CHRISTINE Lagarde, the chief of the IMF, warned the bosses and the bankers yesterday, in a speech in Japan, that the crisis is a world crisis and that it is deepening with the prospect of an even more explosive banking collapse than was seen in 2008.
She opened by saluting the ‘60 years of Japan’s partnership with the IMF’ and warned that ‘today, in the face of the worst global financial crisis since the Great Depression, this spirit is needed as never before.’
The very thought of this drove her to immediate mysticism: ‘Here, the words of Haruki Murakami are inspiring: “If we have any hope of victory at all, it will have to come from our believing in the utter uniqueness and irreplaceability of our own and others’ souls and from the warmth we gain by joining souls together”.’
Taking into account the world crisis, the wars and revolutions that the Great Depression introduced, Lagarde is well aware that much more will be required than ‘joining souls together’.
Speaking about the financial crisis, she said: ‘Over the past few months, the outlook has, regrettably, become more worrisome. Many indicators of economic activity – investment, employment, manufacturing – have deteriorated. And not just in Europe or the United States. Also in key emerging markets: Brazil, China, India.’
She outlined: ‘Just last week, European leaders agreed to significant steps in the right direction to address the immediate crisis, which is encouraging.’ She however insisted: ‘That said, further progress will continue to be needed to overcome the crisis decisively and avoid the damaging effects on stability and growth. Not just in Europe, but across the globe. For make no mistake: this is a global crisis.’
She warned of the dangers of ruling class disunity saying: ‘In today’s interconnected world, we can no longer afford to look only at what goes on within our national borders. This crisis does not recognise borders. This crisis is knocking at all our doors. And there are risks in all corners of the globe – Europe, the United States and, here too, in Asia and Japan.’
Lagarde continued that ‘no one is immune’.
She warned any inward-looking Japanese souls: ‘The spillovers from Europe are increasingly visible here. Lower stock prices, capital outflows, and higher spreads have already affected a number of Asian countries. For Japan, two risks are of primary concern:
‘Upward pressure on the yen from the continued flight to safety would be an unwelcome hurdle to Japanese growth. And, with a large share of your exports destined for Europe, a deeper crisis there would take its toll on growth. So, just as those in the midst of crisis must work to rise above it, others must work to guard against it. No one is immune.
“There must be cooperation’ she said.
She hailed ‘the actions taken most recently in Europe, for instance. Last week’s European Summit puts in place the first building block of a banking union – a unified supervisory framework. Yes, other elements are needed and there will be hurdles to implementation.’
Her battle cry was to achieve the goal ‘will require coordinated action to break the main chains of this crisis: weak sovereigns, weak banks, and weak growth. We must break all three. First, restoring sovereign strength. Countries must deal decisively with the issue of public debt…there is no alternative but to do it now.’
Cassandra then issued her shrillest warning: ‘The United States, in particular, must do all it can to avoid driving over what some have described as the “fiscal cliff”’ and toppling into the abyss.
The essence of her speech is that on a world scale everything depends on the ruling classes not wasting a moment and pressing forward to force the workers and the poor of the world to pay the full price for the world crisis of the capitalist system.
The response of the working class of the world must be to develop and fight for the victory of the world socialist revolution to replace bankrupt world capitalism with world socialism.