Germany dives into deflationary spiral


THE crisis of world capitalism continues to batter the economies of the eurozone into the ground with virtually every day bringing forth yet more disasters for every one of the 19 member states.

The latest figures released yesterday show that even the mighty German economy is gripped by the deflationary spiral that envelopes not just the zone but is rampant throughout the capitalist world.

In January, inflation in Germany fell below zero, to -0.3%, while prices have fallen by 0.5% in the past twelve months.

Overall, the last time prices were this low was in 2009 when the effects of the banking collapse first started to hit German banks and the economy.

Germany has joined with all the other countries of the eurozone in a deflationary spiral with prices across the single currency area falling by 0.6% in January – a sharp increase from December’s figure of a 0.2% drop.

Bourgeois economists try to explain the crisis by stating that: ‘The drop in core inflation almost certainly reflects the continued weakness in demand in the eurozone economy, and the associated vast amount of spare capacity.’

The cry goes up ‘create more money!’ Appeals go out for bosses to pay more to workers, for the common good.

The story is that workers across Europe have had their wages and living standards cut to such an extent by unrelenting austerity measures imposed by the EU to pay for the bank crisis that they simply cannot afford to spend what money they have on anything but the essentials of life.

While workers may find goods cheaper, deflation means disaster for the manufacturers and industrialists who face falling demand and end up closing down as their profits vanish.

As we have seen in the case of British capitalism, deflation – with its loss of tax revenue from unemployment, dependency on zero-hours contracts and part-time low-paid work – has driven up the state debt as the government is forced to borrow more and more just to cover day-to-day costs.

Bourgeois politicians are pinning much of the blame for the deflationary spiral on the collapse of oil prices.

While this drop in oil prices – initially welcomed as a destabilising mechanism to smash up the Russian economy – is fanning the flames of the world deflationary crisis, it is the result of an historic slump in demand as a cyclical crisis hits the capitalist economies of the world.

In fact, a vast monetary inflation, an expression of the historical crisis of capitalism, is coinciding with its cyclical crisis, that is capitalism’s tendency to go from boom to slump and vice versa, a unity that expresses its historical crisis and the death agony of the system!

The eurozone’s only answer to this massive combination of capitalism’s cyclical and historical crises has been to launch its Quantitative Easing programme, to create more fictional money, pumping over 1.1 trillion euros into the pockets of the banks in the desperate hope that this will result in them investing in bankrupt industries to ‘revive’ them.

All that will happen, as it has in Japan, America and Britain, is that this free, valueless paper money will be used by the banks to bolster their own profits or be used to speculate on the money markets, vastly inflating asset prices and creating yet more and bigger inflationary bubbles, that can burst at any time.

As it is, even ‘experts’ like Mark Carney of the Bank of England reckon that 1.1 trillion euros is ‘too little, too late’ to save Europe from the destruction of deflation.

The only ‘salvation’ for capitalism is to impose the full effect of its combined deflationary and inflationary crisis onto the backs of the working class, and to prepare the way for a new world war, and a vast destruction of the productive forces, both industrial and human, to try and prepare the way for a new revival of the system, on top of mountains of corpses.

For the working class there is only one way out of this crisis, and this is to organise socialist revolutions to put an end to capitalism and imperialism world-wide and go forward to a planned socialist economy on a world scale.

This historic task requires the building of the revolutionary leadership of the Fourth International in every country to lead the worldwide workers struggle that is rapidly emerging to the victory of the world socialist revolution.