January–February 2015        

Laughing all the way to the bank

Eugene McCartan

We have begun a new year just like the old one: the political establishment treating the people like fools, weaving a web of deception about their failed policies with the pretence that we have “turned the corner” and are on our way back to economic health.
     Again Ireland has been touted as the poster boy for compliance, with Christine Lagarde, managing director of the International Monetary Fund, and others from the EU Central Bank congratulating the Irish people on the sacrifice they have made and for taking the medicine dished up by them without a whimper and declaring that the rest of Europe should follow our example.
     Data recently published by the Central Statistics Office exposes the harsh economic and social reality experienced daily by working people: 12 per cent of children experiencing consistent poverty; 37 per cent of young people—400,000 people—experiencing deprivation; 1.4 million people, or nearly a third of the population of the Republic, suffering deprivation, being unable to afford basic necessities. This deprivation is most acute among lone parents, the unemployed, the long-term ill, and the disabled. A quarter of the population are unable to heat their homes.
     We witness the spread of zero-hour contracts, low wages, growing numbers of long-term unemployed, and continued emigration.
      The Labour Party is desperately hanging on in government, in the vain hope that the cuts in tax revenue from the professional class contained in the last budget, to be followed in the next budget with changes to the universal social charge, will swing enough middle-class votes to secure it some Dáil representation.
     There is a scramble between the two government parties to see who can placate the same classes and secure their vote. Lucinda Creighton, in her effort to build a new political party, is appealing to the same social strata, with her “Reboot” outfit also making a play for changes in the USC, as these would benefit the well off more than those on social welfare, pensions, or low wages. She also wants to keep the property tax and the water charges.
     At the EU level Mario Draghi, president of the EU Central Bank (and former managing director of Goldman Sachs), announced the strategy called quantitative easing. There was a great deal of hype about the announcement. In short, the ECB will buy €60 billion worth of sovereign and agency bonds per month, beginning in March 2015 and running to the end of 2016. In total, they estimate that they will pump about €1.14 trillion into the European banking system.
     This will mean that global investors will be able to make vast profits off shares. The ECB’s statement also makes it clear that it is an open-ended strategy and “will in any case be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below but close to 2 per cent over the medium term.” A speculator’s dream.
     Of course the threat is there that they will buy bonds only for compliant governments that meet their criterion, which is what they call “restructuring,” to make the economy more competitive. To working people this means further stagnation in real wages, precarious employment extending further throughout the economy, tight budgetary controls, and the privatisation of public assets and the commercialisation of public services.
     Quantitative easing will only lead to a growth in asset prices and speculation. The European stock market will boom, just as Wall Street boomed with Obama’s quantitative easing in the United States. The rich will get richer and the value of shares, government bonds and commercial property will grow, while workers’ wages will remain stagnant and the cuts will continue. “Austerity” is to be permanent.
     Another trick pulled by the ECB is that 20 per cent of bond purchases will be subject to what they call “risk-sharing,” which is designed to limit the exposure that the ECB (i.e. Germany) has on its balance sheet. The greater part of the risk, 80 per cent, will remain with national central banks.
     What this means is that the banks will have a lot of money to lend; and those clambering for it are the financial and property speculators, once again exposing working people to all the risk and being left to pick up the bill from wild speculation.
     Quantitative easing is not about easing your financial problems; it will not help you pay your bills, your mortgage, or the loan on your car, nor will it put food on the table. It is part of the continuing attempt to save a failing currency, the EU power structures, and a crisis-ridden system. It reflects the central role and the power of finance capital within that system.
     It will do little to affect the growing mass of unemployed. It will not put one extra bed in a hospital for those waiting on a trolley. What it will do is make the rich richer; and the bankers and speculators will be laughing all the way to the Cayman Islands.

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