do not make provision for the future will be condemned to repeat the past.
Paul Sweezy and Harry Magdoff . Banks: skating on thin ice.
By means of the banking system the distribution of capital as a special business, a social function, is taken out of the hands of the private capitalists and usurers. But at the same time, banking and credit thus become the most effective means of driving capitalist production beyond its own limits and one of the most effective vehicles of crises and swindle.
-- Marx, Capital, vol. 3
The specter haunting today's capitalist world is the possible collapse of its financial institutions and an associated world economic crisis. The miasma of fear is hardly surprising in the light of the coincidence in many capitalist countries of seemingly uncontrollable inflation, declining production, and instability in financial markets. The banking and credit community is showing increasing signs of weakness. Thus, in the span of one year the United States witnessed the two largest bank failures in its history ( U.S. National Bank in San Diego and Franklin National Bank in New York). In addition, according to a report in the Wall Street Journal of December 18, 1974, more than a dozen European banks reported big losses or failed in 1974.
The state of mind of the ruling classes of the leading capitalist countries was well illustrated in an article in Le Monde ( October 22, 1974), Europe's most prestigious newspaper, entitled "The Bankers of New York Begin to Feel the Wind of Panic." According to the paper's special correspondent in New York, he was told by a well-known American banker:
"It is not impossible that the monetary authorities will be led in the near future to make dramatic decisions, such for example as freezing certain long-term deposits in the banks (deposits established against the issuance of CDs, i.e., certificates of deposit for which there is a very active market in the United States). It is not even possible to exclude the possibility of a panic which would drive depositors to withdraw their funds."
These somber prognostications, made during a luncheon attended by some ten people, raised no objections from the other guests, whose analyses in other respects however were quite different from those of our interlocutor, a man with world-wide experience, not confined only to the United States.
Superficial apologists are inclined to gloss over these warning signals by dwelling solely on the special and, by implication, unique errors of the banks that collapsed, thereby ignoring the fact that these so- called errors are merely distorted reflections of more basic difficulties besetting the money markets. The more responsible financial leaders of the capitalist class tend to speak more frankly. For example, Robert V. Roosa, a partner in Brown Brothers Harriman and former Under-secretary of the Treasury, observed last August, according to a Washington Post disptach:
"There has been a loss of confidence in the [financial] machinery most of us took for granted. There is a fear, a kind of foreboding." It is "not too much," Roosa added, to say that these concerns are similar to the kind that prevailed in the 1930s. (Published in the Boston Globe, August 5, 1974).
And the chairman of the Federal Reserve Board, Arthur F. Burns, in a major address to the latest convention of the American Bankers Association ( October 21, 1974) also went back to the Great Depression as a point of comparison for today's critical conditions. While he did not specifically identify the decade of the 1930s, he could not have meant anything else by his opening sentence: "This year, for the first time in decades, questions have been raised about the strength of the nation's, and indeed the world's, banking system." Rather than sweep this notion under the rug, as one might expect from a conservative government official charged with the responsibility to sustain the public confidence and faith on which banks rely to stay in business, Burns