Sunday, 2 August 2009

Global banking class wages war to extend profits and power

A very good article by Stefan Steinberg, International banks exploit the crisis to reap massive profits, from the World Wide Socialist Website exposes the control the powerful banking class is exerting over the world. The big banks are experiencing an obscene return to profitability. Having caused the financial meltdown, then secured trillions and trillions of public money to bail them out, big banks are now making mega-profits through their tight control of credit. They're lending to indebted governments (because of the bail outs and a collapsed global economy) at high interest rates and making a killing. Likewise they're strangling industry in the real economy and profiting on bond speculation. Steinberg writes:
The bailout measures adopted by national governments represent a huge safety net for the banks, enabling them to once again engage in highly speculative forms of financial trading. The levels of debt resulting from the bank bailout packages and other forms of economic stimulus have assumed gigantic dimensions and will be paid for by generations to come. At the same time, the rapid accumulation of debt by governments opens up vast and lucrative opportunities for the banks. Trading in government loans bound up with financial rescue packages is emerging as a central activity of the big banks. Average government debt in the European Union is expected to rise to 80 percent of GDP this year and even higher in 2010. In Britain, government debt is expected to reach 100 percent of GDP in 2009. Japan’s government debt is headed for 200 percent by 2011, and government debt in the US is expected to reach 100 percent of GDP by the same time. As the levels of debt rise across the globe, rating agencies are downgrading the lending status of individual countries, which then have to pay increased interest rates to the banks in order to service their loans. For the banks, it is a classic “win-win” situation. At the same time, banks are refraining from investing in businesses because, as they note euphemistically, “in the current financial climate” the prospects for ordinary companies and industrial enterprises are “too risky.” Confronted with the refusal of the banks to extend credit, industrial and commercial companies are forced to sell corporate bonds at much higher levels of interest. The banks make further profits by speculating in the trading of these bonds.
The banks are waging an aggressive war, out in the economy and through government insiders, to secure their control and wealth at the expense of everyone else. The role of the banks in the global economy needs to be brought to the attention of masses of people who are suffering the fallout of the financial crisis. Strategies need to be thought of that best mobilise people against the banks and others of the global finance class. See also The Joy of Sachs by Paul Krugman.

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