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Banking system on the brink

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the banking crises of March 2023 — the collapse of Silicon Valley Bank, Signature Bank, and Credit Suisse — are not isolated regulatory failures but symptoms of a deeper, unresolved contradiction within monopoly capitalism. The central thesis is that the capitalist state can no longer permit the "creative destruction" that would restore equilibrium to the financial system, because the scale of monopolisation and systemic interconnection makes any major bank failure catastrophic. Consequently, central banks and governments are forced to nationalise risk while privatising profit, trapping themselves between the need to raise interest rates to combat inflation and the need to keep rates low to prevent banking collapse. This contradiction, the article claims, reveals that the productive forces have outgrown the limits of private property, and that the system can only lurch from crisis to crisis, each time imposing greater misery on the working class and preparing the ground for revolutionary upheaval.

Theoretical Grounding

The analysis is rooted in the Marxist theory of capitalist crisis, particularly the understanding that financial crises are expressions of the underlying contradictions of accumulation, not merely regulatory failures. The article draws on Lenin's theory of monopoly capitalism and finance capital, emphasising the fusion of banking and industrial capital and the role of the state as the executive committee of the bourgeoisie. The concept of "too big to fail" is theorised not as a policy error but as the logical outcome of monopolisation: the state must socialise losses because the destruction of major banks would devastate the entire economy. The article also deploys the Marxist critique of "moral hazard" as an ideological smokescreen — the bourgeoisie cannot allow the market to function as it claims to believe it should. There is an implicit reliance on Marx's analysis of fictitious capital: government bonds, treated as "safe" assets, are revealed as fictitious when interest rates rise and their real value collapses. The argument that "too much safety becomes unsafe" echoes Marx's observation that the credit system contains the seeds of its own instability. The article sits firmly within the Trotskyist tradition, particularly its insistence that capitalism has exhausted its progressive historical role and that only the working class, through socialist revolution, can resolve the system's contradictions.

Conjunctural Relevance

The article was written in March 2023, at the height of the banking turmoil triggered by the fastest pace of interest rate rises since the early 1980s. It identifies the specific mechanism of crisis: banks had loaded up on long-term government bonds during the era of quantitative easing and near-zero interest rates, treating them as "safe" assets. When the Federal Reserve began raising rates to combat inflation, the market value of those bonds collapsed, creating paper losses of $2 trillion across the US banking sector. Silicon Valley Bank was the first to break because it had to sell bonds at a loss to meet depositor withdrawals. The article notes that Credit Suisse was effectively a "zombie bank" kept alive by cheap credit, and that its forced merger with UBS was a state-orchestrated bailout. The geopolitical context includes the ongoing war in Ukraine, which the article identifies as a source of persistent inflationary pressure through energy costs, protectionism, and military expenditure. The article also points to the wave of strikes and class struggles already underway — including the revolutionary movement in Sri Lanka in 2022 — as evidence that workers are reaching the limits of their tolerance for real-terms pay cuts and austerity.

Where the Argument Continues

The article leaves several threads open. It does not develop a detailed analysis of the relationship between the banking crisis and the tendency of the rate of profit to fall, though the concept is implicit in the claim that the system cannot restore equilibrium. The argument that inflation will persist because central banks cannot raise rates without triggering another banking collapse is stated but not fully worked through in terms of the long-term trajectory of the world economy. The article gestures toward the political consequences — the collapse of the "centre ground" and the radicalisation of youth — but does not elaborate a strategic perspective for revolutionaries. Readers should consult other IDOM articles from the same period, particularly those analysing the UK bond crisis of September 2022 and the broader inflationary conjuncture. The theoretical framework is developed more fully in the Marxist tradition's classic texts on finance capital and crisis, including Lenin's Imperialism, the Highest Stage of Capitalism and Marx's Capital Volume III, especially the chapters on credit and fictitious capital. The article's analysis of the state's role in socialising losses connects to the broader Marxist literature on the fiscal crisis of the state and the tendency toward state monopoly capitalism.

Connections

  • Lenin, V.I. — Imperialism, the Highest Stage of Capitalism (for the theory of monopoly capitalism and finance capital)
  • Marx, Karl — Capital, Volume III, Part V on "Division of Profit into Interest and Profit of Enterprise" and the credit system
  • Hilferding, Rudolf — Finance Capital (for the classic analysis of the fusion of banking and industrial capital)
  • Sweezy, Paul — The Theory of Capitalist Development (for the theory of monopoly capitalism and crisis)
  • Mattick, Paul — Marx and Keynes (for the analysis of state intervention and the limits of Keynesianism)
  • IDOM articles on the 2008 financial crisis and its aftermath, particularly those analysing quantitative easing and "zombie capitalism"
  • Against the Stream episodes from March-April 2023 covering the banking crisis and its political implications

Key Quotes

  1. "The banks are fine, as long as they can hold onto the bonds until they mature. But if they have to sell them early, and at a fast pace, then they very quickly end up in a world of trouble."

  2. "By having the central bank guaranteeing every bank, they are generalising the crisis. Their policies are turning the crisis of each bank into the crisis of the system as a whole. They are nationalising the risks, whilst of course privatising the profits."

  3. "Banking stands revealed as a part of the state masquerading as part of the private sector."

  4. "What this describes is a situation where the free market no longer functions. The productive forces have outgrown the narrow limits of private property."

  5. "The crisis of the banking system therefore becomes a crisis of the central bank. And this means a crisis of the whole capitalist system."

  6. "However they get out of the present crisis, it will create even more misery for the working class, provoking more waves of class struggle."