Economy Financial madness brings the world to the brink

Harbingers of financial collapse of historic proportions are multiplying. After an unprecedented rise, securities listed on Wall Street, in the City of London, on the Paris or Frankfurt stock exchanges, regularly experience severe bouts of weakness. So on Feb. 3, Facebook won over 25% in New York, confirming the first telluric push that hit many Silicon Valley digital giants in January. The high-tech index fell more than 15%, breaking all records in November last year.

one Exponential financialization of the economy

Under the pretext of fighting the Covid pandemic no matter what” dear to French President Emmanuel Macron, has in fact led to a doping of the financial world, driven by floods of free loans given to it by all issuing institutions, including the European Central Bank (ECB).

Wealth managers have taken advantage of the windfall to take out a bunch of loans designed to boost their pensions like never before and boost the value of their stock portfolios. So swollen, swollen titles that were considered the most profitable … To form so many bubbles, so liberated from the gravity of reality that they are about to burst.

A number of sectors were infected by this financial obesity, while others, on the contrary, stuck to long-term schedules and represented a serious disadvantage, not guaranteeing a fast enough return on investments in the stock market, such as semiconductors, were seriously neglected. Right up to the emergence of inflation, terrible imbalances and other bottlenecks that are now emerging.

2 dot icon A threat of unprecedented proportions

To properly assess the threat, it is sufficient to compare the stock market’s insane valuation with modest gross domestic product (GDP) growth. In the United States, the risk of a financial crisis is often measured by the ratio between stock prices and GDP. Over the past fifty years, it has stalled at an average of 0.8. It has now reached 2. This means that US financial markets weigh twice as much as the real economy.

The success of the so-called “ETFs” (“exchange-traded funds” or index funds listed on the stock exchange) is one of the most obvious illustrations of this monstrous financial mess. Indexed on the indices of the major markets where their securities are traded from New York to Paris, London or Tokyo, these products, originally created by Wall Street giant BlackRock, have an outstanding amount that today exceeds $10,000 billion (8,500) . billion euros). A trend reversal in the stock market will cause these ETFs to drop dizzyingly at returns that have hitherto been presented as “providential”, with a guaranteed knock-on effect on the rest of finance through defaults by borrowers-buyers of the securities, which in turn will shock the market. banks.

3 dot icon Cryptocurrencies, symbols of speculative delusions

Another financial megabubble looming over cryptocurrencies is causing traders to break into a cold sweat. These virtual currencies, created on the Internet to keep money transactions out of public control, in accordance with an overtly libertarian creed, have become a kind of Eldorado for speculative investment and a dream washing machine for dirty money from all mafia trading.

CoinMarketCap, an organization that specializes in overseeing these “crypto assets,” has estimated that more than 2,000 billion euros have been leaked. The price of bitcoin, the most emblematic of these currencies, increased more than 100 times in the months between 2019 and 2021. Strong earthquakes have already been recorded in this market, which caused a terrible reaction from speculators who again invested it there. getting into huge debts.

4 dot icon​​​​​​​ Free credit, a boon for traders

Real estate, certain raw materials, agricultural resources: the appetite of financiers extends to all areas where a quick profit seems guaranteed. As the Ehpad Orpea scandal in France, or the rise of record student debt across the Atlantic, against the backdrop of an increasingly financially distressed American university system, has shown. Each time, free loans from central banks provide traders with enormous leverage to gain control of securities that are destined to increase their value tenfold.

As these bubbles grow, warning messages multiply. Jeremy Grantham, a wise observer of the stock market, is concerned in a British newspaper. The keepertheir phenomenal size compared to those that preceded every crash in a century“. The Bank of France, which has delivered rather prudent verdicts in other respects, issued a storm warning in January (1).

five dot icon“Classic” politics, accelerators of the crisis

The turning point will be the beginning of 2022. The preponderance of financial bubbles and the soaring value of stock markets have begun to have an undesirable effect on the real economy. Inflation, mostly of financial origin, initially kept to a minimum and presented as a transient phenomenon, has stabilized over time at increasingly high levels, around 5% in Europe and to over 7.5% in the United States, unheard of since 1982.

Classically, raising interest rates is the agreed-upon tool of central banks to reduce inflation. This allows a return to austerity to be programmed so that price increases do not eat away at the return on investment. And it aims to protect the markets from the wage increases demanded by workers when the real value of their remuneration, and hence their purchasing power, is greatly reduced. The Fed has announced that it will start raising rates in March. ECB President Christine Lagarde is still hesitant, but is increasingly suggesting that she could initiate more restrictive monetary policy this year.

The dilemma: an increase in the value of money would mean at the same time the end of free liquidity being dumped on banks and champions of capital. The maneuver could pull the markets down just as much as free credit would take them to the skies. How to predict the end of a very flexible monetary policy without plunging Europe into economic ruin for the ECB?

6 dot iconUrgency of other use of money

Breaking free of this ticking movement (inflation-interest rates) becomes as important as it is vital. There is a need for radical changes in monetary policy, as well as in wage policy. In France, March 17th is a new big day of action against wages and purchasing power against deadly monetary tightening.

Money and the financing of the economy are at the heart of the emerging class struggle. To avoid a collapse with detrimental consequences for all employees, new solutions are needed against the absolutism of capital and its criteria. “Winning new economic and political powers for employees and citizens in their place of life and work is essential”Communist economists emphasize.

In France and in Europe, workers’ and citizens’ representatives must have access to the ECB’s money cabinet. To keep the faucet of free credits open, but no longer to treat the lords of the stock exchange, but to finance the real needs of Europeans. Be it employment, research, training, public services or funds to be taken against global warming. In order not to be drawn into the orgies of capital towards historical collapse, it is time to enter a new democratic era.

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