IN a radio interview yesterday morning the Tory prime minister, David Cameron, pronounced that the UK economy was seeing a ‘balanced economic recovery.’
All this talk of British capitalism seeing a recovery is certainly not supported by the economic reality facing workers and the vast majority of the middle class who have seen their pay cut and the entire welfare state being slashed to the bone in order to pay for the huge debts of the banks.
As Cameron spoke these debts, and the inevitable bankruptcy arising from them, became all too clear to see as stock markets around the world collapsed with billions of pounds being wiped out in seconds as share prices tumbled.
In the UK, the FTSE 100 index crashed by 100 points a drop of 1.5%, a fall that was mirrored over the weekend by similar collapses in all the European stock markets, while Japan’s Nikkai 225 fell by 2.5%.
In the US the Dow index fell by 2% on Friday.
Hardest hit in this financial rout have been the so-called emerging markets, with the Turkish and South African currencies plunging in value and the Argentine government forced to devalue the peso to an unprecedented low.
According to the financial experts at Bloomberg’s: ‘Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signalled it would scale back stimulus. While Brazil, Russia, India, China, South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability.’
In fact it is not these emerging markets that pose a threat to the world capitalist system, it is the colossal amount of purely fictitious capital that has been created in a vain attempt to stave off disaster following the banking collapse of 2008.
This took the form of the US government literally printing trillions of dollars-worth of worthless paper money (under its Quantitative Easing programme) to use to hand out to the banks and financial institutions to stop them going bust.
These initial sums have been augmented with a steady supply of ‘free’ money ever since, with the US Federal Reserve pumping $85 billion a month into the system.
This free money was then used by the banks and financiers to engage in a further orgy of speculation.
It was used by financiers to drive up share prices and to invest in highly profitable, but extremely risky, investments in these developing economies, where wages and conditions are almost non-existent and exploitation of workers is at its most brutal.
Such a huge speculative bubble can only burst and this is what we are witnessing today.
The Fed, fearful that it risks the complete devaluation of the dollar through QE, is trying to wean the banks off all this worthless money by tapering off, reducing QE from $85 billion to $75 billion a month, and this week they will be considering a further cut of $10 billion.
It is this prospect of no more free money that has caused panic and collapse amongst the stock exchanges of the world.
A stock market collapse, as in 1929, will necessarily involve the collapse of the entire capitalist banking system along with what remains of manufacturing industry, with the working class paying the price through mass unemployment and literally starvation, as a bankrupt capitalist system decrees that it cannot afford to pay any benefits whatsoever.
The massive debt-fuelled capitalist system is in the middle of an historic crisis far deeper than that of the 1920s, when the stock market crash ushered in the hungry thirties.
The only way out for capitalism is to dump the entire crisis on the backs of the working class internationally, while for the working class there is no option but to fight to bring down this rotten, historically outmoded capitalist system and replace it with socialism through the victory of the world socialist revolution.