For more than a year now, the state has been seen as a knight in shining armor in the global financial and economic crisis. In its capacity as “lender of last resort,” it has formed rescue lines all over the world by means of a flood of money from central banks, quasi-war economy mega-debt, rescue packages and economic stimulus programs, without, however, any new autonomous accumulation of global capital itself being in sight. The state, however, only has a formal competence to create money; substantially it remains tied to the real valorization of capital. Everyone knows that an enormous inflationary potential is built up when state programs replace real value creation. How is this potential expressed in economic terms?
Greece’s impending sovereign default is currently the weakest link in the chain. As is well known, similar cases are lurking in the background. People console themselves with the fact that states, unlike companies or banks, cannot really go bankrupt. But what does that mean? A look at history shows how sovereign bankruptcies are resolved: Either the states deleverage themselves out of necessity through inflation or, in a more incremental form, through a currency devaluation. But since Greece, like the other euro countries, no longer has its own currency, its problem becomes that of the entire currency area. First of all, the external value of the euro, against which the big funds are already speculating, is falling. This is not the malicious arbitrariness of financial sharks, but the immanent consequence of every state’s inability to pay.
If other cases follow, the decline in external value will turn into a decline in internal value. The reason is obvious: with a currency devaluation in the air as a last possible “deliverance” by the central bank, companies are forced to rapidly raise their prices in order to escape the devaluation of their commodity capital. This is a self-perpetuating process, because it would intensify the compulsion to devalue the currency. The danger of a euro crash is thus self-evident. Despite all protestations to the contrary, the central euro states must be liable for Greece and other bankruptcy candidates. But if they prop up Greece in order to save the euro, they will put themselves in a similar position, since they themselves are already reaching the limits of their regular financing capacity. The famous “loss of confidence” vis-à-vis the banking system is repeated vis-à-vis the currency. This is not a merely “psychological” matter, but a consequence of hard economic facts.
But a euro crash would have a devastating effect on the world economy and the other currency areas. A general devaluation of assets and incomes through inflation or a currency devaluation would not only strangle the EU’s domestic economy, because globalization has created a far greater degree of interdependence among all economic areas than in the past. In any case, the public finances and thus the currencies of the U.S., Japan and China are up to their necks in water. The “controlled inflation” of no more than 6 percent, which the Anglo-Saxons and Southern Europeans have brought into play as a means of curbing public debt, is threatening to get out of hand before it has even begun. Like Greece within the eurozone, the eurozone as a whole is the weakest link in the currency structure of the capitalist centers because of its fragile construction. The fact that all currencies have already depreciated dramatically against gold is an indication of the crisis of the monetary system in general.
Originally published in Neues Deutschland on 03/05/2010
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