By Mike Treen, Unite Union National Director
(Reprinted from The Daily Blog)
The decision of the US Federal Reserve to end its programme of “Quantitative Easing” signals a desire for a return to monetary “normalcy” in capitalist policy circles. The announcement was made on October 29, the anniversary of the 1929 crash on Wall Street—triggered by a previous series of monetary tightening measures by the U.S. central bank that ushered in the Great Depression of the 1930s.
But the world capitalist economy today stands at a critical juncture that is far from normal.
Stagnation is the order of the day across Europe. Output remains two percent below the peak reached in 2008 before the financial crisis and great world recession. Investment remains 15 percent below 2008 levels. The European central banks and governments are now instituting their own forms of monetary loosening after years of austerity in an attempt to jump-start the economy and escape a deflationary spiral. A similar picture exists in Japan.
A classic crisis of overproduction
The world economic crisis of 2007-09, a classical capitalist crisis of overproduction, was by far the worst since the crisis 1929-32. Like all such crises it was preceded by an explosive growth in credit as the capitalists sought to escape the basic laws of economics and produce more commodities than the market could absorb. But in the end, interest and principal must be paid and when it cannot interest rates rise, the bubble bursts, credit contracts and the economy enters a new recession. Capitalism has had this process repeat itself regularly for nearly 200 years, and yet the pro-business economists and media commentators always seem surprised.