IMF Managing Director Lagarde has warned that the world economy is ‘too weak for comfort’, and that it could be heading for years of ‘sub-par growth’ as it scrapes along the bottom.
Lagarde added that without ‘brave action’ the world could fall into the ‘low growth trap’ of deflation.
Lagarde continued that the global economy would grow by more than 3% this year and next, but that market collapses and the implications of the tensions in Ukraine posed risks, especially to gas and oil prices and even to the supply of these resources to Europe.
Inflation in the eurozone is at 0.5%, compared to the official CPI figure of 1.7%, that grossly underestimates inflation in the UK, and 1.1% in the US. Consumers cannot afford to buy goods and services, while governments and businesses have not got the cash to pay their debts.
Lagarde looked to the US for a solution to this crisis and called on the European Central Bank (ECB) to pursue ‘more monetary easing, including through unconventional measures’.
There is no doubt that she is suggesting that the ECB adopt a policy similar to the Quantitative Easing that has seen the US Federal Reserve print some $85 billion a month in order to hand it to the big banks, while the Bank of England has handed over some £375bn to the UK banks, so far.
This type of policy is the only way, as far as Lagarde is concerned, of avoiding ‘a potentially prolonged period of low inflation that can suppress demand and output, and suppress growth and jobs’.
Her advice to the ECB came the day before a meeting of the central bank’s policymakers.
Economists do not expect them to announce any measures to reverse a drop in the region’s rate of inflation, which fell to 0.5% in March, its lowest since 2009. It was the sixth month in what ECB President Mario Draghi called ‘the danger zone’ below 1%.
The reason for doing nothing while the EU comes to a halt, is that the US Federal Reserve has begun to cut back on its printing of money, now down to $75bn a month, because of the massive indebtedness of the USA. This cut has already caused several stock market collapses, as the banks react to being deprived of their free money.
The Bank of England, meanwhile, is still printing money for the UK banks and going further into debt, but is split asunder over when it will have to raise interest rates and cut back on easing, since these changes will plunge millions of mortgage holders into bankruptcy and burst the housing bubble that the Tory-led coalition has developed.
As well, Lagarde called for governments to reform labour markets, that is to attack the working class and its trade unions worldwide, to raise the rate of profit and encourage employer investment.
The IMF last week announced financial support of $14-18bn (£8.5-£11bn) for the coupist regime in Kiev in exchange for tough economic measures that will see Ukraine reduced to the status of Greece practically overnight, with massive price rises, rampant unemployment and huge privatisations and bankruptcies.
The IMF and the EU want to get their hands on the massive wheat production of Ukraine and close down all of its ‘out of date’ industries, turning the Ukraine into a semi-colony of finance capital.
The reality is that the capitalist crisis is deepening and preparing revolutions, particularly throughout Europe. There is already a new quality in the class struggle that is raging in Spain and Greece where workers and youth fight the riot police on a daily basis.
This revolutionary movement will be joined by the workers of the whole of Ukraine very shortly as they are sacrificed for the good of the EU bankers and the IMF.
Lagarde referred very delicately to the crisis in the Ukraine. Others have spelt it out. Europe will have to spend up to $215 billion through investments if it decides to stop buying Russian natural gas, or the supply is halted, US-based financial research company Sanford C Bernstein & Co said on Wednesday.
It is estimated that the crisis in Ukraine has the capacity to shut down the whole of the EU industrial and commercial base, making the three-day week of the 1970s in the UK look like a picnic.
Capitalism is broken beyond repair, leaving the likes of Lagarde and Carney floundering. The only realistic policy is to build the Fourth International worldwide to lead the world socialist revolution that is rapidly emerging to overthrow capitalism and replace it with world socialism.
