Zombie capitalism

Ever since the crash of 2008, when Lehman Bros. bank went under, politicians in the EU and USA have been battling to restore the status quo, which is often described as 'business as usual'. But it wasn't the collapse of Lehman's which brought the capitalist economy to its knees, it was the accumulation of a huge bubble of toxic debt in the world banking system. Rather than a crash, it has been more of a slow motion collapse, as the house of cards comes down.

The banking bailouts which followed, where governments injected capital into a bust banking system, was supposed to solve the problem, but it hasn't and it never could have done because the debt is still there, it hasn't just disappeared. In the shorter term the debt problem has become a sovereign debt crisis which is threatening to break up the Eurozone. European banks have been propped up by short term loans from the ECB, and this still hasn't solved the problem, but what if it can't, what if there is simply too much debt for the system to pay off?

I have blogged before about how I suspected that there were lots of insolvent banks which were hiding their insolvency with the collusion of governments. For any other kind of business this activity would be illegal, but as we have seen, there is one law for the banks and another for everyone else. Now the Telegraph has revealed the state of hidden debts in the UK banking system. The article, by Liam Halligan, shows that UK banks are sitting on £40 billion of undeclared losses, and that is just what we now know about.

Britain's banking black hole

My guess is that taxpayers patience is exhausted. Are we really going to be expected to bailout a bust system yet again? Not a chance in my view. The reality is that there can be no return to 'business as usual'. Neoliberal capitalism, through privatisation and deregulation, has broken the world economic system. The emperor has no clothes. There isn't going to be a recovery, not in the short to medium term, probably not ever. In a recent post I explained why I thought capitalism had reached the end of the road. In essence falling profits have lead to a class-war attack on the 99%, cannibalisation of the public sector, mass unemployment and an unsustainable property and financial bubble. Now there is nowhere left to go. We urgently need a radical alternative economic strategy which has to involve the state taking responsibility for control of the economy, nationalisation of the banks, a Green New Deal, and a move to a low carbon economy. The alternative could just be a collapse into the kind of barbarism we saw in the 1930s. Oh, and don't forget the fact that we have to deal with climate change, and we saw a graphic illustration of that in the UK this weekend.