Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page: https://www.socialistparty.org.uk/issue/188/8059

From The Socialist newspaper, 12 January 2001

What We Think

Now the Party's Over

THE BELL is tolling for the decade-long US economic boom. With all the US economic indicators showing signs of slowdown, US Federal Reserve Chairman Alan Greenspan's surprise cut in US interest rates has started speculation that something in the US economy is about to go spectacularly wrong.

Initially, the interest rate cut had Wall Street and world financial markets jumping for joy and share prices leapt up accordingly. Then questions were raised about why the ultra-cautious Greenspan was lowering interest rates in between the regular monthly meetings of the Fed.

Rather than calming nerves about a recession, Greenspan's decision could lead to panic. Numerous rumours are circulating that a potentially bigger collapse than that which threatened Long-Term Capital Management (LTCM) in 1998 is imminent and that is why Greenspan has lowered interest rates.

One potential candidate is the Bank of America and a number of other financial institutions (including Barclays in Britain) that threaten to implode because of their liability over California's ailing privatised electrical utilities.

But the bigger fear is that the US economy as a whole is about to tip into a deeper than anticipated recession, which could see it go into a long period of stagnation, like the Japanese economy suffered throughout the 1990s.

All the indicators are that the US economic bubble is bursting. Now the fear is that even if Greenspan's interest rate cut could start a final short-term spurt to the speculative shares bubble which will build in a worse recession in the future.

The so-called 'New Economy' of high-tech shares, which were grossly overvalued, saw a massive decline last year. The Nasdaq index that monitors these shares dropped 55% in 2000.

But this is no longer a matter of curtailing 'irrational exuberance'. The consumer boom based on debt was reliant on confidence that income from shares would continually rise.

The decline in value of these shares has sucked out an enormous amount of personal wealth, causing consumer confidence to dip and sales to drop.

This in turn has affected the 'real' economy - manufacturing and retail - as has been seen in the mass layoffs at General Motors, Sears and many other large US companies.

The expectation that the boom would go on indefinitely has also left many US states massively exposed. In all, 12 states have not got enough reserve funds set aside to deal with a rise in unemployment benefit claims. If unemployment rises even marginally, then these states will become insolvent and will have to be bailed out by the US federal government.

The old adage that when the US economy sneezes the rest of the world catches cold is likely to be borne out once again. However, contrary to some cabinet ministers and commentators' belief, the British economy is not 'recession proof' and could be heading for the flu or even pneumonia.

Stephen King, an economist at HSBC bank not the horror writer, sketched out the potential economic nightmare that New Labour faces in last week's Observer: only Mexico and Canada - allied with the US in the Nafta trading bloc - are left more vulnerable by a threatened US recession.

That's why Blair and Brown are hurriedly trying to hype up the government's economic achievements, anticipating a May general election, which they hope will be before any significant world downturn.

But even then New Labour will not escape the fall-out. William Keegan, the Observer's economics guru, said that "Labour's economic policies will probably look 'sound' and 'responsible' until the election is out of the way. Then the fun will start."

The feeling in the US especially is that the party's over. Time magazine reluctantly conceded: "This time it's different" and said that Karl Marx's theory that capitalism is doomed to repeated recessions because of cycles of overproduction has once again been "vindicated".

Marx also pointed out that workers bear the brunt of every capitalist downturn. But workers, as has been seen in recent strikes and anti-capitalist movements, will also want to ensure 'this time it's different' and that the capitalists are made to pay for the mess that they've created.

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.


In The Socialist 12 January 2001:

Exposed: Labour's Election Hype

Students worse off under Labour

Now the Party's Over

Hackney: stand up to these attacks

Hackney debate: How to take the dispute forward

Fight for all Vauxhall jobs

Import controls no solution

He who pays the piper...

Thousands rally in support of Czech TV workers


 

Home   |   The Socialist 12 January 2001   |   Join the Socialist Party

Subscribe   |   Donate  




Related links:

US:

triangleThe Socialist inbox

triangleYour newspaper fights with you: help fund it with May Day greetings

triangleVietnam War: 50 years since the Tet Offensive

triangleVictory! Trump's UK visit cancelled by fear of protests

triangleMovement challenges Iranian regime

Economy:

triangleTory infighting escalates - workers' action can oust them

triangleAmber warning lights flash on British economy

trianglePowerful picture of the Port Talbot steel workers' struggle

triangleYoung people being strangled by debts

Shares:

triangleCapita in crisis: bring all outsourcers back in-house

triangleAmazon tax halves as revenues soar - nationalise now!

triangleSocialism 2016: Putting socialism on the agenda

International

International

14/2/18

France

France: rallies in support of oppressed Kurdish people

14/2/18

Unemployed

Big political strike against Finnish government's attack on unemployed

14/2/18

Brazil

Brazil: Lula conviction confirmed

14/2/18

South Africa

Cape Town drought

7/2/18

China

May's silence is a green light for Chinese repression

7/2/18

Tamil Solidarity

Protesters denounce oppressive Sri Lankan regime

7/2/18

Sudan

Sudan: Mohamed Satti released - global solidarity campaign gets results!

31/1/18

Kurds

Stop the war on the Kurds

31/1/18

Austria

Vienna: 50,000 march against racism and austerity

31/1/18

Kurds

Stop the war on the Kurds

24/1/18

Palestine

Punishment of Tamimi family awakens wave of international solidarity

17/1/18

Hong Kong

Stop repression in Hong Kong and China

17/1/18

Tunisia

Tunisia: explosion of protests against government austerity

10/1/18

Iran

Movement challenges Iranian regime

10/1/18

Appeal

Appeal from Iranian independent unions

triangleMore International articles...


Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party
Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube

LATEST POSTS

CONTACT US

Phone our national office on 020 8988 8777

Email: info@socialistparty.org.uk

Locate your nearest Socialist Party branch Text your name and postcode to 07761 818 206

Regional Socialist Party organisers:

Eastern: 0798 202 1969

East Mids: 0773 797 8057

London: 020 8988 8786

North East: 0191 421 6230

North West 07769 611 320

South East: 020 8988 8777

South West: 07759 796 478

Southern: 07833 681910

Wales: 07935 391 947

West Mids: 02476 555 620

Yorkshire: 0114 264 6551

ABOUT US

ARCHIVE

Alphabetical listing


February 2018

January 2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999