Sep 2, 2013
The debt of European states continues to expand, threatening the cohesion of the Euro-zone and the existence of the single currency. The Chinese economy slows and brings on fears of a brutal turnaround that would affect the whole world’s economy. But Wall Street is beating all the records.
In six months, from the beginning of January to the end of June, the Dow Jones index, made up of the stocks of the largest American businesses, jumped by 19 percent. The big banks top the list. Thus the five biggest American banks, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup and J.P. Morgan Chase, made accumulated profits of 21 billion dollars in just three months, from April to June.
The considerable enrichment of these financial institutions, enrichment from which the whole capitalist class benefits, is the fruit of speculation. Yet the official growth of the American economy was under two percent, that is, nearly ten times less than the growth of Wall Street.
The rapid expansion of Wall Street’s new speculative bull market is, in reality, maintained by the American state itself. For nearly five years now, the rate at which the big banks can obtain credit from the central bank, the body responsible for issuing money, has remained at rock bottom. And each month, through the intermediary of this same central bank, nearly 80 billion “new” dollars are injected, by way of buying up bad loans that wouldn’t otherwise find a taker. It’s this politics of easy money for finance that continually feeds speculation.
Now, if the speculative bull markets permit astronomical gains for the capitalists, they don’t create wealth. On the contrary, in attracting capital with the goal of rapid profits, they dry out investments in the rest of the economy and aggravate the crisis. Moreover, this speculation can reverse itself from one day to the next. The smallest piece of bad financial news can cause a brutal collapse in the price of the most sought after stocks, transforming them into scraps of paper without value. That can then lead to a chain of bankruptcies, and in the end, unemployment for millions more workers.
The world economy is constantly at the edge of the abyss, a hair’s breadth from economic collapse. This is the sharpest expression of the aberration and the danger that capitalist organization of the economy represents.