You may not have read about it in the regular media yet, but the financial press is full of it: financial markets are currently experiencing a “bloodbath” over the deepening turmoil in the global periphery. As I wrote on Friday, five years since the collapse of Lehman Brothers, we may now find ourselves at the start of a new phase in the global financial crisis. Just when European leaders were boasting about their debt problem finally being “under control”, investors are losing their cool over a Chinese slowdown and the Federal Reserve ‘tapering’ its stimulus program. The fear is that the resultant liquidity crunch and commodity slump will negatively affect the ability of some developing countries to pay back the debts they accrued over the past decade of cheap credit.
As the Fed pumped cheap money into the economy in the hope that Wall Street would reinvest this into production, the bankers just took the money and ran with it — to São Paulo, to Istanbul, to Johannesburg. This in turn led to an utterly irrational geographical pattern: while Greece collapsed, neighboring Turkey boomed as it became a major sponge for the absorption of Wall Street’s capital surpluses. US investors lent to Turkish banks which in turn reinvested that money in enormous urban renovation projects, giving rise to a regime of neoliberal urban development that saw high rises springing up across the Istanbul skyline. In the emerging market bonanza, Turkish Prime Minister Erdogan clearly got high on cheap credit and began to hubristically exceed his popular mandate with megalomaniac construction projects, culminating in the third bridge over the Bosporus and a shopping mall on top of Gezi Park, Istanbul’s last remaining green space — thus giving rise to a major “right to the city” movement, and of course the Gezi uprising of June 2013.
Jerome Roos in More evidence that capitalism never solves its crises (Roarmag)