If Forrest Gump were an economist he’d say: “My Mama always said capital is as capital does.” Such is the logic of capital. Years removed from the subprime mortgage crisis of 2007-08, it appears that the capitalist economy of the US has not learned its lesson. Another subprime lending time bomb has appeared. This time in the auto industry sales.

After the disaster of the of the global crisis, auto companies required their sales to be boosted in order to pay back the bailouts they received from Congress. With wages have been drastically decreased and unemployment high, the auto companies did the only thing they could: make it easier to get an auto loan. in other words, the began a subprime bubble in the auto market.

“…since the Great Recession, business has exploded. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion were, topping average pre-crisis levels, according to Wells Fargo & Co.

“Few things capture this phenomenon like the partnership between Fiat Chrysler Automobiles NV and Banco Santander SA. Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines.” Source

As these loans have picked up, defaults have increased a great deal. More people than ever are defaulting on the loans given to them to purchase their cars. It appears as though a crisis in the auto loans industry is building. Manufacturers are having to go to greater and greater lengths to get the necessary sales to keep in profits. All of this is creating another bubble in credit that could very possibly end in another crisis. Certainly not one large enough to cause another recession, but it would be big enough to cause some serious damage.

Thus we see again the logic of capitalist accumulation. The focus of finance capital is entirely on the collection of capital, with no regard as to how value is created. Marx theorized that credit is fictional value. It is a representation of value that has yet to be created in the labour process. Credit only becomes real value once it has been received by the creditor. Until that time, it is an assumption that the value will exist sometime in the future. The illogical nature of fictional value is that it is entirely detached from the creation of real value. The person who loans money has no guarantee that the money will be repaid. At any time, for any reason, that value may not be realized.

This situation is compounded by the profit motive. Automotive companies took a severe hit during the global crisis of capitalism of 2007. These companies struggled to survive, requiring the bourgeois government to bail them out. The automotive industry, like all industries, require a constant supply of sales in order to keep them profitable. In the wake of poor auto sales during the crisis – in order to keep up those sales, credit for auto purchases became easier to acquire. The new influx of customers were a boost to sales.

The problem is that these sales on credit are subject to all other forms of credit: the possibility of default. At no point is there a guarantee that the workers who purchase those cars will receive enough value in wages to make good on those loans. The auto companies themselves have no control over the value those workers receive. (They can control their worker’s wages, but not the whole labour economy.) They have no way of knowing if those workers will be able to pay them back.

They have mathematical formulas to calculate the possibility of default. But they are far form perfect, nor can they judge an economy on the whole. Due to the effects of the recession, they’re reliant upon auto loans more than ever to keep sales afloat. The more desperate they are for the sales to stay in profits, the lower the prerequisites are for loans are. As profits decrease and the riskiness of loans rises – they travel along the increasing continuum of possible defaults.

But what is the auto manufacturer to do? They have to keep selling in order to stay in business. They can’t cut back on the loans they give out because sales are too low. They have no choice but to increase the risk involved. They literally can’t do anything. The logic of capital forces them to act in a self-destructive way. Any regulation placed on them by the bourgeois state to restrict these loans would only hasten the decline in sales.

Crisis is inherent to capitalism, and Marx would probably call this a crisis of overproduction. As real value creation in commodity production is shifted to lower and lower cost markets, the fewer value workers have in order to pay these loans back. This lower cost labour will always be sought due to the tendency of the rate of profit to fall. It’s a contradiction of capitalism that no bourgeois government policy can solve.