Agreement of People website

Sign here if you support the campaign for a real democracy

Our blogs


AWTW FacebookAWTW Twitter

Your Say



A House of Cards - from fantasy finance to global crash


Avoiding a repeat of history

Karl Marx cited the words of his teacher Georg Hegel, when he recalled, “all facts and personages of great importance in world history occur, as it were, twice”, with Marx adding: “The first time as tragedy, the second as farce.” That déjà vu feeling came to mind while watching TV and reading the news over the weekend.

The Wall Street crash of October 1929, when the American stock market came down to earth, was featured on BBC2 on Saturday evening. The Great Crash was, as the commentary said, the precursor to the Great Depression, a global slump, the collapse of democracies in Europe, the rise of fascist regimes and World War Two. Like the present financial crash, the 1929 collapse had its origins in a speculative orgy based on credit.

Fast forward almost 80 years later to last autumn. Lord Myners, a former banker from Rothschild’s sitting in an office above the Treasury, faced the total collapse of Britain’s banking system and recalled the scene for the weekend press, saying:

How close were we to a systemic collapse of the banking system? We were very close on Friday, October 10.

There were two or three hours when things felt very bad, nervous and fragile. Major depositors were trying to withdraw – and willing to pay penalties for early withdrawal – from a number of large banks. The whole system is like a house of cards. It would have been – Bank A today – Bank B tomorrow –  Bank C the next, all the way down.

The Bank of England had to contact major creditors in Tokyo and New York to dissuade them from withdrawing vast sums from the Royal Bank of Scotland group. 

Back to Wall Street in October 1929. Bankers and the financial authorities tried innumerable measures to steady the ship and hold share values. But it didn’t stop a thousand banks going bankrupt and a shanty town of cardboard huts being created in Central Park, Manhattan! Nor did the New Deal policies of Roosevelt have much of an impact on the economic slump that quickly followed. 

Yesterday, Ruth Lee, an economic advisor to the Arbuthnot banking group, said of Myners’ remarks, “it was highly irresponsible for Myners to reveal the scale of the problems because it could wreck already fragile levels of confidence. We are not out of the woods yet … If it was panning out that way, then the government would have no choice but to step in and nationalise the whole financial system.” 

This begs the question whose fragile “level of confidence” are people like Lee concerned about? Savers, workers or pensioners in Britain? Not at all. The authorities are concerned about foreign lenders and those who underwrite insurance risks about New Labour’s ability to honour government bonds that are flooding the market.

Despite those “in the know” wanting to keep mum, the truth of this crisis will out and we will have to face the facts and the consequential political decisions that the capitalist state and its agencies will use in an attempt to restore order. These realities cannot be ignored nor should they paralyse you. History does not have to be repeated. To be forewarned is to be forearmed. Take up the struggle for your rights and fight for a transfer of economic and political power into the hands of working people as the way to avoid the catastrophe that followed 1929. Signing the People’s Charter for Democracy would be a practical first step.

Ray Rising
AWTW member
26 January 2009

Dulwich Daisy says:

This is an excellent analysis of the problem. In fact, during 1929 the Federal Reserve did not see it as appropriate for either itself or the government to rescue banks; some were saved by coalitions of larger clearing banks, thousands of small local banks were left to go to the wall. The lesson the capitalist class took from 1929 was 'don't let the banks collapse'. But of course, it is proving to be the wrong lesson - the contradictions have not been resolved by the bail-out. All that has happened is that the crisis of the banks has been imported into the very body of the state itself in a far more advanced way than in the 1930s.

As a result the crisis is much deeper in terms of the threat to the stability of the currency. The state itself is now threatened with bankruptcy - and "fiscal easing' - i.e. printing more money - is their last throw of the dice.

This will unleash inflation, wrecking the lives of those on fixed incomes like pensioners. And, as President Obama made clear in his inauguration speech, alongside this will come pressure on workers to contribute to recovery by accepting cuts in their standard of living.

Dylan says:

At least the Icelandic Goverment have done the decent thing. But here in England, accepting responsibility and resigning seems to be a thing of the past. Still, I shall dream on. No Labour, that's a good name for them. No Conserves etc. A better day..

Comments now closed

Your name

Your E-mail (we will not publish your E-mail)