The clientele of California’s failed Silicon Valley Bank (SVB) was the high tech start-up industry in Silicon Valley. Banking is a con industry. Without the confidence of depositors, no bank is solvent. This was what SVB faced. Some of its depositors withdrew their deposits to gamble on risky, high-interest rate stocks. The bank did not have enough liquid cash to honour this request. The remaining depositors were left short.

The US government knew if it did support the bank depositor/investors, it could not be publicly called a “bail-out.” Why not? The term bail-out “had become a toxic word in the wake of the 2008 financial crisis. The depositors would be protected, but the bank’s management and its investors would not.”

The March 2023 bailout was for the full amount – not simply the $250,000 normally protected by the Federal Deposit Insurance Corporation (FDIC), the banking regulator. These rich depositors were ‘bailed out’ by the US government in full. This includes Pieter Thiel, the multi-billionaire.

Jamie Dimon, chief executive of J.P. Morgan — when asked for his advice by the Biden administration’s Deputy Secretary of the Treasury — warned of “potential” for the banking crisis to spread to other banks in a “cascading series of bank failures.” And indeed the cryptobank Signature Bank was also at risk of crashing soon after and was taken into receivership by the government (US speak for temporarily nationalised).

What happened? Clients had deposited their cash in SVB to reap profits with the bank’s investment strategy. That was locked into US government fixed, long-term bonds, which yielded stable returns. Profit-seeking capitalists realised however that there was a catch in the post-COVID era as inflation re-emerged.

This resulted from an increase in the money supply following the government pumping money into businesses, but also to the population during the pandemic. Between them, the Trump and Biden administrations put into the economy over $5 trillion (“almost a quarter of GDP”) of which $1.8 trillion went into households.

It is true that in the current inflation phase, other non-monetary causes of inflation operate. These include poor supply chains exacerbating supply and demand mismatches, employers wishing to squeeze wages, and businesses using the situation to gouge prices. But there was an undoubted major increase in the money supply.

Attempting to control this money supply, the central banks reverted to their traditional “solution” of raising interest rates. This makes the commodity of money more expensive to buy. As rates steadily rose, the profits from fixed, long-term government bonds (or Marketable Treasury Securities) fell below those obtained by shorter-term bonds or pure speculative gambling. That led investor/depositors to start withdrawing their deposits from SVB. They switched that capital into lending money for shorter term but higher interest rate loans. The search for “fictitious money profits” – as Marx put it – once more led investors to shift money around in search of extra profit increments.

The same dynamic for the lowered profits on long-term Treasury bonds applies also to other so called “fixed income” bonds. It appears that in total some $2.2 trillion are “over-valued” currently, a looming threat destabilising the economy and many exposed banks.

“Other fixed-income markets like the $12 trillion mortgage-backed securities market and the $10 trillion corporate bond market also saw big losses in market value. This is a key reason why banks, which hold such securities, are currently under stress. A recent study found that such assets in the U.S. banking system are overvalued by $2.2 trillion due to mark-to-market losses.” See David Beckworth’s analysis:  “The Fed Has Overseen a Remarkable Transfer of Wealth From Bondholders to Taxpayers.”

Actually the amount of holdings by Banks of such “fixed income” markets has soared between 1980 to 2023 from about $0.5 trillion to $6 trillion.

There is another feature of what has happened that we should note: the effect of the rising interest rate has also been to diminish the so-called Debt to GDP Ratio. This is shown below, expressed by the amount of ‘Marketable Treasury Securities’ held as a percentage of GDP.

This is a very new phenomenon as Adam Tooze points out. His depiction from Federal data from the years 1970-2023 makes that case:

This took hold from the post-pandemic period from 2021. The consequence of this is that government public debt has fallen dramatically. We have discussed previously the divisions of interest between banking and financial capital and industrial capital, which remain intense. At the core is an enthusiasm for high interest rates by finance capital, which gains from the higher rates of borrowing capital. But this is contradictory to the interests of the industrial capitalist who borrows capital for reinvesting in new technology and means of production, therefore preferring a lower interest rate.

Ultimately the contradictions of capital continue to grow immensely. Marxists understand that the whole international banking system under capitalism is – like all other features of capitalism – incredibly fragile. Three points can highlight this.

First in the US, in emergency moves the government established a “Bank Term Funding Program” to underwrite banks. This defends them against depositor withdrawals by using government loans against their original purchase of long-term government bonds, because the government knows that many banks in the US are “underwater.” What this means is they hold large stocks of government bonds that have lost in value as compared to short term “risky” betting investments. That is termed “unrealized losses.” On top, the capital the banks hold frequently cannot cover sudden withdrawals – about 10% of banks have less capital than SVB did. The total unrealized losses at US banks is estimated now at $620bn, or 2.7% of US GDP.

Second, this is not a phenomenon restricted to the United States – it is international. For example, the collapsing confidence in the 167-year old Credit Suisse Bank forced a take-over at basement-low prices by its long time rival, Swiss UBS. But UBS demanded that the Swiss government guaranteed it against potential losses on the books of Credit Suisse, providing $100 bn in liquidity funding to cover deposit withdrawals.

Third, potential solutions such as bank regulations have been weakened, such as the Glass-Steagall Act of 1933. As we pointed out previously, this was weakened by the Democrats and Republicans together — but apparently not enough for financial investor greed. Even the International Monetary Fund (IMF) despairs of meaningful regulations. Its diplomatic language notwithstanding, it concedes “regulations” are not effective: “As the financial system continues to evolve and new threats to financial stability emerge, regulators and supervisors should remain attentive to risks… No regulatory framework can reduce the probability of a crisis to zero, so regulators need to remain humble.”

Normal mechanisms such as lowering real incomes by inflation and removing any vestiges of a “welfare state” are not enough to satisfactorily balance the competing pressures. Meanwhile leading capitalists hope for newer territories and work-forces to exploit. These ambitions are steadily leading to a new world war. Workers and toilers of the world must organize to frustrate this path. Only a workers’ and toilers’ revolution can succeed in this goal. This requires Marxist-Leninist parties, which are being built in many countries.

This article originally appeared in ‘American Party of Labor

We spoke with Rosemary Grennan, one of the founders of AGIT, about cultural intervention in Berlin. Here’s what she had to say:

Hi Rosemary, thank you for agreeing to speak with us. Could you please start by introducing yourself and AGIT?

I’m Rosemary Grennan, one of the founders of AGIT, a new organisation based in Berlin. AGIT is a residency and archiving space that examines historical movement materials to make interventions into contemporary struggles and critical questions today.

The organisation has three different focuses: exploring movement histories and contemporary politics in Berlin and beyond, developing international collaborations focused on building left history, culture, and theory, and finally experimenting with different technologies to develop ways of building and distributing open access archival collections. AGIT is organised around funded residencies where historians, activists, and cultural producers can collaborate on history and collections outside of a formal research setting.

My own background is at an archive in London called the Mayday Rooms, where we have built a substantial archive of social movement histories in London. The other founder is Jan Gerber, based in Berlin and part of an organisation called 0x2620, which builds software for large digital collections. They have worked with video collectives in Turkey and Egypt archiving audio-visual material around Gezi Park and Tahrir Square protests, and have also spent a lot of time in India building the online platforms pad.ma and indiancine.ma.

You’re doing this in Berlin, where there are many cultural and artistic initiatives, as well as lots of academia. What is AGIT aiming to offer that’s not being provided elsewhere?

I don’t know if we’re trying to offer something that’s completely different – more to add to the rich left cultural initiatives already existing in Berlin. AGIT wants to build on the rich history of radical publishing, libraries, and self-archiving on the left by developing new forms of archival dissemination and ways of making things public. We want to create a space for people to work specifically on these histories, to have time to research, translate, read material from past struggles, and create a public context around them. The way the residencies are formed is that people can work with us and other archives to learn how to archive their own histories and build resources and collections around that. We are a young organisation and hope that each residency will build the organisation in some ways and leave something behind.

How much of this work is voluntary, and where do you get funding for what you have to pay for?

The day-to-day organisation is voluntary, but we currently have funding for the residencies and residents can stay in the space. We received a donation to start up and have applied for other cultural funds to keep us going.

On Friday, April 7th, you’re organising your first event – the opening night of a month-long exhibition. Could you tell us a little about it?

Our first resident is Hussein Mitha, an artist and writer from Glasgow. Hussein has created a mural in the space using vinyl cutting and sign-making techniques to incorporate texts and images with vibrant swaths of colour. The idea for the residency was to use political ephemera from different social and political histories of Berlin to create the mural and add to Berlin’s strong tradition of political mural-making (such as those on the Press Cafe and the Haud der Lehrer on Alexanderplatz). The opening of Wir Weben on April 7th is the unveiling of the mural, as well as a small exhibition of historical sources that are either referenced or alluded to in the mural. This includes material from the Silesian weavers all the way up to political print culture in 1970s West Berlin. We will have on display Käthe Kollwitz’s Weavers’ Revolt, John Heartfield’s Five Fingers has the Hand from the Rote Fahne just before the 1928 election, the 1 Million Roses for Angela (Davis) campaign from the DDR and documents surrounding the court case of the Agit-Drucker in 1977.

Let’s talk briefly about the Silesian Weavers. The mural is called Wir Weben (We Weave), which is from a Heinrich Heine poem about the weavers. We also find references to them in Marx. Who are they and why are they so important?

When Hussein first came and stayed in our space, we went on a lot of different walks around Berlin and visited the bronze reliefs on the side of the Neuer Marstall opposite the Humboldt Forum. One relief shows Karl Liebknecht proclaiming the “free socialist republic of Germany” in 1918, and the other commemorates the German Revolution of 1848. Through this, we started to read Heine’s poem about the Silesian Weavers, which strongly influenced the workers’ movement in Germany. Briefly, there was a weavers’ revolt in 1844, where the weavers in the Silesian region of Prussia revolted against increasingly bad conditions and cuts in pay. They were brutally suppressed by the authorities but had a big influence on left intellectuals like Marx and Heine. Heine then published his poem in Vorwärts, which was the newspaper that Marx was editing from Paris. The poem repeats the refrain ‘wir weben, wir weben (we weave, we weave),’ and this became one of the starting points for the mural, weaving together different histories from Berlin and beyond.

What is the connection between the Silesian weavers and the more contemporary issues that are part of the exhibition?

At the top of the mural, there is a spinning wheel and from this a single red thread that goes through the mural, bringing all the material together. I did an interview with Hussein about the making of the mural, and they said that when they came to create the mural, it was interesting how some of these histories don’t really fit together and resonate, and there’s no necessary continuity between the weavers and, say, the squatters in West Berlin, but still the possibility of solidarity.

The exhibition will be held at Nansenstraße 2, which is the location of AGIT, but it is also home to Right2TheCity, the English language branch of Deutsche Wohnen & Co Enteignen. What connections do you, as a cultural organisation, have with political organisations like Right2TheCity?

Nansenstraße 2 is also used by the Western Sahara Solidarity group and other groups that are loosely associated with those in Right2TheCity. There is also a group called the KiezProjekt, which is organising support for tenants of the buildings that would be expropriated if the referendum were to be carried out. In the evenings, people use the space to hold meetings and other events. We thought it was important to confront political history from a place that is not detached from current struggles.

What is the role of art and culture within political movements? Do you believe that art can change the world?

Although our primary focus is on preserving and archiving movement history, we do recognize the role of culture in bringing these histories back into collective memory. Therefore, cultural production has increasingly become a terrain of struggle in a context of “culture war” narratives. However, rather than focusing on that, it may be more important to consider how we can produce culture that reinforces processes of organisation, struggle, and cultural memory of our history. I always think that the workers’ photography movement is a good example of this. There, the question is posed: is photography for the workers or workers’ photography? The photographers were part of a political movement rather than trying to represent it from afar.

For the exhibition, I was examining some of the material from John Heartfield. One of the pieces is an advertisement for an exhibition of Heartfield’s work in 1929 in Arbeiter-Illustrierte-Zeitung. The title of his exhibition was “Use Photography as a Weapon,” and the inscription below read, “Only art that sees and recognizes the moving forces of our society and draws the conclusion from this knowledge has a right to life and validity: taking sides and fighting!”

What are your future plans for after the exhibition in April?

The exhibition Wir Weben, after the opening on Friday, will be open until 30th April and can be viewed Friday-Sunday 2-6pm.

We currently have another residency called Making Fists with Sam Dolbear, who is exploring queer histories and public memorialization in the GDR. We also have an upcoming residency from Bak.ma, a video collective who have created a public video archive of the Gezi Uprisings. They will come and work on their material this summer to mark the ten-year anniversary. In the winter, we will also have an archival exhibition on the Wages for Housework campaigns in Berlin and how they relate to similar international movements. That will bring together archival material from Berlin, London, New York, and Italy.

Why should people come to your opening event on Friday? How can people follow what you’re doing?

We will be unveiling Hussein’s fabulous mural, as well as a small archival exhibition that relates to elements of the mural. The documents on show include solidarity stamps, films of children climbing the statue of Kathe Kollwitz, reproductions of Vorwarts, and more! We will be having drinks together, so please come by for a chat and find out more about the space. Everyone has their own involvement in different historical campaigns or social movement histories, and we would love to hear about them.

Sign up to our mailing list to hear about upcoming residencies and events. We also have a website and a very young Instagram account. Additionally, come to our events and send an email to contact [at] aaagit.org if you have material that you want to work on.

The exhibition Wir Weben opens at Nansenstraße 2 at 7pm on Friday, 7th April. It will continue on Fridays and Sundays until the 30th of April.