GERMANY, the world’s biggest exporter of commodities, and the strong man of the EU, has begun to slump with government figures showing that its economy contracted by 0.5% in the third quarter.
This is after a 0.4% contraction in the second quarter. Orders for German goods fell by 8% between August and September, according to the economy ministry in Berlin.
The slump of the strongest economy in the EU leaves the UK in the position of a cornered rat, with production falling rapidly, unemployment rocketing towards two million by Xmas, and with the Bank of England and the City getting ready for another major cut in interest rates.
It is desperate times for capitalism in the UK, calling for desperate measures – big cuts in interest rates – to try to keep the economy from collapsing, but sacrificing the pound sterling in the process, and preparing a new gigantic inflation. The state itself is leaving itself open to bankruptcy by taking reponsibility for more and more of the debts of the capitalists.
The pound has hit its lowest rate in six years against the US dollar following the report from the Bank of England on Wednesday that the UK economy had worsened and that it would cut interest rates again, and again if necessary.
Sterling has fallen to $1.4807 – its weakest level since 2002, losing more than 25% of its price against the dollar since July, when it was worth $2.08. Sterling is heading towards the disaster of the one dollar pound!
The critical events in the German and UK economy are being compounded by the deepening of the US crisis.
Treasury Secretary, Paulson, has given up trying to purchase all of the banks’ ‘toxic debt’, because there is simply too much of it to purchase.
Instead he is opting to purchase government shares in the major banks, but is causing consternation with his refusal to give the same cash support to the collapsing US motor car giants GM, Ford and Chrysler.
GM says that by the beginning of January, before Obama becomes the president, it will have run out of cash, and will have to apply for Section11 bankruptcy.
Sales at GM fell by 45% in October compared with the same month last year, while sales at Ford fell 30% and at Chrysler by 35%.
Faced with this scenario Wall Street dropped by 411.3 points to 8282 points – a huge fall.
However there is worse to come. In the US in October, 280,000 US properties received a default notice, warning of a pending auction, or were repossessed, a rise of 25% in a year, and 5% worse than in September.
In the UK the latest news shows that of the thousands of workers who lost their jobs at MG Rover, when the trade union leaders refused to take action to defend them, 90 per cent are working in the service industries and earning over £100 a week less than they were at MG Rover.
Unite leader Woodley admitted yesterday: ‘But the bald reality is that most of them were forced to abandon manufacturing, set aside their skills and take a hefty pay cut just to stay in work.’
He added: ‘The real lesson from the Rover experience, and one that we urge government to pay close attention to at this time of tremendous economic uncertainty, is that we must never again allow highly-skilled, well-paid manufacturing jobs such as these to be lost from our communities.’
Woodley and Simpson the leaders of Unite are once again looking to the government to bail out Ford and GM. They are refusing to demand that the motor car industry in the UK be nationalised, the only way to defend every job.
They are limiting themselves to calling for £13bn of aid for the UK bosses, and an international bail out for GM. This is no solution. The bosses will simply pocket it all and carry on cutting, sacking and closing.
The way forward is to bring down the Brown government to bring in a workers government that will nationalise the motor industry.