Yesterday on CNN an editor for the Wall Street Journal, possibly the Europe edition, Fred Kempe, was scathing about the "Potemkin Banks", the facade of a financial system that is collapsing at this moment. In what sounds like an epitaph on the US and IMF attempt to colonise the former Soviet Union, he said sweepingly, that "market capitalism" requires "real institutions": there was no point in setting up these spurious imitations. So the c word is being openly spoken. The chips are down.
The BBC is saying today that the losses by international investors are of the order of 30 billion dollars. Another commentator said what a blow this turn is for the US and the IMF. The weakness of all the emerging markets, including Brazil, was a sign that the Asian and Russian crisis was turning into a global crisis of loss of confidence in the IMF, which is, I gather, sort of bankrupt? Interesting at any rate that the G7 saw no reason to meet at a time when Russia has reneged on 40 billion dollars of short term debt and the reconstruction proposals mark down creditors assets by 95%.
But before we savour for the full implication of the end of civilisation as we have known it, can I check with people's help the statistic that Kempe gave which implied that in Russia company finance is also in effect barter. He said of the 210 largest companies, 75% of their financial dealings (?) are in the form of barter, of swaps of securities or other credits. Can anyone explain this? And how does this permit economic activity to continue even though according to the neo-liberals it should stop immediately?
Chris Burford
London.