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This is from an interesting talk by John Smith (author of Imperialism in
the 21st Century, MR Press 2016), given to a New Zealand Marxist group
and the zoom of which was recently distributed by Phil Ferguson. The
talk is in two parts, one on the bailout and the other on the effects of
the pandemic and its economic consequences on the poorer countries in
the global south. I have excerpted a few salient remarks.
https://www.youtube.com/watch?v=RzK5sFrhIEg
*
...*why the US government could not adopt the simple route of just
printing that money and spending it, rather than going through this
farrago of issuing Treasury bills**and then buying two-thirds of it
themselves...[because] printing money and spending it to purchase bonds
and other forms of corporate debt, "monetizing the debt," it**is
feared...would lead to a complete collapse of confidence in the US
currency...If investors saw the US government just printing money
without this exercise of taking vast amounts of debt onto its balance
sheet, they would lose confidence in the money, and with good reason,
because all that this money is, basically, is just abstract labor.
*
*capitalists cannot find anywhere to put their money apart from US
Treasury bonds. So the US government borrows this money from them and
then uses it to do what those investors refuse to do, namely to purchase
private corporate bonds, or even to spend on wages to replace the demand
which, if the corporate investor were to spend it anywhere, would
actually increase demand. Whatever it was they'd spend their money on.
...they don't print money. They borrow it, by issuing US Treasury bonds.
So as they issue US Treasury bonds, they soak up what spare cash there
is in the economy...*
*We've heard of QE1 and QE2...one of the correspondents in the Financial
Times says that we now have not 1, not 2, but QE infinity...the US
government is prepared to print as much money as it feels it needs to,
to purchase however many bonds it needs to issue, in order to replace
demand and to replace the corporate bonds which private investors refuse
to purchase.
...they will therefore be buying their own debt.
...why can't they just cancel that debt?
...you can't just cancel a debt; you have to imagine that debt as a
quantity of negative energy. You can't just cancel that negative energy
unless you cancel an equivalent amount of positive energy. You would
need to spend some of your cash, to use some of your assets in order to
cancel that liability. In other words, debtors cancelling the debt is
not just the same as tearing up a piece of paper. To cancel that
negative force, you need to cancel an equivalent positive force...
this is reaching the end of the road. It cannot continue. Capital cannot
continue to rule in the same way...it has been traveling since the
crisis of the 1970s, and it cannot continue in the direction in which it
has been traveling since the 2007-2009 crisis. All they've done, all of
this accumulation of debt, has been to kick the can down the road and to
postpone the day of reckoning, and to make sure that when that day of
reckoning comes, it will be even more cataclysmic.
Impact on Africa, Asia and Latin America:
Financial Times:
With Europe and the United States, the virus arrived first, forcing
a public health response, and then - as the enormity of the crisis
struck home - a massive fiscal and monetary injection. In much of
the developing world, the sequence has happened in reverse, with the
economic devastation of the corona virus arriving before the
epidemic itself.
Emerging market assets have been dumped on a scale never seen
before. According to the Institute of International Finance, foreign
investors have withdrawn $95 bn from stocks and bonds since they
woke up to the crisis on January 21. That is four times the outflows
in the same period after the start of the 2008 global financial crisis.
Asia, Africa and Latin America were already largely in stagnation...it
is a crisis that truly is global. It's not just affecting the
imperialist countries; it's affecting the whole world...causing
collapsing currencies, collapse in remittances from their workers who
had gone to rich countries, hundreds of millions in the global south who
are completely dependent on remittances from their family members, and
those remittances have plummeted in the recent time, while tourism is
very important for many, many countries in the global south, which has
come to a complete halt.
foreign investors have withdrawn $95 bn from stocks and bonds since
January 21....
Financial Times: _
_
Private creditors, however, are resisting calls altogether for a
voluntary standstill to loan repayments on commercial sovereign
debt_._..This position is untenable. It raises the unseemly
possibility that poor countries will receive debt relief with one
hand only to pay it out to private creditors, including banks and
hedge funds, with the other.
the G20 countries, that is, the G7 countries plus South Africa, Brazil,
Indonesia, China, India. I think the G20 countries altogether comprise
something like 80% of the global population. So it's the G7 imperialist
countries plus major so-called developing countries. And they called for
and agreed to freeze official loan payments from low-income countries,
and the IMF has made a hundred billion available to developing countries. _
_freezing**official loan payments doesn't mean cancelling; it just means
postponing, the $100 billion that may be made available by the IMF is
loan finance; it's not grants. Nothing is being given away.
*
*poor countries will receive debt relief with one hand only to pay it
out to private creditors, including banks and hedge funds, with the
other...the full force of the economic crisis of the world and in their
own countries is going to be placed on the shoulders of the workers and
the farmers of these countries without any relief whatsoever. None
whatsoever...the beginning of a slump without precedent in history in
Africa and Asia and much of Latin America.*
*
The mountain of debt is so much bigger than it was at the time of the
1929 stock market crash... now we have something very different,...that
you have to inflate bubbles, to pump money into the economy and prevent
a slump. or else you get 10 years of decline which can only be solved
through world war. Instead of that, they are busy just blowing up
bubbles as fast as they possibly can in order to prevent an asset
destruction.
[Schumpeter saw] only by allowing capital to carry out its own
spontaneous, self-correcting mechanism of destroying assets, and that
only that can lay the basis for a new round of capital accumulation and
a new period of growth.
*
*I don't know whether it's going to happen in three months or six
months, but we are not just looking at a repeat of the 1930s and a
pre-war situation. We are looking at something that is qualitatively
more dramatic even than that, and this is really the deepest crisis that
capitalism has ever faced, not just quantitatively but qualitatively.
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