SPEAKING at the Policy Exchange in London this week Alan Greenspan, former head of the US Federal Reserve Bank, issued his direst warning about the future prospects for an almighty crash in the US economy.
For years Greenspan, who retired from the Fed in 2006, has been issuing warnings about the mountain of debt being run up by US capitalism and predicting that the economy was storing up problems for the future when this debt bubble burst.
Now he is convinced the day of reckoning is upon America with a crash that will completely undermine the capitalist system. He puts the blame for the crisis on the size of the US government debt which has been forced to rely on foreign loans to invest in industry, with no investment coming from within the US itself.
But, Greenspan points out, all this borrowing by the US has been used to finance ‘unproductive spending’ and not into investing in industries that actually produce wealth.
Greenspan is complaining that all the debt, including the massive tax hand-outs from the Trump administration of $1.5 trillion to US corporations and the rich, has gone, not to boosting the US economy but simply to make the wealthy even wealthier.
Where all this $1.5 trillion went is revealing.
According to the Goldman Sachs investment bank analyst David Kostin, US corporations are engaging in a massive binge of stock buy-backs. Share repurchases rose 50 per cent in the first half of 2018, he states: ‘For the first time in 10 years, buy-backs are garnering the largest share of cash spending by the S&P 500 firms.’
Corporations are using this hand-out and piling on debt in order to buy back their own shares and inflate their share prices, guaranteeing million-dollar bonuses and huge pay-outs to investors.
Manufacturing industry is on its knees throughout the world as giant corporations struggle to sell their products in the wake of the 2008 financial crash which left workers with at best stagnant wages or wage cuts.
The car industry, for long the barometer of the health of industrial production, is in crisis across the US and Europe with every car manufacturer laying off workers and closing plants as they struggle in the face of falling demand and the inevitable outcome of Trump’s trade war with the rest of the world.
Far from bringing American jobs back home Trump is watching General Motors close down production in Ohio as his war to bankrupt US rivals costs thousands of jobs while US farmers are driven into poverty as their produce is barred by tit-for-tat trade retaliations.
Meanwhile, as Greenspan moans, revenues to the Federal government are falling as the living standards of American workers are falling and they are forced to rely on foreign debt just to keep the government solvent. Borrowing to cover the day spending of the government is due to rise to over $1 trillion a year and Greenspan worries this will dry up at any moment as the debt bubble explodes leaving the US bankrupt and unable to pay its bills.
Greenspan’s solution to this crisis will be familiar to workers in Britain and Europe, namely to dump capitalist crisis on the backs of the US working class. Capitalism’s debt crisis is, he maintains, caused by excessive state spending on welfare with Greenspan noting that economists believe that a permanent 25% cut in welfare spending is essential to try and bring down Federal debt.
Greenspan lauds Sweden as a ‘perfect example’ for their ‘political courage’ in driving up the state pension age to cut the amount spent on healthcare and pensions. He avoided using the example of the UK and the rest of Europe where savage cuts to welfare and pensions are provoking a revolutionary uprising by workers against the old bourgeois parties of austerity just as he avoided blaming the banks for their crisis.
The powerful US working class are set to move rapidly into a revolutionary confrontation with a bankrupt capitalist system alongside the workers of Europe. The struggle for the world socialist revolution is upon us today, a struggle that makes absolutely necessary the building of revolutionary parties of the Fourth International in every country to lead it to victory.