for their “toxic” securities, the banks no longer have to mark down the full value of the assets they can’t sell; instead, they have only to subtract a portion of that value. Thanks to that trick, Citigroup inflated its profit figures by 413 million dollars in the first quarter.
No wonder analysts have been talking about a “great whitewash” producing “junk income”!
And, of course, things have gotten better for the banks because the government has handed them trillions of dollars in bailout money. They took this money and poured it right back into speculation! Big banks are buying smaller banks. Big speculators are buying up bank stock. They’re doing the same thing that created this mess, all over again!
The banks are receiving trillions in fictional money from the government, and they’re creating fictional profits out of thin air. But underneath, they’re grinding down real people and the real economy beneath the weight of this fictional bubble.