FOLLOWING the decision of the US federal Reserve Bank to reduce its interest rate by 0.5 per cent, double the expected 0.25 per cent cut, shares on Wall Street rocketed upwards and all the proprietors of the indebted banking and mortgage institutions cheered, at the breathing space that they believed had been handed to them.
However, the bill for the manoeuvre will be a very heavy one, and will have to be paid much sooner than expected.
The first installment of the payment came immediately when the price of oil soared to $82 dollars a barrel, the price of gold reached $726 dollars an ounce, and the price of the US dollar fell to a record low against the Euro.
The mountain of debt is now set to be inflated, while all those states, and China is only one of them, who have bought billions of dollars of US Treasury bonds that keep the vastly indebted United States of America from going bankrupt, will be seriously weighing up whether the time has arrived to dump the dollar and buy gold.
The decision of the Federal Reserve Bank is in reality a vain attempt to postpone the wiping out of all the fictitious values that have accumulated in the previous period.
It is an attempt to stop capitalism being capitalism and to evade its laws, which will hit home with redoubled intensity, and far sooner than many people think.
The ‘risk takers’ will also have been encouraged to engage in even more perilous and desperate financial operations, and there is no doubt that they will take the opportunity given to them to do their worst.
In Britain, the Federal Reserve Bank was beaten to the punch by Prime Minister Brown. He gave the Northern Rock bank a guarantee that the state would provide £28 billion to cover its deposits.
Brown has gone from his original position – that he had transformed British capitalism by removing its tendency to go from boom to bust and vice versa, to a new position that has never before been declared by a British Prime Minister.
This is that he now recognised that there was a crisis, but that he was ready to put the resources of the state, especially the taxes provided by the working class, into baling out the banks and the bankers when they are about to sink.
In Britain, where debt is primary to the extent that domestic debt stands at £1.3 trillion, while the Gross Domestic Product stands at £1.2 trillion, Brown’s position shows a willingness to bankrupt the state in the interests of the banks.
He is now in the position of guaranteeing the bankers £28 bn, while denying the workers a small above inflation pay rise, saying that if they received such a rise, inflation would destroy the state.
He is obviously a servant of the bankers and an enemy of the working class and the trade unions.
This contradiction between Brown, the bankers’ man and the trade unions can only become more intense as the crisis worsens, and as he responds to it by seeking to force the working class to accept massive cuts in wages and benefits and pensions, so that the bankers can stay afloat.
With the capitalist crisis deepening by the minute, the only way that the working class and the middle class are going to survive in Britain is through putting an end to capitalism by expropriating the bosses and the bankers.
For this task they need an entirely different leadership than the cringing reformists who lead the trade unions into one disaster after another.
The working class needs a revolutionary leadership based on the struggle of Marx Engels, Lenin and Trotsky for the world socialist revolution.
The Workers Revolutionary Party is the British section of the International Committee of the Fourth International.
The WRP is building a new leadership in the trade unions to mobilise the working class to put an end to capitalism through a socialist revolution.