BANK SHARES rose rapidly yesterday with the news that the Federal Reserve Bank is to open up the inflationary floodgates and re-prop up the banks by spending over a trillion dollars buying dud mortgages.
The Fed is to inject $40bn (£25bn) a month into the US economy indefinitely, allegedly until the current bust turns into a new boom, fuelled by mountains of paper and electronic numerals masquerading as ‘money’.
The plan to buy up mortgage debt will continue until ‘further notice’, the Fed announced, as it continued to keep interest rates at below 0.25%.
The aim is to make the banks feel much better about themselves and to reduce long-term borrowing costs for businesses and home-owners.
The hope is that this flood of paper money and electronic non-existent ‘money’ will finance the revival of the US economy, and carry the rest of the planet forward with it.
The record boom, which prepared the way for the catastrophic bust, has given way to the greatest gamble in the history of capitalism – to get out of debt by getting much further into it, by flooding the capitalist system with trillions of promises to pay.
The last time that this was tried was in the 1930s when the spending/debt cost of the Roosevelt New Deal and the massive inflationary debt built up by Hitler’s rebuilding and rearmament programmes could only be recouped by a second world war, whose infinite destruction of the means of production, including hundreds of millions of people, prepared the way for capitalism to finally embark on a new boom, the greatest in its history. This finally ended in 2008 with history’s biggest financial collapse.
Now, at a time when inflation is already galloping upwards with rising food, oil, metal and basic commodity prices, the US ruling class is gambling with complete state bankruptcy that will lead to worldwide bankruptcies, with all of their desperate economic, military and revolutionary consequences.
The prospect of new trillions of dollars of debt – ‘fools gold’ – was welcomed with the following words: ‘They’re saying that the punch bowl, the fuel for the economy, isn’t going away – it’s going to be here as long as you need it,’ stated Hamilton Place Strategies, a policy consulting firm.
In a research note from HSBC, analysts said that the Fed ‘is trying to convey to financial market participants that they can count on low interest rates and accommodative monetary policy for a long time and not to expect a reversal of policy in reaction to modest improvement in GDP growth or in the unemployment rate’.
It is to be an unlimited paper money supply, and with it an unlimited inflation and a vast pauperisation of the working people of the world and the rural poor of the oppressed nations.
Where the Fed has trodden, the European Central Bank will follow. Credit Agricole analysts put the matter in the following way: ‘With a few obstacles removed this week, the context should be even more favourable for bonds of the most fragile countries.’
This led to feverish speculation that the European Central Bank and International Monetary Fund were discussing a 700bn euro bailout for Spain during its meeting of finance ministers.
The crisis of the world capitalist system is deepening rapidly. The only way out of this world crisis is for the workers of the world to carry out the world socialist revolution to smash crisis-ridden capitalism and replace it with a worldwide socialist planned economy.
