When the Banks Crash …

In the last week of September, the U.S. government announces its intention not to let another big bank fail following the collapse of Lehman Brothers. Instead, the treasury secretary intends to buy the banks’ worthless securities for 700 billion dollars, and so supply them with fresh funds. The rescue package triggers off fierce controversies in the U.S. Congress and among the public: everybody notices the preferential treatment enjoyed by the speculative trade, and critically asks if it really is the state’s job to bail out investment bank “gamblers” with “taxpayers' money” and save the assets of failed speculators. Leftwing demonstrators and proper Republicans protest against “Wall Street socialism”: “No bail-out!”

With the beginning of October the debate is settled. Whether the state should save the speculators is outstripped by a more fundamental insight: It must — fair or not. After all, the banking system depends on the collapsing banks — and the entire economy depends on the banking system. The profit and growth rate of finance capital are not the only things that thrive on the health of the speculative trade; the entire society depends on it for making money: when businesses can no longer get credit, when they are no longer able to prefinance investments and other business requirements — then they cannot do any profitable business at all. And when their enriching themselves doesn’t work out, then the boon that a flourishing capitalism holds in store for the masses is lost: jobs! In fact: if the jugglers on the stock exchanges and in the bank palaces do not succeed in profitably increasing their investments, then there are no opportunities for the country's poor to work for a living in the service of others’ wealth.

And that’s not all. In one go, the public becomes aware that even money already earned and put aside — by no means only the money of the rich — is at stake. Savings exist in no other form than as endangered bank accounts and dubious securities. The private provision for one’s old age, life insurance — all that is gone when the banks, which have collected it and placed it in speculative investments, go bankrupt.

Yet another week later, the view that the state must rescue the banks gives way to doubts as to whether it can do that at all. Every day, chancellors, finance ministers, and prime ministers as well as heads of central banks appear before the press and announce the latest government measures for stabilizing the financial sector. Meanwhile the authorities nearly everywhere guarantee savings deposits without limit, no more important banks in Europe will be allowed to crash, central banks lower interest rates all around the world in order to ease profit-making for private banks — and they give them credit without end anyway. After each announcement, everybody waits expectantly for the opening of stock exchanges the next morning: will investors acknowledge the step, will they believe the guarantees and have the confidence again to speculate — or is all that pointless, and the state has to go still further with assistance and guarantees? Witness as an example the British government: it has given up keeping bankrupt institutions afloat with credit and takes them directly under state control in order to maintain their function.

Slowly the question arises as to whether states really can afford to guarantee and take over all the bad debts. One of them, little Iceland, is even facing national bankruptcy; bigger states threaten to ruin the stability of their currency by their rescue activities; the term 'currency reform' is rediscovered. One learns that even money that doesn’t rest in the bank but is already in the wallet of its owner is only worth so much as the state that issues it has a functioning banking sector at its disposal.

Fall, 2008, is like a crash course on the question of what it means to live in capitalism. Absolutely everything, working and buying, living and surviving, is a dependent variable of the financial business. If stock brokers and bankers fail to enrich themselves, then everything fails — and an entire people is dispossessed in one blow.

It’s a pity that the people in all their panic just don't have the time to look into the absurd preconditions of their everyday life. They are fully preoccupied with accompanying the rescue of the financial system with their hopes and fears, so that everything can go on as before.

So that it doesn't go on as before, we’ll take the time to explain the accomplishments, mode of functioning, and the collapse of finance capital.

Further reading ⇒

© GegenStandpunkt 2008