Is This The End of Derivative Financial Capitalism and the Crypto-Currency Bubble?

VT's Claudio Resta examines the global economy and its impact on our future


Are Silvergate, Silicon Valley Bank, First Republic, and Western Alliance failures just the beginning of a much bigger avalanche?

You can still believe that business is as usual because stock indexes are manipulable by the authorities due to bank bailouts for the sake of a false apparent stability of the market so that the investor’s perception is falsified…until finally, this Ponzi scheme must collapse.

On Mar 13, 2023, at 6:10 p.m. Dow Jones U.S. Banks Index closed at EDT 401.30 -31.68 -7.32% (!) after all!   As of March 15, at 1:40pm EST, the Dow is at 31,477.51, down over 4% in the last 5 days.

Right now, after the backward trench of Marxist resistance among the economists who many in Europe adhered to this ideology which was nearly hegemonic in the last century just before Thatcher age has given up for a long time, the prophecy of a century and a half ago by Karl Marx finally seems to be coming true: the End of Capitalism.

These former Marxist economists were then discouraged by the end of the Soviet Union in 1991 and exhausted by a messianic expectation of a natural end of capitalism according to Marx’s provisions and not by an end shortened by a Leninist revolution as happened in Russia in 1917, if they all have not yet passed away, certainly their few survivors by now they all had thrown away the hope of seeing their dream come true by observing the affirmation almost everywhere in the world of a neoliberal Verb (and Praxis).

But Fate, as we know, is mocking and when everyone had lost hope, Fate enjoyed itself like an irresponsible enfant terrible in turning the Fate of Neoliberalism upside down.
Joking images aside, it must be specified that today’s Capitalism is not the Capitalism of Marx’s age. What was then mainly based on the manufacturing industry and had national compartmentalization with money backed by a commodity.

Before the 1971 Nixon shock the international monetary system all over the world was much more stable in terms of purchasing power, exchange rates, and interest rates thanks to a balance of payments regulated by currencies convertible into gold due to the dollar standard.

With Nixon’s shock in 1971, President Nixon made a mess but this mess allowed the growth of the monetary base and therefore of the financial sector never seen before.

U.S. President Richard Milhous Nixon

Then thanks to the deregulations of Reagan and Thatcher first with derivatives instruments and today with a huge growth in the cryptocurrencies

But there is a limit to this abnormal growth and perhaps we have reached this limit now.

So today’s Capitalism is a highly inflated one first because of the expandability of Fiat money than that of derivative instruments and finally because of the crypto-currencies bubble with a high level of global integration not only in an economic sense but also in a political sense. With the exception of the Superpowers, the Nation States are increasingly downsizing in terms of legislative power and political autonomy in favor of their system of alliances and supranational entities (such as NATO and the European Union).

Exemplary of this globalized leadership is the case of the current Prime Minister of the United Kingdom Rishi Sunak, born in Southampton but of African parents of Indian origin and Hindu religion, (Queen Victoria will turn over in her grave!) after graduation, he first worked for Goldman Sachs and then as a partner in a hedge fund management company, his wife is also the daughter of an Indian multi-billionaire and he is a billionaire himself.

Someone might argue that mine are just gossip about his private businesses but that’s not really the case in my opinion. Since he is the Leader of one of the most influential and avant-garde Countries in the World, after all, and must share all the responsibility of the such role.

It also seems that he (who is the one that among other duties runs to the financial policy of his Country!) and his wife (potentially large taxpayers) manage their tax accounts in a very nonchalant and unscrupulous way by resorting to tax havens and similar!

Besides that how can such a character who has always lived in the midst of the international business and financial elite and for this, for instance, take care of the socially weaker section of his Country, the fellow citizens who are the poorest and most disadvantaged of the United Kingdom?

Even the American sociologist Immanuel Maurice Wallerstein argues like Marx that the end of capitalism will be caused by the fall in the rate of profit but his most modern analysis also takes into account factors present in modern society that were not in Marx’s nineteenth-century one.

We start from the fact that for Wallerstein as according to Marx, the end of capitalism will be caused by the tendential fall in the rate of profit. The latter is the ratio between the surplus value that the capitalist takes away from his workers and the production costs that he has to bear.

As this differential decreases over time due to competition, the first strategy that capitalists adopt is always the increase in prices. But this dynamic cannot expand over time, because it ends up alienating customers.

The only alternative, then, is to reduce production costs.

And, it is a personal remark of mine, I would add the fact that nowadays producers are reducing the quality of their products too, which becomes increasingly poor as a result of increasing mass production and according to increasingly industrial and less and less artisanal procedures.

For Wallerstein, the costs include three items: personnel salaries, the purchase of raw materials, and taxes to be paid. Costs have always increased in the last half-century.
As for raw materials, they involve costs both for their renewal and for the pollution they cause. Finally, the latter is one of the many reasons that lead to an increase in the taxes to be paid.

The profit of the capitalists, therefore, is increasingly threatened worldwide. As for Marx, and also for Wallerstein, this depends on dynamics inherent in the economic system itself. Here too, the only possible solution is already marked: the End of Capitalism.

The failure of the Silicon Valley Bank could be one the first signs of this End also considering the fact that it has also infected European banks, which collapsed on Monday the 13th in the grip of an “emotional and psychological reaction” that is sending all the main price lists.

Not only that but also on Wall Street are on stage the failures of Silvergate, Silicon Valley Bank, First Republic, and Western Alliance as I said before.

After all, this crisis seems to demonstrate for the umpteenth time the cyclical nature of the economy, that primitive and agricultural in this case of Ancient Egypt which the Bible already spoke of, known as “The dream of the seven fat cows and the seven lean cows” made by the Pharaoh of Egypt and interpreted by Joseph son of Jacob, in the book of Genesis.

In its modern version the cyclic nature of the phases of the economy has been expressed by the Russian economist Kondratiev (the theory of Kondratiev’s waves) who considered the duration of a cycle about 50 years, and given that from 1929 it separates us about a century that makes about exactly 2 cycles!

If in the more immediate future this catastrophe, the end of global financial capitalism based on the US dollar, in some way similar to the crisis of 1929, should take place, I hope that it will be followed by a sort of new-New Deal which will bring about a paradigm shift which should lead to greater State intervention in the economy, with a freer public spending policy. A sort of neo-Keynesian policy.

After almost half a century of neoliberal policies first applied to the United Kingdom and the United States of America followed then by the Rest of the World, in my opinion, it is time to reverse the economic political direction to restore a financial, economic and also social more balanced setup.


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