[DEBATE] : (Fwd) Endorse Marx please!

[Patrick Bond]

Was he right? If you too think 'yebo!', vote here:
http://timesonline.typepad.com/comment/2008/10/has-karl-marx-b.html 
<http://timesonline.typepad.com/comment/2008/10/has-karl-marx-b.html>

(If he was right about financial crisis, it's because the predictions 
come true again and again)

http://www.marxmail.org/faq/financial_crisis.htm

What are financial panics and crises?

(prepared by Patrick Bond)

A financial crisis typically consummates a period of irrational 
speculation, in the wake of monetary/credit expansion during a 
structural stagnation (or even decline) in underlying economic growth 
rates. Starting with the 1720 South Sea Company bubble, panics occurred 
in financial, commodity or property markets in 1763, 1772, 1793, 1797, 
1799 and 1810. Such panics reflected relatively immature markets, 
underdeveloped institutions, the uneven expansion of financial systems, 
the gullibility of investors, and systemic vulnerability to emotion. 
Wars and geopolitical conflict were often catalysts. The Bank of England 
and City of Amsterdam performed lender-of-last-resort functions.

More disturbingly, the past two centuries of world capitalism were 
punctuated by the 1815-48, 1873-96, 1917-48, and 1974-99 episodes of 
stagnation, speculation and crashes. Such periodic cycles (or `long 
waves') suggest that a crescendo of financial turbulence may contribute 
to economic catharsis and renewed capital accumulation (Marx described 
`violent eruptions... forcible solutions of the existing contradictions 
which for a time restore the disturbed equilibrium'). Yet discrete 
crashes are sometimes insufficient to restore conditions for recovery, 
generating instead `payment-freeze' which in turn makes commerce or 
investment very difficult to finance in subsequent years. (Thus the past 
three cycles were interrupted by severe financial panics--1873, 1882, 
1890, 1893; 1920, 1929, 1931; and various 1980s-90s crises--which did 
not immediately rejuvenate growth.)

Even where recovery follows, the panics cause enormous financial, social 
and ecological harm, often to firms, workers or entire societies which 
were innocent of speculation. Concedes contemporary speculator George 
Soros, financial markets `move in a herd-like fashion in both 
directions. The excess always begins with overexpansion, and the 
correction is always associated with pain'. Given the late 1990s role of 
the Bretton Woods Institutions and New York Federal Reserve in baling 
out emerging-market investors, the asymmetric liability (or 'moral 
hazard') for the enormous costs associated with financial panic was one 
important reason for the challenge to `Washington Consensus' economic 
policy, by even World Bank economist Joseph Stiglitz.

The most recent speculative bubbles and panics--to some extent offset by 
limited bailouts, but generally destroying a third or more of the value 
of financial assets--included the dollar crash (1970s), gold and silver 
turbulence (1970s-80s), Third World debt crisis (1980s), farmland 
collapse (1980s), energy finance shocks (mid 1980s), crashes of 
international stock (1987) and property (1991-93) markets, and the long 
fall (from 1973- 99) in non-petroleum commodity prices and related 
securities. Emerging markets offered spectacular late 1990s examples of 
financial panic, including Mexico (early 1995), South Africa (early 1996 
and mid-1998), Southeast Asia (1997-98), South Korea (early 1998), 
Russia (periodic but especially mid- 1998) and Brazil and Ecuador (early 
1999). Other examples of investment gambles gone sour included 
derivatives speculation, exotic stock market positions, and bad bets on 
currency, commodity and interest rate options, futures and swaps, with 
specific victims covering enormous losses: Long-Term Capital Management 
($3.5 billion)(1998), Sumitomo/London Metal Exchange (1.6 billion 
pounds)(1996), I.G.Metallgessellschaft ($2.2 billion)(1994), Kashima Oil 
($1.57 billion)(1994), Orange County, California ($1.5 billion)(1994), 
Barings Bank ((900 million pounds)(1995), the Belgian government ($1 
billion)(1997), and Union Bank of Switzerland ($690 million)(1998).