WALL STREET PROVOKES TRADE WAR: Fed bailout to kill jobs, spur poverty & inflation

By Abayomi Azikiwe
Editor, Pan-African News Wire

Nov 10, 2010

A recent decision by the Federal Reserve to provide the bankers another $600 billion in bailout funds demonstrates the government’s continuing failure, even under Democratic Party leadership, to provide any relief for working people and the oppressed.

This new handout has been condemned by some of the leading African, Asian and Latin American governments. In South Africa, Finance Minister Pravin Gordhan said, “Developing countries, including South Africa, will bear the brunt of the U.S. decision to open its flood gates without due consideration of the consequences for other nations.” (French Press Agency, Nov. 5)

Gordhan pointed out, “Most of the $600 billion that the Federal Reserve will pump into the U.S. economy will find its way into the financial markets of emerging market countries, where these dollar flows will have the effect of strengthening emerging market currencies.”

Artificially strengthening currencies in the developing states will decrease their exports and exacerbate their existing crises, already worsened by the world economic downturn.

Brazil, China and other states within the G-20 have complained about the move, which is taking place just ahead of a meeting of the body in Seoul, south Korea. In Seoul there was to have been a joint agreement on how to address the global financial crisis. The unilateral action by the U.S. financial sector illustrates ruling-class desperation to maintain the facade of an economic recovery amid continuing high unemployment and increasing poverty rates.

Wall Street met the $600 billion injection into the banking system with jubilation, though the Nov. 6 Financial Times noted in a headline, “Wall Street trades at its highest since Lehman’s fall, but can the rally last?”

In addition to the massive supply of liquidity to the U.S. banking system, the Obama administration’s treasury secretary announced other proposals to limit current account surpluses and deficits for all states involved in the G-20.

Deputy Foreign Minister Cui Tiankai of China responded: “We believe a discussion about a current account target misses the whole point. If you look at the global economy, there are many issues that merit more attention — for example, the question of quantitative easing.” (Financial Times, Nov. 5) “Quantitative easing” translates into a central bank allowing the government to increase the money supply — i.e., print more money — which usually inflates the currency.

Imperialist rivals of the U.S. also objected to this new round of U.S. financial policies coming ahead of the G-20 summit. German finance minister Wolfgang Schäuble said: “With all due respect, U.S. policy is clueless. It’s not that the Americans haven’t pumped enough liquidity into the market. Now to say let’s pump more into the market is not going to solve their problems.” (Financial Times, Nov. 5)

Jobless recovery spells disaster for workers

Although the stock market has made significant gains in recent weeks and profits are up among the leading capitalist corporations and banks, this alleged economic recovery has led to few jobs. The October monthly jobless report claimed that more than 150,000 new positions were created, but there are still officially 15 million people out of work in the United States.

The 9.6 percent unemployment rate omits the 15 million to 20 million other workers who are “discouraged” or are working part-time because there is no full-time work available.

The New York Times wrote: “The jobless rate has not fallen substantially this year, largely because employers have barely added enough workers to absorb the people just entering the labor force. And even if the economy suddenly expands and starts adding 208,000 jobs a month — as it did in its best year this decade — it would still take 12 years to close the gap between the growing number of American workers and the total available jobs, according to the Brookings Institution’s Hamilton Project.” (Nov. 5)

The injection of $600 billion will lead to no significant job creation. Since 2007, central banks throughout the capitalist world have given more than $10 trillion to the banks and multinational corporations. This has only resulted in the loss of tens of millions of jobs in the U.S. and Europe and the further impoverishment of workers and oppressed all over the globe.

This failed policy of bailing out the banks has been most evident in the housing sector, where millions of people have been foreclosed and evicted despite the trillions handed to the financial institutions as workers’ wages decline.

In the U.S. tens of thousands of educators and public workers have been thrown out of work over the last three years as schools, academic programs and sports programs have closed.

The capitalist media in collaboration with the two ruling class parties rigged the midterm vote by avoiding the critical issues facing workers and the oppressed: jobs, income, health care, housing and quality education. The outcome of the elections does not indicate that workers in the U.S. are satisfied with the wars of occupation, high unemployment, underemployment, growing poverty, the loss of pensions and health care, and the increase in state repression.

The election results represent the lack of an effective political organization that genuinely represents the interests of the workers and the oppressed.

A political program that advocates the creation of a WPA-style jobs program becomes even more significant in the coming period because the failure of the ruling-class parties to create employment exposes their incapacity to represent the millions of people who need immediate relief. There can be no real recovery without creating tens of millions of jobs with good wages and benefits.

In addition, there is the pressing need to stabilize the housing sector by imposing an immediate moratorium on foreclosures and evictions.

The Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shut-offs, based in the economically depressed state of Michigan, pointed out in a recent leaflet, “This bailout [of the banks] continues even in the face of massive foreclosure fraud by the largest banks, which forced JPMorgan Chase and GMAC to temporarily suspend foreclosures during October 2010.”

This leaflet continues, “Instead of the government bailing out the banks by paying off overvalued fraudulent loans, the government should allow people to stay in their homes with affordable payments based on the real value of property.”