That is probably never going to happen. But, if it were, if there were a demand for additional capital to make good the hole in the Financial system, imagine the rate of interest that would be required to encourage the phenomenal supply of money-capital to meet this demand! It is for that reason that central banks have instead simply continued to print money for the last five years. In fact, the money printing by the US Federal Reserve is greater today than it was at the height of the crisis in 2008! It is why, as over past weeks, global bond rates have continued to rise, and stock markets have panicked at the prospect of even a slow down in US money printing, and Ben Bernanke baulked at even the most modest tapering of QE – Why Ben Bernanke Baulked.
But, Bernanke has only delayed the inevitable, and possibly made it even worse. The markets had been prepared for the beginning of tapering. In the day before the Fed decision, US 10 Year Yields had even pulled back slightly from 3% to 2.8%. Now, they will have to go through all of that preparation again. The dollar fell, and gold soared, as fears of inflation were raised. Stock markets soared, but then today US markets have fallen back. Moreover, just as has happened with his UK counterpart, Mark Carney, and as happened in Japan a few months ago, the announcement designed to push yields down, hasn't worked anyway. UK rates had pulled back slightly, but are rising again to the 3% level, German Bunds are also about to go back above 2%, and the US 10 year which had fallen as low as 2.65% is back up near 2.8%, where it started yesterday.
Whatever, central bankers do, interest rates and inflation are moving higher. That will cause a crash in the bond market, followed by a crash in the property market, quickly followed by a collapse of the banks and stock markets. That will be the real resolution of the contradictions created in the financial markets over the last 40 years. It is, however, from the perspective of capital in general the necessary resolution of 40 years of contradictions that money printing has built up within the system. The actions of central banks is now and for the last 30 years has been based upon meeting the needs of money-capital, as opposed to the interests of industrial-capital. That is not surprising central bankers are themselves bankers after all! That policy has been made possible because it was in tune with the ideology of right-wing, populist governments whose membership and electoral base is within the nationally based, small capitalists, who themselves rely on that early 19th century mentality of extraction of absolute surplus value, via the creation of a low wage/high debt economy. That model has now definitively hit the buffers. Wages and conditions in developed economies cannot be screwed down to Chinese, Indian and Vietnamese levels, and when you arrive at the stage where large numbers of workers rely on Pay Day loans at 4000% rates, and when even sections of the middle class are resorting to borrowing from pawn brokers, you know that the limits of loading families with debt has gone as far as its going to go.
The debt can only be repaid out of income, and that requires the production of real wealth. The extortions of money-capital from industrial-capital are an impediment to that. As Marx put it,
"As regards the fall in the purely nominal capital, State bonds, shares etc.—in so far as it does not lead to the bankruptcy of the state or of the share company, or to the complete stoppage of reproduction through undermining the credit of the industrial capitalists who hold such securities—it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favourably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.” (TOSV2 p 496)
Your coverage of this most important of issues is second to none.
ReplyDeleteBut is it not most peculiar-- there is very, very little commentary elsewhere, even on other leftist-style blogs.
I guess they didn't catch the lesson back in 2007-2008, when they were left--flat-footed.
I appreciate your work.
Yusef,
ReplyDeleteThanks for your comment. I've said before that, in a sense I was lucky being able to warn of the Financial meltdown back in 2008 a couple of weeks before it happened. Not lucky that I was right, but lucky that I spend a lot of time watching business TV such as CNBC and Bloomberg. I spend a lot of time listening on these programmes and on financial websites to what actual traders are saying. So I just picked up a sentiment, and background of what was happening over a period that said to me, something big is going to happen here.
You couldn't have deduced that from Marxist or any other economic theory. You might have been able to say something like this is likely to happen, but not to have been able to say its going to happen now, within a matter of weeks.
The reason most left organisations etc. don't cover it is precisely for that reason. The level of understanding of Marxist economic theory amongst Marxists is pretty appalling. Even most Marxist economists have interpreted Marx's writings through a heavy lens of the statist ideology that most organisations have been infected with over the last 120 years.
Most, are also reduced to a level of Economism, given that over the last 30 years, even the possibility of pushing forward political reforms, or improvements in the social wage have been non-existent.
My approach is different. Like Marx I will support workers struggles, like strikes, opposition to austerity etc., obviously. But, like him, I do not put much weight on such economistic struggles. They are by definition reformist, and bourgeois.
The main task is to mobilise workers to fight for socialist solutions. That is why I argue for workers not only to organise occupations etc. but to see the need to go beyond that in establishing worker co-ops, as part of a European worker owned and controlled sector of the economy presenting the working-class with an alternative, superior model to that of Capital.
But, in order to build that alternative, its necessary to understand the nuts and bolts of how modern Capitalism works. Lnin in his speech on Co-operatives, told Russian peasants they needed to learn to be cultured traders like their European capitalist competitors. He and Trotsky said Marxists had to become accountants and stock market experts, because before you can replace markets, you have to understand how they work, and how to use them. Marx himself dabbled on the stock market, though not successfully.
Such an approach is anathema to Left organisations that today can see no further than the next strike, the potential to recruit fleetingly a couple of new members. They lack any world view, any grand plan for the future, which is why they are so unattractive to most workers, for whom doing pointless paper sales, week after week, doesn't offer much of a future.