Recently, China’s Xinhua News Agency carried an article explaining how the U.S. obsessed by capital is wrecking global economy.

The main content of the article is as follows:

In March, coinciding with the failure of three U.S. banks, the front pages of the world newspapers were splashed with articles covering the nexus between the government and enterprises as well as the peculiar profit-exploiting policies.

Today, the U.S. capital that strongly backs America’s financial hegemony is defined as the “business rules” of the international capital market. For the past several years, the U.S. – the world’s biggest economic state – has made capital “exploit” politics and hinder policy regulation while creating irregular global financial crises.

Capital Controls Political Regulation

The recent banking crisis is another vivid example of the well-known “revolving door”. The “revolving door” means that the upper echelons of the political circles move to business world and vice versa.

The Signature Bank in New York went belly up in March. The surprising thing is that the former U.S. Representative Frank had become a member of the bank’s board of directors after two years since quitting politics. When he was a Representative, Frank instigated the Congress to adopt the “Dodd-Frank Law” and insisted that stricter control measures be introduced to prevent recurrence of financial crises.

After becoming director, he appealed to the Democratic Party to pass the relevant bill proposed by Wall Street, openly arguing that measures controlling the financial sector should be abolished.

Meanwhile, among the members of the board of directors of the bankrupt Silicon Valley Bank, only one had worked in the banking business and the rest were mainly members of the Democratic Party. In other words, the key factor that threw the U.S. financial business into turmoil was the capital which, standing at the center of the economic system, is controlling policy regulation and creating a risk.

Starting from the late 1980s, the U.S. began to weaken the power of financial supervisory and regulatory agencies. Until the outbreak of the 2008 global financial crisis, supervision and regulation on the U.S. financial sector continued to weaken, resulting in a rapid accumulation of financial risk elements. In the end, the “real estate bubble (housing price bubble)” burst, causing a serious global economic crisis.

Thereafter, the U.S. financial supervisory and regulatory agencies began to introduce stricter control measures on “banks of institutional importance”. Banks that valued over $ 50 bn now had to undergo the Fed’s annual stress test (a test to evaluate whether banks can cope with losses made in extreme conditions).

However, the American government has failed to draw a lesson. The lobbying of financial institutions including the Silicon Valley Bank led the Trump administration to instigate the Congress in 2018 to increase the limit of the assets of banks required to do the stress test to $ 250 bn. The recently failed banks had all paid the heavy toll of this.

Even weirder is the fact that bankers can play the role of both “player” and “coach” at the same time. The President of the Silicon Valley Bank worked as the President of San Francisco Reserve, a regulatory agency, before the bank went belly up. For all this, the San Francisco Reserve could not find anything wrong with the bank. U.S. Senator Sanders said that this was “one of the most absurd aspects behind the failure of the Silicon Valley Bank”.

Aftereffects of the U.S. Financial Crisis

Turmoil in the U.S. financial circles can lead to a worldwide mayhem.

Under the pretext of innovation, U.S. capital is used for reckless speculation, amplifying the dangers of the financial circles and devastating the economy. The U.S. capital supremacy, as much as military supremacy, has created global disorder.

In the 1980s and 1990s, hedge funds became popular amongst the U.S. financial institutions. During the 1997 East Asian crisis, these funds created currency fluctuations and raked in wealth from Thailand, Indonesia, and other East Asian countries.

Owing to heavy capital losses, the “economic bubble” burst one after another in Southeast Asia, seriously inhibiting economic development.

Before the 2008 financial crisis, some of the credit-rating agencies disguised themselves as “reliable and fair supervisors” of the U.S. financial market and rated high-risk assets as “assets with high ratings”.

Victims of the capital supremacy are the ordinary Americans and world investors, and those benefiting from it are a handful of capitalists. Investors who lost money in the recent banking crisis came to know the fact that several officials of the Silicon Valley Bank converted stocks into cash just before it declared bankruptcy. For instance, the bank’s president sold over $ 3.6 m worth of stocks two weeks prior to the bankruptcy.

From the confusion created by hedge funds in 1997 to the financial crisis in 2008 to the still ongoing banking crisis in the U.S. and Europe, the U.S. has changed its ways of destabilizing the world economy. But the role of the American capital as “crisis creator” still remains unchanged.