Systemic Breakdown? Financial Bubbles Creating Conditions for New Crash
By Nick Beams
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.
Other economic data highlight this process. Last month, US industrial production fell by 0.5 percent, compared to a projected decline of 0.2 percent, prompting predictions that results for the second quarter would be even worse than the last quarter of 2012, when the US economy showed virtually no expansion.