The crash of 2008 and the prospects for 2009

Original article, by Nick Beams, via World Socialist Web Site:

Whenever a historical review is made certain years attract attention because of the decisive events with which they are associated. The years 1914, 1929, 1933, 1939 and in more recent times 1956 and 1989 are some that come to mind. The year 2008 is destined to join this group.

With the effects of so many bubbles popping showing up last year, can there be any doubt about this?  The failure of the capitalist system (or the inability to face Adam Smith’s invisible hand) ensures hard times for everybody small enough to fail.  Mind you, the bosses are sitting pretty for the time being, as they have governments at their beck and call.

The figures speak for themselves. The US government alone is committed to providing more than $8 trillion to prop up the financial system. Interest rates charged by central banks around the world have been cut to record lows, in the case of the US to near zero, in a desperate bid to prevent a financial meltdown.

$8 trillion for the bosses and bankster frauds.  Think about that.  Then keep in mind that the $35 billion for the auto industry is going to be used to try to break the auto unions and the workers.  Plus, you know that there’s going to be howling at the very effort to stimulate the economy (and it’s likely that that stimulus will go towards the corporate masters as opposed to the poor, working and middle classes).  The capitalist God plays dice, and the dice are loaded.

The collapse of financial markets is now being matched by the decline of the real economy. Next year total economic output in the advanced capitalist economies will fall-the first such contraction in the post-war period. According to Olivier Blanchard, the chief economist of the International Monetary Fund, the contraction in demand “could exceed anything seen since the Great Depression in the 1930s.”

Yay!  sarcasm

And the prospects for the US, the heart of the global economy, have become, in the words of a recent report from the Levy Economics Institute, “uniquely dreadful, if not frightening.”

According to the Levy report, US gross domestic product (GDP) will fall by about 12 percent below trend between now and 2010, with unemployment rising to about 10 percent. The report concludes that the “virtual collapse of private spending” will make it “impossible for US authorities to apply a fiscal and monetary stimulus large enough to return output and unemployment to tolerable levels within two years.”

We’re teetering on a tightrope with no end in sight.  Fall to the left and we get a deflationary depression.  Fall to the right and we get hyperinflation.  And waiting for us under either circumstance?  The World Bank and IMF placing their neoliberal restrictions on the economy.  Third world, here we may be coming.

Read the entire article.  It gives a very good overview of how things are right now and what the problems we are facing look like.  The article’s final view is also worth reading:

As world capitalism enters its most serious crisis since the breakdown of the 1930s, and the ruling classes draw on their own experiences, so the working class must assimilate the lessons of history. The only way of preventing a repeat of the experiences of the Great Depression, which culminated in the deaths of millions in World War II and the use of nuclear weapons, is the overthrow of the historically-outmoded profit system. The year 2008 marks a milestone in the disintegration of world capitalism; 2009 must become the starting point for a resurgence of the struggle for international socialism by the world working class.

It’s not just the working class, but the poor and middle classes also.  The change of perspective must come from all three, and a unified front needs to be presented to the bosses.  A Socialist solution may be what is in store for us, or it may be a mixed economy:  The thing to keep in mind is that the bosses, politicians, corporations, military and the bankster frauds will be fighting to keep the current system (with some window dressing) in place.

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  1. A question which keeps running through my mind:  With so much of the financial system’s ‘wealth’ being slips of worthless paper, how large is our economy and how much of our economic ‘power’ has been based on bluff and bluster the past 30 or so years?

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