ECONOMISTS at the German Deutsche Bank have issued a report about the inevitable consequence of the US Federal Reserve policy of printing worthless paper money leading to hyperinflation that will devastate the world capitalist economy.
The Fed is injecting a staggering $6 trillion into the US economy by printing money and buying up government bonds to fund Biden’s ‘coronavirus stimulus’ package.
Yesterday, the US inflation rate was forecast to rise to a 13-year high of 4.7%, the fastest rise since 2008 – the year of the world banking crash.
The report stated bluntly that capitalism is ‘sitting on a time bomb’ and that: ‘The most basic laws of economics, the ones that have stood the test of time over a millennium, have not been suspended. An explosive growth in debt financed largely by central banks is likely to lead to higher inflation.’
It continues:
‘We worry that the painful lessons of an inflationary past are being ignored by central bankers, either because they really believe that this time is different, or they have bought into a new paradigm that low interest rates are here to stay, or they are protecting their institutions by not trying to hold back a political steam-roller.’
It goes on to rage:
‘Fiscal injections are now “off the charts” at the same time as the Fed’s modus operandi has shifted to tolerate higher inflation. The coordinated monetary and fiscal response has practically no parallel in US history.’
In fact, there does exist a parallel, not in the US but in 1920s Germany.
With the German economy shattered by their defeat in World War I and suffering from the most vicious demands from the allies for war reparations, the Weimar government resorted to financing its debt and spending precisely by printing money, leading inevitably to hyperinflation that drove millions of German workers into poverty and starvation.
The echoes of the memory of this catastrophe emerged last year when the top German constitutional court ruled that the European Central Bank (ECB) had breached its rules when it embarked on its own massive scheme to pump trillions of euros into the eurozone under ‘pandemic QE’ to prop up the failing economies of Europe.
Despite the fact that the German court pulled back from stopping the massive ECB stimulus programme, the European Commission on Wednesday took the unprecedented step of taking legal action to prevent any further attempts to stop money printing.
The fact that the EU is prepared to take legal action against its biggest economy to enshrine the supremacy of the central bank testifies to the determination of the central banks to carry on regardless of the consequences of hyperinflation.
But when inflation does begin to dominate, as the recent figures in the US and Britain show is already starting, then the other great fear is that the central banks will be forced, out of desperation, to slam on the brakes, cut money printing and bond buying and push up interest rates.
With the world stock markets and capitalist financial structures entirely dependent on artificially printed money backed by zero interest rates, turning this off will cause a worldwide crash greater than that of the 1929 collapse of Wall Street triggering the great depression of the ‘Hungry 30s’.
What is clear is that there is no way out of its crisis for a capitalist system that is going over the edge and plunging rapidly towards a massive world recession.
As Deutsche Bank says: ‘The effects could be devastating, particularly for the most vulnerable in society.’
In other words, the working class internationally will be the ones to suffer mass unemployment and poverty not seen since the depression era.
The working class will not tolerate being driven back to this poverty and instead will demand an immediate end to this bankrupt capitalist system by taking the power and going forward to the world socialist
revolution.
Only the world socialist revolution can resolve the crisis of capitalism and the urgent issue is to build sections of the International Committee of the Fourth International in every country to lead this revolution to victory.