THIS week the International Monetary Fund (IMF), the world organisation charged with protecting the international capitalist financial system, held its weekly annual meeting in Marrakesh.
The outpourings from this get-together to try and sort out the world crisis of capitalism has produced nothing more than dire warnings of imminent collapse, tempered by desperate claims that catastrophe could be averted at the last minute if only banks could be reined in.
The tone of complete despair was set when the IMF admitted that the world’s supposedly richest capitalist nation was drowning in unsustainable debt.
Bluntly, the IMF said that the US debt of $33 trillion was ‘unsustainable’ and corporate defaults are rising. This $33 trillion debt is 121% of the US GDP (the total wealth produced by America) in 2022.
The US government has already racked up a $1.5 trillion deficit in the first 11 months of 2023, and corporate defaults are up as the large corporations will be unable to pay back on the vast amounts of loans they took on while interest rates were at near zero.
The rapid increase in interest rates will cause a massive crisis for borrowers with over $2 trillion in corporate debt due to mature in the first quarter of 2024, meaning repayments will either have to be made or these companies and corporations will be declared bankrupt.
The US debt crisis is the ‘most worrying’ among all the world countries, the IMF’s research-director Pierre-Olivier Gourinchas told a press briefing on Tuesday.
In an attempt to stem the spread of panic and doom, Tobias Adrian, director of the IMF’s monetary and capitals markets, told the Financial Times: ‘Hopefully, calm will prevail at some point, but there is certainly heightened risk.’ Particularly, Adrian highlighted the risk of a US banking collapse especially amongst those hit hard by the collapse of the Silicon Valley Bank in March.
Despite this apocalyptic warning about imminent collapse, all Adrian could do was urge central banks to ‘stay the course to get inflation back to target in a durable manner’.
In other words, carry on pushing up interest rates even at the cost of mass corporate and bank collapses.
The only solution the IMF could offer was a vague suggestion that central banks should impose more regulations and controls over banks in an attempt to limit their over exposure to debt.
At the same time it insisted that governments across the world will be forced to raise taxes – which will come nowhere near eating into the debt mountain – or slash public spending to stop inflation spiralling out of control. Either way the plan is for the working class to pay for the crisis.
While the IMF was calling for central banks to ‘hold their nerve’ and keep interest rates high to try and halt inflation – even at the cost of mass bankruptcies – the opposite view was expressed in a comment article in the Daily Telegraph by Patrick Minford, a professor of applied economics at Cardiff University who has been credited as being a major influence on Liz Truss and her disastrous policies.
Minford is also acutely aware of the risks of an impending financial crisis but his solution is for central banks to ‘ease off the ferocity’ of their interest rate increases and quantitative tightening while at the same time relaxing the regulations on the banks and calling on the government to cut taxes for the rich.
This will create, he claims, a low tax environment ‘friendly to entrepreneurs’ who will miraculously rescue capitalism from being crushed by its huge, unsustainable debt mountain.
Both the IMF and Minford are acutely aware that an almighty crash is coming, if it is not already here, but have no idea how to avoid it.
What they agree on is that as world capitalism is crushed by debt and dives into recession, the working class will be expected to passively accept being dragged down with it.
The working class internationally has other ideas – workers will not sit back and have their lives destroyed by a bankrupt capitalist system but are recognising the necessity for dumping capitalism and replacing it with a socialist society and a planned economy, both owned and under the management of the working class.
The only solution to this developing crisis is for the working class and the masses of the world to go forward to the victory of the world socialist revolution.