In this backdrop of recurring capitalist overproduction, there emerged the combination of industrial and financial capital, the financial oligarchy or the monopoly capitalists, which intensified their investments in the financial market to avoid the spectre of overproduction. Finance capital, after all, by dealing in the selling and buying of bonds and stocks and other forms of securities and extending loans can expect to profit through interests and dividends without producing a single good. Through manipulating accounts, as would often occur in the development of finance capital and the spreading of rumors among the public, the latter could be enticed to buy stocks and bonds which will increase the capital value of capitalist corporations. Thus, after the second crisis of overproduction in 1911, which capitalism hurdled through World War I, excepting defeated Germany, the financial oligarchs strengthened their financial institutions to rake in more monies from the public by setting up more mutual funds, insurance companies and eventually investment houses. Going into the 1930s, though there was a growing stockpile of goods in capitalist warehouses due to the chaotic technique of capitalist production where every one is on his own as government intervention is considered anathema, capitalist corporations continued to profit through the rising values of credits or fictitious capital, stocks, bonds, and other paper capital. But soon, this kind of bubble economy will be exposed and will burst as it did in the Great Depression of 1929, also caused primarily by a plunge in the speculation on real estate properties in the US, which led to the fall of stocks in Wall Street. As usual, millions of Americans were thrown off their jobs with even some Wall Street employees jumping off windows because of their sudden poverty. The term “cardboard” America became in vogue during the Depression, which tries to depict the situation where many Americans lived in cardboard houses on the streets and other areas and with cardboard soles for their shoes. These scenes with thousands of Americans now living in trailers because of the current financial turmoil of capitalism may be revised as “trailer America”.

The Recurring Capitalist Financial Crises

It was another great war, World War II which again salvaged the bankrupt monopoly capitalists of the US as the New Deal of Roosevelt that desperately tried to revive the sick
American economy came to no avail. The intervention of the US government through deficit spending in the 1930’s is a case in point where a capitalist government violates its principle of free enterprise when it comes to saving the rich as in the present case in the “mother of all bail outs” .The US, through selling of arms and other war materiel on credit again even to their former enemy, the USSR, entered the so-called golden years of the American economy in the 1950s, greatly assisted by its establishments of the IMF and WB in 1946 to assure its premier position vis-à-vis other capitalist nations devastated by the war, which now rely on US investment funds.

The two wars entered into the US after 1946, the Korean War and the Vietnam War continued to create an artificial prosperity for Wall Street as the American monopoly capitalists, the industrial military complex, maintain their profits through the churning out of war materiel which also boosted other related industries, like oil and the electronic business.

But with the end of the Vietnam war in 1976, recessions started to haunt the US economy and speculative investments intensified to stem the falling rate of profit due to overproduction.
The increasing speculative investments in the US money market led to the great crash in the real estate business, causing a plunge in Wall Street stocks on what has been called as Black Tuesday in November, 1987. As we have mentioned earlier, in this market crash the US government came to the aid of bankrupt capitalist corporations through a bailout of $500 billion. However, even after the bailout, speculative investment continued to rise, especially in mutual trust funds and again in real estate.(Talk about the greedy never learning) During the first half of the 1990’s, US speculative investment was 23 of the private sector’s total net fixed capital stock, more than any industry. [Robert Brenner, The Economics of Global Turbulence, A Special Report on the World Economy, 1950-1998, New Left Review, London, 1998, p. 211.] US finance companies also scouted around for high-earning speculative investments in the global financial markets, particularly seeking out sovereign bonds of countries in the latter’s mania for foreign investment though these may be hot money. It is to be noted that the policy of the liberalization of the finance market promoted by globalization helped considerably in the unbridled flow of speculative capital the world over, which eventually brought about the Asian financial crisis of 1997 and the Russian and Brazilian crisis of 1998.

With this trend, especially on their home front, the US capitalism was dangerously creating again a bubble economy for their people. In 1997, the values of shares in the US stock exchange reached $10.9 trillion, exceeding US GDP of $8 trillion. The fervid shifting to speculative investment led by US monopoly capitalism has been followed by other capitalist nations. Thus, we have such big fund managers and investment banks at present, United Bank of Switzerland (assets $920 billion), Kampo of Japan (assets $720 billion), Axa of France (assets $429 billion) and Barclays of England (assets $385 billion), among others. Finance managers have crafted new devises to attract investors from other corporations and the general public. There are now what are called the new derivatives, apart from stocks, bonds and mutual funds, like investing in the future prices of commodities (like oil) and in hedge funds. [Hedge fund is considered the most risk-free type of speculative investment because it is supposed to balance the value of one security paper against others based on a calculation of odds by stastisticians.]

The Nature of the Present Bubble Economy

With the rise of US speculative investment in the 1990s, its bubble economy will inevitably burst and this happened again in 2000 with the collapse of the dot com industry. In that year, the stocks of big computer companies started a steep dive in Wall Street, as it turned out that they have been hoodwinking the public regarding their financial liquidities. These companies have enticed the public to buy stocks from them in the much vaunted information revolution propaganda or the so-called New Economy, even backed by the US government. World Com and Adelpha and other big dot com companies went bankrupt when it was found that they have been doctoring their books of account to show profits. The 4th largest oil company in the US, Enron, also closed down and was a subject of an investigation, together with the dot com crowd, by Washington regarding malfeasance. However, those involved in such shady dealings with the money of ordinary Americans, as usual, received very mild penalties from the US government.

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