August kicked off with one of the most severe stock sell-offs in decades. Japanese markets saw their worst day since 1987. The DOW and S&P 500 also fell sharply, triggered by an underwhelming jobs report and fears that the Fed’s reluctance to cut interest rates could trigger a recession.

An estimated $2.3 trillion in stock-market value was lost in a single day. The VIX volatility index—known as the “fear” index—jumped by 172% to its highest level since March 2020. By midday, the situation appeared to stabilize, but this market “correction” has reawakened fears of economic instability. Goldman Sachs revised their outlook for a recession over the next year from 15% to 25%.

The VIX volatility index—known as the “fear” index—jumped by 172% to its highest level since March 2020.

“Markets are a little bit out of control … This is just total panic. It’s not real, but it is painful, and it could be with us for weeks,” said Andrew Brenner of National Alliance Securities.

For months, a stock-market rally was driven by companies like Nvidia, which boasted record-breaking highs as a result of the AI frenzy. But that bubble is now deflating. Although most tech companies are still posting huge profits, the money they are making simply didn’t justify their hugely inflated stock prices.

In the last period, the capitalists arrogantly believed they had achieved a “soft landing.” They claimed the economy was better than ever and couldn’t understand why Americans feel worse about their finances now than in 2008. But outside of the stock market’s world of inflated and fictitious capital, all recent indicators down here on earth point to a fragile and weakening economy.

The official unemployment rate has now risen to 4.3%, the highest level since October 2021. The more inclusive U-6 measurement now stands at 8.2%. According to household surveys, job growth has actually stagnated since the middle of 2023. Headlines have sounded increasingly alarmed with the diminishing number of job openings for college graduates, with some major companies receiving over 100 applications per opening.

Consumer spending is also slowing down. Grocery sales saw a dip of over 3% and billions fewer items were sold over the last year. From fast food to airlines to online retailers, there has been a noticeable decrease in sales. Millions of workers struggle to buy even basic necessities.

Headlines have sounded increasingly alarmed with the diminishing number of job openings for college graduates.

This should all hardly be surprising, as there has been a 20.8% increase in inflation for consumer goods since the pandemic. A typical household now spends $925 more every month to buy the same goods and services as three years ago. 39% of US adults say they worry most or all of the time that their family’s income won’t be enough to meet expenses. Consumer debt alone now stands at nearly $18 trillion, or 65% of US GDP.

This affects the bottom half of the population the most starkly. In a country that produces 40% more food than is consumed, millions still have to choose between rent and bread. This is the reality of life for Americans during a so-called economic “recovery.” An all-out recession will have a devastating impact—and threatens to trigger mass social unrest.

Politically, Trump would certainly benefit from an economic slowdown before the election. But neither party has enough tools at their disposal to rescue an economy that has been teetering for years. Less than two years ago, major banks SVB and Credit Suisse went under, and two years before that, Covid-19 triggered the steepest crash in history.

Capitalism is a zombie kept artificially alive through cheap credit—but central banks are running out of magic dust. On a world scale, governments owe an unprecedented $91 trillion, which is almost equivalent to the entire global economy. Just in the US, the annual federal budget deficit is projected to be $1.9 trillion this year, with total national debt at $54 trillion or 123% of US GDP.

The central bank or the government can’t solve this crisis by means of “clever’” policies. If they could, they would have done so at some point during the past 16 years of crisis. We have entered the most turbulent epoch in capitalism’s history—punctuated by wars, economic instability, and revolutions. Almost any event could set off a chain reaction. A war in the Middle East could easily be an earthquake for fragile markets. These are the death rattles of a decaying and irrational system that must be overthrown.