The latest news about Merrill Lynch, swallowed by the Bank of America and the abrupt demise of the Lehman Brothers investment bank have made economists talk about the beginning of a deep crises comparable to the Great Depression.
Some sociologists and historians believe this to be the predicted collapse of the American empire as well as the present world system.
Lehman Brothers had lost 90% of its market value since the beginning of the year, yet investors still hoped the financial giant would be saved. It could have been bought by state insurance. Barclays and the Bank of America were both likely buyers, but at the last moment they decided against it, saying the U.S. government was not ready to guarantee any of Lehman's bad assets, especially its $128 billon long-term commitments.
Experts are sure the series of bankruptcies (11 companies have filed for bankruptcy since the beginning of the crises) will not stop. They also forecast the closing of hundreds and thousands of financial companies.
Former U.S. Federal Reserve chairman Alan Greenspan has called the current crisis in the United States "the most wrenching since the end of the Second World War."
It seems no one is yet ready to give an accurate forecast of the current U.S. crisis, but there are many examples from history of huge international empires that once united a part of the world with language, ideology, religion, government system and economy but collapsed because of their own complexity.
The basic principle of most economics (including in America) is the formula "demand breeds supply." With mass production, however, a plentiful supply can breed its own demand. This process repeats and causes an outgrowth of the economic system. Unfortunately, however, this growth cannot be endless. As America uses the world's resources, its economy secures high living standards for Americans. As soon as the resources run out, the system will collapse.
Only radical changes can help. Western futurologists of the 1980s created a theory of the postindustrial society - a market alternative to communism. They thought that scientific discoveries and technological breakthroughs would solve a number of economic, environmental and demographic problems as well as adjust most social differences. The key values of the information society were education and science, whereas the main part of its economy was not an industrial company but a university, research center or, using modern language, technology park.
But everything went the wrong way. Banks and stock markets became the heart of the economies of the postindustrial countries, though the utopian capitalists thought it would be a technology park. Financial traders, not scientists, became the main economic agents.
The end of the 20th century saw galloping growth of the financial component in the U.S. economy. It resulted in a great number of credits and the growth of a financial bubble - a system where profit does not depend on real production, but is a result of sophisticated financial transactions.
The industrial ballast, that did not experience the anticipated technological stimulus, was transferred to regions with cheap work force, like Southeast Asia. Having distributed its industrial potential all over the world, America retained control over the cash flows coming into the national budget and became a bottomless market for industrial goods.
There lies the main danger for the U.S. itself, as well as for all the countries whose economies are tied with the American one. The warnings about the possibility of a financial collapse were frequent. However, it was very profitable to make money out of money, thus the funds in the bubble surpassed the real economy. The current financial crisis may result in a loss of control over the periphery economies, as well as a decline of demand in the U.S. that will result in overproduction crises in the countries that supply it and collapse of raw economies.
The beginning of this process can be observed right now, as the economies of China, India and Southeast Asian countries have slowed, energy prices have also gone down, causing the fall of stock markets in the countries that produce and supply raw materials.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.