In an extensive interview with "Tareeq Al-Shaab", the central organ of the Iraqi Communist Party, published on 12 October 2008, the party leader Mr Hamid Majeed Mousa dealt with a number of pressing internal issues as well as major recent developments in the international arena. The following is an excerpt regarding the current world financial crisis:
Q: The heart of capitalism is now witnessing a financial crisis whose consequences are not yet fully borne out, both inside the US and outside. Can you give the readers of our newspaper your evaluation of what is going on?
A: What has happened, and is still going on, stems from the nature of the capitalist system that is characterized by the emergence of periodic crises, which the market system cannot avert before it disposes the working people and toilers of their dearest assets. These are crises that result in maximizing the wealth of the rich who have fixed assets and reduce to a minimum the purchasing power of consumers and wage earners. What has happened reflects, in concrete terms, the dominance of financial capital over the capitalist economy, as demonstrated by the inflation of the role of financial institutions and inflated financial circulation at the expense of the real productive economy.
According to the available facts, the financial circulation, which includes the assets of banks and financing institutions, insurance and stock markets, is three times what the real finance economy represents in the world. This means that two-thirds of the global economy is a shadow economy whose owners grab its profits from the productive economy, but through very complex and interrelated means, that ordinary citizens cannot grasp their mechanisms, secrets, complexity and repercussions.
The problem developed when the U.S. economy, the leader of the world capitalist economy, faced stagnation and crisis, and millions of people who got loans to build or purchase houses and real estate were unable to pay mortgage instalments due to the lack of adequate resources because of the stagnation of economy and the rise in interest rates. As a result, mortgage companies repossessed more than 10 million housing units. This led to a huge crisis in liquidity, with these institutions being unable to fulfil their financial obligations and pay back credits. Their failure to pay back debts led to many banks declaring bankruptcy.
This cascade of repercussions has led to a major crisis in the U.S. economy. And the consequences and results are continuing, and more will follow in the future.
Given globalisation and the role of the U.S. economy in the system of globalisation, the effects of the collapse of mortgage and insurance institutions and banks will not remain confined to the U.S. market, especially that it controls the global currency (the dollar). By virtue of dependency, and as a result of overlapping investments and economic ties, the waves of this quake, that has its centre in Washington, will cover other capitals. No state or economy will be spared.
Let me warn against what some Iraqi economic experts, or Central Bank staff, have been saying, that the Iraqi economy is immune to the economic shocks taking place in the world. How can this be the case when the cover for the Iraqi Dinar is mainly the U.S. dollar? How can this be true while the American market is one of the major importers of oil? How is it so when we rely on oil prices that have been affected by the hurricanes for the past two or three months?… and while we are mainly importing from American markets and other world markets? Yes, we shall certainly be affected. But we are still reaping the first waves, and we'll see what happens... We must work to reduce this loss. Those who attempt to belittle the danger of what is going on risk should think instead about reducing the negative effects of global shocks on the Iraqi economy, the Iraqi market and the Iraqi Dinar… instead of claiming that the American quake has no effect on the Iraqi economy.