Commentary on Political Economy

Wednesday 10 August 2011

And Now for the 'First of the Class'

As you know, when Greece began having problems with its sovereign debt, a chorus of voices, loudest were those from German political and industrial leaders, rose to flay and condemn the appalling lack of fiscal discipline of of the Hellenes - some going even so far as to suggest that they sell the Parthenon or Aegean islands to pay for it. At the time, the German elite were loudest in telling their workers how virtuous they were with their low wages, high productivity, low consumption and high competitivity: how they were "the first of the class".

Well, French banks were attacked last night and German banks too. In fact, the DAX (Frankfurt Bourse) is the worst performing European market after... the Italian! As you can check in recent posts on this site, not only have we been predicting this, but we have predicted also that European banks would soon fall prey to Bernanke-cashed-up US banks - and yesterday's announcement by the Fed will hasten that process. I think that, despite three dissenting votes, Bernanke has the requisite "resolve" to carry the FOMC (monetary committee) with him, and engage in QE3 shortly, if things deteriorate.

And he will not be put off by "inflation" - that is a furphy! Another furphy! Speaking of which: perhaps the one overriding lesson to be taken from recent events - two actually - is this: Orthodox bourgeois economists are brought up to believe their fantastications. So long as the capitalist economy goes according to plan, there is no problem. But once it begins to falter, they really have not got a single clue!

The other lesson is about "timing". I have stressed recently that "markets" (private Finanzkapital) exploit institutional and political "gaps" in the structure of capitalism - in other words, private competition in a downturn serves to weaken rather than strengthen capitalist institutions. But one of these "gaps", an essential one, is that of "the time of reaction". In other words, if "the collective capitalist" (the State) is too slow to remedy existing "gaps", Finanzkapital will be "quick" to take advantage and make things worse. - Which is precisely what is happening right now all over the world: politicians are too stupid, too dazed - too slow! - to react. Cheers.

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