The Crises of Capitalism: An Analysis and a Chronicle

In the third volume of Capital, we read how credit appears to be an attempt to overcome the limits of capital. Marx speaks here of credit “as the main lever of overproduction and exasperated speculation in commerce, which forces the process of reproduction to its extreme limit.”

In this process, the so-called interest-bearing capital, i.e., capital that is lent by the owner to the industrial capitalist, plays an essential role. “With the development of interest-bearing capital and the productive system, each capital seems to double and in some cases triple because of the different ways in which the same capital or even the same credit title appears in different forms in different hands. Most of this monetary capital is purely fictitious.”

Capital needs continuous and unstoppable valorization, but this is based on the antagonistic nature of capitalist production and therefore on the effective development of the productive forces which, under capitalism, must guarantee its constant growth; growth which is, moreover, a limit to this very development, but which is sustained and accelerated by the credit system; “but at the same time, the credit system accelerates crises, the violent eruptions of this contradiction and, therefore, the elements of the dissolution of the old mode of production.” (quoted from Book III, chapter 30).

This is a difficulty, a critical point in the reproduction process that seriously hinders it when, for whatever reason (including any strictly financial crisis), there is a lack of credit, “it is not the mass of inactive capital (i.e., temporarily outside the reproduction process) seeking investment, but capital hindered in its reproduction process, which reaches its peak just when the lack of credit also reaches its peak.”

Here is described the unstoppable process of the capitalist crisis, its nature which is essentially intrinsic to the production process itself. In the background are the strictly financial crises that thrive “up to the purest and most colossal system of deception and gambling, as well as the exploitation of social wealth by the few.” (ibid.).

For Marx, credit is one of the main instruments with which capital attempts to overcome its own limitations.

As far as the process of reproduction is concerned, through credit, all available and potential capital, i.e., that held not by capitalists but by other subjects, pushes production beyond its limits. And when credit decreases and its availability declines, whatever the reason, then the crisis appears as a credit and monetary crisis.

In short, our doctrine closely correlates credit crises with capitalist crises, but essentially highlights the latter as the trigger for the former, which, however, increase its scale and severity. Our doctrine definitively clears the field of justifications based on a lack of morality, references to individual greed, ‘errors’ caused by the accursed ‘hunger for gold’, and the short-sightedness of bankers and financiers who failed to see the crisis coming in time, but rather traces ‘the crisis’ back to the dynamics of capitalism.

At the time when “Das Kapital” was conceived and written, crises broke out at fairly regular intervals, but they were not so serious or widespread. In the last century, however, crises occurred at longer intervals, but with far more disruptive effects. The concept that has always been expressed by both the economic authorities of states and bourgeois theorists of all schools, however, is that the contagion spread from finance to the “real” economy.

Marx harshly denounces this theory, which is based on the belief that capitalism is in itself a neutral system that develops the potential of labor and technology to the fullest and finds the synthesis of its impartial functioning in the “market,” where all the contrasts between producers and users are harmonized. Crisis due to “excessive speculation and abuse of credit”.

This is the thesis that completely reverses the cause-effect relationship that was expressed in 1858 in relation to the search for causes by the British Commission tasked with drafting a report on the serious crisis of that period, and it is the theoretical principle of all bourgeois analysis.

As with the 2007 real estate crisis in the US, the fall in business investment due mainly to excess production capacity, i.e., overproduction, precedes the bursting of the credit bubble, which first masks it and then, when it bursts, seems, wrongly, to be the cause.

Similarly, the theoretical and practical solutions implemented to prevent the disaster from happening ‘this time’ are the most diverse and imaginative, except for special cases that have allowed the most powerful imperialism to operate beyond the limits of its own national debt.

The credit cycle that develops beyond the needs of production and is also used extensively for financial speculation is, however, a phenomenon already known in Marx’s time, well known since the days of “Das Kapital”: speculative activity is carried out to obtain levels of profit that would not otherwise be achievable. Marx already pointed out that “all capitalist nations are seized by a frenzy in which they want to make money without the mediation of the production process.” This iridescent world, without material substance, without the production of goods and the mechanism of capital valorization taking place, is essentially no different from the great financial crises of the 20th century and those of the new millennium.

A common feature of every credit crisis, whether it concerns production or pure financial speculation, is what Lord Keynes called the liquidity trap: a condition in which, even with very low interest rates, credit is not used, money is not spent or invested for productive purposes, but hoarded.

This behavior on the part of monetary capital holders occurs in all credit crises. We read in “Accumulation of Monetary Capital,” Book III of “Capital,” Chapter 26: “As regards the hoarding of money by the banks during the crisis of 1847 […] As the Bank was forced to raise its interest rates more and more, apprehension became widespread; provincial banks increased their cash reserves and likewise their reserves of banknotes […]. The result was thus a general hoarding […]‘.

But the fall in fictitious capital, i.e., government bonds, shares, and in general any other type of speculative-financial investment, does not entail the real destruction of capital, but simply “a transfer of wealth from one hand to another,” which means that crashes in the financial sector are not destructions of capital, which can restart the cycle of capital accumulation and, in essence, the real economy.

The solution implemented each time to remedy or at least keep the crisis process under control is always to transform private debt (“debt” is the other side of “credit”; where there is one, there is obviously also the other) into public debt, or, as they say, “sovereign” debt. The state commits resources that it has, or does not have, and which it obtains in the usual ways, through tougher taxation, the issuance of debt securities, and so on, thereby increasing the conditions for a further crisis.

This is true in general, but in the post-World War II period, a very particular condition of the global imperialist alignment made it possible for a state to exceed the limits of the financial crisis and allowed it to implement containment measures that in other circumstances would have caused an otherwise uncontrollable crisis, similar to that of 1929.

It is clear that in this situation, the dominance of the dollar as the general currency of account is essential for the United States, and it is essential to maintain in every way the political (which also means military) conditions that this privilege of being the world’s leading imperialist power allows. How long this can last cannot be quantified at present. But the process of erosion is not stopping, and the American warlike attitude is becoming more rigid.

The future is therefore necessarily “war,” when, together with the conditions of general and irreversible crisis of capitalism, US financial dominance will also collapse.

Our revolutionary work regularly examines the productive and commercial situation of capitalism, according to the various states and their economies. Here we want to mention the other component of the crisis, the one linked in particular to finance; and if we want to deal with the capitalist crises of this post-war period, we must start from the end of the 1960s. As in 1929, the epicenter is still the state of the first world imperialism, and for even a brief description of these turbulences, the starting point is the financial events in the US.

It was during this period that the post-war economic growth phase came to an end and the US economy returned to its propensity for debt. The use of ‘interest-bearing capital’ grew increasingly impressive, and in parallel with the growth of credit leverage, financial instability grew. In the period from 1945 to 1975, there were no banking crises in the US, but they reappeared in the following decade. With the abandonment of the Gold Standard in 1971, the process of financialization proceeded unchecked, and the dollar became the legal tender, flooding the world. Its role was consolidated in 1973 with the oil crisis, and having become the world currency in place of gold, it also assumed the role of a safe-haven currency in all the financial storms that shook other countries. Similarly, the system of laws and regulations that had been built to prevent a new 1929 was dismantled, removing the limits on speculative banking activity.

And so began the bankruptcies of American savings banks, with the usual system of “recovery,” state intervention that inflates public debt. In the rest of the world, crises continue to erupt. In the 1990s, Japan’s financial bubble burst, entering a period of stagnation that lasted more than a decade; in 1997, the countries of Southeast Asia entered a crisis, known as the “Asian Tigers” crisis, a stock market crisis caused by unbridled speculation, and the following year Russia was also hit hard. Large amounts of capital fled the Asian and European stock markets and took refuge on Wall Street, triggering the dot-com bubble in 2000, the “new economy” with dizzying speculation on emerging technologies.

A frenzied credit cycle that drastically reduced the basis of production due to the objective need for profit, a cycle that no longer allows, in general, the profits that a decaying system needs to continue to survive.

The stock market crash of the “new economy” was quickly reabsorbed, after the usual gigantic transfer of money from the “fools” to the “clever,” and the American recession of 2001 ended after the usual system of large amounts of liquidity made available by state finances. This monetary policy was made possible, at this stage, by two particular conditions: low levels of inflation, and therefore interest rates at their lowest levels for the period, and the role of the dollar as an international reserve currency.

The US trade balance has been in deficit since 1976, and any economic system in these conditions of credit expansion would have paid for it with a deep debt crisis, which was avoided precisely because of the role that the US currency plays in the world. Thus, the United States of America was able to afford to issue currency (currently in dematerialized, digital form, but this does not change the substance of the process at all) without budgetary constraints.

In the early 2000s, low interest rates, linked to the enormous availability of money, fueled both credit and the real estate bubble, a sector in which huge amounts of mortgages were taken out.

When, starting in 2006, real estate prices began to fall physiologically, the crisis erupted due to the inability to honor the mortgages that had been taken out. First, for the financial institutions that had opened those positions, and then for the exposed banks that first entered into “distress” and then collapsed; the bankruptcy of Lehman Brothers is a striking example.

This was the subprime mortgage crisis, i.e., mortgages, or the granting of funds, without collateral security; the year was 2008. Once again, the use of a sophisticated rescue system, again at the expense of the state, made it possible to absorb the crisis, which lasted over a year. However, the crisis spread to Europe in the following years, when “sovereign debt grew, with widening yield spreads on bonds (the famous ‘spreads’) and credit default swap risk insurance between these countries and other EU members, mainly Germany”; in other words, when the countries with the highest debt (relative to GDP) began to pay unsustainable amounts to honor the fiscal terms of the financial mechanism of “insurance” against “default,” in simple terms, “bankruptcy.”

The story of this secondary crisis ends with the usual solution, the 2011 agreement to increase the European Financial Stability Facility (EFSF), established in 2010 with a budget of €750 billion, by more than €1 trillion. The euro thus remained stable against the currencies of the EU’s main trading partners.

This story, from 2008 to 2011, clearly shows how the explosion of the crisis in the economic sphere produces an even more violent cascade of crises in the financial sphere, which then spread beyond the national borders of the area where it first occurred.

We will only briefly mention here the production and financial crisis caused by the Covid pandemic, which was formally recognized in December 2019 and exploded in 2020, with the suspension of most economic activities, violent effects on commodity markets, and a whole series of effects that, two years after the declaration of the end of the emergency and the resumption of capitalist activities, had still not been completely overcome in 2025, and have instead led to an increase in the availability of funds for states to control and emerge from the emergency.

The construction sector in China, under the same conditions as the subprime crisis, also led to the bankruptcy of the Chinese real estate giant Evergrande, which was the symbol of the country’s economic growth, collapsing in the face of more than $300 billion in debt following the real estate crisis. The similarities with the bankruptcies of Freddie Mac and Fannie Mae, the two financial giants that provided the infamous unsecured mortgages, are obvious.

Evergrande was unable to honor its exposure in 2021, its liquidation was decreed in January 2024, and it was delisted from the stock exchange in August 2025. In a chain reaction, other real estate giants, such as Country Garden and Sunac, were overwhelmed by the crash, leaving millions of buyers with mortgages to pay and apartments not delivered.

Since 2021, after four years, the effects have not yet been fully absorbed. And many provincial administrations still find themselves in a kind of financial trap, unable to pay off the debts accumulated during years of construction boom.

It is a classic mechanism of capitalist crises. “Governments don’t invest, businesses don’t build, families don’t buy,” as the economic pundits declare, believing they have discovered who knows what.

Of course, the Chinese state has other powerful resources, but we see this as confirmation of the financial crisis following the production crisis. This is exactly as predicted by our economic science.

The contradictions in the field of finance and in the production process have certainly not diminished; on the contrary, they are emerging with ever greater virulence. Government debt is growing at an ever-increasing rate, and interventions in the field of finance continue to increase it, without any reversal of the trend. Wars and clashes testify to the irreversible severity of the crisis, now in its twentieth year.

We are not prophets of doom, nor do we presume to provide “precise dates” for the economic collapse of this world based on profit at any cost. But we cannot fail to see how close the day of reckoning is, how the continuous wars and clashes, “political” effects in the broad sense, in this terminal phase are destroying all the political and economic certainties of the world and reopening the conditions for the resumption of class struggle.

What is still missing is the party of revolution, the Communist Party; without which any movement of the class without reserves, however violent and courageous it may be, has no hope of defeating the monster of world war.