THE decision by the Swiss National Bank (SNB) to abandon its three-year cap on the franc last Thursday has had an immediate and catastrophic effect on the euro and directly threatens every other currency in the world.
The vast interlocking capitalist ‘conspiracy’ that comprises the world currency markets experienced its very own tsunami when the SNB ended its three-year-long cap on the Swiss franc – buying up vast quantities of euros to drive up the price of the franc on the eve of the EU making its big decision over whether it is going to toss a trillion euros of QE money to the EU banks to try and prevent the EU economy deflating.
A new word ‘Francogeddon’ has been coined to describe the carnage wrought by this decision. The effect was instantaneous – the price of the franc shot up while that of the euro plummeted.
The Swiss decision secures the SNB through a very ruthless action, and spells out to the European Central Bank that if it embarks on a massive round of money printing (Quantitative Easing), in a desperate attempt to prop up the sinking economy of the eurozone, it does not have its support.
By printing an estimated trillion euros of worthless paper currency, the ECB hopes to halt, or at least hold back, the slide of the eurozone even further into the deadly spiral of deflation – a spiral that is gripping British capitalism as well.
The SNB is giving a lead to the big German banks to stamp on QE, and reminding Chancellor Merkel that the cycle of financial collapse, hyperinflation and then slump led to the rise of Hitler and the Third Reich.
In fact, QE has been tried for years by the US and Britain and has signally failed in its stated aim of providing the banks with free money to be invested in manufacturing industries.
All that happened was these vast sums handed to the banks went straight into a speculative frenzy on the stock markets of the world creating huge asset bubbles set to burst at any time.
It is clear that the real hope of the ECB is not that the banks will invest in industry but that the price of the euro is driven down in the vain hope of boosting exports and making imports that much dearer.
We are in effect witnessing a currency and trade war of ‘beggar your capitalist rival’, which has the capacity to split and explode the EU states and set Germany and its allies against the states of Eastern and Southern Europe, bringing down the EU and the euro.
This economic war between the EU ruling classes is accompanied by a class war between the working class and ruling classes, the latter desperate to impose cuts and poverty on an unprecedented scale.
In a desperate attempt to stave off complete collapse, the central bankers are prepared to drive currencies into the ground resulting in the kind of hyperinflation that wracked Germany in the 1920s and 30s.
Then, overnight, entire industries collapsed and workers found that their paper money had virtually no worth whatsoever.
The difference between the 1930s and today is that the working class of Europe and the world have not suffered the defeats experienced in that period – on the contrary the working class internationally remains strong and undefeated despite the treachery of its Stalinist and reformist leadership.
The inescapable fact remains that for capitalism there is no way out of its historic crisis except through the destruction of all the worthless paper money it has created and by taking on the powerful working class.
In Britain, the effect of this collapse of the euro will be acutely felt as the feeble economy will be crushed by this vicious round of devaluation and inflation.
On January 25th, there is to be the Greek general election. The bourgeoisie of the EU has now become used to the notion that there is to be a Syriza ‘left’ government.
However, a victory for Syriza will bring the Greek working class rampaging onto the scene to take back all that has been plundered from it and to go forward to take the power and begin the European socialist revolution.
This is the period that is opening up. Now is the time to build the Fourth International in every country. Forward with the world and the European socialist revolutions!