THE US Federal Reserve chairman, Ben Bernanke, gave the clearest indication this week that the Fed is intent on pursuing a policy of ‘tapering off’ its latest round of Quantitative Easing (QE) this year with a view to ending it in 2014.
When Bernanke made similar noises last June, the stock markets around the world immediately went into a meltdown for two days until he started to make soothing remarks that nothing was set in stone and suggesting QE would not be ended immediately.
However, the entire US economy is in tatters, its manufacturing base shattered, with once-mighty industrial cities like Detroit completely bankrupt.
The whole point of QE was the simple notion that by artificially creating vast amounts of new electronic money and pumping it into the capitalist system via the banks, this would create a ‘trickle down effect’.
This valueless, fictional, electronically produced money was given the Herculean task of reviving the bankrupt capitalist system by trickling its way down from the banks into businesses and industry in the form of cheap loans, thus stimulating the revival.
This electronic fiction, masquerading as value, not only did not work – there has been no stimulation of the economy either in the US or in Britain where the same policy has been carried out by the Bank of England – instead it has rebounded on the system with a vengeance.
There was no ‘trickle down’ effect. The vast sums created – the US Fed is currently pouring $85 billion (£54bn) a month into the banks – has been used by the banks simply to keep themselves from going under and allowed them to use this free money to embark on a speculative frenzy exceeding even the one that led to the banking crash in 2008.
Much of this cheap money ended up in the so-called emerging economic superpowers, India, Brazil and China being at the fore. Now the threat to cut off this supply is leading to foreign investment streaming out of these economies as the entire inflationary bubble strains to bursting point.
Already, the price of the Indian rupee has crashed in anticipation of the entire Indian ‘boom’ collapsing.
The miracle economies that were supposed to be saviours of international capitalism are being exposed as mirages, and very false dawns.
Why should Bernanke and the Fed contemplate ending QE then – after all, Mark Carney, head of the Bank of England, has made it clear that he will continue with the policy of QE and low interest rates for the foreseeable future.
The answer is that Bernanke is acutely aware that QE on this scale has created a worldwide flood of worthless, fictional currency that must inevitably lead to an epic crash in the form of hyperinflation across the world.
The cause of hyperinflation in 1930s Germany was precisely this printing of paper money with no value backing it up, in order to pay off the country’s huge national debt (caused by war reparations).
Overnight, the deutschmark became worthless and German workers found it cheaper to paper their walls with bank notes rather than with wallpaper.
Whatever road the central banks follow, it is inevitably leading to an almighty catastrophic crash which will pitch the working class internationally into a war against capitalism.
This cannot be avoided, the capitalist class and the bankers can only salvage something from the wreckage of their system if they impose the full weight of it on the backs of workers, the middle classes and the impoverished masses of the world.
Equally, for the working class to survive it must take on this bankrupt and weak capitalist system and overthrow it, replacing it with a socialist planned economy that produces for need, not for the profit of the bankers and bosses.
For this struggle to succeed, it requires the building of revolutionary parties of the Fourth International in every country – in Britain it means building the WRP.