I include below the full contents of a letter I sent to the Weekly Worker
newspaper yesterday on the economic crisis. The paper's editor, Peter Manson,
cut quite a lot for the published version (with heading "Crisis" at
http://cpgb.org.uk/worker/737/letters.html) but kept the most important points.
[Peter edits letters sent on Wednesdays; letters sent before then are edited by
the letters editor (Steve Cooke) first.]

There is one serious point I got wrong (which I think is a common
misconception), according to the BBC2 programme "Working Lunch" today - if you
have a mortgage or loan with a bank that goes bust, you don't get it for free! I
suppose capitalists had to come up with some sort of system that allows a bank
to fail without such a favourable outcome for working and middle class people!
The consequence of this seems to be that letting a bank collapse and using
money from mortgage/loan-payers to help pay the compensation would seem to be an
option (although I haven't investigated the procedure by which this happens).
Therefore a Tory government could let a bank fail rather than nationalise it...




As chancellor, Gordon Brown claimed to have ended the cycle of boom and bust,
which is of course impossible under capitalism. The New Labour government
borrowed heavily to prolong the boom and we are now entering a severe recession.
Big business and its New Labour allies are trying to make working class people
pay for their crisis – escalating food and fuel prices and a housing slump,
with big cuts in living standards unless we go on strike.
 
The credit crunch is mainly blamed on “subprime” mortgages in the USA , sold
to people with a poor credit history and with high interest rates starting low.
This caught many ordinary people out, since most US mortgages are at a fixed
rate for the entire term, which (due to high inflation) could lead to many banks
around the world that have lent the money for such “prime conforming”
mortgages facing bankruptcy.
 
On Sunday, Lehman Brothers, the world’s fifth biggest investment bank, went
bankrupt and Merrill Lynch, another huge US bank, was taken over. The
repercussions are immense – RBS (Royal Bank of Scotland ), Barclays, Bradford
& Bingley and especially HBOS (Halifax Bank of Scotland ) have suffered huge
falls in their share values. HBOS has been saved from disaster with the probable
takeover by Lloyds TSB and Barclays’ shares have risen again on news that it
is to buy some of Lehman’s assets for what is probably a bargain $1.75
billion. The Bank of England is lending £20 billion more to banks, on top of
£50 billion earlier in the year – gambling that they will stay solvent with
taxpayers’ money. Meanwhile, banks don’t trust each other – the inter-bank
lending rate LIBOR rose to 6.8% this week, compared with a Bank of England rate
of 5% (if it reduced interest rates by 0.25% to limit the effect of the
recession as some politicians and
commentators are calling for, this would just help the banks at the expense of
the rest of us and have very little effect on mortgage rates). Even more
dramatically, the dollar overnight lending rate between US banks rose above 10%
at one point, despite the official interest rate being 2%. The US Federal
Reserve has just lent $85 billion to AIG, the largest insurance company in the
world and sponsors of Manchester United, to save it from bankruptcy.
 
Big business used to make huge amounts of money very easily by gambling on the
stock market, from the work carried out by working and middle class people. That
era is over – for good! The FTSE 100 (measuring the share values of the 100
biggest UK companies) has fallen to its lowest level for over three years.
Individual companies’ share values have fallen even more considerably -
AIG’s market value fell in a year from $173.5bn to $12.8bn. Speculators are
even having difficulty making money from commodities, that have risen
considerably recently – oil that had nearly reached $150 a barrel has fallen
below $100 – which the September 16 International Herald Tribune said was
“on expectations of a global economic slowdown”.
 
At the time of the run on Northern Rock, savers were only promised compensation
for the first £2,000 and 90% of the next £33,000. Now we are promised the full
£35,000 (which the Tories are offering to help New Labour raise to £50,000 by
cooperating with quick legislation) by the Financial Services Compensation
Scheme (FSCS). I strongly recommend visiting its website (www.fscs.org.uk) if
you want to know how a bank’s collapse would affect you. The website points
out that levies from financial institutions only raise a maximum of £4.1
billion a year, which is chicken feed compared to the assets and liabilities of
the big high street banks. The government would be forced to stump up any
shortfall, presumably by increasing borrowing, if a major high street bank goes
under – failure to do so would risk massive demonstrations and possibly even a
general strike raising the prospect of a socialist revolution!
 
The Tories have previously suggested that they would not bail out a bank in
trouble (in a Sunday Herald article) but in reality, they would also be forced
to nationalise. Letting a big bank go under would give millions of ordinary
people a free mortgage or loan!
 
If socialists get our act together, the economic crisis will lead to socialist
revolutions in many countries of the world. A new more ethical capitalist world,
where rich people are forced to pay their fair share of tax with the abolition
of tax havens and loopholes (a measure that the Liberal Democrats have talked
about at this week’s conference as well as nicking the Tories’ policy from
the last election of promising tax cuts paid for by abolishing waste in the
welfare state), may be on the cards. Bill Gates has talked about retiring and
giving all his wealth away to charity. The Convention of the Left will be a
marvellous opportunity for left-wingers inside and outside the Labour Party to
prepare the ground for a revolutionary anti-capitalist party – which in the
current economic climate could even win the next general election, if there’s
not a revolution first!
 
--
Steve Wallis (Glasgow, Scotland)
For important/urgent communications, please email:
warcrysteve@...
Blogs: http://groups.yahoo.com/group/steve-wallis-socialist-blog,
http://blog.myspace.com/galaxiasteve
My socialist website: http://www.socialiststeve.me.uk
My pages at MySpace: http://www.myspace.com/galaxiasteve, Facebook:
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http://www.bebo.com/SteveW519
Founder, Good Intentions Network: http://www.goodintentionsnetwork.org
Founder, Ethical Capitalism Network: http://www.ethicalcapitalism.net
Founder, Foundation for PR-based Socialism: http://www.PRsocialism.org
Founder, Revolutionary Platform Network: http://www.revolutionaryplatform.net
My socialist band, Red Day: http://www.red-day.net
Author, "Revolution Destroyed? Have I ensured that a world socialist revolution
will never happen?": http://www.revolutiondestroyed.net
For discussion of the credit crunch, go to
http://www.revolutionaryplatform.net/forum/index.php?board=156
For discussion of 9/11 conspiracy theories, go to
http://www.revolutionaryplatform.net/forum/index.php?board=89

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