Financial Collapse

March 10, 2023. Black Friday. The day SVB, Silicon Valley Bank, collapsed. This day will go down in history as a day of mourning for the capitalists. The day one of the biggest banks in the country, with assets of 200 billion dollars, collapsed, within the space of a mere 48 hours! The beginning of the end of capitalism! 

The guardians of the sacred temple of capitalism were quick to respond. The politicians and bourgeois economists, those loyal and devoted servants of the monopoly capitalists, the billionaires, the bourgeoisie, did not wait for the markets to open, the following Monday. Indeed not. 

Instead, they spent a very busy weekend assuring one and all that this was an ‘’isolated incident’’, despite the fact that another sizeable bank also failed, and numerous others are on the brink of bankruptcy.

The politicians were afraid that the ‘’contagion would spread’’, that it would give rise to a ‘’run on the banks’’, which is the very thing which happened on Saturday. They are also afraid that this could ‘’spread to other parts of the economy’’, that it could lead to a ‘’systemic failure’’, due to an ‘’unstable environment’’.  

Their fears are well grounded!

In particular, the Treasury Secretary, Janice Yellen, wasted no time in assuring people that their deposits were insured, up to 250,000, a quarter million, so that those with less than that amount of money in the bank, had nothing to fear. 

True enough. All banks pay the FDIC, Federal Deposit Insurance Corporation, a fee to insure their deposits, up to that amount. All deposits above that amount are not insured. At least, not until now!

That same Treasury Secretary, as well as President Biden, swear that the taxpayers will not be ‘’on the hook’’ for any bank failure. They lied!

In fact, the FDIC, in conjunction with the Federal Reserve Bank, and ‘’back strapped’’ by the Treasury Department, has agreed to insure all deposits! The American tax payers are now responsible for all deposits, regardless of the amount!

To put this in perspective, the FDIC currently has 126 billion, which it can use to cover the first quarter million of all deposits, of all banks. At least, it did. That was before it gave 40 billion to the two banks that failed. And that is just the beginning!

Numerous other banks are on the brink of collapse! Economists estimate that it may take 9 trillion to cover all of their deposits! That is where the tax payers come in!

Bear in mind that a trillion is one thousand billion! This is to say that the American tax payers are on the hook, thanks to Biden and Yellen, for a further 9 thousand billion! As the national debt currently stands at 31 trillion, it could soon sky rocket to 40 trillion! 

All in the interests of bailing out the banks of the billionaires, those that are Too Big To Fail! The rest of us, those who are not billionaires, are Too Small To Succeed! No one is about to bail us out!

Yet, in all fairness to the politicians, they have their ‘’eyes on the big picture’’. Instead of focusing on the current fiscal crisis, which may well spread to ‘’other parts of the economy’’, and lead to a ‘’systemic failure’’, which could well include a default on the national debt, they are focused on the next federal election, especially the presidency. They certainly have their priorities well established! The expression ‘’Nero fiddled while Rome burned’’ comes to mind!

But in the interest of winning the forth coming federal election, they have wasted no time in playing the ‘’blame game’’, concerning the SVC collapse. 

President Biden is blaming former President Trump for ‘’deregulation’’ of banks. Economists are blaming the crisis on everything from the Covid epidemic, to inflation, high interest rates, dramatic increase in interest rates, the national debt, too much bureaucracy, too much regulation, not enough regulation, and ‘’woke capitalism’’, among other things.

My personal favourite is that of ‘’woke capitalism’’.  

According to the Internet, ‘’the term woke capitalism was coined to describe companies who signal support for progressive causes as a substitute for genuine changes.’’

True! Companies may well ‘’signal support for progressive causes’’, giving it verbal recognition, commonly referred to as ‘’lip service’’, while in fact, doing nothing else. To blame this verbal recognition of worthy causes, as the cause of bank failures, is utterly ridiculous!

It is capitalism that is the cause of banks failures! The system of capitalism is to blame! That is the one thing that the capitalists either cannot, or will not, face!

Despite the best efforts of the politicians, the stock prices of countless banks took a nose dive on Monday, March 13. The Internet reports that trading was halted on 30 stocks, in an effort to halt the ‘’bloodletting’’. Even in Europe, economists are reporting a dramatic drop in the price of banking shares.

Some of the more clear headed bourgeois economists are warning of a possible ‘’perfect storm of out of control inflation, recession and national debt crisis’’. They also expect the interest rates to rise dramatically. 

Other economists, in a display of refreshing honesty, are questioning the legality of holding the tax payers responsible for the debts of all the banks. They have pointed out that it is the Congress, by which they mean the House of Representatives, which controls the money. As it is the Republicans who control the House, they may well have a thing or two, to say about the plan of Biden, a Democrat, to bail out the banks!

As is well known, the federal government is due to run out of money, very soon. They have already ‘’hit the debt ceiling’’, and are now using ‘’extraordinary measures’’ to keep paying the bills. That is expected to lead to a government shut down, possibly in June, unless the debt ceiling is raised. Yet the Republican members of Congress are not at all anxious to increase the debt ceiling. They want to cut spending. They want no part of raising taxes, certainly not on the billionaires. They have no intention of paying the nine trillion that Biden has in mind, in order to save the banks!

Incidentally, it is customary for the president to exercise powers, of which he has no legal right. As long as the House and Senate allow this, he generally gets away with it. Yet this time is different. It is doubtful that the House will allow Biden to cover all bank deposits with tax payer money. 

Even though Biden and Yellen, the Treasury Secretary, have agreed to cover all bank deposits, the simple fact of the matter is that the Treasury has no money! The simplest way, the easiest way, for the Congress to stop Biden and Yellen, is by doing absolutely nothing!

But in the interests of winning the next presidential election, it is far more likely that the Republican led House will ridicule the notion of bailing out the banks, with money they do not have!

Those two, Biden and Yellen, just made a promise they cannot possibly keep! Even if the money was available, which it is not,  they do not control it!

It is perhaps significant that one economist pointed out the truth. He stated that the only way they can ‘’bail out the banks’’ is by ‘’creating money out of thin air’’. True! He also pointed out that this is absolutely inflationary!

I say that this is significant, because it is not in the best interests of the bourgeois economists to ‘’blurt out the truth’’. Their duty is to say that which the capitalists want them to say.  Any relation to the truth is strictly coincidental. 

Yet as Marx and Engels pointed out, in the Communist Manifesto, ‘’in times when the class struggle nears the decisive hour, the progress of dissolution going on within the ruling class, in fact within the whole range of old society, assumes such a violent, glaring character, that a small section of the ruling class cuts itself adrift, and joins the revolutionary class, the class that holds the future in its hands.’’

In our case, the ‘’class that holds the future in its hands’’, is the proletariat. At least one economist has chosen to speak the truth, thus joining the ‘’revolutionary class’’, the proletariat, which indicates that the ‘’class struggle is nearing the decisive hour’’.

It is very likely that the more clear headed bourgeois economists are correct, in the sense that we have a ‘’perfect storm’’ brewing. Yet they are wildly optimistic, as they have failed to consider the Revolutionary movement! Working people are not about to put up with this!

In conclusion, we can say that the politicians are aware of the impending financial disaster, and think they have it under control. They do not. 

Both political parties, Democrat and Republican, are only focused on the upcoming federal elections. Biden is determined to serve a second term, while the Republicans are equally determined to stop him. 

If Biden carries through on his promise to give the banks a further 9 trillion, which he does not have, then this will lead to extreme inflation. As well, a government shut down is ever more likely, as the Republicans are determined to block any increase to the debt ceiling. That will also very likely be followed by an American bankruptcy! 

Without doubt, this would lead to a severe increase in the suffering of the common people. A Second Great Depression!

The point being that those who are predicting a ‘’perfect storm’’, have no idea of just how correct they really are! This is not the nineteen thirties! Working people are not about to put up with the suffering that is part and parcel of another Great Depression! 

On the contrary, working people are becoming increasingly well aware of the alternative, that of Socialism. Now it is up to politically conscious people to bring to the working class the awareness of themselves as a class, with their own class interests, which involves the necessity of overthrowing the monopoly capitalists, the billionaires, the bourgeoisie, smashing the existing state apparatus, and subsequently crushing those parasites under the Dictatorship of the Proletariat. This is referred to as Scientific Socialism.

To put it is popular terms, the ‘’ball is in the court of the intellectuals’’. Now it is up to us, those who are aware of the Revolutionary theories of Marx and Lenin, to make the working class aware of the necessity of Scientific Socialism.

We will know that we are being successful in this when the posters and signs read:

Workers of the World, Unite!

Scientific Socialism!

Dictatorship of the Proletariat!