US bailouts are back
On July 31, the United States Federal Reserve (Fed) lowered interest rates by 0.25%, leaving the interest rate in a band between 2% and 2.25%. That measure is an official recognition that the global crisis of capitalism, which began in 2000 and has been going on for 19 years, is getting worse. When an acute peak of this crisis erupted between 2007- and 2008, the response of the capitalist governments to avoid the collapse of capitalism was the bailouts. Now the Fed is preparing to re-inject salvages into the Global Conglomerates that dominate the world economy. All economists, analysts and officials agree that the crisis is getting worse, but an immense global debate has been unleashed about what are the reasons for this sharpening, where capitalism is going, and what will happen in the next period.
A whole chorus of economists, analysts and officials says that the crisis is a product of the "Trade War in China and the US", that we are going towards a "War of currencies", that everything is a product of "Macroeconomic tensions" or "Factors geopolitics ",World War III is coming between China and the US, or with North Korea. They are absurd analyzes and theories, totally erroneous of economists, analysts and bourgeois officials, as well as Marxist sectors, which has been establishing a wrong forecast after another. It is necessary to establish the perspectives from a scientific Marxist explanation, polemicizing with the absurd theories that seek to lie and hide the truth of what is happening with capitalism. In turn, it is necessary to give a serious perspective to the activists, militants and leaders who carry out the fight against capitalism in Hong Kong, in France, in Sudan, Honduras and in other revolutionary processes that are taking place in the world.
The world economy is falling into recession
The central reason why the United States Federal Reserve under the interest rate is that the US and world economy is falling into recession. It is not the only reason, but it is the most important. All major capitalist economies are in recession: Europe is in recession with 1.3%, Germany in recession with 0.8%, France in recession with 1.1%, England in recession with 1.1%, Japan in recession with 1%. The United States is on the verge of recession with 2.3%, and after a growth of 3.1% in the first quarter of this year fell to 2.1% in the second quarter, which sounded the alarms of the Fed. The other capitalist economies such as China, Russia, Brazil, or Mexico also sank. The world economy slows, cools, which aggravates all the imbalances of capitalism and impacts world trade. Faced with this whole picture, they don't know what to disguise as bankers, officials, businessmen, and analysts who assured that the crisis was over, because they trusted that the rescue and rescue would solve the crisis of capitalism. However, this was not the case, and the crux of the matter lies in understanding what the salvages are, and why they produced a worsening of the crisis in the world capitalist economy.
The bailouts are a complex maneuver of economic operations that have been carried out for 10 years, and consist of the injection of masses of capital that already take between 30 and 40 billion dollars in the Global Conglomerates that dominate the world economy as JP Morgan Chase, Goldman Sachs, Bank of America, Morgan Stanley, Wells Fargo, or Citigroup, etc. The bailouts were carried out by the Central Banks of all the imperialist countries USA, Japan, England, Germany, France, Canada, and Italy, as well as in China that is not an imperialist country, but a capitalist sub-metropolis.
They began in July 2007 when the sharp peak of the global capitalist crisis broke out, and at the beginning they were done in a disorganized and random way, as banks, investment funds exploded. At that time in 2008, given the magnitude of the crisis, and when it was noted that the Global Conglomerates were bankrupt, this disorganized capital injection and random failure. Upon the collapse of Conglomerates such as Bear Sterns and Lehman Brothers, the most important capitalist governments agreed to a larger, coordinated and global rescue mechanism to deal with the crisis.
Thus, in September 2008, the so-called QE began, which in English means Quantitative Easing, a complex system of economic operations that allows Central Banks to inject huge masses of money without gold backing. It's called "easing" because the rules become more flexible, relax, makes "easy" in order to issue huge masses of capital. This coordinated maneuver of all the Central Banks, the US Fed, the BOJ of Japan, the ECB of Europe, the BoE of England, the BoC of Canada, working together with the BdPC of China allowed "save" the Global Conglomerates of the central countries and the most important economies. The first stretch of salvages was called QE1, and it was carried out from September 2008, until March 31, 2010.
In addition to preventing the bankruptcy of the Conglomerates, the objective of QE1 was for the world economy not to enter into recession. This objective is fundamental for the governments of the most advanced capitalist countries for fear of the revolution. The images of the ranks of thousands of unemployed and unemployed in New York during the great recession of the 30's of the twentieth century, combined with the hunger revolts, insurrections, and the development of revolutionary and leftist movements that led to all that stage of great capitalist crisis, it is a lesson that world imperialism has already taken out, and it does not want in any way to be repeated.
The QE1 achieved the objective of preventing the bankruptcy of the Global Conglomerates, but failed to remove the danger of recession. The world economy soon began to show signs of a recession, and on November 3, 2010, the second round of salvages called QE2 began. QE2 began on November 3, 2010 and ended on June 30, 2011, a period in which huge masses of billions of dollars were injected back into the Global Conglomerates, with the same result: Bankruptcy was prevented, and a bankruptcy was maintained a weak economic growth, but the danger of recession was not removed, which led to a third round of salvages called QE3, which began on September 13, 2012 and reached an average of 85,000 million dollars per month.
The QE sharpens contradictions and pushes capitalism to a new crisis
Between 2014 and 2015, all economic authorities, analysts and officials began to explain that the crisis was over. Janet Yellen, the president of the Fed, came to say that there would be no more crisis "for many years, and perhaps never happen again," and the whole chorus posed that we were facing "longer economic growth since the postwar period." They began to talk that the "worst had already happened" and that it was time to "normalize" the economy. However, the reality was the opposite of what the bosses of world capitalism argued. What the salvages produced by 10 years of injection of between 30 and 40 billion dollars was a real disaster that pushed capitalism to greater and more serious dangers, of a magnitude far superior to everything that had been lived up to that moment.
First, if what had opened an acute peak of crisis between 2007 and 2008 was a gigantic capital over-accumulation process in "second category" mortgages (in English called "sub-prime") now that process of Over- accumulation had become an even bigger and more dangerous process. What in Marxism we call "capital accumulation" a phenomenon typical of capitalist accumulation, bourgeois economist call it "bubbles". Using this terminology that has become popular, the reality is that after 10 years of salvage, now the real estate bubbles multiplied by 12 and spread to 11 countries, affecting some of the most important cities in the world such as London, Geneva, Paris, Zurich, Tokyo, Vancouver, San Francisco, and many cities of China.
Second, the sharp peak of the crisis between 2007 and 2008 revealed the existence of large companies that dominate the world economy, such as JP Morgan Chase, Goldman Sachs, Bank of America, Morgan Stanley, Wells Fargo, Deutsche Bank, Barclays, Citigroup or UBS. All movements protesting the global crisis of capitalism developed on the basis of the denunciation of the existence of these giant Conglomerates, so huge, that analysts, economists and civil defense officials have defined them as "Too big to Fall".
Precisely the size of these companies is one of the reasons for the outbreak of the acute peak of the crisis. But after 10 years of salvage, the "too big to fail" became now larger companies. The flagship case is the Deutsche Bank, on the verge of bankruptcy, but it can be any of the other Conglomerates, whose bankruptcy can trigger another sharp peak of crisis. In addition, as a result of receiving injections of monstrous masses of capital for 10 years, the executives in charge of these companies used that capital to expand their operations, and fortunes, since they are professional scammers, white-collar criminals, who permanently plunder the world whole.
The wealth and the over-accumulated capital of these large companies, is in the opposite direction with the hunger, poverty and misery that billions of people around the world suffer, while the rates of environmental destruction for the planet also advance dangerously, and nature. The Marxist category of "Imperialism" and monopolies, abandoned by the majority of Marxist economists, takes noticeable relevance with the existence of these Conglomerates, which thanks to the bailouts are now larger than before, and push the global economy towards new dangers.
Thirdly, with the bailouts, the development of old speculative maneuvers of the Global Conglomerates such as share repurchases and all kinds of fraudulent activities exploded. If between 2007 and 2008 around papers such as the MBS, CDO, and the CDS, a gigantic bubble was built that exploded, now even more risky financial instruments such as the Negotiated Investment Funds (in English, Exchange-Traded Funds, ETF), which do not bet on the price of a good, or an asset but rather bet on the price of an index. For example, the raw materials index, the stock market index, the volatility index, the technology companies index, etc., Billions of dollars have been invested in these instruments by mounting a very dangerous bubble that has raised all kinds of warnings from analysts, journalists ,"weapons of mass destruction" .
Fourth, in China a gigantic bubble was formed called "the mother of all bubbles," and as a result of the salvages a bubble has been mounted on a global scale that bourgeois analysts call the "Bubble at all . " The financier Jared Dillian explains it like this: "... In 2000, we had the dotcom bubble. In 2007 we had the real estate bubble ... In 2017, we have the bubble of everything ..."(Stock Market 6/29/17). In turn, one of the most shocking phenomena of the current crisis of capitalism has developed: The existence of zero or negative interest rates. The phenomenon is spreading every time, impacting the Central Banks, and especially in Europe and Japan. It is a process that acquires historical edges considering that it has practically no background in the history of capitalism. Currently $ 14 billion of global debt has a negative return.
Another element that showed the deepening crisis was that in June 2016, the masses of Great Britain voted "no" to the European Union (EU) in a process known worldwide as " Brexit", which constituted a devastating blow to the Euro, the Troika, the European adjustment plans, and the imperialism plans. Definitely, the multiplication of real estate bubbles by all regions and major cities in the world, the explosive reappearance of old speculative maneuvers such as the repurchase of shares, the growth of Global Conglomerates that are now larger than when the crisis broke out; the emergence of new products and more dangerous speculative maneuvers such as ETFs, and the appearance of interest rates at 0 or negative, are the disastrous result of the bailouts that failed to achieve economic growth and push global capitalism to a peak of a crisis bigger and more devastating than the one that shook the world between 2007 and 2009.
From QE to QT: The consequences of an unprecedented operation
But the bosses of capitalism did not know, or lied about this reality, and made a series of decisions that caused a sharpening of the crisis. Under the argument that "the worst of the crisis is over" and that "we must normalize the economy"In November 2017, the Fed began an economic operation called Quantitative Adjustment (QT). The QT is an inverse process to the QE. If the QE is a relaxation of the monetary emission norms that allow the creation of money to be promoted, the QT is a restriction of the monetary expansion to limit the existence of money. The Fed sought with the QT to reduce the amount of assets it accumulated, reduce the amount of money and global stocks of money to try to eliminate, make disappear or as we call in Marxism "burn capital" by a mere administrative route. And in that way, appease the imbalances that the QE had caused.
The Fed said that the transition from QE to QT would be so gradual that it would not cause any problems, no trance, no critical moment. Philadelphia Fed President Patrick Harker announced that the process would be as boring as staying to see how the paint dries. Together with the QT, the Fed carried out five increases in the interest rate to cause the end of the 0% interest rate stage, taking it to a range of 2.50%, but like all forecasts, predictions and omens who made since the beginning of the crisis, the QT took a direction opposite to that announced by the heads of capitalism.
To the extent that the Fed restricted the flow of money, eliminated capital, disappearing the deposits that had been created with the QE, and raised interest rates, it became a vacuum cleaner that absorbed all the dollars that circulated around the world. By attracting the dollars of the whole world, the Fed unleashed a "shock" in the world economy, caused the crisis of the currencies of the semi-colonial countries, because the dollars began to flee from the economies of the poor countries. Turkey and Argentina collapsed, the currencies of Indonesia, India, and Egypt began to shake, and conditions in hundreds of countries worsened. Three months after the start of the QT, all the mirage of the "end of the crisis" collapsed. On February 5, 2018, the largest Wall Street collapse occurred since 2000, and the VIX index that measures the uncertainty of the world economy shot up.
To stop the collapse, the heads of capitalism took two emergency measures in a coordinated manner, first the People's Bank of China (BPCh) made a rescue of 84.3 billion dollars, the largest injection in a single day in the history of the BPCh. Second, the Fed suspended "Operation Twist", which was part of the QT. With these measures they avoided the collapse, but they could not avoid the recession of the world economy. In the course of 2018 China fell into recession. Treasury Secretary Steve Mnuchin called an emergency meeting with the heads of the Global Conglomerates to face a possible outbreak, but as the meeting was suddenly called and one Sunday, something not usual on Wall Street, he set off the alarms, which caused that on December 25, 2018, in the middle of Christmas, the world's stock exchanges suffered their worst collapse in 100 years and the worst of the last 10 years. Thus ended 2018 and began this 2019, in the midst of a tremor of world capitalism.
The rescues return to the US, to face a more serious crisis
When the Fed lowered interest rates in July 2019, it officially terminated the attempt at economic "normalization" of QT and the rise in interest rates. Official recognition began that the global crisis of capitalism is worsening, and the Fed is preparing to re-inject salvages. The current Fed president Jerome Powell justified his decision for "the implications of global events", a euphemism not to mention the imbalance they have caused. Is there a solution from the capitalist point of view for the world crisis? Of course it exists.
What the bourgeois economists and vulgar Marxists hide is that in order to overcome the crisis, a world-class exploitation rate qualitatively superior to everything that exists today is necessary. To graph it with an image we can explain it like this: Imperialism should impose a rate of exploitation and living and working conditions that it has imposed on China, for the whole world. It should liquidate bourgeois democracy, install a dictatorship, sweep away the rights to organize, to protest, to assembly, upon request, to impose strenuous work, black work, semi-slavery, widespread precariousness, lack of all labor rights, and repression. brutal to any kind of union or social organization. And it should impose it globally, on the five continents. Just so, and that would be the beginning, but not the definitive solution.
Only with these measures is not enough to solve the crisis, and in fact in China they have not solved it. The reason why this occurred is that capitalism can only recover the necessary exploitation rate and get out of this crisis through a violent capital burn, as was World War 2. The Global Conglomerates suppose an over-accumulation of capital on such a colossal scale, that the burning of capital necessary to solve the crisis reaches historical proportions, dozens of ports in China and the world should be closed, lay off hundreds of millions of workers, eliminate regions and Whole districts of the world economy. The failure of the QT, implied the failure of the attempt to "burn capital", in a peaceful way.
If bourgeois economists and vulgar Marxists fail to understand why capitalism cannot get out of the crisis in economic terms, they cannot give an explanation in the political arena either. The reason why imperialism and capitalist governments fail to recover the necessary exploitation rate, or carry out a violent burning of capital, is the product of the existence of a mass insurrection, a world revolutionary situation, led by the sectors the most exploited and oppressed of society, women, immigrants, oppressed races, youth, the most backward and native nations and peoples, but also the workers and peoples of the most advanced capitalist nations such as France. In China, rising labor struggles have increased wages in the manufacturing sector.
Capitalism can only impose high rates of exploitation or the burning of capital through a brutal defeat of the working class and peoples of the world, a political process that is virtually impossible today. While the caravans of immigrants multiply across Central America and Mexico to the US, or the entire Mediterranean from the Middle East and Africa to Europe, and the riots multiply in Sudan, Algeria, Honduras, France, or Hong Kong, the "final solution " that Global Conglomerates require is impossible. And if the governments of the United States have been characterized by acting as gendarmes against the world revolution, bombing and attacking permanently for decades to all kinds of nations, and peoples, it is surprising and ironic that we could give the Donald Trump government the " pacifism " for being the only US government that has not invaded any country, or bombed almost anything.
For example, the "progressive" governments of Obama and Clinton got tired of killing, bombing, ships and drones, not to mention the Bush. Beside them, Trump seems the most peaceful in history: He could not even establish the "Wall" on the border with Mexico. The explanation is not that the "sinister" Trump is progressive, but that the depth and dimension of the global revolutionary rise puts a brake on all imperialist plans. This and not another, is the real reason why the crisis of capitalism worsens day by day.
Those who intend to explain the crisis by stating that it is the product of a "trade war between the US and China" simply lie. The US and China are partners that fight over the distribution of a shrinking cake, but they collaborate with each other and their capitals have been deeply interrelated for decades. China is an American factory, almost an associated state that acted as a locomotive of the world capitalist economy on the basis of the terrible conditions of super exploitation that imposed on the young and nascent new Chinese working class. For those who want to see an "anti-imperialist" struggle of Xi-Jinping against the USA, they will take a chasco since they will only find a servant representative of an oligarchy that transformed China into a paradise of multinationals.
The one that sharpens the crisis is the existence of the Global Conglomerates. Conglomerates are unfeasible, broken and are true living dead, "zombies"economic as the bourgeois analysts themselves call it, whose support means the suffering of millions who must pay dearly for the existence of these monstrous predators. The bailouts and the intervention of the states to sustain them, have a double meaning, on the one hand, they are the expression of the impotence of the ruling class that cannot impose the exit it needs, and it only comes down to buying time. But on the other hand the intervention of the imperialist states is an expression of the claim of the objective reality of the economy, that these companies are unviable and must be nationalized and expropriated, which would mean the end of capitalism. The multinationals have come to an end, to their maximum limit of development, but their end should not mean in any way the end of humanity.
The global revolt against capitalism, which crosses regions, towns and continents, is deepening to the extent that the global economy develops the recession. The return of the bailouts to the US under whatever name, QE4 or other, will not change this perspective. The 1% oligarchy that governs the destinies of humanity has lost control of events, but the final result is not written in advance. The capitalist oligarchy of 1% says in its favor that there is no Socialist International willing to carry out the task of leading this global revolution against capitalism, but the emergence of this organization is in the hands of revolutionaries, not capitalist officials .
The absence of this revolutionary international organization allows capitalists to buy time, but no more than that. They have already shown that they are unable to solve the crisis, they only know how to aggravate it. Our task will be to set up that Socialist International, regrouping the revolutionaries. And it will be in these years that they will come when they will decide on the basis of an acute worsening of political, social and economic conditions, if the counterrevolution of the capitalist governments, or the revolution of the workers and peoples of the world that imposes on a scale prevails Global socialism.