AN ‘historic gamble’, a giant ‘leap into the unknown’ – these were just two of the headlines that greeted the news that last Thursday the European Central Bank (ECB) has cut its deposit rate below zero.
The deposit rate is now -0.1%. What this means is that banks who deposit their vast sums of paper money with the ECB, instead of getting interest on this deposit will now be charged for the privilege.
While it may appear to be a simple issue of the banks parking their money elsewhere and avoiding this penalty, the reality is that this would mean the banks having to hold it in hard currency and the prospect of putting all this cash in warehouses around Europe is not one that the banks care to contemplate.
The introduction of negative interest rates is a desperate, and futile attempt, to kick-start capitalism by forcing the banks to stop sitting on piles of money and force them to lend to businesses.
The hope is, that by forcing banks to lend to capitalist enterprises, this will stimulate the economy of Europe and avoid the increasing spiral of deflation – where commodity prices are falling, unemployment is shooting up and the entire capitalist system of production for profit is crashing down around the ears of the bourgeoisie.
What this hope leaves out, is the simple fact that the banks, awash with trillions of pounds worth of free money courtesy of Quantitative Easing and near zero borrowing rates, are not lending because there are no capitalist industries or businesses that they can lend to and be assured of a profit.
The workers and the middle classes in Europe and Britain today have had their pay cut to such an extent by the years of ‘austerity’ – imposed to pay off the bank debts – that they have nothing left to spend. In fact, millions of people are just surviving, on a hand to mouth basis, through getting into massive personal debt to the credit card companies and loan sharks.
The only sectors that the banks are interested in investing in, are speculative gambles on the stock exchanges of the world, and in the creation of massive housing bubbles.
This new monetary policy of negative interest rates is certainly not going to be the solution to this crisis. It is just one more demonstration of how desperate the capitalist class is, and how apparent it is that it cannot avoid a complete collapse of capitalism by fiddling around with interest rates.
How they really intends to deal with the crisis has been brought home this week in Greece, where the crisis is at its most advanced stage. In Greece, armed riot police attacked women cleaners protesting about their illegal sacking by the Greek government.
Only by mobilising the repressive apparatus of the state, against workers fighting for their rights and a future, can capitalism hope to survive. It is dumping the full weight of its crisis onto the only class that produces real value, the working class, and driving its rate of exploitation up to levels not seen since the 19th century.
This crisis has led to a complete polarisation in Europe, as all forms of consensus and the old reformist policies of class compromise are smashed up under the impact of the crisis. The gloves are well and truly coming off in the sharpening class struggle.
The only road open for the working class is the road of revolution, to advance society from a bankrupt capitalist system to the higher socialist society where production is for human need, not for the profit of the few capitalists.
That this bankrupt and historically outmoded capitalist system is surviving longer than it deserves, is down, not to any inherent strength, but to the crisis of leadership in the working class.
This crisis must be resolved through the building of a new revolutionary leadership in place of the Stalinist and reformist leaders who refuse to lead any struggle that threatens the rule of capital.
This requires building sections of the Fourth International throughout Europe and the Americas as a matter of the greatest historical necessity.