The article by Mike Morrissey first appeared in Unity, the weekly publication of the Irish Communist Party.
JUST after the 2008 financial crash, Queen Elizabeth II, while meeting a group of economists, asked the obvious question – why did nobody see it coming? The trend, however, is that few seem able to predict economic crises. The phrase ‘this time it’s different’ seems to be the inevitable prelude to a sharp downturn.
The 2008 crash, the biggest fall in output since the 1930s, is a good case in point. Ignorance of what was coming was based on the erroneous belief that house prices in the US would inevitably move upward. In turn, this led to the creation of mortgage-backed securities (financial derivatives) that sliced up some very dubious mortgage loans (Sub-Prime or worse, Vampire mortgages offered at initially low rates of interest that then climbed steeply) and then sold them on.
The assumption was that even if borrowers were unable to meet mortgage repayments, the additional value accruing on the property would deal with the problem. However, when borrowers defaulted in sufficient numbers to drive down housing prices, the banks and other financial institutions holding such securities were in serious trouble no matter how many maths PhDs were doing their risk assessment.
In most cases, governments stepped in to bail out capital while none of those responsible were held accountable for what was little more than financial fraud.
Misplaced Confidence
On some indicators, the US economy appears to be currently stable. At the beginning of October inflation stood at 2.9%, the unemployment rate at 4.3% and the stock market had risen by 11% since the start of the year. But, as the Economist (08/10/2025) comments, ‘strains are starting to show: retail sales are weakening, housing starts have dropped to their lowest level since mid-2020 and an immigration crackdown is tightening labour supply’.
In addition, the dollar has been falling against a basket of other currencies and consumer confidence, while volatile, is on a downward path. The growth rate for 2025 looks like being a full percentage point below last year’s 2.8% while future growth ‘is shaping up to be below trend’ (S&P Global, ‘Economic Outlook US Quarter 4 2025’, 23/09/2025).
There are growing worries that much worse is yet to come.
Ignore the Madman; Fear the Project
Some see everything in the US through the lens of the president’s social media outposts and odd behaviour (Adam Gabbat, ‘The President is Unhinged…’, The Guardian 05/10/2025) thus believing he is responsible for anything that happens. While Trump staggers between idiocy and indecency, he is little more than toxic froth on top of a more fundamental project to remake the US by people who are both very bright and very determined.
They are completely open about their goals as evidenced in the Heritage Foundation’s Project 2025 report. That is to restore the economic, political and military dominance the US was assumed to have acquired by the fall of the Soviet Union.
The first step is the creation of the ‘unitary presidency’ i.e. one that is unrestrained by the constitution, the Congress or the law, quickly followed by the cowing of all possible sources of opposition – labelled radical leftist, Marxist or subversive (including the Democrats and many judges).
This authoritarian surge is, following historical precedent, couched in the jargon of restoring law and order. The paramilitary, masked bands of ICE agents have a budget to rival the defence budgets of some European states. On false claims of urban disorder, the National Guard and Federal armed forces are deployed in Washington, Portland and, most recently, Chicago (Democrat cities) even though, in theory, the US armed forces cannot be deployed in domestic situations.
A right-packed Supreme Court is being relied on the quash attempts by lower judges to inhibit the agenda.
The centralisation of accumulated power can then be used to strengthen the dominance of big capital (low taxation, low regulation, vanishing employment rights) within the framework of a North American fortress, super-state (hence the annexation talk about Canada and Greenland).
The tariffs are about reshoring off-shored production to increase its self-sufficiency. Only such changes, it is claimed, will enable the US to overcome its real threat, China.
More, the project framers are too bright to believe climate change is a hoax, but the US they envision would be better able to cope with its impact no matter what happens to the rest of the world.
There has no problem about doing this while indulging the president’s ego and revenge fantasies nor with tolerating his underlings who appear equally bizarre – the Secretary of War seems to believe the ‘lethality’ of the armed forces will be improved if only they do more push-ups.
The Chinese must have been highly amused.
Yet, Trump’s embarrassing behaviour on the international stage is irrelevant. The president’s value lies in his ability to project a persona adored (amazingly) by around 40% of the population. His declining poll ratings can also be managed so long as the Democrats do not come back strongly in the mid-terms. Gerrymandering, voter suppression and voter bribery will be rampant.
Big money and disinformation can do the rest. The real question is whether this project will succeed or collapse under its own contradictions.
Ominous Signs
Strangely, in its current form, the new regime may be short lived. For one thing, investors are increasingly nervous about a US debt burden of $37 trillion and a president pressing the Fed to dramatically lower interest rates. Effectively, they are looking to ‘de-dollarise’ their portfolios, while the dollar’s advantage as a global currency is under threat. Commodity prices are on the rise.
The price of gold hit $4000 an ounce in October, increasing by 50% in a single year. Goldman Sacks estimates it will be just under $5000 by the end of 2026.
Simultaneously, US borrowing costs are rising as the bond market fears persistent inflation will erode returns, particularly for long-term bonds. Underlying all of this is worry about a possible US sovereign debt crisis.
Inequality, steadily rising in the US, is economically inefficient even ignoring its human costs. Bernie Sanders (The Guardian, 24/09/2025) warns ‘for most Americans, the system is not just broken, it is collapsing and is increasingly resembling life in the Third World’.
The cause – ‘in one America, the richest people are becoming obscenely richer and have never, ever, had it so good’.
Back in 1902, Hobson (Imperialism: a Study), argued that capital was plagued by under consumption which drove its imperial ambitions, i.e. to offload its surplus goods. In the contemporary US, maintaining overall consumption now depends on the spending habits of a fraction of the population. Larry Elliot (The Guardian, 25/09/2025) notes that almost half of consumer spending comes from the richest 10% of the population.
Almost a third of their wealth is held in stocks and shares. So long as shares continue to rise, they will most likely continue their spending. However, a fall in the value of stocks and shares would curtail their spending and thus threaten recession.
Moreover, even within the establishment, there are growing fears of company overvaluation. The Bank of England’s monetary policy committee (The Guardian, 08/10/2025) expressed concern on October 8th that ‘the risk of a sharp market correction has increased’.
In an interview with the BBC (BBC News 09/10/2025), Jamie Dimon, the head of America’s largest bank, J P Morgan, expressed his worries about a sharp market correction within six months to two years. The source of this concern is the extraordinary increase in the market valuation of AI companies.
In October last year OpenAI was valued at $157 billion; this month it’s $500 billion. Anthropic’s value rose from £60 billion to $170 billion.
In effect, the US is betting that an AGI (artificial general intelligence) breakthrough will increase productivity exponentially. Ignore the hype by the AI-centred companies or the time lags in its application.
Note instead the widespread agreement that it’s a winner-takes-all competition – the first company to achieve AGI will leave the others standing.
Yet, there are at least seven companies engaged in this endeavour and investing hundreds of billions – a break-through by one or two would drive the others to the wall. If that doesn’t cause a crash, nothing will.
Even More Authoritarian
In short, despite Trump’s usual hyperbole, the super-heated US economy is substantially more fragile than it appears. When the downturn becomes impossible to ignore – how many more statisticians can he possibly sack? – the tend will be to blame it on external and internal enemies. The predictable response will be to accelerate the authoritarian measures already being implemented.
Having lived long enough to witness the triumph of capitalism, it now appears I am seeing the return of fascism.