What is happening to the world economy?
The world capitalist economy has been buoyed up by a tide of liquidity, a flood of cheap credit. This has fuelled the frenzied financial speculation of the last few years, a profits bonanza for the super-rich. Underlying this, however, are unsustainable imbalances and deepening contradictions in world economic relations. LYNN WALSH looks in depth at the processes taking place. AT THE END of February, world stock exchanges and other sectors of the financial markets (company bonds, debt securities, commodity futures, etc) suffered a sharp fall, opening a period of jitters throughout the global financial system. The dip was apparently triggered by a 9% fall (27-28 February) on Chinas two main stock exchanges, Shanghai and Shenzhen. The fall in China was precipitated by investors fears that the Chinese government would increasingly curb the flow of credit for purchasing shares, undermining the recent surge in share prices (up 130% in 2006). But the effect of the fall on Chinas stock exchan
