Everything now clearly indicates that the advanced capitalist world is headed for recession. The only question is when and how deep that recession will be. In fact Merrill Lynch says the US economy is already in recession. And that’s bad news for all of us. Here Mick Brooks at what is really going on in the world economy.

We have seen the sharpest falls in stock markets around the world for almost a decade. Billions have been wiped off share prices worldwide. As we have predicted, fear mounted among the financial authorities that the panic could lead to a full-blown recession.

Panic! The world's stock markets had their sharpest fall since 9/11 on Monday 21 January. It is supposed to be the most miserable day in the year in the Northern hemisphere, where the daylight is short, the weather is bad, people have colds and flu and they have run up debts from Christmas. But this year, it really was a Black Monday for capitalism.

As the New Year begins Alan Woods comments on the state of world affairs, highlighting the impasse facing humanity, a direct consequence of capitalism in its phase of senile decay. At the root of the present world turmoil is private property of the means of production, a system based on greed for profit. In the next period the workers of the world are faced with the task of removing the system.

Everywhere the cry is: credit crunch! You can smell the sweat on the brows of bankers as their necks are squeezed by the tightening credit noose. In all the offices of the great investment banks of Wall Street, the City of London and gnomes of Zurich, you can hear the hissing sound of the global financial bubble bursting and deflating.

According to a recent United Nations study, the richest 1% of adults in the world own 40% of the planet's wealth. Europe, the US and some Asia Pacific nations accounted for most of the extremely wealthy. More than one-third lives in the US, while Japan accounts for 27%, the UK for 6% and France for 5%. But bourgeois economists still insist Marx was wrong!

The bourgeois economists are incapable of understanding crises, which are an inescapable result of capitalism. They look for subjective factors such as “confidence”, even “human nature”. In reality what we are witnessing are the real workings of the capitalist system in a period of decline.

Over the past 15 years production has risen at about 3% a year in the OECD countries, while money supply, mortgage and company debt, personal borrowing and the massive so-called derivatives market based on this credit has increased at over 25% a year! Result? A huge bubble which is now bursting, starting with Northern Rock.

Recently, the Bank of England hiked its interest rates yet again to 5.75%,the fifth rise since August 2005, and "further action" on interest rates could be on its way. The interest rate may go to 6% or more by the end of this year. The credit-led boom is now in jeopardy as central banks raise interest rates everywhere.

The financial turbulence of recent days has wiped billions off the price of shares all around the world. On Friday August 10th London’s stock exchange, the FTSE 100, alone dropped £63 billion. What does this mean?

This speech was delivered at a meeting of the leadership of the International Marxist Tendency in Barcelona on 24 July 2007. The recent turbulence on world stock markets fully confirms the perspectives outlined in it.

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