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Post-capitalist irony

Ironically, the best case for the abolition of private ownership of production and finance is now being made by capitalism itself. For example, banks which until just a few months ago were firmly in the private sector are now state owned or controlled. As yet, the world as we know it has not come to an end following this remarkable turnaround.

Of course, George Bush and Gordon Brown have not become revolutionary anti-capitalists. Their actions are desperate moves to prop up the failing international financial system and save it from total collapse. Every day there’s another frantic response. Yesterday, America’s Federal Reserve made $30bn available to central banks in Australia, Denmark, Sweden and Norway, to ease money markets. The American government is printing money like there is no tomorrow.

What the crash of 2008 is demonstrating, however, is that a) the market-driven capitalist economy and financial system has failed big time b) there is no iron law that says private ownership is necessary and c) there are alternative ownership models which can actually work.

So the crisis itself indicates the solution. Shareholder-owned and profit-driven corporations and banks have produced chaos and an impending catastrophe. Let them be commonly owned and run for the benefit of society as a whole. Of course, the capitalist state and proxy governments like New Labour are only interested in keeping the system going, if at all possible, whatever the social consequences in terms of unemployment, repossessions and lower living standards. They intend to either wind up or hand back to the private sector the enterprises they have nationalised.

Yet this assumes that the financial crash is now under control and manageable. Some superficial observers even believe that current events lead back to a much more conservative financial system, where credit/debt is much reduced and the regulatory framework is tightened up. This back-to-the-future fantasy scenario is championed by liberal commentators like the Guardian’s economics editor Larry Elliott and Will Hutton, chief executive of the Work Foundation.

Serious analysts know that the credit crunch is only just beginning, however. The unravelling of countless trillions of dollars of fictitious “assets” has a long way to go and will be reinforced by the impact of recession, falling house prices and lower consumer spending. All eyes are now turning to another mysterious area – credit default swaps (CDS).

These are insurance-like contracts that promise to cover losses on certain securities in the event of a default. They typically apply to municipal bonds, corporate debt and mortgage securities and are sold by banks, hedge funds and others. Contracts can be traded – or swapped – from investor to investor. The instruments can be bought and sold from both ends – the insured and the insurer.

The CDS market exploded over the past decade to more than $45 trillion by mid-2007, according to the International Swaps and Derivatives Association. This is roughly twice the size of the US stock market and far exceeds the $7.1 trillion mortgage market and $4.4 trillion US treasuries market. The top 25 American banks hold more than $13 trillion in CDS instruments. As asset prices plummet and companies go bankrupt leaving nothing but bad debts behind, the CDS market is ready to implode.

Yet another powerful reason to refuse to pay for the bankers’ crisis and to mobilise for the Stand Up for Your Rights festival on 18 October.

Paul Feldman
Communications editor
24 September 2008

Fiona says:

Credit default swaps - yet another of these fantasy finance 'products' that seem to have been deliberately created in order to bamboozle ordinary mortals. This is the first mention I've ever seen of them. There is even more financial havoc on the horizon then.


Paul says:

Hi Peter, just fancied a rant and looks like you guys are thinking the same.

Under Thatcher our utilities were all sold off, some would argue that selling off key assets like this was tantamount to grand theft on a massive scale. its no surprise that energy companies make as much profit as they can, it's underwritten in company law that directors have to put the interests of shareholders first so profit is really there only reason to exist. That the state, can pay billions to set something up, sell it cheap to those who can afford it through the issue of shares, so that they can sell it back to all of us at huge profit, the people who got rich on this were the bankers who sold them and the fat cats who got richer on them, well the rest of us just paid for it, the idea that only the rich are allowed to get richer is enshrined in govt policy and thinking and I for one have had enough.

Water, electricity, gas and oil are currently essential to existence, until we can create another energy source that will remain the case. I would argue that all of these companies and distributors are unfit for purpose and the quicker they are all back in public hands the better, the current credit crunch has proved that capitalism does not work in the interests of the many for services that we all need to exist, banks as well have proved time and time again that they are not responsible guardians for our savings, how can they be when they pay themselves so much and live in such ivory towers (they cost a lot as well, and not just in cash, but also the resources that go into building them). Speculators as well should give the money back, how can it be good for society for the rich to speculate at the expanse of everyone else, if all they do is drive prices still higher, which in turn pushes more of us into poverty.

We live in a world where the rich just say fuck you, I want it all.

and where have all the bank's reserves gone ? and all the losses they have made, money has to go somewhere ? my guess is that most of the money has gone on annual bonus's and pensions for already rich bank and investment professional's as well as dividends to the owners and shareholders, getting it back from them would be a very worthwhile exercise by politicians, problem is that the state does not understand how they work and anyway are members of the same club. Offshore centre hotels are still full of tax avoiders and the same banks that made so much from us all and since it's the same bankers that control these as well, they hardly going to put there hands up and pay it back, there only aim is private plunder.

Banks continue to pay out excessive salaries, excessive pensions to CEO and senior execs and bonus's that at the end of the day will come from the poor and needy, we need to change around the view that making more money for the already rich is madness and can only end in unrest and revolution by the rest of us. The rising gap between the rich and poor worldwide is evidence of the ineffectiveness of capitalism, a move toward fascism in newly capitalised Russia is more evidence if any were needed of the danger in putting so much power in politicians who are linked to corporations, following on from the terrible years of a bush regime in which support for a crazy war cost billions which we are paying for.

Blair's recent appointment at JP Morgan is further evidence if any were needed of the unacceptable link between our leaders and corporations.

Only a few weeks ago Invesco perpetual and M&G stopped dead in its tracks the UK's need for nucleor energy which means decisions on our energy needs are being taken by unelected money managers fat on wealth who have the final say regarding our energy needs, proof if more were needed at the ineptitude and complacency of our politicians to do anything. These are unelected money managers whose only raison-detre is skill at accumulating billions of investment dollars to enrich their shareholders, at the expense of everyone even the sucker investors who who supported them.

Bubbles always burst, problem is that this one has lead us into the greatest depression ever, even bigger than the great depression of the 30's.

So we all live in world ruled by despots and corporations, even the state in most countries are now nothing more than a large corporation serving the interests of its politicians and civil servants. It's a fact the UK will need to collect at least 50% tax from everyone working in the private sector just to pay its pension commitment for its politicians and civil servants. And what steps are politians taking to stop final salary schemes for themselves and their workers - none, this is potentially an even bigger bomb than sub prime mortgages, and as the banks go down, as will the state coffers - result chaos and revolution.

Steps to take.

Get the money back for the people from Banks and energy utilities, this means taking it back mainly from senior execs and shareowners, putting them firmly in the peoples hands. Control of banks in offshore centres, what were talking about is either complete state control of banks.

Its time to start understanding that the situation we are now in requires urgent war time like defensive positions to secure the well being of all of us that live on the planet, and not just the well being of spivs.

Control of financial markets, this includes repatriating funds that are offshore, stuffed in large pension pots of the rich, held by big speculators.

Stop burning fossil fuels, stop anything that harms the planet.

Start living locally, with local economies, not global ones, live within our means and share rewards with everyone.

Reward environmental positions and not greed based ones.

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