IN THE LATEST update of its Global Financial Stability Report, the International Monetary Fund (IMF) is warning that ‘complacent’ financial markets are facing a sudden collapse if central banks and governments start to cut back on handing out trillions of dollars of free money to the banks and speculators.
IMF boss Tobias Adrian said that the massive amounts of free money pumped out to keep capitalism staggering on throughout the coronavirus pandemic has been used in a massive stock-buying surge by investors hunting down profit.
What is scaring the IMF is that the entire world stock market and capitalist financial structure is now completely dependent on artificially produced money printed by the central banks and backed up by zero interest rates.
The IMF warns: ‘With investors betting on persistent policy backstop, a sense of complacency appears to be permeating markets; coupled with apparent uniform investor views, this raises the risk of a market correction or “repricing”. A sharp, sudden asset-price correction – for example, as a result of a persistent increase in interest rates – would cause a tightening of financial conditions.’
When the IMF talks about ‘market correction’, it is really warning of a catastrophic crash.
When the coronavirus pandemic swept the world in March last year, the stock markets after an initial fall swiftly recovered when it became clear that the central banks in the US, UK and EU were prepared to print trillions of worthless money to keep capitalism from drowning.
While workers were laid off, faced with wage and benefit cuts and forced to rely on the charity of food banks, the stock market reached record levels.
Since last March, world stock markets have added $33 trillion in value.
According to the IMF, governments and central banks face a ‘difficult dilemma’ between continuing to pump out money, stoking corporate debt and the stock market bubble, and safeguarding ‘the financial system against unintended consequences of their policies’.
The consequence they are warning about is that printing worthless money to pay off government debt leads inevitably to a collapse in the value of the currency and hyperinflation.
The IMF is banking on the forlorn hope that mass vaccination can defeat the Covid-19 and create conditions for a swift reopening of capitalism and a return to capitalist ‘normality’.
In fact, capitalism has been surviving only by printing money long before the Covid pandemic, which has merely accelerated the debt crisis and brought it to the point of explosion.
On Wednesday, Tory Chancellor Rishi Sunak made it clear at a meeting of Tory backbench MPs that he was not prepared to continue with propping up decaying British capitalism and was determined to ‘return to sustainable finances’ before his budget on March 3rd.
While the IMF is calling for governments not to rush to cut their deficits for fear of sparking a stock market crash, Sunak is taking the position of swiftly cutting the UK’s spending, allowing business and industries to collapse taking the jobs of millions of workers with them.
Capitalism is caught in a massive contradiction from which it cannot escape except by driving the working class into the gutter.
That is, keep printing money to fuel a massive stock market bubble that is on the point of exploding bringing down the world banks and industry, or put an end to it which will lead to the same catastrophe.
This will result in millions of workers thrown on the scrapheap in an economic depression that will be far greater than the collapse of Wall Street in 1929 which led to the Hungry 30s.
The working class will not tolerate being driven back to the poverty and hunger of the 1930s.
Instead, they will demand the immediate end to this bankrupt capitalist system.
Only the working class organised to bring down the Tories and going forward to a workers’ government that will expropriate the bankers and bosses under a planned socialist economy can resolve this crisis.
This means building the WRP and Young Socialists as the revolutionary party that will lead the revolution to victory – join today, there is not a moment to lose.