Since the beginning of January the dollar has slid 10 percent against the euro, with the European common currency edging up toward parity with the greenback.

The Nasdaq composite, which lists the shares of high-technology companies, is down 72 percent from its peak in early 2000, while the Dow Industrials index is down 22 percent over the same period. The Standard and Poor’s index of 500 companies has fallen 36 percent.

At the same time the markets have become more volatile, swinging widely as they decline. "A wild day ends in relief" and "More storms batter weary investors" read two recent headlines.

"For the first time since the 1920s, stock markets have been falling during the first few months of an economic recovery," reported the June 22 Economist. Despite this "correction" the big-business media and other pundits state that the major stock markets remain "overvalued" and that the slide will continue.

U.S. Treasury bonds have jumped in value as investors have withdrawn funds from the stock markets. "Investors Flock to Safety of Government Bonds," read one story. The yields of these government-backed notes have fallen to less than 5 percent, the lowest level for some months.

During the anemic recovery, now in its fourth month, the official rate of unemployment has continued to rise, reaching an eight-year high in April of 6 percent. Signs of an up-tick were registered the following month, when nonfarm employment grew by some 41,000 jobs. But more than half of these were temporary positions. Reporting a pickup in demand for industrial workers, the head of one temporary-worker agency said that the bosses are "reluctant to hire full-time employees because they’re not sure how long [demand] will last."

Holding off new hiring of workers as long as they can, the bosses often add on overtime hours and increase the pace of work, where they can get away with it. Average factory overtime hours increased to 4.3 hours a week in May, the highest since November 2000.

Reporting the closure of a bacon processing plant in North Carolina by Tyson Foods, and the loss of 500 jobs, the Wall Street Journal noted the "newly intensified cost-cutting culture that is sweeping across corporate America. Factory executives...are finding ways to save every penny possible."

Of particular concern to the big-business media and others in ruling-class circles is a series of financial scandals involving major companies that were prominent in the stock market boom of the 1990s.

The biggest such revelation has involved WorldCom, a Mississippi-based Telecommunications giant. WorldCom, embroiled in a $3.8 billion accounting scandal, "is the most mainstream company that is lying," said one delegate at a fund managers’ conference in Chicago, bluntly expressing the growing unease among capitalist investors.

Speaking at the Group of Eight meeting of representatives of the major imperialist powers two days earlier, U.S. president George Bush described the admission by WorldCom’s owners of their maneuvers to inflate their profits as "outrageous.... We will fully investigate and hold all people accountable for misleading not only shareholders but employees as well.... Those entrusted with shareholders’ money must strive for the highest of standards."

Terrence McAuliffe, chairman of the Democratic National Committee, said, "WorldCom and everything else has totally undermined consumer confidence in America." Democratic Party representatives have sponsored a Senate bill that purports to impose new restrictions on business practices. Each of the four major accounting firms that remain after the collapse of Arthur Anderson--recently convicted of "obstructing justice" in the Enron case--faces at least one investigation by the Securities and Exchange Commission, along with threats of probes by the Justice Department and lawsuits by private investors.  
 
Layoffs and pension fund debacles
The first victims of WorldCom’s looming troubles and possible bankruptcy have been its employees. On June 28 the company laid off 17,000 people, one-quarter of its total workforce.

Through massive investments by city and state pension funds, the retirement incomes of tens of thousands more working people have been jeopardized by the company’s collapse. Total losses of these public funds are expect to run to more than $1 billion dollars. The country’s largest such fund, the California Public Employees’ Retirement System, reported a loss of more than half a billion dollars. The New York City pension fund, which invested the retirement benefits of firefighters, teachers, and other municipal workers, stands to lose $100 million.

By contrast, the severance package of WorldCom’s chief executive, Bernard Ebbers, who resigned in April, provides him with $1.5 million annually for life, the use of a company plane for 30 hours a year, and medical and life insurance.

More broadly, pension funds have taken a beating in the slump of the stock market. In 2001, public pension funds in the United States averaged a loss of 4 percent. "Because of the two-year slide...mayors and governors across the United States may have to fire teachers, close libraries and raise taxes--all to help cover shortages in public employees’ retirement funds," reported the Bloomberg news service on May 7.

WorldCom’s accounting sleight of hand, which involved the shifting of day-to-day line costs into the category of long-term capital expenditures, turned a bottom-line loss into a profit of $1.38 billion last year. The adjustment in the company’s books is expected to be one of the largest in U.S. history, and more than six times that of Enron Corp., the power and gas trading company whose bankruptcy last December was the biggest to date.

From 1989 to 1999, WorldCom grew into the country’s second-largest telecom company through a series of 70 acquisitions and mergers. The price of its shares reached $60 in mid-1999, but has plummeted to less than $1 today.

In a June 20 article entitled "Why the Bad Guys of the Boardroom Emerged en Masse," the Wall Street Journal stated that "the scope and scale of the corporate transgressions of the late 1990s...exceed anything the U.S. has witnessed since the years preceding the Great Depression." The article listed 18 "big companies [that] face serious questions about their business practices." The companies included Xerox Corp., Adelphia, Global Crossing, Kmart, and Tyco International.

Xerox reported at the end of June it had overstated its pretax income by $1.41 billion, or 36 percent, over the past five years. The move turned a 1998 pretax loss of $13 million into a profit of $579 million. The company’s share price has fallen from $60 in mid-1999 to less than $7 today.

Some companies, reported the Journal, are guilty of "gross distortion of reality" in their profit claims. While noting that U.S. treasury secretary Paul O’Neill and some other commentators view the culprits as a "few bad apples," the paper reported that "there’s another view: The headline making cases are symptoms of a broader disease, not exceptions, and a regulatory apparatus that isn’t up to the challenge."

The exposés have contributed to "a crisis of confidence in the markets," said an economist at J.P. Morgan Asset Management.  
 
Slide in value of dollar
Along with the continued decline in the stock markets and the relatively feeble character of the recovery to date, the slide in the U.S. dollar has helped to reveal the underlying weaknesses and instability in the U.S. and world capitalist economy. Since the beginning of the year the U.S. currency, which dominates world capitalist trade and investment, has declined 10 percent against the euro, and 8 percent against the Japanese yen.

Some U.S. exporting capitalists, whose competitive position is improved by the decline in the dollar’s value, have celebrated the dollar’s decline. By the same token their competitors in the imperialist powers of Western Europe and Japan have expressed growing concern.

The Japanese government has intervened in currency markets seven times since the end of May, selling off massive amounts of its own currency in a futile attempt to halt the increase in its value against the dollar. The Japanese rulers fear that the yen’s rise imperils their export-led recovery from a recession last year--a downturn which ranks as the worst in half a century.

The problems besetting the U.S. stock markets do not "mean that any new star has taken its place," editorialized the June 22 Economist.

Indeed, the euro’s rise doesn’t reflect a new strengthening of any of the capitalist economies in Europe. Relative to the price of gold, the euro has declined in value, along with the dollar.

At the end of 2000 the price of an ounce of gold stood at $273. A year later it had risen about $5 to $278.70. But over the past year since the end of June 2001 the price for an ounce of gold has shot up almost $50 to $325.60.

Commenting on these trends, an editorial in the June 24 Financial Times of London noted that from 1995 to 2000, "the combination of a strong demand with a soaring dollar made the US the locomotive of world demand. That era is now over. It is essential for policymakers everywhere to adjust to this uncomfortable new reality."

Noting some of the trade advantages for U.S. corporations in a weaker dollar, the paper notes that the currency "remains very strong.... The real exchange rate remains higher than at any time in the past three decades, except for 1984 and 1985. The US currency seems to have a long way to fall."

The impact of this economic uncertainty and growing protectionist moves by the United States, and conflicts among the imperialist powers, is felt most keenly in the semicolonial world. Measured by stock market performance alone, prospects are increasingly grim for some of the largest economies in Latin America. While the value of stock markets in semicolonial countries as a whole declined by an average of 10.75 percent in the three months to June, the stock market indexes in Brazil and Mexico fell by around a quarter and a fifth, respectively.

By contrast, several of the Asian stock markets have risen significantly. The Wall Street Journal commented, however, that "given the global uncertainty...these highflying markets might be subject to extensive profit-taking in the quarter ahead."  
 
 
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