Systemic Breakdown? Financial Bubbles Creating Conditions for New Crash
May 21, 2013
It is a sure sign of the systemic breakdown of the global capitalist system that the very measures put in place to try to prevent a crisis are creating the conditions for a financial meltdown beyond even the scale of 2008.
For almost five years the world’s major central banks have pumped an estimated $7 trillion into financial markets with the stated aim of trying to spark an economic recovery. Economic data from around the world indicate that it has been a manifest failure.
The statistics on price levels are among the most significant. These show that rather than prices increasing—a sign of recovery in so-called “normal” conditions—deflationary pressures are intensifying.
In the US, consumer prices fell by 0.4 percent in May, the biggest decline since late 2008, following a 0.2 percent decline in April. In Europe, excluding food and energy costs, consumer prices in the 17-member euro zone rose by just 1 percent in April from a year earlier.
The downtrend has far-reaching implications. Confronted with falling prices for their products, major firms and corporations seek to make profits not by investing and expanding production, as they would seek to do if a recovery were underway, but by savage cost-cutting coupled with financial speculation. The consequent cuts in pay and jobs lead to a reduction in consumer demand, further fueling the deflationary trend.