First IKB and Northern Rock, then Bear Stearns: Who's next?

One is tempted to leave this question unanswered to mock the conscience of those apologists of the greed driven market economy (let’s be clear: there’s nothing ‘free’ about this system), but it’s exhilirating to know they don’t have a conscience. Their only concern is ‘getting ahead’, stepping on others as they haste to ‘explain’ the latest indices of a world on the threshhold of another deep recession.

Of course it’s silly to predict who’s going to be next. We are not prophets. Or charlatans. Our method of analysis (of world political events, social movements, market indicators and the leading mediocrities of the individuals in service of a system hopelessly incapable of bringing lasting stability to billions upon this planet) aims to understand the objective and subjective causes of things in the hope it would assist in political clarification and thereby help to build upon attempts to end this system of individual appropriation. Understanding why the world is on the brink of another major recession and the place of the Federal Reserve Bank of America’s rescue of that country’s fifth largest investment bank, Bear Stearns, in all of this, aids such clarity.

Bear Stearns was one of Wall Street’s most admired financial institutions. It had a complex strand of links in the financial services and investment market across the globe, from Europe to China to South Africa. Less than eight months ago, two of the Bear’s hedge funds linked to the housing market collapsed. The extortionist increase in housing prices in South Africa over the last four years has very little to do with local confidence in the home grown property market; it has everything to do with reckless speculation by seasoned financial services tycoons in what’s seen as the latest patch for making the quick buck. The housing crisis is far from over in America, and an early slump is just about beginning to rear its head in South Africa.

The economies of Europe and Japan had their first shocks and the plummeting indicators on Nasdaq and the Dow Jones are panicky references to this. It is not hard to work out how desperate governments will become to shield entire economies against that ‘bad patch’ across the Atlantic.

To bail out the Bear, the Federal Reserve Bank of the US was forced to use a little used and little known provision of the Federal Reserve Act of 1932 (enacted in the throes of the Great Depression). Earlier in this year the House of Commons in the British Parliament introduced emergency legislation to allow for the nationalisation of Northern Rock.

It is now in order to sound the alarm bells: we’re on the brink of another recession. First it was IKB of Germany, then Northern Rock of Britain’s north eastern region; they were followed by Bear Stearns of the USA. Who’s next? France’s Societe Generale or Absa of South Africa?