THE US CENTRAL Federal Reserve Bank on Wednesday performed an abrupt U-turn on its policy of attempting to hold back the vast amount of worthless paper money being pumped into the banks and financial institutions when it announced that it would be cutting interest rates by 0.25%.
This marks the first cut by the Fed since the economic financial crisis of capitalism broke into the open in 2008. In order to stop the banks from going bust the Fed pumped trillions of dollars into the financial system providing even more fuel to the world debt crisis.
The Fed was not alone in attempting to keep a bankrupt capitalist system from collapse by printing worthless money and handing it to the very institutions responsible for the crash.
The same policy of Quantitative Easing and ultra-low interest rates (which guaranteed that the massive debts run up by the banks and corporations were cheap) was followed by the central banks of Europe and the UK.
All the trillions of dollars, pounds and euros pumped out by the central banks was necessary they claimed to stimulate investment in industry, which in turn would increase jobs and wages for the benefit of all.
Far from stimulating manufacturing and creating well paid jobs, manufacturing industry in the US, Britain and Europe is collapsing.
In Britain, barely a day goes by without yet another industry, from cars to steel and now airlines announcing a ‘restructuring’ – meaning closing down or cutting thousands of jobs.
The same is happening across Europe where the once mighty German economy is now teetering on the brink of recession. In the US millions of full-time well paid jobs have gone to be replaced with part-time ‘gig’ economy working in the same way that jobs have been destroyed in the UK.
The reality was that these trillions went straight into the pockets of the bankers and hedge fund speculators to vastly inflate stock market prices for their own enrichment.
Free money was used to speculate on stocks, driving them to record levels while the companies themselves made little or no profit.
This massively inflated debt bubble the Fed has been trying to deflate by tiny increases in the base interest rate. Now this has been reversed under pressure from Wall Street and their leading champion US president Donald Trump.
Trump has been piling the pressure on the Fed to make not just small cuts but ‘aggressive’ cuts to ensure the cheap money keeps flowing, and he went ballistic when just a relatively small cut was announced.
In Britain, the Bank of England was slightly more cautious and announced that there would be no change in the bank’s interest rate of 0.75% with its governor, Mark Carney, citing fears that economic growth has been shattered under the impact of the world crisis and the trade war launched by Trump.
Clearly Carney and the Bank are terrified that increasing the amount of cheap money will only fuel an already explosive situation. None of these concerns by the central bankers worry Trump and the bankers who have gorged themselves on all these massive hand-outs.
They fully intend to survive the impending world financial crash as they did in 2008 by demanding that they are bailed out by the working class.
As in 2008, the capitalist class will make sure the full brunt of the crash is borne by workers through the destruction of jobs, massive cuts to wages and conditions along with savage cuts to welfare spending.
The austerity that capitalism will attempt to inflict on workers will far exceed anything seen so far.
The working class in Britain, Europe and the US are rising up against the austerity measures already imposed to rescue a bankrupt capitalist system and the impending new crash places immediately before every worker the reality that capitalism can offer them nothing but destitution and starvation for their families.
The only answer to this crisis is for the working class to seize power and put an end to this historically outmoded and bankrupt capitalist system through the victory of the socialist revolution.
