How banks run the world

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Since the worldwide financial crisis exploded in 2008, governments have been hitting workers, youth, retirees — everyone but the billionaires — with increasing austerity measures. Protests globally are coming up against bought-off politicians who won’t hear anything but the demands of big banks. They get all the bailouts they want.

Huge financial interests are clearly calling the shots. But how is it that in alleged democracies and dictatorial regimes alike, financial high rollers are the only ones who count?

What do progressives need to know that will give them the tools to change the game?

A world of debt. For decades, poorer countries have been pushed into deep debt and refinanced their government loans through the World Bank and International Monetary Fund (IMF). The price for these friendly loans from imperialist banks was always to inflict privatization and social service cuts on the people of the borrowing countries.

Now the same scenario is playing out in the richer countries of Europe. In an unfolding drama, one country after another has seen its credit rating drop and its debts skyrocket.

Each has needed large loans from the European Central Bank and IMF. The usual price was levied — imposing severe hardships on working people.

Details vary, but the overall picture is the same. Iceland’s deregulated banks were overextended by 10 times the size of the country’s economy. Greece was in economic crisis before the international crash. The Irish government went deep into debt to bail out its six major banks. Portugal and Spain were victims of repeated bouts of financial speculation that lowered their credit ratings.

As the dominoes started to fall, Italy, France and the other rich countries came under pressure — and remain shaky.

The “sovereign” debt crisis of European nations is just a continuation of the 2008 crisis sparked by the crash of the U.S. housing market.

Banks lent out much more money than they had assets to back up their loans. The big European and U.S. banks lent to each other; when defaults spread, each bank that got into trouble put the others at risk.

This includes the Federal Reserve, the central bank of the U.S., which secretly loaned out over a trillion dollars to banks, financial firms and corporations in the U.S. and Europe from 2008 through 2010.

The U.S. is only somewhat different from Europe, because ever since World War II, it has functioned as the world’s banker, with the dollar being the global reserve currency.

This means that major commodities like oil and gold are priced in U.S. dollars, and many countries keep reserves of dollars to pay for international trade.

Because global demand for its currency was high, the U.S. was able to run up its national debt to fund multiple wars and tax cuts for the rich.

In all these countries, the banks demanded — and got — enormous bailouts from their governments, then thundered for governments to balance their national budgets!

Along with bank-imposed belt-tightening for European workers, U.S. residents now face cuts to Social Security, Medicare, Medicaid, education and social services. The “debt ceiling crisis” in D.C. was a purely political maneuver by both parties to justify such cuts.

The S&P credit rating agency sang the same tune when it lowered the U.S. credit rating, and called for more federal budget cutting.

Why do these financial entities have so much power?

Capitalism today. Almost a hundred years ago, Russian revolution leader Vladimir Lenin explained it in his book, Imperialism: the Highest Stage of Capitalism. Imperialism is generally defined as the domination of powerful countries over weaker ones, but Lenin further explained its underlying economic basis.

“The twentieth century marks the turning-point from the old capitalism to the new, from the domination of capital in general to the domination of finance capital.”

Under imperialism, gigantic corporate monopolies take over the capitalist economy and finance capital dominates industry. Lenin described this evolution. “Monopoly has sprung from the banks. The banks have developed from modest middleman enterprises into the monopolists of finance capital … [They are] a financial oligarchy.”

In this finance empire, banks are intertwined with insurance companies, stock markets, and a proliferating mess of financial “instruments” of speculation.

They mostly create what Karl Marx called fictitious capital. This is capital that multiplies far beyond the real wealth created by industry, and is backed by little but bubbles — in real estate, dot-coms, currency speculation, etc.

Capitalism, however, has an even more basic fatal flaw. Only the production of commodities — the useful things we consume — creates real wealth. But businesses only make a profit when they can sell products. Cutthroat competition between companies (Apple vs. Microsoft, Boeing vs. Airbus) forces them to constantly introduce new machinery, technology or speed-up to beat out their rivals. This continually “grows” productivity.

Here’s the hitch. Workers, the main consumers, cannot afford to buy endless commodities. In this case, the rock of over-production runs into the hard place of not enough customers. And once again, recession or depression ensues.

The crises of over-production always underlie financial crashes, and the banks cannot fix this problem. But they do prop up their profits through government bailouts and by bleeding the working-class goose that crafts the real golden eggs. The bubbles get bigger, and there are still not enough worker-consumers who can afford to buy, buy, buy.

Time’s up. The only way out of the quagmire is to dispose of a destructive economic system. Liberal commentators, top union officials and Democratic Party supporters argue for the party to vote for reforms such as more spending to create jobs, meaningful regulation of Wall Street, taxing the rich and corporate giants. Conservative libertarians advise turning back the clock a century or two and going back to “civilized” capitalism without monopolies.

But finance capital has all the power, and there is no way to regulate it within capitalism. For proof, none of the crooks in suits are in jail for their massive, fraudulent sale of questionable mortgage “investments.”

A whistleblower recently revealed that the Securities and Exchange Commission has been shredding the results of its investigations of the U.S. financial industry for twenty years!

Working people need to militantly organize now in defense of expanded social services, union protections and free speech. In fighting for our rights, we can consolidate the power to overthrow this system and get one that works.

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