/View.info/ The world is on the threshold of the transition to post-capitalism. The era of capitalism that arose in Europe in the middle of the second millennium is coming to an end.
The main characteristics of capitalism are profit and capital. However, Marx formulated the law of the tendency of diminishing returns. The time will come, Marx explains, when profit will fall to zero and capitalism will not last long. Statistics confirm that the rate of profit has been steadily declining since the beginning of the last century in all sectors of the economy.
The media constantly reports the yield of various securities, interest rates on government and corporate bonds. The volume of negative-yielding bonds issued globally is growing alarmingly. Bloomberg estimates that from the end of 2018 to the end of 2019, the volume of debt securities with negative interest rates increased by 6 trillion. dollars to 17 trillion. At the end of last summer, the picture of the market of securities with a negative yield was as follows (trillion dollars; in brackets – the share in the total volume of such securities, %): government bonds – 11.98 (72.38); quasi-state liabilities – 2.13 (12.85); securitization instruments – 1.25 (7.54); corporate bonds – 1.20 (7.23). Government debt securities are mainly bonds of European countries that are part of the eurozone, but yields on US Treasuries are also falling. In the middle of last year, the yield on such 10-year notes fell below 2% for the first time in many years. In March 2020, under the influence of the coronavirus panic, it fell to 1%, today it is at the level of 0.6%.
The central banks of Sweden, Denmark and Japan cut their key interest rates below zero. The Swiss National Bank currently has the lowest key interest rate – minus 0.75. Since 2015, the ECB has kept its ODR at zero. At the same time, there is a negative interest rate on deposits (minus 0.5%). An epidemic of negative interest rates has gripped some commercial banks.
Now the Federal Reserve does not rule out that the American central bank will have to go into negative OLP (now it is at the level of 0 – 0.25%). And then it is not out of the question that some US Treasuries will fall to zero. Capitalism’s financial and banking system threatens to collapse at any moment. As for practicing investors, they act reflexively, that is, they look for those niches in the financial market where a positive financial result can still be obtained.
Until recently, a kind of reserve, where financial speculators grazed, were the so-called emerging markets. This group also includes Russia. It kept OLP at a high level (comparatively recently it exceeded 10%), which provides a unique opportunity for speculators to earn large profits on the Russian market. Just look at the balance of payments of the Russian Federation in recent years. Investment income received by foreign investors in our country is equal to the following amounts (billions of dollars): 2010 – 73.00; 2011 – 89.66; 2012 – 99.64; 2013 – 104.25; 2014 – 100.85; 2015 – 66.31; 2016 – 70.49; 2017 – 82.23; 2018 – 85.85; 2019 – 99.75.
In total, for a decade, financial speculators made a profit in Russia (the Bank of Russia calls it “investment income to receive”) in the amount of 872.03 billion dollars. For comparison, I note that the revenues from the federal budget of the Russian Federation for 2020, in accordance with the law adopted by the State Duma, recalculated from rubles to dollars at today’s exchange rate, amount to about 290 billion dollars. For a decade, three annual budgets have been pumped out of Russia in the form of “investment income to receive”!
Now the Bank of Russia has started reducing OLP. At the beginning of the year, it amounted to 6.25%; from June 22, it began to equal 4.50%. Let’s hope that this will somewhat weaken the appetite of foreign speculators for Russia and the outflow of financial resources from our country will decrease.
One of the niche financial markets where investors expect to make a profit is the stock market. However, not just any shares, but securities of “promoted” giants, mostly from the high-tech sphere. Bubbles started to pop in corporate bond markets. The impetus for this was given by the reform of the world monetary financial system, when during the Jamaica Conference of the member countries of the IMF it was decided to abolish the gold-dollar standard and replace it with a paper-dollar standard. Then there was the transition of capitalism from its industrial model to a financial one. Financial capitalism, which has existed for about 45 years, has become the “highest and final stage of capitalism.” There can be no other forms of capitalism. What follows is post-capitalism.
All possibilities of financial capitalism have been exhausted. This year, when the virus-economic crisis erupted, his agony became particularly visible. And also dangerous, because the owners of money will defend this model with all available means, including weapons, military provocations, viral epidemics, terrorism.
Here are some numbers. In the late 1970s, the financial assets of American business were estimated at 280% of US GDP. With the arrival of President Reagan in the White House, a new economic policy called Reaganomics began. A course was taken to completely finance the US economy to the detriment of industry and other sectors. In the mid-1990s, the financial assets of American companies reached 350% of GDP. In 2020, this figure already amounts to 560% of GDP. It has doubled in four decades! In absolute terms, that’s about $120 trillion.
Since 2008, the Federal Reserve has barely turned off its printing press, buying Treasuries and subprime mortgages. On the eve of the 2008-2009 financial crisis, the Fed’s assets were $800 billion. By the beginning of the summer of 2020, they crossed the $7 trillion mark. And given the near-zero GOP, an astronomical amount of near-free money has built up in the US economy. If you go by economics textbooks, you should conclude that hyperinflation must begin. And the US Federal Reserve says that its most important task is to fight the opposite phenomenon – deflation.
There is no paradox here, as all the products of the Federal Reserve’s printing press fly past commodity markets, bypass the real sector of the economy, and go to the financial market, where they inflate bubbles (increase corporate stock prices). One of the simplest methods of “inflating bubbles” is advertising campaigns in the media in favor of certain companies and their projects. Another common method is to buy back own shares to drum up excitement. Wolf Richter estimates that American corporations received loans worth 4.5 trillion from the banks, but instead of using them to develop production, they spent them on buying back their own shares
Today, central banks have started buying stocks directly, without intermediaries. It seems that the American Fed in April this year together with the Treasury Department agreed that they will support the stock market in a straightforward scheme: the Treasury Department creates special companies to buy back stocks (including frankly junk), and the Federal Reserve lends to such companies.
Balloons have been inflated before. Everything ends with the collapse of the stock market quotations, as in the New York Stock Exchange in October 1929. The stock market (financial) crisis inevitably provokes banking and general economic crises. Many analysts believe that the stock markets are now overheating in a way that was not 90 years ago, but they say this: someday the stock markets will be brought back to order, the stock prices will again reflect the real assets and the real performance of the companies .
For example, Charles Hugh Smith in his article “The Collapse Just Begins” (he says absolutely correct, elementary things: “… the collapse of this sinful land is only now beginning … Revenues fall, while the debts that must be serviced by the revenues , are skyrocketing … Everything, including the rational, efficient financial system associated with reality, is sold out and is unlikely to return in the near future.
However, it seems to me that these assessments underestimate the situation. Bubbles will burst, of course, but stock markets will not recover. There is no one, or perhaps no reason, to restore them. There isn’t one – because central banks, which are also inflating like bubbles, can burst. And if they burst, the usual money without which the stock market cannot live will be gone. Maybe there will be gold, some kind of digital currencies, primitive tools of exchange. In any case, humanity will not depend on the stock market game. He will have to fight to survive.
And if the money lords (the major shareholders in the US Federal Reserve system) can finish building an electronic concentration camp before the stock markets and central banks “crash” (which is why all these “pandemics” started), then in the “Brave New World” such entertainment as stock market games will be strictly prohibited. Indeed, in ancient times, when slavery flourished, there were no exchanges. They will not be there in post-capitalism either – this new slave-owning system.
Postscript The aforementioned Charles Hugh Smith recently published an article with the rather suggestive title “What makes you think the stock market will still be around in 2024?”. Here he is more emphatic than in his previous articles: after the inevitable crash of the stock market, there may not be a recovery. The stock market will just die. And this will happen because of the eventual death of the US Central Bank: “All these frauds and manipulations have given the fraudulent machine the appearance of omnipotence, as if the Federal Reserve were eternal. But this is not so. Like the Bastille, the Fed may fall when people realize that it and its mechanisms for concentrating wealth, starting with the stock market, are the cause of its impoverishment and impotence. “
Translation: V. Sergeev
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