In April the International Monetary Fund dubbed the growing economic crisis "the largest financial shock since the Great Depression", leading to a one in four chance of a full-blown global recession.
There is little doubt that the US economy is already contracting.
The immediate problem is a pool of bad debt, so-called "toxic waste", clogging up financial markets. The waste is a consequence of the scramble to lend money during the property boom of recent years. Arcane financial innovations, which saw debt parcelled out and gambled on by banks, hedge funds and corporations, ensured that the contagion from dodgy mortgages went global.
Now the banks are in trouble. So Citigroup, the largest bank in the world, had to "write down" the value of its assets by £8 billion last month. At the same time it announced 9,000 job cuts, on top of the 4,000 it has already made. Closer to home, the Royal Bank of Scotland has been forced to turn to shareholders in an attempt to raise £11 billion and plans to write down assets by up to £7 billion. As Socialist Review went to press, chancellor Alistair Darling and the Bank of England were preparing a plan to swap £50 billion in public money for the banks' dodgy assets.
It is not only socialists who might question the logic - or morality - of bailing out some of those most deeply implicated in the crisis. Sections of the ruling class might ask why a government so committed to free market ideology would act in this way. So Vince Cable, the Liberal Democrats' treasury spokesperson, complained, "We cannot have a situation where the banks are able to privatise their profits and nationalise their losses." While Cable represents those in the ruling class who think the banks' profits and losses should both be privatised, socialists argue that, instead, their profits should be nationalised too. The money can then help those in danger of losing their homes or jobs.
The crisis is likely to increase as the financial problems spill over into the real economy. There are already signs of this. A recent survey of medium sized British companies revealed that 45 percent plan to cut jobs and 60 percent are witnessing a fall in profits. In the US unemployment has grown and real pay fallen. Rises in food and fuel prices have amplified the problem and are likely to grow still further as financial speculators look for a new source of profits, and the dollar (in which commodities are priced in world markets) continues to slide in value.
A consumer downturn in the US will have major implications - it has been a major motor of the world economy. If the US is removed from the picture, China, famed for its export-led growth, is a net importer.
More importantly, consumer spending absorbs 70 percent of US output. The other 30 percent is bought by companies, in the form of raw materials, investments in new machinery and so on. This investment is heavily dependent on the rate of profit and, as Chris Harman argued in February's Socialist Review, the long-term decline in profit rates is ultimately behind today's problems. A series of economic bubbles combined with rising personal and government debt have helped conceal underlying problems - until now.
For instance, last month General Electric (GE), one of the world's largest multinationals, saw the value of its shares fall by $47 billion in one day. GE was regarded as a "safe bet", a profitable US corporation. But now the Economist magazine can write, "GE's profits grew with the sort of predictable consistency that was made possible by laxer accounting standards and a talent for making good any unexpected shortfall with last-minute sales of assets held by the firm's notoriously opaque finance arm, GE Capital."
GE's profits were not just from making light bulbs and jet engines - they were from credit offered to consumers and other financial investments. It remains to be seen how many other firms have relied on these methods.
Faced with these sorts of problems, Gordon Brown's instincts will be to launch more attacks on workers. His attempts to cut public sector pay have little to do with "inflationary pressures" (which most serious economists agree are only weakly connected to public sector pay) and everything to do with cutting spending so he has more freedom of manoeuvre to bail out his friends in the City.
For Karl Marx capitalism was characterised by anarchism in the marketplace and despotism in the workplace. Both are likely to grow as the financial meltdown gathers pace.