The growing volatility of the stock markets--which have ballooned up in a speculative bubble--highlights the underlying weakness of the world capitalist economy. Even amidst a continued modest yearly upturn in the U.S. economy, the stock market jitters show the lack of long-term confidence in what the future holds.

"Dow, Nasdaq Enter Free Fall," shouted the Washington Post in its front-page headline on April 15. The Nasdaq, which is dominated by "high tech" companies, fell a "sickening" 25.3 percent in value over the week, in the words of one journalist. This was the worst decline in its 29-year history.

The loss wiped out the large gains registered this year on the Nasdaq index, which has been the scene of the wildest speculation and sky-high share prices, which have no relation to a company's future earnings or assets. More than $2 trillion was wiped off the value of U.S. stocks in those five trading days--almost half on Friday alone. Newsweek reported that "many Internet stocks...are down 70 or 80 percent from their highs," and named Palm Inc., Red Hat, and VA Linux Systems as examples.

But the bottoming out of the drop, and record one-day increases that came on the heels of the precipitous fall, demonstrates that the wealthy exploiters will put their money where they perceive they will receive the biggest returns. The long-term trend in the capitalists' falling average rate of profit and stagnating mass of profits lies behind the run-up in stock prices and explosion of other forms of commercial paper values.

These developments revealed once again the looming catastrophe a financial breakdown in the center of world finance capital holds for the semicolonial countries, as well as other imperialist centers.

The "stock rout," as the decline was described in one newspaper, took an immediate toll on overseas markets. In Tokyo, shares suffered their fifth-largest fall ever of nearly 7 percent, and their largest since the worldwide stock market crash in October 1987. European stock markets also fell.

A particularly destabilizing factor is the huge level of debt taken on by large investors to pay for their stock market forays. One form of finance is dubbed buying on margin, where an investor borrows from a broker to buy stock. If the stock declines, they are subject to a "margin call" to pay back the broker. The customer has to put up more money to make up for the shortfall, potentially sparking further sell-offs. By law no more than 50 percent of a stock purchase can be financed by debt, but such measures have not stopped "margin debt" from reaching record levels. "Buying on margin becomes a habit," the Times headed one article before the decline.

Two days before the Nasdaq slumped by 10 percent, the International Monetary Fund described the U.S. economy as "steaming," and predicted growth of more than 4 percent. The fact is that the growth is shallow, and is being maintained through deepening the exploitation of workers and farmers in the United States, extracting more from labor of working people in the semicolonial countries, and heightening competition with other imperialist powers.

According to IMF figures, the Japanese economy will grow by less than 1 percent this year, in an international economy forecast to expand by 3.9 percent in 2001.

These "violent ups and downs" that characterize the stock market--the expression used by the New York Times editors--are manifest today in a period of relative economic growth. The potential is there for a serious crisis, such as the onset of a recession or other economic disaster, to bring with it a much more devastating fall in the stock markets. Such an event would threaten the banking system, and bring in its wake a collapse of industrial production and trade, with all its devastating consequences for working people around the world.  
 
 
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