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Economy
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As the recession begins to bite deeper with every passing
day, millions of ordinary people face losing their homes, bankers’ profits are
taking a hit, tens of thousands are facing the dole queues, the world is on the
brink of economic recession, yet the super rich have never had it so good,
especially the hedge fund managers.
The immediate cause of the sliding dollar
is not far to seek. It’s the US
deficit with the rest of the world. Last year the USA imported nearly twice as much
as it exported. Their current account deficit stands at 6% of national income.
If a country is spending more than it’s earning, then it has to pay for the
difference.
The Financial Times has reported a debate among accountants
about giving a ‘fair value’ to company assets.
What does this mean? As we know, finance capital has a slight problem at present.
Banks, hedge funds and other financial institutions have assets on their books
that they have found out are actually not worth as much as they thought when
they paid for them.
Japan is
the second biggest industrial economy in the world. In the 1980s it experienced
a huge speculative bubble, just like the housing bubble that has burst in the USA and is on the point of bursting in Britain now.
When the bubble burst, the Japanese people, who up till then were regarded as
living in a ‘miracle economy,’ experienced a decade of recession - a ‘lost
decade’.
125 years ago, on March 14th 1883, Karl Marx died. Marx was a
revolutionary above all else. His most celebrated scientific discovery
explains how the working class is exploited under capitalism. Where does profit come from? This is the
central mystery of economics, a mystery that was solved by Marx in his
most famous work, Capital.
The nineteenth century was an era of price
stability. It was also the age of the gold standard. Inflation can have many
triggers, but it always involves an increase in money emissions at some point
in order to give expression to higher prices. It is difficult to increase the
money supply quickly if you have to mine precious metals, so runaway inflation
just didn’t happen back then. The government can’t really control inflation.
Now it’s back!
We
need to take over the banks to bring order out of chaos and growth out of
stagnation. In future months we will be urged for the need to nationalise
loss-making financial institutions. We are not just interested in nurturing
losses. Those who incurred the losses can look after them – and that’s not us.
We need to take over the lot. We need to separate the fat cats from their wads.
We need to run the banks in our interests as part of a socialist plan. We need
to run them under democratic workers’ control and management. And we need to
start organising ourselves to do this now.
World stock markets are still reeling from yet another shock to the
system brought on by the so-called credit crunch that has enveloped capitalist
financial markets since last summer. The latest shock was the biggest yet.
The Chinese have a saying and curse – may you live in
interesting times. The financial crisis and credit crunch are certainly
interesting times. But how do these complex shenanigans impact on the real
economy?
We are experiencing a crisis in what is called the monoline
business in the USA where banks are set to
write down more than $200 billion of their assets. Kissing goodbye to all that
money brings a banking collapse so much closer. $2.4 trillion in loan
guarantees have been called into question.
Last Thursday it was Carlyle Capital’s turn to
go belly-up, a corporation that has George Bush and John Major on its board and
has done very well out of the Iraq war. It is a private equity company - firms
that borrow other people’s money in order to take over other firms and loot
their assets. Under capitalism firms do eat each other. Now it can be argued
that, without jackals, the veld would be full of wildebeests that had died.
Jackals keep the place tidy. But you wouldn’t really praise jackals as wealth
creators.
Last month 100,000 American private sector workers lost
their jobs. This is the third monthly rise in the unemployment figures in a
row. Capitalism is out of control. It’s
not delivering the goods. And it’s not just in the USA. Across the world alarm has greeted every bit of bad news from the States. Even if capitalism doesn’t fall
over and crush you this time, it will always be a threat to the welfare and
happiness of workers all over the world.
Now Gordon Brown has handed over the reins as Chancellor to
Alistair Darling it transpires that for the past ten years Gordon has been
displaying the fiscal prudence of a drunken sailor. The British government has
the biggest hole in their finances in Europe, a whopping £43bn – and it could
get up to £50bn. Where has it all gone?
The government has a good scam going on rising prices. They're trying to hold public sector pay down to 2.1%, which is the rate of inflation measured by the Consumer Prices Index. But if you measure inflation by the Retail Prices Index (another official government index) prices have gone up by more than 4% over the past year.
It emerges from the Parliamentary debate on the
nationalisation of Northern Rock that billions of pounds are to be diverted
away from the intended purpose of preventing a banking collapse, into the
pockets of the Rock's management. The directors set up a financial institution called Granite, allegedly a charity for handicapped children. Not one handicapped child has seen the colour of their
money. The real purpose of Granite was to act as a scam for
tax-dodging.
Milions of workers came out on strike in defence of their pensions. This was the biggest such action for decades. The fight goes on!
