" …that an accumulation, an abundance of borrowed capital may take place that is only linked with productive accumulation inasmuch that it stands in opposite relation to it."

"On the other hand, however, partly by mere riding out of bonds, partly by merchandise exchange for the mere sake of bond fabrication, the process gets so complicated that the appearance of a very solid business and fast returns can still continue to persist very calmly, even after the returns as a matter of fact are only made at the expense partly of deceived creditors, partly deceived producers. Therefore, business always appears almost exceedingly healthy immediately before a crash."

Karl Marx, "Capital", Volume III

Part I: When Bubbles burst

Everything was going so well. Still this spring, the large financial firms were bathing in a warm Dollar rain. Josef Ackermann put on his most unpleasant smile and presented for Deutsche Bank "the best quarter in the history of the business": Profits had again shot upwards by 30 percent, the yield on capital stood at a well-filled 41%. The institute owed this glamorous result in the first line to its investment bankers, who earned three quarters of the pre-tax gain of the company. The gushing yields thus for their major part did not come from the classical credit business, but from playing with stocks, bonds and derivatives as well as from the accompaniment and advising of firm takeovers. In particular the latter boomed like never before and flooded the cash registers of investment firms with easily earned revenues from commissions.

In the first half-year of 2007, the volume of company purchases had climbed world-wide to the lonely record sum of 2.7 billion Dollars. This process was driven last but not least by so-called private equity firms, whose business idea consists in purchasing half-healthy firms with strong revenues with the help of credit financing, to push their debts for the sake of cheaper purchase into their balance sheets, to get out everything usable and to sell them afterwards with half their employees and high debt burden to the next soldier of fortune. For the private equity shark, the business is profitable even if there only lasts in the end an overly indebted insolvent mass. Because he can as a rule fetch back the capital invested plus yield by way of special payments to the stock-holders, for which the company then gets charged with further debts already after a brief period. Leveraged buy-out (LBO) is the official name for that kind of credit-financed crusades. The victims are of course the employees, but also society as a whole, because part of the lucrative yield comes from tax breaks that the financial investors enjoy in comparison to normal firms and that are extended by cleaver tax dumping.

End of the boom

In the first half-year of 2007 alone, companies with a value of 644 billion Dollars were bought in this way, as much as over the whole year 2006 and double the annual value of 2005. And the banks queued up in order to keep going the business of the private-equity firms by way of cheap credit money – after all as a rule 80 percent of the purchase money are financed by credit. The companies taken over became ever larger, the prices ever more exclusive. One of the most spectacular coups was the takeover of the 80 percent share in the car company Chrysler by the US financial investor Cerberus for 12 billion Dollar. Already signed are purchasing prices of almost 50 billion Dollars each for the energy suppliers TXU, the Canadian phone company Bell Canada and the credit card service firm First Data.

Yet suddenly, nothing works any longer. Even already concluded deals such as those mentioned or the purchase of the US soft-drink section of Cadbury Schweppes for eight billion pounds by a consortium of private equity societies for the time being lie on ice. New big projects are hardly initiated at this point. Even the Chrysler purchase in the meantime almost tipped, because the financiers got cold feet. Cerberus needed to use a credit line by the seller Daimler, negotiate again with the banks and reach significantly deeper into its own pockets. Wide and far no more bank that is willing to nourish the ever more risky feeding rampages of the grasshoppers with cheap money. On the contrary, lately the money institutes have been hoarding every Dollar that they have been able to take hold off. Even at banks, cash is only handed on unwillingly and against increased interests. The latter has now called the central banks repeatedly into the arena, trying to make the money markets liquid again by injections in the billions. With weak success. Not to forget: the stock market as well has finished its boom, fluctuates strongly and in its trend goes downward. In particular bank stocks are already thrown out of the portfolios for precautionary reasons.

Your home as a nightmare!

The immediate trigger of this whole problem is an event that at first sight has nothing to do with global trade of firms and parts of firms, the crisis on the US mortgage market. That business with American mortgages is in crisis became apparent at the latest in April when one of the largest arrangers of sub-prime mortgages in the USA, New Century, needed to file bankruptcy. In the beginning of August, there followed the tenth-largest US mortgage financer American Home Mortgage Investment. From then on, every TV viewer world-wide knew a new word: sub-prime credits.

By this elegant name, one calls credits handed out to firms whose income situation makes one guess from the very beginning that they won't be able to shoulder the charges for interest and repayment of the principal. Since these families as a rule also do not have any savings, the home is typically financed to 100 percent. The interests are often low in the beginning and are only tightened later to make the offer appear attractive. Who would like to incur a credit after all, whose interest and repayment charge already in the first month amounts to the 1 ½-fold of income? That way the bad ending that transforms the dream of one's own home into a nightmare typically only threatens after a few months or even years. On the whole, during the last years in the USA, there were given out sub-prime mortgages in the overall value of 1.5 billion Dollar. A fourth of the mortgages given in value terms in 2006 went to credit takers with unsure or simply too low an income.

Therefore, already in that year, despite health business activity, ever more American house owners got into payment difficulties. Every fifth owner of a sub-prime mortgage by February 2007 was behind his or her payment schedule. In the meantime, every month, twice as many houses have to be auctioned off by force than only a year ago. Following official numbers, the credits of about 2 million US American homeowners are considered endangered. At least 500,000 of them are threatened in the year future with the loss of their home.

Even Bush's recent seemingly generous proposal to supply refinanced mortgage credits under certain conditions with state insurance offers very little help to most concerned. Because only he or she gets to enjoy such a back insurance who complied without fail with his or her payment obligation during the last six months, owns at least 3% capital on the house and can prove a regular income. Precisely those who are up to their neck in water, that way fall through the meshes.

And to that category belong far more than the real sub-prime credit takers. The rating agency Moody's in the meantime also voiced doubts of the worth of so-called Old-A mortgages the next-higher credit class over sub-primes. Since ever more mortgages with variable interest are given out, the credit charges on the households has grown continuously over the years. After all, the US central bank Fed has hiked interests since 2004 from over one percent gradually to over 5 percent. In an almost perfidious manner, back then US central bank head Alan Greenspan by the way, before the beginning of this cycle of increases beat the advertising drum for mortgages with variable interests that saddle the entire interest risk on the house owners. "The American consumers would profit", Greenspan had droned, "if credit-givers offered more alternatives to traditional fixed-interest mortgages. These traditional fixed-interest mortgages seem to be a rather expensive method for the purchase of a home." Oh, well, the profiteers of the mortgage hype will have thanked him. Because without the appearance of apparently cheap credits whose true costs only turned out later, the whole show on the American real estate market would probably already have been over 2 or 3 years ago.

Global sub-prime crises

The rising number of forced auctions as such would not have driven the mortgage market into crisis. Because as long as by way of rising real estate prices, the emergency sale of the house is able to fetch back the counter-value of the principal plus yield, the business remains attractive enough to continue to turn the wheel. It is clear that none of the investors is concerned whether the families concerned in the end stand there even poorer and desperate than before their trip into the world of home ownership. What interests the money givers is with what expected interest, their capital comes back. A man called Kal El-Sayed who worked for nine years for the pub-prime financier New Century and made out building mortgages impossible to pay in the end to a couple of thousands families boasted still in March 2007, one month before the collapse of the firm in the New York Times: "We couldn't even believe how much money we had made. And we didn't have to do anything for it. Only show up."

Only when the first signs of weakness could no longer be overlooked on the US real estate market and due to house prices expected to fall, the refinancing of the ever more expensive mortgages by way of the house sale was no longer sure, the party came to an end. Ever since, the spectre of the sub-prime crisis has been sneaking around the world, and has spoiled their balance sheets to financial institutes of the most different colour, ever now and then also breaking the neck to one in an unsoft way. Already in June, the US investment bank Bear Stearns had to admit publicly to be forced to close two hedge funds due to enormous losses in the trade with sub-prime credit derivates. That way, the mortgage crisis had reached Wall Street. From there, it went straight over the whole globe. Be it the IKB Bank and Sachsen LB in Germany, BNP Paribas in France, the hedge Fonds Calibar Global Investment and Queen's Walk in London, the Australian Basis Yield Alpha Fund or the Bank of China, everywhere, red numbers showed up all of a sudden, which led in some cases to bankruptcy, in others to sale or to massive support actions. And all observers are united in the opinion that the losses booked up to now are at most the tip of the iceberg. The US stock-market control agency SEC has already announced to want to examine the balance sheets of the large investment banks more precisely, since up to now noticeably few Wall Street houses have shown losses.

Monopoly money for hedge funds

How come that the payment difficulties of US-American home builders can grow in lightning speed into a global financial crisis? In fact, such a process would have been still unthinkable twenty years ago. It became possible by the almost complete deregulation of the legally tradable financial constructs and the complete liberalisation of the global financial streams.

The classical credit mechanism apparently consisted in the bank handing on the savings deposits booked on the liability side of its balance sheet to certain credit takers – meaning firms or precisely also homeowners – and drawing its profit from the difference between deposit and credit interests. Because bank credits due to legal regulations must be buttressed by a certain volume of capital and moreover, a part of the deposits needs to stay as a minimal reserve on an account at the Central Bank, credit issue in this framework has clear limits. Moreover, the credit-issuing bank bore the whole risk of default; it therefore also had a great interest to hand on its money only to liquid borrowers. For both reasons, a credit explosion, as we have witnessed during the last years, would have been impossible.

But that was yesterday. Today precisely the big banks are intent on functioning only as the arrangers of credits and want to sell on the risk positions as fast as possible. Among the celebrated financial innovations that make precisely this possible, there belong so-called asset-backed securities (ABS), meaning certified credit packages that are secured by a real or imaginary asset. One subgroup of these are the Residential Mortgage Backed Securities (RMBS). In the latter, the housing credits of various risk classes are bundled into one package. Just like the buyer of a stock earns an entitlement to a share of the company, the owner of such bonds earns a claim to a share from the payments on the interest and principal. The fundamental value of such a paper, therefore, depends on the expected yields, which in turn depend not only on the level of the bundled credits and the interest rate, but also on the percentage share of foul credits that are hidden in the pool. These nobody knows precisely, and that's where the risk lies.

The trick now consists in placing these shares in slices or layers, usually three at a time on the market, where these slices pick up defaults in different ways. The lower slice is the most risky that can only be sold with a high risk deduction. If in the end after all, less credits turn foul than expected, these layers earn their buyer an over-proportional yield. They are therefore ideal monopoly money for hedge-funds whose peculiarity it is after all to beat over-proportional yields out of risky assets. The second slice, called mezzanine, already seems less risky, because it is only hit by defaults if these transcend a certain amount. The upper slice, finally, conveys an image of false security, although the credit package as a rule contains highly risky credits. Yet, because the yields of the upper layer are only touched if these reach an unusual magnitude in the historical comparison, this slice was evaluated by the rating agencies with the highest grade "AAA". It was evaluated, in other words, to be almost as sure as bonds (interest-bearing assets) by General Motors or state bonds by the Federal Republic of Germany.

The false image of security

By way of the construction of the RMBS, the mushrooming fictitious capital that grew wild here is not yet at an end. The next step here consisted in repackaging about hundred certified mortgage bundles each again into such a package. Such packages are the Collateralised Debt Obligations (CDO) that are brought to the market following the same pattern. Here as well there are various slices that represent various risk classes. These vehicles are traded outside of the stock-exchanges and were bought euphorically from Europe by way of China up to Australia and as over-proportionate yield bringers with seemingly low risk and attractive object of speculation by bank conduits, hedge-funds, but also insurances and pension funds.

The trick with the double certification and the various slices therefore allowed it to transform highly risky credits into an apparently sure form of investment. And because they were considered sure, the demand was great, where the sale opened to the arranging banks the room of manoeuvre for ever new credits without taking any risk oneself.

In the meantime, it is clear that the ratings of the CDOs were just as hypocritical as used to be those of Enron, Worldcom or Parmalat who had also received best grades until shortly before their bitter end. Since rating agencies are after all not external observers, but important earners in the certification trade and swindle, nobody should be really surprised about that either.

In fact, it was clear that the long-term expectation values that lay at the basis of the ratings concerning payment defaults for mortgages already could not be very meaningful for the simple reason that never before standards have really ever been that lax in the matter of credit issue and never has there really ever been that kind of a tower of outstanding mortgages, moreover at a trend of rising interest rates. The crux of the whole development therefore consists in the fact that just these financial instruments that by the image of false security they conveyed only made possible a booming segment of high-risk building credits in the first place, precisely that way destroyed the basis on which there relied their own evaluation.

Of course, everybody could have known that in advance. But as long as money poured and credit brokers, banks, rating agencies, hedge-funds and additional investors earned themselves a golden nose by blowing up the credit bubble, so long thee was after all only one interest: to keep the wheel turning at any price. In the year 2006, there were once more sold mortgages of a total value of 2.5 billion Dollars to the willing customers. Mortgages in a value of 1.9 billion Dollars were certified, about a fourth of them at sub-prime status. These horrendous sums make it possible to guess the volume of brokerage and counselling fees that the diverse actors were able to shuffle into their own pockets in that context. Not to speak even of the profits from such speculative purchase and selling-on of such assets. The 10 largest mortgage firms in the USA already knew why in the last years they invested about 185 million Dollars into lobbying work, so that stronger political regulation of credit standards by no means spoil them their rapid profit-mongering.

Part II: Luxuriant foulness

The US investment banks were by no means the only ones who had an interest that business with the indebtedness of the American households should continue as long as possible. Rather, the exorbitant bloating of private indebtedness for at least a decade was the life artery that kept America's and in a certain way almost the whole world economy going. An old basic problem of capitalism apparently consists in that profits, on the one hand, are all the higher the less access the working people have to the riches they produce, that on the other hand, however, their exploitation does not pay off if the products in the end find no buyer.

There have been in the past various attempts to escape this fundamental capitalist dilemma. A temporarily possible escape is the Keynesian one, to create additional demand by means of state credits which – in contrast to rising wages – do not at the same time register on the capitalist books as a cost factor. If this road, unfortunately, were to be tread too gingerly, interests would usually rise in the long term which does not encourage productive investments either. Another variant is the path of the Federal Republic of Germany to largely cut off domestic consumption by way of ruthless wage and tax dumping, to figure well this way on an international scale, however, and to find its markets by way of undercutting one's competitors in other parts of the world.

The US American growth model of the last years, in turn, is a third variant, if not for the resolution, so at least for the postponement of the capitalist accumulation problems. In sync with the modern privatisation trend, it is here a case of a kind of private Keynesianism: Not the state accepts red numbers in order to help the economy to sell more (although also this takes place again under Bush, in particular in the armament sector), but the large majority of the population incurs privately a growing mountain of debt to finance a consumption that would not be possible on the basis of its wages and incomes alone.

Growth by credit

In fact, the real hourly wage in the private US economy, if higher management and other leading occupations are figured out, in December 2000 lay at more than 5 percent below those of the year 1979 (Robert Brenner, The Boom and the Bubble). The median family income in the 90s and also after the turn of the century hardly rose despite apparent economic boom. For the lower 20 percent of the families, it continued to decline even further.

Consumption in turn grew in sizable rates and that way kept the whole economy going. Responsible for this was, on the one hand, an excessive luxury consumption of the US American upper-class that profited from many years of political redistribution, generous tax gifts and of course from the stock exchange and credit boom. The second engine was the growth in the construction sector fuelled by easy mortgages, a long period of low interest rates and apparently endlessly rising real estate prices. Thirdly, the mortgages were not, not even for the most part used for the financing of home purchases. They also served for the rescheduling of arrears in credit card payments and other consumer credits or simply for the supplementary financing of life upkeep. That way, often enough, the existing mortgage was increased or even the previously debt-free house only charged with a credit so as to liberate money for consumption purposes.

The advertising offers and seemingly cheap building credits thus not only seduce families who actually can't even afford it to buy a home or respectively too expensive a house. They animated them mainly to incur ever higher debts on already existing real estate, apparently secured by their virtually growing market value. The development of annual new mortgage credits (minus repayment) and the building investments of private households, both set in relation to disposable income show that these two numbers for a long time grew in parallel, which actually only means that mortgages were really used for the financing of home purchases. In the mid-90s, however, the value of new bonds began to explode, whereas for the real purchase of new houses smaller parts of income were spent than in the late 70s.

Ever new debts

However, mortgages are in no way the only debts that eat the income of the US households. Also other types of consumer credits have been given away, and there as well there are first signs that the consumer milked by interests and repayment at one point is no longer able to give any milk any longer. That way the number of credit card defaults in the first months of this year has risen by about 30 percent. "It has become visible", the Handelsblatt worried a week ago, "that erosion in credit quality extends from the real estate sector to other sectors such as cars and credit cards." Also car financing and credit card debts were by the way packed into debt obligations and sold into the wide world.

What the US-American middle classes financed by the ever new debts were in fact only rarely luxury goods. It was rather in their majority daily things such as hospital bills or tuition fees. Often only by way of rising debts was it able to keep up the accustomed standard of living, because prices for elementary services rose much faster than income. Much faster also than the official consumer price index shows! How much the US households of various income groups spent for what kind of consumption can be seen from statistics such as the Consumption Expenditure Survey (CEX) compiled every year. Since in the CEX, as in most such panels, the really rich remain excluded, the data convey a relatively good picture of the consumption habits of the middle classes and the poorer households.

When you talk about the luxury craze of the American consumer, you normally understand by this category, expenditures for new cars, expensive clothes, jewellery, fun parks, trips, entertainment electronics or holiday apartments. If you sum up precisely these kinds of expenditures following the CEX data and calculate their share of disposable income, there results in no way a rising, but ever since the 80s a falling trend. Various graphs show the course of the expenditure curve for the third, fourth and upper fifth of the households seized by the CEX – meaning the real middle classes – and for the average. There can hardly be any question of an exaggerated tendency to luxury. What has significantly risen, also this is shown by the CEX, are by contrast to the luxury categories rather the expenditures for health and education and everything around the own home.

Without the inflated credit bubble, the growth of the US economy would, without any doubt, long since have come to nil. But also by way of unprecedented consumer debts, the accumulation pains of the profit economy after all can only be bridged and not be solved. At one point, the limit is reached beyond which indebtedness can no longer grow. And then, the dynamics turns into its contrary, because not only bad wages, but additionally enormous interest and repayment charges strangulate consumption.

The market for credit certificates has contributed in a major way to postpone this bad end. In the meantime, it seems to have been reached after all. The rating agency Fitch records that US consumers at this point are using more card credit, even though they are already spending less. The simple reason is: They finance their credits with new credits, for instance, so as not to fall behind in the repayment of mortgages. Average earners simply no longer have enough money to serve mortgages as well as all the rising costs for health prevention, gas, kindergartens and food, Harvard professor Elizabeth Warren told the Chicago Tribune. The lapse of the US economy into a harsh recession that way seems more than likely. Already in August, the official number of employed has sunk again for the first time in years. A recession in the US, however, would not go past any part of the world without leaving a trace.

Firms without capital

The dark clouds that brew in the context of the debt-ridden US consumers, however, are not the only messengers of a menacing storm. The credit balloon puffed up in the last couple of years still has a further dimension. As is known, the mortgage crisis already has seriously messed up the business of the private equity vultures, although these actually have nothing to do with US construction borrowing. The reason lies in that there is an immediate parallel between the ever laxer standards of mortgage issue in the USA and the credits that the private equity societies have charged on the firms taken over: Thus, just like families were burdened with interest and repayments that exceeded their current income in an expected way, the debts produced by the purchase stood ever less in a relationship to the revenues of the company concerned.

If European firms on average are indebted, for instance, by the three-and-half fold of their operative result (Ebitda), this value in the case of firms that are bought by grasshoppers lies at six times of the same. In not so few cases, six to twelve months after the buy-out, they have virtually no capital any longer. The fact that banks proffered the needed credit sums never less readily and at such a good interest rate had to do exclusively with the practise that these demands as well immediately after concluding the deal were bundled into packages and thrown on the market. As in the case of the CDOs (Collateralised Debt Obligations – mortgage bundles traded outside of the stock-exchange, see Part I, jW), the banks here as well drew their profits from fees and commissions that given the growing credit volume could be driven up ever further.

"It is no longer of interest whether the borrowers can repay the credit, but only whether the credit flows are maximised", the Financial Times Germany noted in May, when the activity was still in full swing (FTD, May 23, 2007). Cov-light is the sub-prime equivalent in firm credits. Here as well, these are credits of which no reasonable person expects that they will ever be paid back in full. Yet, as long as any buyer of the papers departs from the assumption to still find a yet dumber person who will buy the stuff from him with the same expectation at a higher price, business will hum.

"There will be a wave of credit defaults", the manager of the American consulting firm Alix Partners specialised on rehabilitation told the Frankfurter Allgemeiner Zeitung already in October 2006. For the two following years alone, it prognosticated foul credits from the private equity rampage alone in a value of 25 to 30 billion Euros. A quarter of these in Germany by the way, where the financial investors were especially active! In their monthly letter of August, the European Central Bank describes the threatening crisis potential in a stilted way by the following words: "The world-wide market for Leveraged Loans (meaning debts from company buy-outs - S.W.) to which there also belongs a large European segment shows some similarities with the sub-prime mortgage market in the USA which might provoke worries with regard to financial stability in the case of a negative turn of the credit cycle. The high foreign share in the most recent take-overs can be compared to the high borrowing limit for sub-prime mortgages. Beyond that the practice of dividend recapitalisation, in which case the LBO partners (the buyers – S.W.) (…) profit from the rising market evaluation of the goal enterprises is comparable with mortgage refinancing that was an important support factor for the sub-prime factor in the last years of rising US home real estate prices."

One might also express it less elegantly. On both markets, people have been trading with hot air, and that had to escape at the point where the bubble on the market started to burst for the asset values used as the respective collateral (houses or firms). In the end, there remain ruined home owners, firms forced into insolvency, fired workers and a mountain of foul credits.

When the CDOs secured by American sub-prime mortgages, the banks consequently also found fewer and fewer investors who were ready to accept certified credit packages of over-indebted firms with an uncertain future into their portfolio. Or if they did, then against hefty price discounts! That way, the banks remained stuck with about 300 billions Dollars in acquisition credits from the record takeover wave of the first half of this year that they must keep on their books for the time being.

Yet, unimaginable masses of these and similar credit derivatives have long been on the market, and make life deservedly hard on those who have them on their books. In the year 2006 alone, in the USA, there were brought on the market instruments of the kind of the CDOs in a value of 4.6 billion Dollars and sold to investors all over the world. Nobody knows precisely in what conduits (financial management companies) or hedge funds how many of these keep hidden. Since at least the hedge-funds are also not forced to transparency and open drawing-up of their balance sheets, we shall most likely only get to know it there, where a vulture signals that an investor has completely over-strained itself.

Consequences for the world economy

Large hedge-funds and banks may be in a situation to deduct value losses step by step, as the Japanese banks did it with the mountain of foul credits on which they sat after the bursting of the real estate bubble there. Yet, firstly, this was also possible only, because the Japanese state had deeply reached into its tax treasures to support them. Second, this process after all did force the Japanese economy really into a prolonged recession. And moreover, there is after all in the present crisis a potential that is hidden in the fact that the debt obligation unsold at this point were financed as a rule with short-term credits, so-called commercial papers. These credits have running times between one and nine months and, therefore, must in relatively short intervals be brought again and again among the people.

For possibly insolvent holders of dubious debt obligations, nobody likes to prepare credit, however. That way the rampant foulness among the long-term debt obligation in the meantime also brought the market for commercial papers into trouble. These papers in turn did not only serve the financing of the mentioned credit derivatives, but were also used by firms that need short-term liquidity. The real economic effects if that market stops are obvious.

Added to that is the fact that for many financial companies that are in a bind, the banks are in line of duty with billions of liquidity promises. That means when nobody else pays for refinancing, the corresponding bank must do it. It was precisely this mechanism that drove the IKB and the Saxony LB almost into bankruptcy. Hedge-funds typically don't have such back insurance. If they need liquidity, they must sell stocks or throw other assets on the market. Indeed, their sales were an important trigger of the most recent downward trend on the world stock-market. To the intricacies of the contemporary world financial system, it belongs, however, that such sales apparently unmotivated by the logic of the stock market in turn devalue the mathematical models on which the investment strategy of many hedge-funds relies. This has additionally brought out of sync a couple of these speculation vehicles.

Even if apparently only air is being traded here, the transactions of the hedge-funds will ultimately have considerable effects on exchange rates, on the financing conditions of firms and thus ultimately on investment, jobs and life chances. After all, the right now about 10,000 hedge funds today together administer a fortune of around 1.9 billion Dollars. Thanks to the leverage effect of high credits, they move a multiple of that amount. The sums whose sudden reflow in 1997 unleashed the South East Asia crisis were incomparably smaller and nevertheless managed to throw a gigantic region years back in its development and to destroy millions of life perspectives.

Whether from this mixture, there may today develop a world-wide financial crash with bad results for the world economy, or whether it will be possible, as in the case of the shaking mega-hedge-funds LCTM 1998 and the burst technology bubble 20000 to get the situation preliminarily back under control by way of interest reductions and investment of public sums remains open. Sure is only that the scope for action becomes ever smaller with every new bubble to which such measures inevitably lead.

The global deregulation wave has led to capitalism today showing itself again in that full beauty by which it has written itself into the memory of mankind in the first half of the 20th century. The consequences are well-known. There are pasts that you really don't want to get back.