Robert Kurz

In Germany, the “summer fairy tale” of strong quarterly growth is being celebrated, driven primarily by export successes in the automotive industry (domestic sales have slumped by 30 percent at the same time) and mechanical engineering. The crisis is considered to have been overcome, although GDP has by no means returned to its previous level and a sustained boom in the global economy is unlikely. The current uncertainty factor is the world’s largest economy, the United States. The mood there is deteriorating. This is mainly due to a phase shift in the economy, as the government programs in the U.S. started first and therefore expire earlier. Now it is becoming clear that this supposed “stimulus” is in danger of coming to nothing. Leading economists are talking about an imminent double dip, possibly an even deeper relapse into recession.

The main problem, apart from government debt, is the massive over-indebtedness of U.S. households, whose consumption accounts for 70% of GDP. At the height of the deficit stimulus in 2007, average real incomes were below those of 1970, with spending power coming solely from credit cards and leveraged mortgages, most of which are now worth nothing. Official unemployment has doubled to 10 percent; real unemployment is estimated at 17 percent. Annual growth of 3 percent is needed just to maintain this precarious status quo; a permanent reduction in the unemployment rate would require growth of 6 to 9 percent growth. This is out of the question in the long term, as the middle class in particular is eroding at a breathtaking pace. To regain purchasing power, U.S. households would have to pay down more than $6 trillion in debt or massively reduce their spending for 10 years. That would drag the economy down even further. But further government subsidization calls into question the creditworthiness of the U.S., not to mention its global military power. The cost of operations in Afghanistan, Iraq and elsewhere has risen by several hundred percent since 2002 and can no longer be paid out of petty cash after the financial bubbles burst.

The rampant anti-American gloating in the face of this development ignores the role of the world power economy for global capitalism. A longer-term decoupling of the world economy from the U.S. is illusory. This structure, built up over decades and based on deficit-financed consumption of the world power, cannot be reversed within months. Neither China nor the EU nor Japan is in a position to take over the role of the U.S. This also applies to the function of world money. After the end of the “gold dollar,” the “arms dollar” is now up for grabs. The Chinese yuan is not even a convertible currency, and the euro is itself in deep crisis. The loss of a recognized world trade and reserve currency would hit the global economy even harder. As soon as the cyclical phase shift evens out and the government programs in China and in the EU (exacerbated here by the imposed austerity programs) also reach their limits, a similar situation will arise for these centers as is now the case for the U.S. The actual end of the world power economy, which is only hanging on by a thread, could then trigger a second wave of the world economic crisis in the next few years at the latest.

Originally published in Neues Deutschland on 08/20/2010

Robert Kurz

Perhaps German social democracy is only on the rise in the polls because the black-yellow coalition government is looking more miserable from week to week. In opposition, the former party of the imaginary “new center” is even rediscovering its social soul. At least, it pretends to. A key motion of the SPD presidium for the upcoming party congress calls for an increase in the top tax rate from the current 42 percent to 49 percent, but only for incomes above 100,000 euros. In addition, private assets are to be taxed at a higher rate. But there is a small credibility problem: the SPD is heroically taking a stand against a tax cut for the rich that it had itself introduced under Chancellor Schröder.

It is doubtful, however, that this regression is the result of any deeper insight. In the meantime, the rich themselves have overtaken the SPD on the left. There is no talk show in which a top earner does not explain how much he resents being taxed so leniently. Even before the SPD, well-known big owners were demanding higher taxes for themselves so that the state could fulfill its duties. In the U.S., billionaires want to give away half or more of their fortunes.

When the rich and super-rich go into sackcloth and ashes like this, even the FDP’s usual rhetoric about the sheer “envy” of those who are less fortunate through their own fault gets in the way. If social cynicism was considered chic at the height of the financial bubble and deficit boom, the insatiable gluttons were denounced in the global crash and now turn out to be role models of altruistic philanthropy. The SPD has gone through all the socio-economic zeitgeist cycles of the past decade. First it gave without restraint to those who already had it; then it was the turn of the locusts to be scolded; now it is allowed to participate in the moral catcalls as soon as the top-earning clientele indulges in them. The contemplative rethinking, however, is probably due to the fear that the global economic crisis will not be over as quickly as hoped and that its still unresolved consequences could plunge society in chaos.

But the moralization of the economy always comes too late. As long as they can afford it, because the economic horn of plenty is overflowing anyway, the elites don’t want to know anything about it – and the political class warns not the rich, but the poor against an excessive sense of entitlement. If, on the other hand, the valorization machine has seized up and, despite all the all-clear signals, is making eerie noises, then it is no longer much use to want to finally become decent. Capitalism is not a matter of good will. The mode of production of wealth itself proves to be a problem that cannot be solved with mere distributive justice. Even if the U.S. billionaires were to give away all their wealth down to the last cent, subjective generosity alone could hardly prevent the impending second crash of the economy. Unfortunately, the system of abstract surplus creation cannot be donated as such to a good cause, so that social peace would finally prevail.

Originally published in the print edition of the weekly newspaper Freitag on 09/02/2010.

Robert Kurz

The more capitalism invokes its rationality, the more irrational it seems to become. Thus, the competition for survival on the markets has led to policy of cutting costs no matter what. Fewer and fewer employees are expected to handle more and more tasks. Wages are to be reduced, and breaks should ideally no longer occur at all. When it comes to working conditions, stinginess is cool. During the crisis, this cost-cutting mania was accelerated, even to the detriment of quality control. Recalls, breakdowns, defects and scandals are on the rise. The radicalization of business management is backfiring on business management itself. This is simply because the capitalist concept of “efficiency” is completely empty. It does not refer to the concrete content of production, but only to the abstract maximization of profit, which has apparently finally entered the stage of its historical incompetence.

This is precisely why the business mania has spread to everyday life. Not only schools, scientific institutes, theaters or children’s shops are to be run like businesses and oriented towards cost-cutting, but also personal relationships. Even the individual person is regarded as a two-legged business, and is subjected to tests (e.g. by the labor administration) to determine the “rationalization potential” of his or her lifestyle. The satirical slogan “sleep faster, comrade” appears as the animalistic seriousness of crisis capitalism; the general pressure for a meaningless “increase in efficiency” has taken on the dimension of a social obsessive-compulsive disorder.

But the imperialism of the economy has two faces. While, on the one hand, a penny-pinching miserliness of the abstract time regime prevails and even going to the toilet is monitored by companies, on the other hand, an almost feudal culture of extravagance prevails. The mania for cost-cutting in business management is matched by a mania for economic grandeur, which blossoms in a relationship with politics. A prime example of this is Deutsche Bahn’s absurd prestige project Stuttgart 21, the estimated cost of which has risen from 4 to 7 billion euros to 12 billion euros, according to independent experts. There is no money for the tracks for local and freight traffic, but for the ICE metropolitan traffic, which is supposed to compete with the airplane, they are allowed to splurge. This pyramid scheme is also likely to backfire on its creators, because the result is likely to be ruined investments.

Ruinous economic prestige thinking has spread to all areas of society, as has a miserly obsession with saving money. They are two sides of the same coin. Municipalities that are thinning out their administrative and transportation personnel are greedy for large-scale events (see Duisburg and the Love Parade disaster); others want to build stadiums for international matches from scratch, while at the same time almost rationing toilet paper. And the same “entrepreneurs of their labor” who allow themselves to be made fools of the performance hustle, omnipresent surveillance and senseless rationalization programs of their lifetimes, plunge into debt for the sake of neurotic prestige consumption, the servicing of which they then save from their mouths. It is not a sign of stability when a society vacillates between extremely contradictory behaviors. Those who rationalize themselves to death must in turn puff themselves up to survival size. Alienated total expenditure is both; but the world is perishing in a noble way.

Originally published in Neues Deutschland on 09/17/2010

Robert Kurz

This year, ex-Chancellor Helmut Kohl narrowly missed out on the Nobel Peace Prize, which, according to the prevailing do-gooder doctrine, he undoubtedly deserved for his role in the annexation of the former GDR to the FRG. Not even Iranian President Mahmoud Ahmadinejad was shortlisted for his efforts to bring stability to the Middle East. For political reasons, a Chinese dissident had to serve this time. The furor over this has somewhat eclipsed another delicacy of the Nobel Committee, namely the award in the field of economics. This most political of all Nobel Prizes is usually awarded to those who have achieved an intellectual feat for the noble purpose of putting humanity even more under the thumb of capitalism. In 2010, the two Americans Peter Diamond and Dale Mortensen, and a Briton, Christopher Pissarides, were awarded in this spirit.

At first glance, the research of this year’s award winners seems to be in a fairly neutral field. Their topic is so-called search costs. This is a rather banal everyday phenomenon: buyers and sellers often need a lot of time to find the right goods or the right buyer; and time, as is well known, is money in this best of all worlds. However, these search costs are ignored in economic models. The economists now being honored conclude that the automatism of supply and demand does not always work, and that government assistance could potentially reduce search costs. Dandy Keynesianism, then, as the statist left loves it. The Oslo Committee also seems to have given neoliberalism the boot.

Things become a bit clearer when you learn that the fabulous problem of search costs is supposedly most important in labor markets. Scientists have shown, they claim, that unemployment is not only (!) caused by wages that are too high, but also by the unemployed taking too long to look for a job or having expectations that are “too high.” In plain language: Wage reductions through the free play of supply and demand on the markets for the commodity labor power are not enough; additional state coercive measures are needed to prevent the unemployed from causing high search costs with their “demanding attitude.” And since they can only be happy if they can finally call a lousy cheap job their own, this is of course in the very best interest of those concerned. And all of this is apparently “scientifically” proven.

No wonder the Handelsblatt blurts out that the work of this year’s Nobel laureates laid “the intellectual foundation” for the “strategy of incentives and demands,” i.e. also for Hartz IV. Unfortunately, the practitioner and namesake of the application of these findings, Peter Hartz, was not among the honorees. But he may yet become the “laureate of the hearts” as soon as it is recognized that he actually gave neoliberalism the boot with his reform. The “invisible hand” of the market is not enough to discipline wage earners; the “visible hand” of the labor administration must also strike. The well-known U.S. Keynesian Paul Krugman has described his prize-winning colleagues as “incredibly deep thinkers,” which makes clear once and for all what we can expect from crisis Keynesianism.

Originally published in Neues Deutschland on 10/15/2010

Robert Kurz

In the fall of 2010, obsessive expectations of economic salvation are booming, especially in Germany. Although not a single one of the global causes of the crisis has been overcome, the media are already painting the prosperous landscapes of a new economic miracle. The belief in faith as the self-sustaining force of the upswing sets the standards for dealing with reality. Whoever falls behind in the race for optimism has already lost. That’s why exaggerated reports of success are always necessary. The worldwide state-financed growth, which is still below the pre-crisis level, is not sufficient for the flights of fancy of the current monetary hope-mongering. But if the state administration allows itself to falsify the unemployment figures with ever new tricks, and the banks are allowed to outsource their bad loans to special-purpose vehicles – why should the industrial groups take a back seat in “creative accounting”? A whitewashing “accounting policy” has always been commonplace. But what the corporations have allowed themselves to do in this respect since the supposed end of the crisis is record-breaking.

This is made possible by the International Financial Reporting Standards (IFRS), which have now been adopted by all major public companies. There is not a trace of increased control in it, on the contrary. The new accounting guidelines give the CFOs a free hand for almost adventurous accounting acrobatics. This applies to both the past and the future. The basis for this is the lax definition of depreciation and so-called special expenses. This means that charges can be removed from the balance sheet almost at will. Siemens, for example, make the liabilities of its finance division disappear; airlines conjure away their leasing costs. And despite high future valuation risks, the overpriced costs of company acquisitions are not written off to a realistic extent. The result is what U.S. financier Warren Buffett derisively calls “bullshit-earnings,” because a growing proportion of up-front or follow-on costs no longer appear on the official balance sheet. In reality, profits are nowhere near as abundant as quarterly reports might suggest.

The lively balance sheet policy only makes sense in relation to the financial markets. The Fed’s desperate dollar glut drives neither consumption nor investment, but only global stock market prices. The stock markets are now less a barometer of real economic development than of profit expectations based on legalized lazy balance sheet tricks. Behind closed doors, there is already talk of a “valuation bubble” among large international corporations. When they buy back their own shares, they reap differential profits quite independently of the real business, for which they themselves have created the wrong conditions in purely mathematical terms. This does not change anything about the dependence of the economy on public finances, because the new valuation bubble can no longer feed a “consumption miracle” as the real estate bubble did recently. It is merely the economic downside of an equally adventurous monetary policy that threatens to lead to a trade and currency war. Then, however, the air will very quickly escape from the valuation bubbles in corporate balance sheets.

Originally published in Neues Deutschland on 11/15/2010

Robert Kurz

At present, the crisis of the international financial system and the slump in the global economy are considered to have been overcome, although the problem has only shifted to public finances. In recent weeks, however, a supposedly successful model of deficit capitalism has once again come under fire.

The flagship project of microcredit in the impoverished regions of the world and in many so-called emerging countries was not only considered crisis-resistant, but also proof of the elemental power of free-market thinking. Under the sign of neoliberal “self-responsibility,” poor women in particular were to be mutated into small entrepreneurs in the service sector with the help of tiny loans of the equivalent of 100 to 500 euros, enabling them to take their capitalist destiny into their own hands.

Significantly, Muhammad Yunus from Bangladesh, the inventor of the model, was awarded the Nobel Peace Prize in 2006, not the Economics Prize. The enthusiasm of the elites was great, because the idea seemed to kill several birds with one stone and to combine a strictly market-based fight against poverty with an equally strictly market-based emancipation of women, i.e. to initiate a social pacification that was entirely in line with the system. Donations from philanthropic capitalists, such as Bill Gates’ foundation, poured in.

Starting in Bangladesh and India, a new financial market for predominantly “female” microcredit in Asia, Africa and Latin America, worth billions, was created within a short period of time. Major Asian banks, as well as financial institutions such as Deutsche Bank, created relevant investment companies. In the course of this expansion, the first microbanks have already gone public. What started out as ethical image cultivation has turned into a hard-hitting business. Every little bit helps. Officially, most microloans go to women’s self-help groups and their business projects. But the same applies to microloans as to large loans: they are an anticipation of future real income and must be “serviced,” i.e., repaid in full with interest.

However, the women’s small businesses financed with these loans hang on by a thread and can quickly fail due to external circumstances. Even the illness of a family member or one of the increasingly frequent floods in the wake of capitalist-induced climate change can cause the microcredit to disappear into “unproductive” (in market terms) costs. As microcredit markets exploded, the microenterprises they supported became increasingly illusory. It became a matter of being in on the growth at all costs. In India, self-help groups increasingly became mere formal shells, while the money was simply used to buy food.

After the crisis of the big financial markets, the crisis of microcredit is now due. However, the situation is much more brutal than in the halls of high finance. Debt rescheduling at the microbanks increases the weekly interest burden. Many women are forced into prostitution in order to stay solvent. In India, suicides are on the rise among debtors who can no longer afford the 5 or 6 euro installments. So much for free-market philanthropy and women’s liberation. The bursting of this particular financial bubble, which is no longer so small, will not only have repercussions on the economies of many emerging countries, but is also a warning sign for the credit crisis as a whole, which has by no means been overcome.

Originally published in Neues Deutschland on 12/13/2010

Robert Kurz

The crisis, whether it is now contained for the time being or will soon return in an aggravated form, is at its core a so-called debt crisis. But what does that mean? Production capital borrows money through the banking system. Therefore, it then has to share its profit with finance capital, which receives  interest from it as the price for the borrowed money. However, if the production capital cannot make a sufficient amount of profit, there is a crisis for both the debtor and the creditor. The “popular prejudice” (Marx) likes to blame the “greedy” finance capital, which wants to enrich itself unproductively. But the question is why production capital needs to borrow money at all in order to be able to pay for the means of production. That is the crux of the matter, not “evil” finance capital.

Competition forces a constant increase in productivity, and this is only possible through the use of an ever larger scientific-technical aggregate. Marx showed that in this process the share of dead material capital, which does not create new value, increases more and more in relation to the share of labor power, which alone creates additional value. Bourgeois statistics say the same thing when they state that the cost of a job is constantly rising along with capital intensity. In other words, the dead upfront costs of production capital can no longer be financed from current profits. Hence the resort to credit to pay for the growing physical capital. In the 20th century, the debt problem has spread from production capital to government and households. Even government spending on infrastructure and private consumption can no longer be financed out of current real income, but only by credit.

But mega-debt at all levels is nothing more than the anticipation of future profits, wages and taxes from real production processes. This “future consumption” becomes a general crisis when it has been advanced too far and the credit chains break. This applies to all actors, including the state. There is now talk of “deficit sinners” and dubious financial behavior. We must not live at the expense of future generations, they say. What is needed is a new “domestic paternalism” with an iron will to save. In reality, however, it is not future food, clothing, housing and equipment that are being consumed, but only increasingly illusory future monetary income, in order to be able to use currently abundant material resources at all.

This absurdity points to the fact that capitalism is an end in itself of abstract money multiplication and has nothing to do with the efficient satisfaction of needs, as its apologists claim. Money is not a real resource, but the fetishistic form of real resources. And the global debt crisis is the result of the desperate attempt, through inflated “future consumption” of money revenues that will never come again, to forcibly keep the vast productive forces within the limits of capitalist self-purpose, even though they have long since grown beyond it. Because capitalism has already consumed its own future, we are now supposed to live worse and to downgrade intact resources, up to and including medical care. It is not only in Greece that the pain threshold has already been reached. But the social consciousness has not yet learned to use the “devalued” resources according to a different logic.

Originally published in Neues Deutschland on 01/10/2011

Robert Kurz

The peace movement ended when Nicole sang ‘a little peace’ and Ronald Reagan and his family joined the human chain. Today, every arms industrialist and torturer is for ‘a little peace’ and democracy. The same goes for the socio-ecological movement and its arbitrary concept of ‘sustainability,’ which misses a fundamental critique of economic calculation by a hair’s breadth.

Since modernity has been given a postmodern facelift, anything goes because nothing means anything anymore. Against the background noise of the global market machine, nothing matters: expressed in monetary terms, all things and living beings in this world seem to be of the same interchangeable quality. And freedom is insight into the necessity of market conformity; Orwell didn’t even need to invent ‘new-speak.’ A voracious plastic discourse is taking hold, appropriating all terms and levelling all differences, the more it talks about ‘individuality’ and ‘diversity.’ Any social critique is swallowed up to become a market commodity alongside credit cards, panty liners and cell phones. Politics and the media stir up the ready-made soup of the zeitgeist, in which the latest buzzwords have to swim for the sake of saleability; even if they have no more substance than a Knorr or Maggi ‘chicken soup’ contains real chicken. It seems that the plastic term ‘sustainability’ has been invented for this fast food ‘discourse.’ This new word is ideally suited to merge hard-headed market interests with whispers of ecological responsibility, in order to feed the product, which is edible for everyone, into the endless operation of morsel journalism.

With the help of ‘sustainability,’ one can effortlessly act as an eco-social beacon without questioning the prevailing social order and its economic rationalization of the world. Every child knows by now that economic rationality permanently externalizes costs: to society as a whole, to the future, and also to nature. It has proved virtually impossible to internalize these externalized social and environmental costs back into the economic balance sheet through political regulation.

But this could have been foreseen, because the essence of business management is that particular calculation which, in the interest of economic self-preservation, literally doesn’t give a damn about the whole. If you don’t screw up the world, the markets will punish you. In any case, it would be an absurd procedure to continue to organize society according to a principle that systematically calculates out the social and ecological consequential costs, only to want to add them back in later. Why not simply use society’s resources wisely?

Unfortunately, this common sense can only be mobilized if society puts an end to the blind business calculation robot. But let us not get carried away. The socio-ecological debate of the 1970s and 1980s was obviously a luxury product of the world market winners. Now the fun is over. And precisely at a time when eco-dumping and social deregulation are accelerating the crisis, ‘sustainability’ is making a career for itself. It is the title for the certificate of surrender of socio-ecological social criticism.

The faster tropical forests disappear and drinking water is contaminated, the more dramatically global mass unemployment and mass poverty increase, the more general the commitment to ‘sustainability’ becomes. This is why even a free-market radical like BDI boss Olaf Henkel can appear as an authority in the sustainability debate. All the goats will become gardeners, and the victorious microeconomy will sustainably destroy the world.

Editor’s note: This text was first published in: Political Ecology January/2000, p. 10. The text could have been written today. Some names would have been different and the word climate catastrophe would have been added.

Robert Kurz

That time is money and nothing else, capitalism knew long before Karl Marx. The abstract fluid time of business management corresponds to “abstract labor,” the expenditure of “brain, nerves, and muscles” optimized for the end in itself of the valorization of money capital – all the while remaining indifferent to the content of this expenditure and to the health of the working people. The capitalist social machine also turns man into a machine. Already in the times of the economic miracle people noticed that the rhythm of working time spills over into “leisure time.” The general obsession with time has become the hallmark of a postmodern acceleration society. The philosopher Paul Virilio spoke of a “frantic standstill.” In Japan, “Karoshi,” which is sudden death due to overexertion at the sacred workplace, became the talk of the town.

The world crisis of the 3rd industrial revolution is taking performance mania to the extreme. The more mass unemployment and underemployment spread, the more unrestrained the extraction of energy from the proud occupants of the workplace became. Whether in the factories of the corporations or in the cleaning crews of the service companies, whether in the privatized postal service and railroads or even in the temples of finance capital: everywhere, one person is supposed to do what three or four did before. In the U.S. and Argentina, it was revealed that retail groups have diapers distributed to cashiers so that they don’t “steal time” from management by attempting to satisfy their elementary physical needs. A heavy workload goes hand in hand with humiliation, all in the name of the need for profit.

But the obsession with performance by no means affects only the lower ranks of the global value chains. Since it is not only about the “muscles” but also the “nerves and brains” of the human combustion engines, the “officers and NCOs” of the much-invoked society of knowledge are not exempt. When a young finance lawyer from the renowned law firm “Freshfields Bruckhaus” threw himself from the seventh floor of London’s Tate Modern museum at the beginning of 2007, it was lamented that: “The city feeds on its children.” Working 7 days of 16 hours each, the aspiring elitist had been unable to endure the “up or out” imperative, despite the prospect of a soon-to-be £1 million annual salary. At the same time, a series of suicides at Renault’s technology center became public. A leading computer scientist threw himself to his death, a highly qualified engineer drowned himself in a nearby pond, and another hanged himself in his apartment. The background is believed to be the “Renault Contrat 2009” restructuring program, which amounted to psychologically terrorizing top executives with negative evaluations in the presence of their colleagues.

Such incidents, discussed in the media in all their helplessness, are only the tip of the iceberg. Time is money, and therefore murder. We may soon see exemplary managers putting on their diapers early in the morning so that they don’t waste their valuable brain time with a superfluous trip to the toilet. Pampers and “Karoshi” for everyone, then perhaps the extreme income inequality will be easier to bear and the “upswing” can continue. The fact that mishaps and catastrophes will accumulate in the process is to be accepted, because concrete realities are no longer important in virtual capitalism anyway. For a universal culture of incineration, the duty to bravely self-immolate also applies.

 Originally published in Neues Deutschland on 04/05/2007

Robert Kurz

The crisis is still considered to be over, and the global economy is said to be growing at a healthy rate that is expected to exceed pre-crisis levels in the near future. However, an advance of inflation is making itself felt on not so quiet legs, which seems to be replacing the deflationary spurts of the great slump. In recent months, the inflation rate in India and China, the world’s great economic hopefuls, has exceeded the 5 percent mark, and food prices have risen by as much as 15 percent (India) and 12 percent (China). The increase in key interest rates, which are now 5 percent or more above the European and U.S. rates in each case, has had little effect so far. A similar pick-up in inflation can be observed in many peripheral regions of the world. In the euro zone, too, inflation reached 2.4 percent in January, breaking out of the official target range. The same development in the USA, of course, only elicits a shrug of the shoulders there.

What would have been considered alarming not so long ago, at least in the EU, is now being talked down here as well. Both ECB President Trichet and Deutsche Bank CEO Ackermann have declared the global price increases to be a “normal” phenomenon in the economic boom, which will recede by itself with the cycle. In doing so, they succumb to an elementary confusion. A mere cyclical general price increase, which arises from a surge in regular demand due to increased profits and wages from real capital valorization, is a pure market phenomenon and has nothing to do with the value of money. It is quite different when government consumption and central bank money artificially fuel the economy. There is a huge difference between whether demand increases because the economy picks up on its own, and whether the economy picks up because capitalist irregular demand is created by government decree. In the latter case, the general price increase is based on a devaluation of money itself. This is the real inflation, and this is what we are dealing with now.

In fact, the states and their central banks have created credit money on a historically unprecedented scale to absorb the world economic crisis. In the U.S. alone, more than four trillion dollars were injected into the economy through various channels within two years. Everywhere, low or zero interest rate policies are spewing money like a fountain into the commercial banking system, which is allowed to deposit bad debt as “collateral.” Moreover, the U.S. Federal Reserve has been buying its own government bonds en masse for some time, because the Asians are increasingly spurning these bonds, which have become dubious. The ECB is playing the same game with the government bonds of deficit countries in the euro zone in order to save the common currency. Contrary to its announcements, it has not succeeded in siphoning off this liquidity through refinancing operations. As long as the flood of money is merely used to reschedule debts or drive up stock market prices, inflation will be kept in check. But to the extent that the purpose of the exercise is achieved, namely to create demand out of nothing, accelerated demonetization inevitably follows. It shows ignorance to deny this connection and to fantasize about a self-sustaining boom. The inflationary bomb will dissolve the illusory growth into thin air just as the deflationary one did before.

Originally published in Neues Deutschland on 02/07/2011