by Robert Kurz
[This article originally published in: ND 7/2002 is translated from the German on the World Wide Web, http://www.giga.or.at/others/krisis/r-kurz_double-dip_nd-Ko163.htm/. Other articles by Robert Kurz, a theoretician of the Krisis group, are available on www.krisis.org, www.mbtranslations.com and www.Portland.indymedia.org.]
Something like a rain dance is staged. The heads of state, central bank presidents and economic ministers work overtime in praying for the great upswing. Is it far in the future? For almost two years, the upswing made itself scarce and had to be shifted from quarter to quarter. For a while, the "bad psychology" after the terror attacks of September 11 was made responsible for the non-arrival of the desired upswing. However the world stock markets are collapsing to new lows even without the collaboration of Mr. Bin Laden. The stock exchange is the seismograph of the economy, people declared smirkingly during the bull market of the century in the 90s. Now it is the stock exchange that deeply mistrusts the upswing signals that are always politically conjured.
The stock exchange has its reasons even if they are seldom expressed loudly. Firstly, the boom of the 90s was a purely financial bubble boom, a "growth without employment". High tech investments weak in job creation and consumption were paid out of speculative profits, not out of real economic profits and wages. Secondly, the process of economic globalization synchronously shifts gears or disengages from the world economy. This had a reinforcing effect upwards in the bull market but has a reinforcing effect downwards in the bear market. Thirdly, the last military world power, the US, also moved into the key position of new finance capitalism. The US must absorb the "surplus" streams of goods of the world. The prerequisite was accepting the world's surplus streams of financial capital (the profits that cannot be reinvested from the real economy and from the speculative superstructure).
To support the bull market, the prospect for a new accumulation-friendly base technology had to be built up to redeem the anticipated speculative profits. However the "New Economy" of the Internet- and Telecom capitalism has proven to be a century-flop. Mountains of debts and over-capacities are left behind. The stock exchanges are in minus territory for the third year. Since the record levels in March 2000, the Dax for example has lost nearly 50 percent, the US technology exchange Nasdaq 78 percent and the Neue Markt 93 percent. The losses were only kept relatively in bounds with 25 percent with the key New York Dow Jones index although these losses are also high. The global finance bubble boom is dead. Retail sales collapse in the double digits in Germany. Sales of firms stagnate or can only be expanded at the expense of profits. The credit-, leasing- and discount boom has also ended.
This is not widely discussed. The capitalist world suns itself in the permanent optimism of the US which is already judged. However while the media consciousness consumes football and politics vanishes in the summer hole, a new secondary thunderstorm brews over the key economy of the US. In 2001, the government and central bank prevented the downfall by early arms contracts and an historically unparalleled series of interest rate reductions. As a result, only a short-lived straw fire was kindled that didn't bring any viable US boom so ardently awaited all over the world. Instead the fear of a double dip spreads in "God's own country". The really "dark" recession could come after a brief recovery conditioned on finance policy measures.
The chain of finance capitalism has actually burst at a decisive place. the bull market was accompanied by the soaring dollar. This soaring flight was dependent on the key position of the US in the finance bubble boom, not on the real economic strength of the US. Through the permanent influx of global finance capital, the US stock markets could take off above-average. The enormous constantly accumulating trade- and balance of payment deficits of the US were financed despite negative savings rates and high domestic indebtedness. With the bursting of the "new economy" and the end of the fictional stock market value creation, an essential stimulus to transfer finance capital to the US has disappeared. Simultaneously the series of US interest reductions has destroyed another incentive, namely the higher interest level of the US. The interest disparity has now reversed.
The consequence is the fall of the dollar since the streams of finance capital in the US have diminished. This decrease leads to further reductions in a negative escalation because of the added currency risk (of an expected further price decline of the dollar). In the past, the US reduced its indebtedness again and again at the expense of the rest of the world through periodic dollar devaluations. Today a constellation is reached so that reduced indebtedness occurs at the expense of the US economic situation. For lack of its own savings and on account of the high domestic indebtedness, the US in the meantime depends completely on the unbridled influx of foreign monetary capital to finance consumption- and balance of trade deficits. The partial outward reduced indebtedness through dollar devaluation and the improved export capacity of the US cannot compensate for turning off this faucet. Conversely a collapse of the US boom also endangers the Japanese-Asian and European export boom intensified by the upgrading of the Yen or Euro and the increased prices of exports.
Good counsel is now expensive. If US monetary policy is no longer enough for prolonging the finance bubble boom, only a strong war boom can "save" the world economy. However no "enemy" is in sight. The role of world policeman doesn't suffice. In addition, the financing question could be raised for an armament- and war boom because Bush must mobilize this on a much higher indebtedness level than Reagan with his "arming to death" of the Soviet Union. A double dip in the US would plunge the world economy very deeply. the stock markets have every reason to be pessimistic.