US interest cuts bring new problems

Ramelson later explained that 'Devey knew he couldn't be a member of the CommunUS interest cuts THE ROLE of the United States dollar, kingpin of the world financial system, is now causing acute anxiety in capitalist circles in Europe.

Leading financial journals of Europe noted last week that 'unofficial' trading in dollars had sharply increased, and that the margin between official and unofficial prices (in other currencies) for these dollars was now very high, higher even than for the So the dollar has become the major focus for largescale financial speculation and is a source of great instability in the international capitalist system.

Then came the news last Thursday in one day's trading, the amazing total of $660m flowed into W Germany alone.

It came at the end of a fortnight during which an estimated $2,000m entered Europe from the US.

'EARNS' MORE

The motive of the capitalists who transfer these sums is quite straightforward Money placed in the Euroean countries, where basic ank rates and other borrowing rates are high, 'earns more than if left in the US, where interest rates have been whittled down over the past few months.

On the same day, America's third largest bank, Chase Manhattan, reduced its prime rate (the lending rate to its most favoured customers) by ‡ per cent to 54 per cent.

This means that businessmen can borrow from the bank at } per cent lower rates, but those who put their money in the bank, and make their money by this money being lent, get less in return.

So the tendency to ship money abroad becomes even more pronounced.

Why this cut in the interest rates, and similar cuts in recent months?

Because, owing to the US recession, industrialists are not borrowing so much money to invest in new plant. General Strike demand on Thursday's Congress YORKSHIRE miners' leaders branch to the union's Yorkwill be asked today to en- shire area council. dorse a call for Thursday's Leeds busmen and SW Lonspecial Trades Union Congress don clerical workers are also to call a General Strike to backing the call. force the Tories to resign.

Nixon, who thinks a reduction in unemployment will help him win the 1972 election, is also encouraging these interest rate cuts.

Now the cuts are worrying some bankers. So slow are the industrialists to respond that the interest rate may go below what is necessary for the bankers to make a profit.

First Pennsylvania Banking and Trust Company (Philadelphia) reacted to the Chase Manhattan reduction:

'Rapid prime rate reductions have begun to erode banks' profit margins. We are at rock bottom now and feel that a reduction of a quarter of a point is enough.' Thus, one of the biggest indicators of a major slump is showing through: the squeeze on the rate of profit makes it impossible for any except the biggest firms to survive (and some of them will also go). This applies to banks as well as to industrial capitalists.

What will be the effect of the flood of dollars into Europe?

First of all, it makes nonsense of the fixed parities between the currencies of the different capitalist powers, and introduces instability into the world financial system by which international payments are settled.

In the European countries, the influx of dollars puts on a big pressure to reduce their own interest rates and discourage the inflow of 'hot' money (capital seeking the highest interest rate).

The Communist Party does bring in order to discourage borrowing and spending, increase unemployment, and carry out their strategy of disciplining the working class.

These capitalists fear that if they reduced interest rates and stimulated the economy, the working class would get even greater confidence and strength and the pressure would be put back on profits.

Their costs of production would rise and they would be priced out of world markets.

The US capitalists are utterly ruthless about this and will do nothing to ease the problem.

They are well aware that a period of intensified competiSCARBOROUGH 1971 April Young 3 & 4 Socialists MAKE THE TORIES RESIGN! DEFEAT ANTI-UNION LAWS! Coaches leaving from all areas. Cost is approximately 14, including bed and breaktast, fare, conference For further details La General Strike.

They consider that the capitalists of the world will not threaten the dollar again by turning to gold, as they did in early 1968, thus risking an uncontrollable world crisis.

PIPE-DREAM

They are confident that the talk about a new all-European currency to rival the dollar is a pipe-dream. So far as they are concerned the world is on a dollar standard and they will have to put up with it.

Nixon's concern about the 1972 election will mean there THE GRAND HALL, THE SPA, SCARBOROUGH and the dance on saturday evening.

Nixon must win, and the Tories of Britain and Europe must find their own way!

The ruling US capitalists are seeking to temporarily solve their domestic political problems by economic measures which threaten stability in the international system and pose problems for the capitalists within every other country.

There is no solution to these contradictions.

They force the ruling classes towards slump, fascism and They make inevitable revolutionary struggles in which revolutionary leadership is the decisive question.

The Marxist movement must be prepared to respond to the most explosive and unexpected developments in such a period.