Resolution on the subprime mortgage crisis

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					   Resolution on the subprime mortgage crisis and the present stage of the
                            decay of capitalism

                                     (Unanimously adopted)
                              General Council of the IVth International

                                        December 14-16, 2007

         The sub-prime crisis is a new major episode of the decaying process of the capitalist regime
based on the private ownership of the means of production. This stage brings all the contradictions of
the capitalist system to an unprecedented level. More than ever, the option Socialism or barbarism
takes the shape of the collision between the march to barbarism already engaged by the decaying
capitalist regime and the exploited and oppressed masses seeking, through their class struggle, the
ways and means of resistance, not only to save themselves as a class, but through this process to save
the whole of humankind. Clearly, the capitalist regime based on the private ownership of the means of
production is now marked by the generalization of what Marx in The German Ideology described as a
tendency emerging at the time and then chronic when capitalism gathered speed and which has
become its general tendency: There comes a stage when new productive forces and means of
circulation are born which can only be noxious in the framework of the existing relations and are no
longer productive forces, but destructive forces (mechanization and money) This fact is linked to the
preceding one in which a new class is born which shoulders all the burden of society, without enjoying
any advantages, and which is excluded from society.

1) The sub-prime crisis burst out in the USA, in the middle of August 2007. Day by day it has been
spreading to the whole world economic system. This crisis confirms the analysis that was made just
one year ago by the 4th International, at its 6th World Congress. The Resolution on the world situation
and the tasks of the 4th International (1) summed up the major characteristics of the world economic
crisis as follows:

―We are still in the framework analyzed by Lenin on imperialism. In this historical epoch, we are
facing the following situation:

    a)      Huge amounts of funds are being daily accumulated at one end of society.
    b) The world market is being established, saturated, and oversaturated. It is unable to consume,
    in the conditions of the social relations of consumption and therefore of production, the mass of
    goods that the productive forces could produce. The outcome is that those huge amounts of funds
    cannot be easily valued in the sphere of production (which supposes that the extorted surplus
    value may be absorbed in the market by selling the goods).
    c) Those huge amounts of funds, which are not valued in the conditions of production of goods,
    are seeking, under any form, to spread the means of speculation, that is to say yield profits by
    getting round the process of surplus value extortion in the producing of goods.

There are three consequences.

a)       The law of evening out the profit rate between the industrial branches (defined by Marx in
Capital) incorporates into the average profit rate, not only all the industrial branches, but also the
financial profits of capital. For the capitalist class, the expected profit rate must be in line with the
return rate on the expected investment in speculation.
b)       In order to bring the profit rate in production to the level of the profit rate in speculation there
is no alternative for capital other than to concentrate the release of the surplus value on the lowering
of ―labor cost‖. And not any more – like in the ascending stage of capitalism – only through the
increase of the productivity of labor, but through the lowering of the recognized standards of the
workforce below the level it has reached historically according to cultural, historical and social
parameters. To take up again Marx‘s formula, it is what the class struggle has established. More than
ever reactionary all along through and through, imperialist capitalism can only survive at the expense
of the destruction of all the organized forms and institutions which safeguard the value of the
workforce: collective agreements, statutes, social security systems, the existence of independent trade
unions, including State institutions and nations. These are the institutions of bourgeois democracy in
the cracks of which, to take up again Trotsky‘s words, proletarian democracy has inscribed its own
c)      As the impoverishment of the working class and the oppressed masses becomes greater, the
capacities of absorption of goods are being reduced.

The means with which capitalism is fighting the tendency to dismember the markets can only worsen
this tendency. Capitalism responds to this by developing mass parasitical measures, particularly
indebtedness which, under another form, fuels speculation.

2) This is a framework of analysis that makes it possible to understand the current crisis, its
development on the global level, the means used by financial capital to try and overcome it and what
the responsibilities of the 4th International are. The Preparatory notes to the report on the world
situation and the position of the 4th International (2) stated:

―The overall economic situation opened in 2001, after the collapse of the new economy, is currently
being closed in the USA. The impending recession – even the collapse – predicted by all the analysts
will have world repercussion.

―The first sign of this announced collapse is the bursting of the real estate speculative bubble. This is
similar to the speculative bubble of the Internet economy that exploded in 2001.

―Once again, the gigantic parasitic means used by imperialism to overcome its contradictions are
bumping into its own limits. At every stage, the question is raised at a higher level. ‗What is to be done
next time?‘‖

This overall economic situation of 2001/2007 was marked by the attempted revival of imperialist
economies, and particularly of US imperialism. This occurred in the aftermath of the collapse of the
new economy on an unprecedented scale and used the means of parasitism and destruction.
Encouraged by the policy of the Fed., [the Federal Reserve Bank] (the US central bank) to maintain
interest rates at a low level—a policy whose main goal was, between 2000 and 2002, to restore a
financial system that had been brought to the brink by the ―dot-com‖ speculative drive—speculation
and parasitism have been developing at an unprecedented rate, unleashing vast masses of funds bent
on securing the highest profits. The funds greedily snapped at any kind of speculative offer: shares,
bonds, raw materials, real estate, etc. reaching out to ever increasingly fictitious markets (i.e.,
apparently disconnected from the ―real‖ markets, be it trading commodities or stocks and shares); the
explosion of derivatives, those highly speculative financial tools, is today the ultimate expression of
that move.

By the end of the second quarter of 2007, those derivatives totaled US$ 516 trillion (more than 13
times the world production of goods and services) compared with ―just‖ a little over US$ 382 trillion
three years earlier; a 135% increase. On this market, US$ 1.2 trillion are daily traded worldwide.

Currently, the exchange market amounts to US$ 3.2 trillion a day, compared with US$ 1.880 trillion
five years ago, a 70% growth (3). The traded volumes nearly amounts to a hundred times the value of
the world trade of goods and services, which indicates the pervasiveness of trading capital and of

As for the hedge funds, they have swollen out of proportion. Today, those funds own US$ 1.5 trillion
of capital (compared with US$ 490 billion in 2000, a 200% increase!) and with the help of sums
borrowed from the markets in addition to those funds, they own US$ 6 trillion worth of stocks and

3) The development of speculation and parasitism springs from the decay of imperialism and, in turn,
fuels it. The central role played by the share of arms production in the total world production expresses
this decay of the declining capitalist system, since increasing militarism and wars are a fundamental
demand of a sharply declining capitalist economy. In 2006, world military expenditures reached US$
1.204 trillion, a 37% increase compared with the figures ten years before. US imperialism military
expenditures, which amount to 47% of the world military expenditures, have increased by 53% in the
last seven years. The US Defense budget for 2008 has been given a 9.5% increase and will amount to
more than US$ 650 billion, if one adds the extra budget for the war in Iraq and Afghanistan (which is
not included in the budget adopted by Congress). Directly or through subsidies to universities and
private laboratories, the Defense Department plays a major role in the development of new
technologies, adaptable to war and transferable to the civilian market, such as research on new petrol-
replacing fuels, biology, etc. Sixty one percent of the total amount of research and development
expenditures (R&D) of the federal government are related to Defense (5). And it is private industry
that carries out the orders to the amount of 70% of those sums (6). The 100 top industrial groups in the
world have produced nearly US$ 300 billion of weaponry, 64% of which are made by 41 US groups.
Five US corporate groups (Boeing, Northrop Grumman, Lockheed Martin, Raytheon and General
Dynamics) (7) turn out a third of the world weapon production. The explosive growth of military
spending, especially during the two last decades confirms that the armament industry is the driving
force of the entire capitalist economy based on extracting surplus value, which implies commodity
production. The core place of the armament industry in the development of production confirms the
program of the 4th International; during the imperialist stage, not only productive forces do not grow;
on the contrary, they are being destroyed, and it is the destructive forces that are developed. US
imperialism must confront the crisis of the world market by increasing its own public deficits in
unbelievable proportions in order to fuel war industry. The burden of the most powerful imperialism’s
public debt is first and foremost laid on the shoulders of its own ―allies‖ but also on the world scale
and on its own working class for a start, which pushes the world crisis still further. The profits
gathered by the weapon-making industry (and also what goes along with it, through the plundering of
oil resources and commodities) fuel world speculation. The growth of the armament industry can be
limited only in the same way as marketable goods production in the decaying capitalist system can be
limited and also by the resistance of workers and peoples to barbarism. In this situation of goods
production in the framework of the crisis of a declining capitalist system, a growing share of those
funds mobilized and of realized profits gets invested in speculative parasitism, which still increases the
crisis of the decay of capitalism. The limitation of capital is capital itself.

4) The parasitical revival of the economy is more than ever based on mass indebtedness, and
particularly on the fact that households run debts, which has caused the explosion of the current crisis.
During the past seven years, household consumption has amounted to a 70% increase of the US GDP.
Essentially this has not been the result of US workers’ wage increase, but by the unprecedented
increase of household debts, stimulated by a policy of very low interest rates (or the cost of a loan)
promoted by the Fed.

In the framework of the decaying regime of the private ownership of the means of production,
indebtedness has the function of trying to solve the contradiction between the necessary (for capital)
lowering of the value of labor (and therefore consuming capacity) to reach the levels demanded by
financial capital, and the demands of financially solvent markets, having enough consumption capacity
to make the realization of profits possible through the sale of goods (that is to say by turning it into
new capital)

In the USA—but also, under less advanced forms, in all the imperialist countries—lowering the cost
of labor does not only mean stagnation, or even lower wages, but also privatization and the submission
to the laws of the market of all aspects of daily life. A book that was published just before the bursting
of the ―sub-prime crisis‖ (8) highlights the following among the major causes of increased income
inequality in USA:

-         A taxation system that is made for the higher income bracket;
-         The high cost of health insurance. Insurance premiums are not pegged to income. They weigh
heavier on lower incomes, which compel those people not to subscribe. Therefore, running debts to
pay for these premiums is becoming common practice and Paul Jorion writes that consequently ―the
expenses concerning health are mentioned as the main cause of personal bankruptcy in nearly half of
the cases‖, including those paying their health-insurance dues. Finally, health insurance is tied to the
job. In the majority of cases a worker is fired when illness lasts too long. He has to pay for the
premium himself, without the employer’s contribution, which he cannot afford unless he runs a debt
for that.
-         The high cost of education. ―Education is more and more expensive and there is selection
through money.‖ Loans for higher education are becoming heavier and heavier, especially for students
from the underprivileged communities, notably Black and Latino communities.

The consequence is running excessive debts in order to make ends meet and to try to get a decent
living standard; workers get under the thumb of banking power and speculation, and society
disintegrates as soon as the debt bubble bursts. In order to overcome its contradictions, financial
capital throws millions of workers in the debt trap.

The ―sub-prime‖ mortgage market is one of the strongest expressions of the decay of the system. As
financial capital reached the limits of the financially solvent estate market — i.e., made up of
borrowers who can pay back their mortgages — it went beyond its own prudent laws and, using
genuine gangster methods, lured millions of poorer US workers into debt.

Financial capital was quite aware of what it was doing. Alan Greenspan, President of the FED from
1987 to 2007, wrote (9): ―I was quite aware that the relaxing of mortgage rates was increasing the
financial risk and that housing assistance (10) was exerting a distortive [sic] effect on the market. But
I also understood that increasing the number of landowners was strengthening the support to market
capitalism — a vast issue. I believed, and I still believe, that the advantages of this broadening of
individual land property was worth the inevitable increase of the risks. The protection of the rights of
property, so essential in a market economy, needs a critical mass of landowners to enjoy political

Therefore, Mr Greenspan, ―the most powerful man in the world‖ to quote the back cover of his book,
knew perfectly well that his — and his social class's — policy was leading millions of households to
catastrophe. But the preservation of the regime that he is defending against all odds made this
catastrophe necessary and even needed.

5) The ―subprime‖ estate market’s function was not only to create a market that was able to consume
goods and realize profits beyond the limits of capacity. It was also the foundation of a wide
speculative market with the transformation of those loans into stocks and shares negotiable on all the
financial markets. This securitization made it possible for banks and mortgage institutions to release
their accounts of those loans and therefore make new loans at the same levels as the released accounts.

In the USA an important portion of the securitization was performed by the FNMA (Federal National
Mortgage Association) and the FHLMC (Federal Home Loan Mortgage Corporation). Both are joint
enterprises (federal government and private capitalists), whose major role is to buy the loans from the
banks and mortgage institutions so that they can get ready cash to grant new loans. Those loans are
sub-prime loans as well as loans granted to borrowers who were regarded as more financially solvent.
The presence of government in the capital of those enterprises enables them to find very cheap sources
of funding, which they generally do not pass on to the final borrowers, thus making sure the private
shareholders of these institutions get sizeable profits. But they transform all the loans which they have
bought, into stocks and shares which are sold again on financial markets on which, These are, by the
way, the same banks which had gotten rid of their speculative loans through specialized funds. In
reality, the market of the stocks and shares created on the basis of estate mortgage reaches far beyond
the subprime market itself.

What made it special is that, being based on loans granted to less financially solvent borrowers, the
corresponding stocks were saleable on the stock exchange only if they offered a high level of
profitability, acting as security against loss liability.

Securitization brings a consequence: failure to pay back the loans does not affect only the actors of
estate funding (banks, specialized mortgage institutions, etc.) but the whole financial system since any
speculator (bank, funds, pension funds, etc.) could buy these shares and negotiate them on the
financial markets. Moreover, many banks have created their own system of securitization (beside
institutions such as Fannie Mae and Freddie Mac) and have caused the phenomenon to inflate.

As the already quoted above Alan Greenspan confirms, the current situation is not the consequence of
a technical mistake or a misjudgment, rather it stems from a basic law: the survival of the decaying
regime of the private ownership of the means of production is operating with the destruction of the
whole of mankind.

6) Despite attempts to hide it, the scope of the catastrophe is being brought to light every day. One of
the most important columnists in the Financial Times, (11) Wolfgang Munchau, writes: ―It is time to
admit that the US economy is heading towards a serious economic recession, much more important
than it was suggested by the understatement of the central banks when they speak of risks thwarting
growth [...] I was pessimistic on the seriousness of the crisis from the start, but things have turned
even worse. I think that the solution to this crisis can be reckoned in years rather than in weeks or
months. My opinion is that we have gone as far as 10% of the way through this crisis, less than 10% in
terms of costs for the financial sector and even less in terms of macro-economical impact [i.e., for the
whole economy – Editors’ Note]‖ Taking into account the place of the US economy, all the economies
will be affected, with major consequences for economies, workers and the exploited. This will happen
because the capitalist class will seek to restore its profits by any means, whatever the cost.

Millions of Americans have already lost or are going to lose the houses they owned. Many households
were lured into the trap by the mortgage birds of prey with interest rates which will cease to be
applicable within a few months. This will cause the burden of the debt weighing on those households
to rise to unbearable levels. Bank of America announces a peak of failure to pay the debt for next
March. The head of the economy department at Standard & Poor’s announces that the failure is not
expected to peak before 2009. Not to mention the households which may be able to keep their homes
but at the cost of a readjustment of their debt which will weigh heavily on their purchasing power.

The building sector and its workers will be seriously affected in the first place. The constantly
decreasing number of new homes being built and collapsing real estate prices will all weigh on a
sector which plays a special role in every country. The collapse of real estate prices will weigh
particularly on the daily lives of millions of American workers who have found no other means to
survive other than mortgaging their homes to get loans for consumption. This explains why US
households have an average debt of 130% of their incomes. (12)

7) In a world economy ruled by financial capital, the situation of the world financial system is a key
issue. This system has been deeply shaken by a crisis which is currently deepening.

Every day new losses are announced by the biggest banks in the world. According to Ben Bernanke,
the Fed President, the losses following the speculation on subprime loans shares would amount to US$
150 billion. But these figures are largely underestimated: on the one hand, no one really knows where
those shares are (and the banks carefully try to hide the news on this issue so as not to cause their
shareholders to panic); on the other hand, the loss of confidence in those shares is infecting more and
more similar shares, negotiated on the financial markets. Deutsche Bank estimates the loss at US$ 400
billion, including US$ 130 billion for the banks.

Central banks have massively intervened since last August aiming to inject the cash needed to
―lubricate‖ the financial machinery; that in itself shows how deep the crisis is. In early November the
Fed had to inject another US$ 41 billion into the financial markets. It had to lower its intervention
rates and it is expected to do so as long as necessary to keep the ship afloat like in the aftermath of the
collapse of the ―new economy‖.

In their turn, the two mainstays of the US mortgage system — FNMA and FHLMC — are hit. On
November 20th, they announced their first losses. The situation is so serious that FNMA has had to
find new funds in the financial markets, up to US$ 6 billion, in order not to go bankrupt.

8) Because loans and speculation are the key cogs in the current system of valorization of capital, the
current crisis has and will have deep consequences for the economy as a whole. All the analysts and
representatives of the highest institutions of the financial capital agree on that, though they are trying
to hide the scale of the problem. In its latest forecast, the Fed reckons a growth rate of the US
economy for 2008 between 1.8 and 2.5%, instead of the range of 2.5 and 2.75% announced in June
2007 (13). In an article concerning the ―vulnerable US economy‖, The Economist (14) writes: ―In
1929, in the days that followed the market crash, the Harvard Economic Society reassured their
members as follows: ‗A serious depression is outside the scope of probabilities.‘ In a survey of March
2001, 95% of US economists said that there would be no recession, although it had already begun.
Today, most of the economists do not forecast a recession in America. The scant forecast of the
profession does not give any comforting words. Our latest assessment suggests that the USA is really
heading towards recession.‖ The article goes on pointing out that the main threat is the collapse of the
major engine of growth, which is household consumption. This is combined with a more and more
marked slowing down of the creation of jobs. Job creation has dropped from a monthly average of
189,000 in 2006 to 118,000 since the end of August 2007. According to La Tribune (15) ―the
document of the minutes of the FED shows a growing concern about unemployment. The
unemployment rate is going to increase slowly, the central bank says. In 2007, it is expected to be in a
range between 4.7% to 4.8% of the work force, which is more than the 4.5% and 4.75% which was
expected previously, whereas in 2008 this rate should reach go up to somewhere between 4.8% and

Two months ago, the IMF announced that it expected a decrease of the world growth from 5.2% in
2007 to 4.8% in 2008, but its spokesman, Massoud Ahmed, has just announced that this forecast is
going to be even lower (16). The same forecast of a decrease is expected for major imperialist
economies, notably in Europe.

The daily revelation of new losses for banks and other financial institutions (such as insurance
companies) strengthens the tendency of the banks not to grant loans to each other and therefore to
increase the cost of loans (this is what is called credit crunch). According to all the analysts, this
higher cost will necessarily bear on corporate investments. But this is only one view of the prospect
and a distorted one as well. The higher cost of credit will mainly lead capitalists to maintain, and, of
course, to try and increase the profitability of capital they have invested. It will also lead them to a
higher rate of exploitation of the work force and a lowering of its value.

9) For many months, the escalating measures taken against the working class and the peoples express
the fact that, as the capitalist class is aware of the disastrous consequences of its struggle to maintain
the capitalist system in the imperialist era, and for which it has no alternative (see the quote from Alan
Greenspan), it must accelerate the conditions of a return to acceptable conditions of profitability of
capital. First, it takes the form of reactionary attacks against all the gains of the struggle of the working
class and peoples. But we can foresee that the pace of off-shoring (together with what it means in
terms of jobs in a capitalist metropolis) will have to be stepped up, from the point of view of capital,
so that the profits from the exploitation of workers in dominated countries show enough profits to
compensate or overcome the damage caused by the capitalist class itself to its own regime.
Among others this is what renewed pressures from the imperialists mean—and in the first place, the
US imperialists—to make the Chinese bureaucracy revalue its national currency. They ask the
bureaucracy not to delay reaching the goal they have assigned by keeping its currency undervalued. In
other words, by making Chinese products less competitive, the revaluation of the Chinese currency
demands pushing the value of the work force in this country ever lower so as to regain lost
competitiveness. This pressure is the expression of the demand that the Preparatory Notes on the
report on the world situation and the place of the 4th International summed up as follows (17): ―We
must highlight here that the growing pressure to liberate the yuan-dollar exchange rate is the
expression of the necessity for US imperialism to shift to another stage: dismember what is left of the
conquests of October 1949 in China, dismember the Chinese working class, and dismember the
centralized system of social property. And in order to dismember this centralized system (including
dismember the Chinese Communist Party) they have to dismember China itself.

10) This demand from China is expressed differently from other dominated countries, but it is the
same and it has to be realized at a faster rate because of the scope of the development of the overall
crisis which is spreading throughout the capitalist system. Financial capital, seeking the way to check
the consequences of the crisis on profits, is going to step up its plundering of dominated countries’
economies and the exploitation of their work force. To do so, all the dams must be destroyed and
notably those of social property in China.

To those who argue that ―emerging countries‖ are going to save the world growth, that their growth
will compensate the slow growth in the richer countries, we would like to recall the previous Asian
tigers of the 90’s and the resulting crisis which took place (18). Those economies, completely based on
the export of goods manufactured by foreign multinational companies using a cheap local labor force,
will sooner or later be hit by the crisis. Financial capital lowers the cost of labor in those countries
with the complete collusion of the local governments. It also, therefore, lowers the home consumption
capacities of these countries. This is not an essential component of the growth of emerging countries
(and by the way the goal of capital is basically not to develop this consumption). If we take up again
the case of China, a survey published in The Economist shows that the share of wages has dropped
from 51% of the GDP in 2000 to less than 40% today and for the same period, household consumption
has dropped from 46% of the GDP to 36%.

On that issue, in La Verite/The Truth No. 52, in the preparatory notes to the 6th World Congress, we

―It is common knowledge that the huge deficits of the American economy are mainly funded by the
Asian central banks, especially the Japanese and Chinese banks.
Officially the assets held by Asian central banks top 2 trillion dollars with 900 billion for China alone.

 At the outset, either the productive activities that were hitherto established in the United States or in
Europe are off-shored; or capital is directly invested in industry – though, as we examine later, most
―Chinese‖ exports from China are linked to activities controlled by non-Chinese capital, mainly from
the United States.
 Second stage: the manufactured or assembled goods are exported from China. They are paid in
dollars, the international trade currency. Those dollars are then deposited by exporters in Chinese
commercial bank accounts…
 Third stage: the Chinese commercial banks sell those dollars to the Chinese central bank.
 Fourth Stage: the Chinese central bank invests these dollars by buying American Treasury bills, thus
financing US deficits.

It is worth noting that the amount of American budget and commercial deficits (between 700 and 1000
billion dollars every year since 2002) compels the American Treasury to borrow 1.8 billion dollars
each day on the market. It is American and foreign institutional investors who provide loans,
especially Asian central banks, that thus place their currency reserves. (…)
But where does this mass of capital, which leaves China to fill the gap in American deficits, come
from? Who does it belong to? Who produced it?
If the commercial balance between China and the United States is, at first glance, highly favorable to
China, this needs to be looked at more closely.

―Actually a large part of China's commercial surplus is realized by multinational companies that seek
the lowest labor costs in this country and have chosen to manufacture here products that are labor
intensive‖. Mr Wu Xiaolong, vice governor of China‘s Popular Bank, declares in ―The Online
People's Daily‖ reviewed on October 16th 2006, Expansion of outside trade in China.)

Indeed, as Mei Xinyu says (quoted in the same article) to a trade expert of the Chinese Minister of
Trade, ―China's commercial surplus mainly comes from the trade of manufactured goods and most of
the exports of these multinational companies have been included in the figures of Chinese trade. A
high percentage of the profits made on exports actually line the pockets of multinational companies‖.
Official figures leave no space for controversy. For the first semester of 2006, enterprises with foreign
investment generated 58.5% of the total value of Chinese exports abroad. State enterprises
represented 24% and private enterprises 17%. Actually, if one takes into account Chinese companies
with mixed capital (―joint ventures‖) the total stands between 60 to 70% of the value of Chinese
exports produced by companies with foreign capital or with the participation of foreign capital.
Foreign capital, but… overexploitation of the labor force of the Chinese proletariat!‖

11) As for Europe, European economies have already been seriously affected through the credit crisis.
On the one hand, European banks are obviously hit by the subprime crisis, a market on which they
have speculated on a wide scale. One after the other, the major European banks are announcing
important losses, some of them going bankrupt (Northern Rock) or bailed out at the last minute (IKB
and Sachsen LB in Germany). Further loss announcements are to be expected.

On the other hand, the ―credit crunch‖, which is developing, will necessarily weigh on the economies
of the sector that, as far as enterprises are concerned, find their biggest investments in the financial
markets dominated by the US financial capital. Investment funds (mainly American), which have
purchased hundreds of European companies by massively resorting to debts, are going to demand a
profitability rate for their capital at the level of the increase of the cost of credit, with the consequences
that can easily be foreseen in terms of production restructuring and lay-offs.

Finally, the dollar value drop compared with the euro (fueled by the crisis and which the Fed lets run
on its own steam for the benefit of US imperialism's own current interests) makes European exports
more expensive and therefore less competitive. This competitiveness will be won only over the value
of the work force (in collusion with the goals of US imperialism) according to the basic principle of
existence of the euro, which, it is worth remembering, was summed up in 1999 by the then president
of the German Central Bank as follows: ―The countries participating in the EMU [Monetary and
Economic Union - European Currency Union or ―zone euro‖] won‘t be able, like in the past, to have
recourse to the mechanism of exchange rates between currencies (..) The weight of adjustment to deal
with the change of labor productivity or to meet the demand will rest exclusively on the cost of labor
in each country. This situation will certainly fuel the outsourcing drive. For instance, the bosses of
EADS-Airbus are openly speaking of their determination to offshore some of the production, notably
to China.

Imperialist demands, which provide the framework of the policies of the governments which accept
them, stem from the crisis which undermines it. Their implementation cannot address mankind’s needs
and cannot even solve the contradictions which are the essence of the capitalist system in its
imperialist stage. Quite the opposite: the solutions to the crisis are not part of a superior stage of the
next crisis. The major limit of capital is capital itself, to quote Marx.

12) The only solution given by financial capital is the permanent revival of parasitism and speculation
which gives — less and less — the illusion of recovery. Already, capital in excess (not from the point
of view of the needs of mankind, but from the point of view of capital profitability) is seeking new
scopes of parasitical accumulation.

Commodities (oil for one) are among those. Much of the rise in the price of oil in recent years is only
caused by the sole speculative factor. But should we be surprised of the simultaneousness of the
subprime bubble explosion on the market and the acceleration of the oil price rise? Since the
beginning of the year the price of oil has taken a sharp upward curve, while this price sat at the already
high range of US $60 to 70 the barrel, with an exception of a peak at about 78 US$, at the end of July
2007. The price of oil suddenly soared in mid-August 2007 (when the first announcements of collapse
took place) and has continued to the near US$100 peak. And that while most specialists didn’t note
any sign of fundamental change in supply conditions (resources and production). The same is
observed for gold: its price, which has been ranging for one year from US$650 to 700 per ounce,
suddenly rose in mid-August 2007 to reach nearly US$850 per ounce in November. The same
tendency can be found in all the most speculative commodities. Only speculation can explain that.
Speculation would account for US$20 to 25 in the current price of a barrel of oil today.

But while other fields of parasitism are invested, some others are being prepared. To take one more
example, there are currency reserves in dominated countries. Because of their submission to
imperialism, the governments of the new dominated countries refuse to use the excess foreign
currencies earned with export to improve the people's standard of living. Hence, they are accumulating
masses of currencies in their central banks which they throw into funds (called sovereign funds) so
that those reserves are put in juicy investments. We can say that all the components of capital are
coveting these funds, which according to Morgan Stanley bank, would amount to US$ 2.8 trillion,
twice the subprime market. With its sovereign funds China has taken a share in one of the main
investment funds in the world, Blackstone. It is also one of these funds, the one created by the Abu
Dhabi emirate, which has taken 5% of the capital of Citibank, which is faced with important losses.

What will the next step be? No one can tell. What can be predicted, on the other hand is that, by itself,
the regime of private ownership of the means of production can only go from one crisis to another,
each time more destructive. And yet, these are not simple economic developments, inevitable
mechanism; this is class struggle. The decay of capitalism towards imperialism fuels the march toward
barbarism, destruction, the regression of mankind, the explosion of nations, of States, alleged ethnical
wars, endless massacres. The march toward barbarism is threatening all mankind. But even within the
march toward barbarism, the elements of a solution are trying to materialize to seek a solution. In spite
of the policies of the apparatuses, the working class, oppressed peoples are seeking to set up the means
of an independent policy, to preserve the independence of organizations, and to set up this class
independence as an instrument to preserve and regain all the components of human civilization. The
option Socialism or barbarism has never before been so true. It is up to us, as activists of the 4th
International, to join in the search of the solution to the crisis of the leadership, which will enable
millions of oppressed and exploited to reverse the apparently inevitable course toward barbarism and
to open the way to a new stage of development of mankind, based on the expropriation of the
expropriators, on the socialization of the major means of production and exchange, socialization which
will enable them to be a factor of development of all of mankind, as it has never known until now.

End Notes

(1) Published in La Vérité/The Truth N° 659 December 2006.

(2) Daniel Gluckstein La Vérité/The Truth N° 52 October 2006
(3) Data from Triennal Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2007
published in September 2007 by the Bank of International Settlements.
(5) Meaning that this not only includes the share R&D budget allotted to the Defense Department but also the
share of other Departments such as Domestic Security, Energy (which includes the budget related to nuclear
armament!) Health and so on.
(6) Data from GRIP (Group of Research and Information on Peace and Security – Belgium) compiled by Luc
Mampaey and titled The role played by R&D in its military and security aspects in Europe‘s ―new strategic
objective‖: some lessons to learn from the USA, September 2006.
(7) Data from Year Book 2007 Armament, Disarmament and International Security published by SIPRI
Stockholm International Peace Research Institute
(8) Paul Jorion, Vers la Crise du capitalisme américain? [On the way towards the crisis of American
capitalism?] La Découverte MAUSS 2007
(9) Alan Greenspan The age of turbulence: adventures in a new world –French publisher J.C. Latès
(10) Let us not be mistaken. When he speaks ―relaxing mortgage rates‖ and ―housing aid‖ Mr Greenspan just
uses palatable language to refer to the rogue methods used in order to flog loans to people who were not capable
of paying them back.
(11) Financial Times (Britain) November 11th 2007
(12) The Economist (Britain) November 17th 2007
(13) La Tribune (France) November 21st 2007
(14) The Economist (Britain) November 17th 2007
(15) La Tribune (France) November 21st 2007
(16) La Tribune (France) November 29th 2007
(17) La Vérité/The Truth N°52 already quoted
(18) On this, read chapter 1 of Class Struggle and Globalisation by Daniel Glusckstein

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