Commentary on Political Economy

Saturday 6 August 2011

The WSJ Agrees With Us

Here is the story

 And this is its opening paragraph:
"An immediate joke in the wake of the U.S. downgrade was that investors confronted by the lesser standing of U.S. Treasurys will flee to the safety of, well, U.S. Treasurys"!!

Perhaps the funniest thing is when those murderers in Beijing ask Uncle Sam to give them "guarantees about the safety" of their loot! of the resources they have extracted and extorted from millions of Chinese workers! One group of bandits - the most truculently murderous in history! - asks another group of gangsters.... to play fair!!

What Bernanke's Fed must do now is engage in a fresh round of QE to ensure that real interest rates in the US are as "negative" as can be - to encourage banks and corporations to invest - in the absence of fiscal stimulus due to Obama's impotence.

The other aim of QE will be to ensure that countries like China and Germany, and their dictatorships, go up to the wall, smashed by an inflationary tsunami, unless.... unless they agree to expand domestic demand and revalue their currencies (more inflation, higher euro and yuan) so as to provide the necessary stimulus to US industry, which is far and away the most "productive" on the globe, and shore up employment there.

Above all, of course, what the US need is a change of President, and a change in political institutions, from the Presidency down, to reflect the productive and social needs of the forces of production in the country.

As you can see, what is happening now is that if the holders of capital (the owners of social resources) have their "pound of flesh" (interest is paid on their treausuries without a hefty dose of inflation to devalue the principal), fresh investment will not happen and capitalist industry will implode! We have the combination of a "liquidity trap" with a "debt trap" - with the first meaning that "private capital" cannot invest for fear it may lose its capital, and the second meaning that "the collective capitalist" (the State) cannot invest because it needs to curb its "spending" to repay its "obligations" (treasuries) to "private capital"! That is the closest a "vicious circle" will ever get to becoming a "Catch-22 situation"!

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