|SocialismToday Socialist Party magazine|
THE GLOBAL CAPITALIST economy has been hit by a major credit crunch. The collapse of the sub-prime mortgage business in the US, brought home by the collapse of two hedge funds managed by Bear Stearns investment bank, provoked panic on money markets. The effects have already spread much wider than the housing finance sector. As a result, there is a paralysis of inter-bank lending and a seizing up of big sections of the wholesale money market.
This crisis is potentially much more serious than the Asian currency crisis of 1997 and its aftermath, the collapse of the Russian rouble and the bankruptcy of the hedge fund, Long Term Capital Management. At that time, the US and other advanced capitalist countries were in a relatively strong position and intervened to stabilise the world economy. The present liquidity crisis originates in the US, the product of a partial deflation of the housing bubble and other debt bubbles which developed after 2001. The global financial system is under threat.
EARLY IN September, the impending insolvency of Northern Rock provoked a classic bank run, with thousands of depositors queuing to withdraw their money. The scenes recalled events in Argentina in 2001, or the last bank run in Britain which occurred in 1886. The problems of this relatively minor bank threatened to detonate a major financial crisis, as well as a political crisis for the Brown government. Moreover, the event highlights the current fragility of globalised financial markets. LYNN WALSH reports.
For working-class people, the link between the policies pursued by a series of governments, Tory and Labour, and rising poverty and inequality has long been clear. Now two authoritative reports, reviewed here by HANNAH SELL, starkly reveal the effects of 30 years of neo-liberal onslaught in Britain.
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