THE US Federal Reserve has announced it is ending its quantitative easing (QE) stimulus programme begun in 2008.
The six years since the banking collapse of 2008 saw the US government rescuing General Motors with a temporary nationalisation and reorganisation programme, and the Federal Reserve Bank handing $3.8 trillion in quantitative easing to the US bankers, building up the US national deficit to a colossal $5 trillion.
The UK, following behind the US, rescued its bankrupt bankers at the cost of £1 trillion, and then continued with its own QE programme of £375bn.
The Federal Reserve said yesterday, as it ended QE, that it was confident the US ‘economic recovery’ would continue.
This is despite the global economic slowdown, the economic and banking crisis in the EU, where scores of big banks have failed stress tests calculated to see whether they have enough reserves to withstand a new banking collapse, and despite the huge and growing energy crisis of both gas and oil that is emerging out of the crisis of the Ukraine and out of the crisis in Iraq and the Middle East.
In fact, QE had to go because the mountain of electronically produced debt was creating the conditions for the collapse of the US dollar. There has been no great economic revival in the US. Only the bankers are happy with QE. Any ‘job creation’ that has taken place in the US has been mainly part-time work on very low wages, touching off a mass movement for a minimum wage of $15 an hour. This is while entire cities such as Detroit are going bust and being turned into farmland!
The US Federal Reserve has also said that it will not raise interest rates for a ‘considerable time’. It is fearful that when it raises rates what industrial development there has been will draw to a halt.
The fact is that quantitative easing was a device that, while the workers and the middle class were suffering, allowed the banks, hedge funds, and other financial institutions to swop worthless bonds with the US Federal Reserve for trillions of dollars, leaving the Treasury with the problem of how to dispose of the bonds at some later date.
The banks and the hedge funds pocketed the cash and refused to lend it out, preferring to use it to bolster their reserves rather than assist with investment in jobs and US industry.
Instead, a good part of the QE money searched the globe for ever-higher yields, driving up fuel and food prices and touching off share crashes, especially in the Far East.
With the free money supply now cut off in the US and shortly in the UK, as the Bank of England apes its US master, the rush out of paper money and into gold will begin, no doubt touching off the new banking disasters, of which even Governor Carney of the Bank of England has recently warned.
The Bank of England will now follow the US example and end its £375bn QE programme with a rate rise in the New Year. The bankers have made their pile and it is the working class and mortgage holders that will pay the price for them.
The QE experiment to try and avoid a further massive crash and slump of the world economy, by paying off the bankers and the hedge funds, has been merely a six-year interlude between disasters.
Deprived of their QE free cash handouts, the bankers and profiteers will turn to gold, while their governments drive to impose the entire burden of the crisis onto the working people of the world through attacks on basic rights, huge super-austerity programmes, and new imperialist adventures in the Middle East and Central Asia.
The world crisis is now set to intensify!
The only solution to this crisis in the interest of the working class and the oppressed nations is the building of sections of the Fourth International in every country to organise the workers and the poor to carry through the world socialist revolution.
This will smash capitalism and imperialism, and in its place the workers of the world will construct a world socialist society where production will be planned to satisfy people’s needs, creating the conditions where humanity can advance, out of its pre-history, that is the law of the jungle under capitalism, and begin its real history under socialism.