WHAT started last week as a crisis in the international capitalist stock markets is turning into a full-scale crash with Wednesday’s decision by the US Federal Reserve Bank to make a further $10 billion-a-month cut in its Quantitative Easing (QE) programme.
For the past two years, the Fed, along with the UK’s Bank of England, has adopted QE as a means of pumping trillions of dollars into the banks and financial institutions at the rate of $85 billion a month.
Last December, this was cut to $75 billion and now it has been cut further to $65 billion with the stated intention of the Fed to cease this supply of ‘free’ money completely by the end of the year.
This has caused complete panic amongst the speculators and banks who have used the trillions artificially produced to ‘invest’ not in stimulating the economies of the US or Europe – as the Fed and the Bank of England promised – but in a huge speculative bubble centred on the so-called emerging markets of countries like India, Turkey, South Africa, Indonesia and Argentina.
According to financial experts, $4 trillion of foreign funds were ‘invested’ in these emerging markets following the onset of the world banking crisis that followed the collapse of the giant Lehman Brothers Bank in 2008.
Now, with the immediate prospect of this endless supply of paper money coming to an abrupt end, the speculators are running a mile, pulling their investments out and shattering these economies.
The currencies of India, South Africa, Turkey and Argentine have already collapsed, leading the head of the International Monetary Fund, Christine Lagarde, to warn that half the world’s economies are ‘one accident away’ from collapse (she optimistically put the chance of this accident happening at 20%).
While QE has had the effect of creating massive inflation of currencies, the cry is now going out from the capitalist class that the real crisis is one of deflation, and that interest rates, which are at virtually zero across the world, have to be dramatically forced up.
As all the funny money flees the emerging markets and with billions being wiped out on stock markets, the banks and financial speculators are looking for profitable homes to run to, and they are demanding huge increases in interest rates for any credit extended in the US, Europe and elsewhere.
The effect of this on the working class and middle class will be devastating.
With entire populations forced to exist on cheap credit, any rise in interest rates will drive workers and their families into complete destitution.
What is emerging is a two-fold crisis hitting both the ‘emerging markets’ and the working class in the advanced capitalist nations.
The capitalist class are fully aware of the crisis course that they have embarked upon.
The Fed and an entire section of the US ruling class have decided that the game is up, that the inflationary bubble they have created is set to burst and the best thing they can do is to let the entire system collapse.
They are reckoning that in the ensuing carnage their weaker capitalist rivals in the emerging markets will go to the wall, as will the incredibly vulnerable eurozone countries, while in the deformed workers’ state of China, (where productivity has fallen and the Stalinist bureaucracy is being forced to devalue its currency in order to compete), the Stalinist bureaucracy will be plunged into a massive crisis.
They calculate that only the strong, that is US capitalism, has any chance of surviving a world economic and banking collapse that will completely eclipse anything seen before. This is what Obama meant when he said in his ‘State of the Union Message’: ‘That’s why I believe this can be a breakthrough year for America. After five years of grit and determined effort, the United States is better positioned for the 21st century than any other nation on Earth.’
This crisis is having a revolutionising effect on workers and masses throughout the world as they refuse to accept that they will have to pay the full price for the collapse of capitalism and the survival of the bankers and speculators.
The urgent task is the building of sections of the Fourth International in every country to lead this revolutionary movement to the victory of the world socialist revolution.
