From: nyt%nyxfer%igc.apc.org@MIZZOU1.missouri.edu (NY Transfer News)
Subject: euro-money crisis reflects worldwide instability /ww
Followup-To: alt.activism.d
Originator: daemon@pencil.cs.missouri.edu
Organization: The NY Transfer News Service
Resent-From: "Rich Winkel" <MATHRICH@MIZZOU1.missouri.edu>
Date: Sat, 26 Sep 1992 19:19:39 GMT

   Via The N.Y. Transfer News Service 718-448-2358, 718-448-2683

 Europe's financial crisis reflects worldwide instability
 By David Perez

On Sept. 16, an earthquake of major proportions hit the global
capitalist economy. On that day, the entire European Monetary
System teetered on the brink of collapse.

It all started with the British pound. For a week, the value of
the pound was falling in the currency market. In other words,
from a capitalist investor's point of view, the pound was losing
its worth.

In an attempt to strengthen it, particularly in relation to the
German mark, the British government tried to prop up the currency
by having the Bank of England buy up billions of pounds. In this
way, the British financiers thought, traders in the currency
market would think that the pound was not "weak," that it was
still worthwhile to buy.

But it didn't work. The pound continued to plummet. So, in a
drastic maneuver, Britain pulled its currency out of the Exchange
Rate Mechanism. The ERM is part of the European Monetary System,
and was set up in 1979 to regulate the trade of the various
currencies in Europe. It was set up in other words to smooth over
international trade and prevent currency fights.

All this fell apart with Britain's decision. Pulling the pound,
and in essence devaluing it, was a vote of no confidence in the
currency trade structure. Thus began a full-scale currency war.

Speculation ran wild as all hell broke loose on the currency
market, estimated to trade back and forth some $500 million a
day. The Italian lira, which has already been devalued, convulsed
some more until it too was pulled from the Monetary System. The
Spanish peseta soon become the next victim. And on and on it
went.

Sweden responded with utter desperation; the government moved to
protect its currency, the krona, by raising the interest rate on
loans to banks to an incredible 500 percent. It has since been
lowered to 50 percent, a huge  figure nonetheless.

As of this writing, the smoke still hasn't cleared. The bourgeois
media continue to report further downturns in the currency
markets, from the dollar to the French franc. On Sept. 22,
Britain announced it was abandoning its attempts to shore up the
pound.

A tone of deep pessimism and worry now afflicts the world's
bosses. The financial breakdown can only make the already deep
global capitalist crisis worse in every country in the world.
With respect to the current calamity in the European currencies,
poorer countries in the region like Ireland and Portugal, where
official unemployment rates are close to 20 percent, will really
get it in the nose.

It is, in fact, the worldwide capitalist crisis that at bottom is
the cause of the currency war in the first place. Even if the
high rollers stave off a catastrophe, it still won't reverse the
fundamental problem of capitalism: the overproduction of goods
and the downturn in production.

The currency war is a fight over exchange value; what one kind of
money is worth compared to another. It doesn't create any wealth
at all.

Nonetheless, the strength and stability of a country's currency
is the ultimate reflection of the strength and stability of its
economic system.

Money is the medium of exchange. It is the also the world's most
important commodity because it can be exchanged for--and measured
against--every other commodity. So a crisis in money is serious
indeed.

What about the U.S.?

Every currency, including the dollar, has been affected by the
tumultuous developments in Europe. And while virtually every
country is ganging up on the German government for causing the
crisis, many are now also pointing the finger at the U.S. For
instance, on Sept. 18, both Spain and Belgium cited the recent
fall of the dollar as precipitating the instability in the
European economies.

The Bush administration at first said the crisis would "not
really affect" the U.S., and might in fact be "helpful in the
long run to both Europe and the United States." (New York Times,
Sept. 17) This of course is absurd.

The U.S. is deeply affected by the events in Europe. And that is
because of the one hundred and one connections between the U.S.
capitalist economy and that of Europe. Take the question of
exports. As pointed out in the Sept. 18 Wall St. Journal, profits
from exports are one of the few "bright spots" in the U.S.
economy.

Bush himself stated in his recent "economic manifesto" that one
of every six U.S. jobs depends directly on exports. While these
figures may not be 100 percent accurate, it is nonetheless a fact
that an economic collapse in Europe--or in Japan for that
matter--would have wide repercussions in the U.S.

Approximately two-thirds of U.S. exports go to Canada, Europe and
Japan. If an economic downturn in any of these countries and
regions gets too severe, then its ability to purchase U.S. goods
would also be curtailed. This in turn would lead to
export-oriented industries in the U.S. to either sell cheap--and
take a loss in profit--or lay-off workers. Guess which one they
usually pick?

Rivals as well as allies

On the other hand, U.S. capitalism looks forward to any weakening
of its rivals to strengthen its own position. Even though
Germany, France, the U.S., etc., are allies they are also intense
rivals. That's one of the primary lessons of the Sept. 16
debacle.

The crisis has brought into the open both the severity of the
worldwide capitalist economic crisis, and the vicious
never-ending rivalry among all the capitalist/imperialist powers.
Jeffrey Garten, a managing director of Blackstone Group, a
high-rolling investment bank, admitted, "What we've seen is the
lowest level of international cooperation possibly since the end
of World War II." (Wall Street Journal, Sept. 17)

Garten went on to tell the Journal how the carefully staged
summits of heads of state and the much-anticipated G7 meetings
(U.S., France, Britain, Canada, Japan, Germany and Italy) are
merely "a kind of show business, a cosmetic to patch over real
problems." Of course, it's only when a great crisis hits world
finance capital that this kind of telling admission is made.

That Bush would react to the near-collapse of the British economy
by saying "maybe it'll be good" demonstrates how all the pats on
the back merely disguise the deeper antagonisms among the
imperialist powers. What makes the attitude toward Britain even
more revealing is that the government of Prime Minister John
Major--and British capitalism as a whole--is the U.S.'s closest
political and economic ally in Europe.

Britain is really a junior partner of the U.S. So much so that
when Britain railed against Germany for being the main culprit in
the financial breakdown, German Chancellor Helmut Kohl, in an
obvious reference to the U.S., snickered that Britain is only "a
puppet."

This kind of falling out among thieves has marked
inter-imperialist relations for almost 100 years. It was the
source of two horrendous world wars. Today, with the collapse of
the socialist camp in Eastern Europe and especially in the USSR,
the capitalist countries face their most acute economic crisis
since the worldwide depression of the early 1930s. This, in turn,
has deepened all the contradictions among the imperialist powers.

Far from giving world finance capital a new lease on life, the
counter-revolutionary developments of the last few years have
instead exposed both the anarchy and viciousness of the
capitalist mode of production.

(Copyright Workers World Service: Permission to reprint granted
if source is cited. For more info contact Workers World,46 W. 21
St., New York, NY 10010; "workers@mcimail.com".)

     The N.Y. Transfer News Service 718-448-2358, 718-448-2683
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