German politicians, media warn about the next global financial crisis

Original article, by Peter Schwarz, via World Socialist Web Site:

Within Germany’s top political circles fear is growing of a second international financial crash exceeding in intensity and impact that of autumn 2008.

This should not be surprising. If a system’s fundamental design is flawed, and any fixing is aimed at keeping it the same, collapse is inevitable. We’ve seen the flaws in a financially based economy, and the fixes we’ve tried were to keep it in place. There’s no surprise that the system’s on the verge of collapse again.

The enormous stock market bubble that has formed over the past eight months is seen as the biggest source of danger of another crash. The most important share indices-the Dow Jones, the Japanese Nikkei and the German DAX-have risen by around 50 to 60 percent since March. The prices of crude oil, copper and other raw materials have also more than doubled. These enormous increases are not based upon any corresponding economic growth. On the contrary, economic activity has fallen in numerous countries and many firms are still posting losses.

Bu..but they’re investing for the future, aren’t they? Well, smaller investors probably are. As for the bankster and corporate frauds?

The rally in stock prices is due to the enormous liquidity that governments and central banks have pumped into the economy. Financial establishments are able to borrow unlimited sums of money from the central banks at virtually zero interest, and thus make high profits from their speculative deals. The trillions in taxpayers’ money that are being spent to revive the economy do not flow into investments, but into speculative deals, high payouts to shareholders, and exorbitant bonus payments for the bankers.

We did not end speculation. By not allowing ‘to big to fail’ to fail, we told the bankster and corporate frauds that things were going to remain the same. Stupid us for allowing the government to do so.

“The stock markets are rising because so much money has to go somewhere-because shares per se are valued attractively,” writes Wirtschaftswoche, the German business weekly, in an analysis of the current stock exchange boom. According to the magazine, the price-earnings ratio-comparing the market value per share to the annual earnings per share of the respective enterprise-has reached a historic maximum of 133. A price-earnings ratio of 14 or more is considered to mean shares are valued excessively.

Keep in mind that the dollar is falling. On Obama’s inauguration day, the dollar stood at 1.2892 to the Euro.   Today it stands at 1.514.  That’s a drop of 15%, which accounts for some of the uptick in prices.  The p-e ratio points the stock markets at being overvalued by 9.5 times.  If the p-e ratio were to hold at what normal value is, then the Dow should be at roughly 1100 value wise.  The bottom’s well below where we are now.

I’ll let you read the rest of the article.  Will we be saved from the fall?  Probably not.  The oligarchy is doing it’s best to cushion itself for the fall, but, perhaps, other forces will bring them down as well.

Is the Pony/Pie/Hide rating system too cutsie?

View Results

Loading ... Loading ...


Skip to comment form

  1. We’re having at 5% pay cut at the library where I work…well, more 5% reduction in hours, but I’m doing ok for now.  I just had my yearly evaulation and got >4 out of 5 (and the cheif boss doesn’t believe in 5s or partial points).  I think I’m safe seniority wise (only the manager in my department has been at the library longer than I have).

    • dkmich on November 26, 2009 at 3:01 pm

    I am by far better off than many, but it sure has screwed up my retirement plans.    

    • Inky99 on November 27, 2009 at 2:23 am

    The dollar, last night, basically crashed against the yen.

    Today, Dubai is defaulting on their debt.  The London stock exchange was shut down for a little while, although they claimed it was due to a “technical glitch”.  Yeah right, with the Dubai news?   That’s a Big Freaking Deal.

  2. this comment in dkmich’s diary, but think it bears repeating, so here’s the link:

Comments have been disabled.