Vol. 77/No. 26      July 8, 2013

Divisions are growing among the U.S. rulers over whether to continue the Fed’s massive “stimulus” programs. On one hand, its proponents fear discontinuation would exacerbate the contraction of production and increase joblessness. On the other hand, the increasingly insistent opposition points to mounting government debt, lack of any progress toward the stated goal and fear of long-term inflationary pressures. While both sides identify real problems for capitalism, neither has any solution.

As head of the Federal Reserve over the past eight years, Bernanke has presided over an unprecedented monetary “stimulus” effort. Since 2008 the Fed has purchased tens of billions of dollars of mortgage-backed securities from U.S. banks as well as their own U.S. government bonds, transferring $2.5 trillion to the banks on the theory bosses will borrow the easy money and boost production, creating jobs.

But the bosses face a crisis of production and trade unlike any in decades. As a result, their greatest avenues for profit do not involve investment in equipment and labor to expand production. They have instead chosen to sit on hoards of billions of dollars or to find higher returns in stocks and other financial “instruments,” essentially speculative bets on the rise or fall of various kinds of commercial paper, what Karl Marx called “fictitious capital.”

The average age of manufacturing equipment in the U.S. is close to 20 years, nearly double what it was in 1990, according to the Bureau of Economic Analysis.

Easy money created by the Fed’s programs has gone into boosting U.S. stock market prices, but it has done nothing to prod the bosses to create a single job.

In the U.S., Standard & Poor’s 500-stock index fell 2.5 percent the day after Bernanke’s announcement, its biggest one-day decline since November 2011. Stock prices dropped even more in Europe, Asia and Latin America.

The jittery reaction to the prospect of the Fed backing off from printing more and more dollars highlights the growing worldwide financial instability rooted in the capitalists’ inability to reverse the slowdown of production and trade. It underscores the place of dollar printing in the efforts by the propertied rulers around the world to postpone financial crashes as they hope for an end to the economic contraction.

In the U.S., manufacturing in May contracted to its lowest level since the “recovery” from the 2007-2009 recession began nearly four years ago, according to an Institute for Supply Management report.

At the same time, China’s economy is slowing, dashing the illusions of layers of capitalist rulers in the U.S. and other imperialist countries that an eternal “Chinese miracle” would prop up world trade and production.

But the more China relies on capitalism, the more vulnerable it becomes to all the pressures and crises of that mode of production.

After Bernanke spoke, stock market prices in China dropped more than 3 percent. Chinese banks are tightening credit, closing down the ability of manufacturers to finance production.

In June, manufacturing output fell in China to its lowest level in nine months, according to the HSBC purchasing managers index, as new export orders declined. The previous month, China’s exports to markets in the U.S. and EU dropped 1.6 percent and 9.7 percent compared to a year ago, according to the Wall Street Journal.

As Chinese manufacturing grinds down, imports are falling as well, affecting capitalist industries worldwide. Demand for metallurgical coal and other resources to make steel in China have plummeted, fueling layoffs and mine closures in the U.S., where coal exports fell 31 percent in April.

In the first quarter of 2013, eurozone gross domestic product, a measure of goods and services, declined for the sixth consecutive quarter, affecting all 17 nations in the common currency and trade bloc.

This “underwhelming data,” the London-based Guardian reported, led Naoyuki Shinohara, deputy managing director at the International Monetary Fund, to tell the paper the world economy will not “generate jobs for the millions who have fallen into unemployment over the last five years.”

While the bosses around the world have no answer to the slowdown of production and trade, they are working to boost their industrial profit margins on the backs of working people through speedup and wage cuts.

Since U.S. manufacturing hit a low point following the 2007-2009 recession, output has increased to nearly prerecession levels. But the same amount of work is being done by 2 million fewer workers. And, according to government figures, U.S. workers’ wages and benefits have dropped to their lowest level since 1955.  
 
 
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