Don’t Get BITten!

 Written by: Duncan B. on 2 May 2021

Nobody knows who invented Bitcoin. It was invented in 2008 by a person or group of people using the pseudonym Satoshi Nakamoto. Bitcoin came into use in 2009.

Bitcoin and its imitators do not exist physically. Bitcoin is a cryptocurrency - a type of money that is completely virtual - an online version of cash. Bitcoin can be used to buy products or services the same as cash. Each bitcoin is a computer file stored in a digital “wallet”.

Bitcoins can be transferred between “wallets”, each transaction being recorded in a public ledger called a blockchain. Bitcoin is not controlled by governments or banks and does not have one single administrator. Transactions are sent from user to user on the bitcoin peer-to-peer network. These transactions are anonymous.

 

Bitcoins are created by a process called “Bitcoin Mining”.  The “Miners” are people who use specialised computer equipment to perform complex cryptographical problems and are rewarded by payment in Bitcoins. The total output of Bitcoins is limited to 21million of which about 18 million have been mined so far.

 

Unlike conventional money which is supported by the gold reserves of a country, Bitcoin does not have a commodity or product tied to its value. Bitcoin has a value because its supporters decide that it has value. People have trust in the Bitcoin system and its processes. The finite number of Bitcoins is also a factor.

 

In “Capital”, volume I, chapter III, Marx analysed the various functions of money:

1) The measure of value and the standard of price.

2) Ideal Money.

3) Money of Account.

4) The means of circulation.

5) The means of payment.

6) Universal money.

 

Bitcoin can perform these functions of money the same as conventional money. Most financial transactions today involve ledger entries rather than actual cash. However, unlike conventional money where governments and central banks try to keep the currency stable, the extreme volatility of Bitcoin makes it unsuitable as a store of value or medium of exchange. Bitcoin has become a medium of speculation.

 

The value of Bitcoin is very volatile. Bitcoin has seen spectacular rises in value and equally spectacular falls. At the time of writing, one Bitcoin was worth about $70,000, up from about $10,000 a year ago. The rise is attributed to investors seeking higher returns at a time of low interest rates, and the actions of big players like Elon Musk, who recently purchased $1.3 billion dollars’ worth of Bitcoin. 

 

Despite the volatility of Bitcoin’s value, the anonymity of Bitcoin transactions, the absence of controls and the difficulties of scrutiny by authorities makes Bitcoin the payment method of choice of money launderers, drug dealers, child pornographers, scammers and all the other evil inhabitants of the dark web.

 

There are objections made to Bitcoin because of the enormous amount of electricity need to power the computers used to mine Bitcoins. It is estimated that Bitcoin mining is consuming energy for computing power more than the annual consumption of Ireland. There are also objections because of the ideology of Bitcoin’s supporters- a mixture of Anarchists, Libertarians and far-right extremists.

 

Governments and central banks are looking at getting in on the cryptocurrency act. Australia’s Reserve Bank and the Bank of England among others, are looking at creating digital currencies. China is also looking at an e-yuan. These digital currencies will not be attractive to the current users of Bitcoin because they will be regulated by governments and their central banks.

 

In volume III of “Capital”, chapter XXV, Marx discusses the workings of the credit system as it functioned in his day. He also discusses what he calls “fictitious capital”, devised by capitalists for the purpose of speculation and swindling.

 

Speculation and swindling still exist today in forms undreamed of in Marx’s day. Finance-capital has invented many new vehicles for speculation such as the securitised mortgage packages and their derivatives that helped fuel the Global Financial Crash of 2008. A glance at the financial press will show there many other new financial creations that are allowing some people to become millionaires out of something that doesn’t exist. Bitcoin is shaping up to be another one of these.

Saviours no more: Finance capital, Greensill, Gupta and the Whyalla steelworks.

 Written by: Alex M. on 31 March 2021

Over the Labour Day long weekend news filtered through that the ‘saviour’ of the Whyalla steelworks, Sanjeev Gupta’s GFG Alliance, was experiencing difficulty with its finances (see Ned K’s 8 March Vanguard article here. ) That is, one of GFG’s key financiers, Greensill Capital, has spectacularly imploded leaving question marks hanging over GFG Alliance’s ability to continue its various operations here in Australia and overseas. 

A Bundaberg born businessman, Lex Greensill, founded Greensill Capital in 2011. Greensill went to one of the heartlands of finance capital, the City of London and established a financial firm that specialises in Supply Chain Finance.

Supply Chain Finance is like a lot of financial practice; it’s rather difficult for an ordinary person to comprehend. (The jargon and complexity associated with finance and financial instruments seems to be opaque by design.) Essentially, it is the speeding up of the payment process for companies actually making products. For example, a large manufacturer producing the bourgeois economists’ favourite item, the widget, has orders for the production of millions of widgets. The orders are from a number of companies involved in either using the widgets in their own production processes or selling the widgets (Marx called the latter merchants). Important here is the time discrepancy between the production of the widgets and the payment of the invoices by the companies that ordered the widgets. For the manufacturer it can be crucial to receive payment as soon as possible in order to have capital to start the production process again. However, invoices can have payments stipulated for 30 days or later after receipt of the widgets.

In order to overcome the time delay between production of commodities and payment for same, credit came into being. In volume three of Capital Marx describes the importance of credit and what he termed fictitious capital for the circulation of capital and the production process. Credit helped overcome the constant struggle to amass money for payment of commodities among other things. On the basis of the perceived soundness of a business or an individual, financial entities such as banks extended credit, thus allowing the production process to continue or the purchase of commodities to proceed with little to no delay. Of course the extension of credit comes at a cost; the debtor has to pay back the loan with interest. Marx highlighted the usefulness of credit and what was later called finance capital, while also pointing out the downside, namely the speculation associated with financial practice. 

Since Marx’s time there has been an exponential rise in the number of financial instruments and financial corporations. In addition, the fragmentation of production processes has proceeded apace. That is, rather than the production of widgets taking place in a single location, the various parts of the widget making process can be separated out with manufacturing firms specialising in producing a part or parts of the widget. These production plants can be located in various parts of the globe due to lower wages, tax breaks, less stringent environmental laws, higher profits and so on, thus adding complexity to the supply chain. A classic modern example of this is the Apple IPhone where Apple subcontracts the production of parts of the phone out to Foxconn in China and the packaging of the IPhone to other companies in other cities and countries. The IPhone and its packaging is the result of a number of production processes located in various parts of the globe, entailing numerous changes of location, warehousing and shipping, before distribution to retailers. Such complex supply chains have helped drive the rise of Supply Chain Finance.

Greensill Capital as a provider of Supply Chain Finance acted as an intermediary between producers and merchants, buying invoices at a discount. Namely, paying the producer/manufacturer before the invoice is due at less than the face value of the invoice (the discount). The manufacturer is happy to get less than the full price as stipulated in the contract/invoice because they are getting payment quickly before the due date. For the purchaser of the manufactured goods, they don’t have to pay the manufacturer; they now have to pay Greensill when they (the original purchaser) take possession of the manufactured goods. 

All very well, but there is a further financial twist; the debt owed to Greensill Capital as holder of the invoices was packaged up as Bonds and sold on the Bond market by Greensill. (Or an entity acting on behalf of Greensill; it is not necessary for the purposes of this piece to ascertain who organized the Bond issue as Greensill is the initiator of the process. One of the purchasers of the Bonds, a major financial capitalist enterprise called Credit Suisse grew alarmed with Greensill’s exposure to one group of companies – GFG – and stopped trading in the Greensill Bonds.) 

Such a step was feasible due to the multitude of invoices they held. Amassing a huge amount of invoices with the attendant streams of income coming in from the original purchasers of the manufactured goods, packaging these income streams into a financial instrument (Bonds) helped Greensill fund their continuing operations in Supply Chain Finance and other areas of finance. 

From its beginning in 2011, Greensill Capital grew dramatically due in part to its operating in what is called the shadow banking sector. Regulations and prudential requirements that financial institutions like banks are subjected to are evaded in the shadow banking sector. Emboldened by the lack of regulatory oversight and its ever-expanding Supply Chain Finance business, Greensill Capital indulged in some risky practices, or, more appropriately, speculative pursuits. As mentioned above, Greensill was one of the GFG Alliance’s major sources of finance. As well as the supply chain financing provided by Greensill to GFG, Greensill advanced GFG some additional unsecured loans resulting in GFG owing something like $4 billion US dollars to Greensill.  

The house of cards started to fall last year, when, with the Covid induced downturn in global capitalism, businesses which owed payments to Greensill Capital began to default in large numbers. Alarm bells rang in insurance companies that underwrote Greensill’s financial business. Insurers declined insurance to Greensill considering it too risky to stay involved. Things snowballed, with Gupta’s GFG Alliance refusing to pay back what it owed to Greensill as much of it was in the form of unsecured loans. Greensill went under in a matter of days in late February, early March and GFG is frantically searching for new financiers.  

This sorry tale leaves the Whyalla steel workers and their families wondering what will happen next. Time will tell, as this saga has not finished yet. What is clear though is that capitalism and its parasitical offshoot finance capital are not and cannot be the saviours of working class hopes and aspirations for secure and meaningful work and lives. Only socialist planning of production and finance can ensure the fulfilment of those working class hopes and aspirations.

 

Stop finance capital’s unacceptable trade in water rights!

Nick G.

Last night’s ABC Four Corners program revealed that billions of dollars in tax payers' money, poured into rescuing the rivers and streams of the Murray-Darling Basin to save it from environmental collapse, had instead benefitted a handful of wealthy cotton growers.

Aided by corrupt officials in the NSW Department of Water, cotton growers are stealing water from the Barwon River and Darling Rivers to create massive shallow dams from which to irrigate vast tracts of land on which cotton is grown.

Imperialist finance capital buys up our water

As valuable as the program was in exposing these rorts, it really only scratched the surface of problems related to Australian freshwater supplies. And those problems do not exist in isolation. They are part of a global theft of public commons by giant multinational financial corporations which have forced their way into a deliberately constructed private water market that allows them to speculate with their surplus capital.

The seizure of freshwater supplies contained in rivers and the Great Artesian Basin by finance capital investors, miners and gas extraction companies mirrors the wave of privatisations and corporatisations of city and state water utilities that occurred in the mid-1990s. The major beneficiaries of the latter included French companies Suez Lyonnaise des Eaux and Vivendi, Thames Water and Lend Lease.

Water trading followed a June 1995 decision to establish the Murray-Darling Cap to put a limit on the amount of water that could be taken out of the Murray-Darling river catchments.  Ostensibly a response to concerns about environmental flows, the Cap came with a new system that allowed irrigators to trade their entitlements to waters taken from the Murray-Darling, and also to trade annual allocations taken under those entitlements.

Investment funds with active interests in water emerged after 2007, when investors no longer had to own land in the Murray Darling Basin to be eligible to buy and sell its water rights.

Water was no longer a common good, that is, a resource deemed to be under the ownership of all Australian citizens and available for their use and enjoyment, but a private commodity, “blue gold” as it was quickly dubbed by corporate investors. And it was no longer a simple commodity, but a financial instrument which could be held, in the case of entitlements, as a security against mortgages.

Whilst making this fundamental change to ownership and control of freshwater supply, the federal government chose not to maintain any register of foreign capital purchasing Australian water rights.  Very belatedly, a register will be introduced in December of this year.

Despite the lack of clarity around who owns our water, several major players have been identified.

By 2010 the major players in our water market, then valued at $30 billion included:

• $20 million worth of entitlements bought by the US-owned Summit Global Management through an Australian subsidiary;
• An estimated $130 million worth of water bought by Olam International of Singapore in a deal involving the purchase of almond groves in northern Victoria;
• More than $30 million worth of rights in western NSW held by Tandou which has substantial British and US ownership.

(It is worth noting that Summit’s assets were sold in 2015 to noted enemies of the Australian working class in the Aware Water investment group, owned by former ports bosses Chris Corrigan and Peter Scanlon. Corrigan, who tried to smash the Maritime Union of Australia is also tied to the Webster Group, one of two corporations currently owning 70% of the Barwon River’s water.)

It was estimated that by 2010, 8.1% of Australian freshwater was owned by foreign capital. By 2013, that figure had risen by 60% to 13.7%.  No doubt the figure will be higher again when the registry data is released next year.

There are currently two investment funds serving to channel local and foreign capital into the water market. One is BlueSky Alternative Investments which incorporates private equity, hedge fund and venture capital divisions and whose major shareholders are JP Morgan Nominees Australia Ltd and HSBC Custody Nominees (Australia) Ltd.
T
he other is a private fund, Kilter Investments.  Financial analyst Alan Kohler reported how in 2015 he “spoke yesterday with Cullen Gunn who runs a wholesale water investment fund (for “sophisticated” high net worth investors and big super funds only) called Kilter. He says water is a "great asset class". "It’s like commercial property except there’s no problem with impairment or messy tenants. The yield is sold, about 5-8 per cent and if someone doesn’t pay you just take the asset back, instead of having to apply to have a tenant evicted."

"Also, it’s clear to me that climate change means there is going to be less water in future, so the economic value of it will increase."

The Australian Constitution – an obstacle to a national approach to water management

As we have stated elsewhere, the Australian Constitution was a weak three-way compromise between the British, the colonial elites in the separate colonies, and the proponents of a central government. It does not provide for control of Australian freshwater by the Australian government. Rather, that control is vested in the States.

As a consequence of our ineffective and outdated Constitution, our two major freshwater systems rely on the cooperation and goodwill of the state and federal governments. Hence there are the Murray-Darling Basin Authority and the Great Artesian Basin Coordinating Committee. The former holds powers referred to it by State Ministers; the latter advises Ministers on behalf of various stakeholder groups.

This is an unacceptable arrangement.  There should be single national authorities with exclusive powers over both Basins. 

In the case of the Great Artesian Basin, there are divergent views on its sustainability.  Some view it as a renewable supply, refreshed by rains falling in north-eastern Queensland.  But another view sees it as a plutonic source of water derived from steam generated by vulcanism deep in the earth over millions of years and hence essentially not renewable.

As per the Constitution, three separate states and the Northern Territory are in charge of their own Great Artesian Basin waters.  SA allows Olympic Dam to extract up to 42 million litres per day. 

The Queensland government has given Adani open slather on Great Artesian Basin waters.  It has no limit on what it can extract but merely needs to monitor and report the amount of water it extracts with a permit that runs until 2077.

Gas producer Santos plans to drill 850 coal seam gas wells through the Great Artesian Basin.

The Achilles heel of the current cooperative arrangements between the states and the federal government over the two Basins is that individual players can walk away at any stage as indeed was mooted by NSW Department of Primary Industry and Water Deputy Director Gavin Hanlon.

In a confidential phone discussion with irrigator lobbyists, a tape of which was played on the Four Corners program, Hanlon raises the Plan B “walk away” option, much to the delight of the lobbyist. When one realises that the value of the NSW water market is equal to the entire value of Australia’s wool exports, the potential for corrupt relations between senior public servants and traders of water entitlements and allocations becomes immediately apparent.

What can be done?

In the short term and within the current Constitution’s limited provisions, the federal Government must regulate the water market to ensure equity and access, control increases in the price of water, restrict the entry of foreign capital to the market, and secure water for environmental flows all the way to and through the mouth of the Murray.

In the longer term, water must be protected as a public trust, as a common good, within a new anti-imperialist and republican Constitution. Private ownership of our freshwater supplies must be abolished and the assets of foreign investors confiscated without compensation.  The two Basins must be administered by a national public authority created to ensure fair water allocation and a healthy freshwater ecosystem.

Only an independent and socialist Australia can implement these changes.

Whyalla steel the casualty of free trade agreements and global over production

Max O.

Australia's steel producing industry may soon come to an end with Arrium steel company's collapse in Whyalla. The steel company's $4.3 billion debt caused its bankruptcy and put it into voluntary administration. Now 2,000 jobs in the South Australian regional city of Whyalla are endangered, with 7,000 workers in Arrium's other plants across Australia also jeopardized.

Arrium's demise is the combined result of the 2008 economic crash and the global slump in the demand for steel. China's dominance in steel production (it produces over half of the world's steel) has resulted in it churning out 400 million tonnes per year that can't be sold. Consequently there has been a massive fall in iron ore prices from $US190 a tonne to $US55 and a 60 percent collapse in steel prices since 2011.

Finance capital puts its interests first

The company in the end was pushed into administration after its bank creditors refused a $1.2 billion proposal for recapitalisation from GSO Capital, an offshoot of the US private equity monster Blackstone. The bank creditors (in particular Australia’s big four banks) were having none of it because it they would loose 55 percent of their loans to Arrium. If it went ahead  GSO Capital/Blackstone would breakup Arrium for a fast profit.

The failure of Arrium is the result of the familiar capitalist business practice of 'grow and bust'. Most of its debt came from loans to purchase overseas plants and iron ore mines after the 2008 crash on in the belief that China's enormous growth would continue to expand Australia's mining boom.

When it went into administration it was owing $AUS2.8 billion to the banks, $AUS1 billion to suppliers and $AUS500 million to its workers. At the timeIn 2000, Arrium the steel-maker was cast out and rebadged as OneSteel by BHP it was alsoand offloaded with $1 billion of the parent company's debt.  OneSteel was renamed Arrium in 2012; one of its three divisions, a steel and recycling business, retains the OneSteel name.

Then In 2001, the vultures and parasites went on to mergemerged BHP with the British and South African miner Billiton and to establish the largest mining corporation in the world. OneSteel and Arrium were then divested, after squeezing massive profits from their workers for years, when their profitability declined.

If and when Arrium is either closed down or revamped the city of Whyalla will be devastated. With a population of 22,000, Arrium's steelworks is the city's major employer. Whyalla's inhabitants’ great fear is that the demise of such an important industry will see the city become a ghost town. On top of the GM Holden car plant closure in 2017 Arrium's liquidation will impose a severe economic depression on the workers in South Australia.

“Free” trade for whom?

Politicians haven't been of much use in the wake of the Arrium's Whyalla steel plant collapse. Prime Minister Malcolm Turnbull rebuffed bailing out the company, with the argument quietly whispered acknowledgement that this would breach recently-signed free trade agreements. This demonstrated the lie that free trade agreements create jobs and growth! 

Bill Shorten, Federal Labor opposition leader, Christopher Pyne, Federal Liberal Minister for Industry, Innovation and Science and Tom Koutsantonis State Labor Treasurer of South Australia have all bellowed that government agencies should buy Australian made steel and said that the soon to be built submarines and frigates for the Australian Navy also should be made from Australian produced steel. Unfortunately Turnbull is right that preference given to Australian steel would breach the free trade agreements (FTAs) and result in overseas companies suing the government through the Investor State Dispute Settlement provisions. These politicians turn a blind eye to this fact and certainly don't propose Australia withdrawing from these economically disastrous FTAs.

Unfortunately some unions are not much better. Like King Canute they think they can hold back the tide of capitalist overproduction and downsizing. In the recent past the AWU have has cooperated with Arrium in convincing its workers to accept the dismantling of hard-won conditions, pay and job cuts to save the company and some of their jobs. Its leadership has argued that the Federal Government must introduce tariffs on imported steel and stop Chinese steel being dumped onto the Australian market. At the same time, it has lined up with the big four banks to change the liquidators appointed by Arrium (supported by the state government and the mayor of Whyalla) to those nominated by the banks.  

The Bank of International Settlements (BIS), the banker's bank, has stated that there needs to be a day of reckoning where a huge wipe off from assets and investments needs to occur; which in effect means the closing down of plants all over the world. From the capitalist point of view, there is no alternative to the BIS plan of recovery but to slash government debts and wipe out excess capacity - close down firms, plants, machinery etc. What has happen to Greece will now occur throughout the world!

The day of economic reckoning has arrived and the union movement can't avoid it anymore. Industries are collapsing in a world wideworld-wide capitalist downsizing and shifting to the lowest wage countries. Union leaders need to honestly confront this crisis and stop deluding their membership that they can save these situations. 

Time has come for workers to mobilise around nationalizing these industries and campaigning against Australia's involvement in FTAs and the Trans Pacific Partnership. Australia, already a client state of US imperialism, is losing even more of its sovereignty to foreign capital. A country and its workers need to have an independent economy that looks after and not exploits its population, including workers of other countries. That should be the mantra of the Australian union movement and it needs to show in practice that it means it.

If we are to achieve a sovereign, just and democratic Australia then big capital and business need to be brought to heel and their assets turned over to the Australian people. Such a process can only be led by the working class, the creators of wealth, and the most disciplined and highly organised class with the most to gain from opposing imperialism’s control of our economy. 

To paraphrase capitalism's favourite epithet, "it’s all about the bottom line", well the bottom line actually starts with the worker creating value. No worker, no profits!

Without workers creating value, there can be no economy.  The capitalist economy, which devalues workers and cannibalises its own productive capacity, has no place in a genuinely independent future Australia.

For a guaranteed steel-making industry, fight for independence and socialism!

The world enters a third wave of economic crisis, with more to come!

Max O

In November last year The Economist, that foremost economic journal of capitalism, stated that "The world is entering a third stage of a rolling debt crisis..." The first one centred on the US with the collapse of the real estate market (2008), the second one centred on the European Union and its members’ sovereign debt crisis and now the current or third one on the Emerging markets - places like China and Brazil.

The financial crash that we have been witnessing at the end of 2015 and the beginning of 2016 may be far larger as it unfolds than in 2008, possibly causing the entire global economy to grind to a halt.

Global and Central Banks cause the crisis

As usual the large global banks and financial institutions are up to their necks in this crisis. With the collapse of oil and gas prices these banks are at risk because their loans to energy companies are now bad debts.

Europe's biggest bank, the Deutsche Bank, has suffered a loss of more than 9 per cent (due to its loans exposure to energy companies) and has hit Australian banks hard.

Morgan Stanley investment bank reported that 'Australia's big four banks' are owed $31 billion from energy companies. The Commonwealth Bank has the biggest risk of $11.6 billion owed to it. Since the beginning of this year, the market values of Australia's two major banks have nose-dived: ANZ down 18.66 per cent and Westpac 14.5 per cent.

J.P. Morgan bank reported that private-sector debt in emerging markets climbed from 73% of GDP at the end of 2007 to 107% of GDP by the end of 2014. The emerging markets debt figure rises even more sharply to 127% of GDP if credit from non-bank financial institutions (so-called “shadow banks”) is included.

The US Federal Reserve and other major central banks through the policy of quantitative easing (printing money), have pumped trillions of dollars into the global financial system. This led to an outbreak of borrowing by corporations in emerging markets, quadrupling their debt from $4 trillion in 2004 to over $18 trillion by 2014. This money is now heading out of the emerging economies and in the process crippling them.

Stock market and financial panic

The current panic sell-off on stock markets in China, Europe, US, and including Australia has seen trillions of dollars wiped out from global share values. As a result of investors getting spooked over fears of the world economy the Australian share market has lost more than $40 billion so far this year.

Money has flooded out of stocks with any trace of risk causing a 'bear market' of panic selling in stock markets worldwide; and Australia's stock market has fallen quicker and more violently than others in the developed world.

'Australian banks' are not shielded from the contamination of tumbling oil prices onto their financial accounts as energy companies become crippled by debt.

It ought to be remembered that 'Australian banks', especially the big four would've collapsed during the 2008 GFC had the Federal Government  not come to their rescue and guaranteed them. They were unable to refinance their overseas loans because the global credit markets had come to a standstill.

The 2008 crisis saw Australian banks borrow $120 billion at the taxpayers’ expense. This was the biggest bailout of an institution in our history.

In September last year overseas borrowings by Australian banks had reached 53 per cent of GDP. Obviously they refuse to learn any lessons from the 2008 GFC.

Now Banks and hedge funds are gripped with terror and alarm as they are forced to confront week after week of collapsing share prices and asset values. Close to 1000 hedge funds in the US were closed down in 2015.

When the US Federal Reserve lifted interest rates above zero whilst the dollar rose, commodity (oil and gas) prices crumpled putting huge a burden on energy companies and economies. Then rivals Japan and some European countries went into negative with their interest rates.

Now central banks are at war with each other by pushing their currencies lower to get whatever trade advantage they can with exports. No doubt central banks and governments will be having serious but covert meetings haggling over what to do with capitalism's latest anarchic economic crisis.

The shift to negative interest rates, as has quantitative easing, will inevitably damage the global banking system. The Royal Bank of Scotland’s advice (which was scoffed at early in January this year by the financial media) to its clients to “sell everything..." and that 2016 could be a “cataclysmic year” appears now to be wise counsel.

Day of reckoning for the destruction of production

The Bank of International Settlements (the banker's bank) contends that there has not been enough wiping off the value of useless investment, what Marxists call de-valorisation. In other words the unthinkable is our reality; the present economic crisis is in fact the implosion of the capitalist system.

The BIS has stated that there needs to be a day of reckoning where huge wipe off from assets and investments needs to occur; which in effect means the closing down of plants all over the world. For example China has excess capacity in steel-making that is larger than the entire steel-making capacity of Japan.

Up till now governments' economic policies have been the postponement of the day of reckoning, because they are politically scared of what the social and political consequences of such actions will be.

However, from the capitalist point of view, there is no alternative to the BIS plan of recovery but to slash government debts and wipe out excess capacity - close down firms, plants, machinery etc. What has happen to Greece will now occur throughout the world!

The free trade agreements with Japan, Korea and China and the Multinational corporations investment protection agreement called, the Trans Pacific Partnership, are a way of forcing through  de-valorisation i.e. the wiping out of excess firms, plants, machinery etc.

Wave of job losses follow the day of reckoning firm closures

A wave of job cuts world-wide demonstrates the declining depression-like conditions of the global economy. In the US 40,000 coal mining jobs have gone; Wal-Mart slashed 10,000 jobs and 154 stores; and the freight transport industry is in a slump.

Here in Australia whilst the Australian Bureau of Statistics (ABS) reports an unemployment rate of 5.8 per cent (727,000) the Roy Morgan survey for January gives a more realistic unemployment rate of 10.3 per cent (2,575,000).

Two major retailers have collapsed: Dick Smith Electronics has placed in jeopardy 3,300 jobs and 393 stores; Woolworths announced it will exit its Masters hardware business, threatening 7,000 jobs and 63 stores.

Last year Chevron cut 1,200 jobs in Australia. In January Clive Palmer's Queensland Nickel Yabulu refinery closed with 237 jobs gone.

The loss of jobs in the mining industry in Australia is never ending:

CBH Resources - 116 jobs

Panoramic Resources - 50 jobs

Mincor Resources - 90 jobs

Independence Group - 28 jobs

Newcrest Mining - 100 jobs

Oz Minerals - 100 jobs

ANGLO American - 245 jobs

Other industries are also carrying out job cuts:

Freight carrier Pacific National - 46 jobs

Ship builder BAE - 325 jobs

Ship repairer Forgacs - 150 jobs

Auto parts manufacturer SMR Automotive - 140 jobs

Banking giant Barclays - 80 jobs

Bank of Queensland - 50 jobs

Lion Beer, Spirits and Wine Australia - 39 jobs

The University of Western Australia - 300 jobs

 CSIRO - 120 jobs

Arrium (formerly OneSteel) – hundreds forecast along with possible closure of Whyalla steelworks

The federal government - 700 jobs

WA government - 1,163 jobs

Only a different mode of production can overcome the economic crisis and threat of war

It is obvious that finance capital through its central bankers and capitalist governments has only expanded and intensified the continual waves of economic crisis that it inflicts on the world. They are only interested in the accumulation of capital for themselves and consequently like mad men pour cash into financial markets sparking off speculation and parasitic mergers and fire-sale buy outs.

This finally brings about the day of reckoning of widespread destruction of productive activity (wipe out excess capacity - close down firms, plants, machinery) and job and welfare losses to the working class.

The escalating global economic crisis additionally risks igniting the geopolitical pressures and the drive to war by the US and other imperialist countries.

The US military strategy of the 'Asia Pivot' and the conflicts it has sown in the Ukraine and Syria are pointed directly at blunting competition from China and Russia.

As Marx pointed out long ago only a different mode of production, socialism then communism, will remove the exploitation and oppression that the working class has to endure under capitalism. However this requires that the working class wrest state power from the capitalists and imperialists, and destroy all the capitalist state’s functions and structures.

The state’s role in a capitalist society is to enforce upon the worker the task “…to satisfy the need of existing values for valorization (i.e. creating growth of and for capital). In contrast to capitalism, communism is“…the inverse situation, in which the objective wealth is there to satisfy the worker’s own need for development.”

The humane purpose of communism is that “…the free development of each is the condition for the free development of all.”

Masters of the financial universe lift US interest rates and inflict their crisis

by Max O.

The US Federal Reserve recently raised by a quarter percentage point the interest banks charge each other. This generally expected rate rise had been clamoured for by 'sages' in the financial media who argued the need for the Federal Reserve to protect monetary credibility by raising the federal funds rate.

Why has this interest rate rise occurred after years of near zero interest rates in the US which was ostensibly to stimulate the productive economy? Because the machinations of the financial system threatens its own very existence!

Banks excess reserves of money capital

Normally the purpose of a rise in interest rates is to halt demand for credit and control inflation. Presently the US banking system has no need to borrow for it has in excess of $2.42 trillion in reserves.

Avariciously investors, searching for new ways to achieve high returns after the fiasco of the subprime mortgage bubble, have been using cheap credit to invest in the corporate and junk bond market rather than investing in the productive economy. US junk bond market more than doubled the volume of issuance in the years before the Global Financial Crisis (GFC), and in 2013 reached a record of $361 billion.

However the decline in the productive economy - drop in sales of manufactured goods, fall off in trade and crash in prices for gas, metals and oil - is now threatening to undermine the US bond market and destabilise the whole financial and banking system.

Recently the growing crisis in the US high-yield but high-risk junk bond market erupted and saw the closing down of three energy junk bond funds - Lucidus Capital Partners, Stone Lion Capital and Third Avenue. Their closure was caused by the collapse in oil prices below $40 a barrel and an avalanche of clients calling in their bond investments that finance houses could not honour, which caused a fire-sale in the $1.3 trillion junk bond market.

When the US Federal Reserve reduced interest rates close to zero and forced down long-term rates it increased enormously the junk bond business; which are bonds issued by finance houses with high levels of debt and low credit ratings and therefore a high risk market.

Looking around for emerging countries to exploit

Whilst the US had near zero interest rates bond funds using cheap credit reached all over the world to find high yield assets to invest in. Investors were buying securities backed commodities and sovereign debt bonds from Asia-Pacific and South American markets.

Now investors have lost faith in betting on high risk financial assets achieving high dividends in these markets, which are full of insecurity and trepidation. The capitalist world started to shudder when in August this year the Shanghai stock market steeply dived and losses in stock markets around globe reached hundreds of billions of dollars.

Seven years after the bankruptcies of the GFC days, this crisis continues with more casualties occurring from one geographical region to another, from one business sector to another. The emerging (developing) countries of the Asia Pacific region who depend on the export of commodities for their income are now facing a serious brake on their economies.

Money comes home to the masters of the financial universe

And now investment money is coming home to the wallets of Wall Street moguls, its real masters. They have decided it is more secure to place their money in US Treasury bonds for the moment.

Despite the colossal public debt, investors have faith that US will not declare bankruptcy for now. If this ever happened the US would loose its dominate status as a reserve currency, and weaken Washington's political hegemony of the globe.

Even though other currencies like the Chinese yuan have expanded their influence, faith in the US dollar has not weakened since the GFC crisis of 2008. Consequently there has been a fall of the emerging countries stock markets and exchange rates.

The International Monetary Fund (IMF) asked the US to not increase its federal funds rate until 2016 or later, to forestall the increasing global financial panic.

So now this money will be assembled and employed to create acquisitions and mergers of US enterprises, as opposed to massively increase production and reduce unemployment. US finance houses and banks have increased their levels of money capital through mainly speculative ventures in the stock market and less to supplying credit to small and medium business.

The rise in the federal funds rate will have a negative effect on small banks. When these small banks become fully loaned up, by lending to businesses and consumers in their community, and are in need of extra reserves to meet their reserve conditions, they will have to borrow from a larger bank with excess reserves.

Therefore the interest rate rise results in the smaller banks paying more for their loans to the big banks. Consequently the Federal Reserve favours the mega-banks who have mega reserves and predatorily exploit the small banks, businesses and consumers.

Central banks have differences but not over exploiting workers

In contrast to the US plans of steadily raising the cost of credit, Europe and Japan are organising to commence an aggressive boost to their of credit programs. There is no consensus among the three strongest central banks on how monetary policies should be used to overcome the global recession.

This was evident in the Group of 20 (G20) summit, held November this year in Antalya, Turkey. Therefore the certainty that instability of the financial markets will not decrease, but will rise for some time to come.

However, agreement was found among the G20 principal looters of the world to increase and hone their exploitation of their respective working classes via ever improving structural reforms. Although reforms to regulate financial activities of hedge funds and corporate tax evasion are slow to amount to anything and lack any real bite.

The money capital paradises that the masters (whether it be in Berlin, Brussels, London, Paris, Tokyo, or New York) of the financial universe operate are presently secure and their rules unassailable. The central banks, such as the Federal Reserve, rapacious policies actually subsidize the expansion of speculative and parasitic financial activities of hedge funds and derivatives.

The administration of near to free credit to investors produced boon profits and another transfer of wealth from the bottom to the extreme top, and has created another new debt and credit crisis that threatens to again cause the collapse of the capitalist financial system.

Millions of Disappearing White Collar Worker Jobs

Ned K.

Australian-born and New York-based venture capitalist Jeremy Philips does not have much of a "Christmas cheer” message this year. He is a key investor in Wealthfront, the world's largest automated investment service which already has $2.1 billion in client assets.

"It is inevitable that trillions of dollars will be managed algorithmically," he is quoted as saying in an interview with the Australian Financial Review.

What this means is that robot financial advisers will replace human financial advisers with a predicted loss world wide of 25 million currently well paid jobs. Phillips is not worried about the loss of 25 million financial services jobs. Why not? He says the 25 million will dwarf the millions of factory jobs being replaced by robots and automation already.

Marx expained that one of the historical roles of capitalism was to revolutionise the means of production. The next wave of the impact of technology on people's lives under capitalism has already commenced.

Under socialism, technological advances will be introduced in a way to benefit the people. One way is to balance technological advance with a reduced number of working hours on full pay for the people.

Under capitalism, capitalists have in recent times made more use of part-time and casual workforces, but on miserable wages. The advances in robotics in the financial services industry are estimated to increase productivity by 45-55 per cent according to the McKinsey Global Institute.

What all this means for the anti-imperialist struggle at this point in time is that millions of white collar financial services will be drawn in to the struggle to defend living standards Many will organise to maintain a reasonable standard of living.