the following is a post I made in a discussion about THIS article, which says:
'A Roy Morgan Research snapshot of more than 4500 people in April put the national unemployment rate at 9.3 per cent.
This compares to Australian Bureau of Statistics estimates that only 4.9 per cent of Australians are unemployed.
"The RBA uses the government's statistics and they say there is no unemployment, so we must keep the interest rates high," Roy Morgan executive chairman Gary Morgan said this morning.
"It is nonsense... the interest rate should have been 3.5 per cent for the last three years."'
Complaining about the interest rate set by the Reserve Bank of Australia, and the differences between it and the rates set by private banks, is a Big Thing in Australia, so I made this post to provide a very cursory and preliminary explanation on what is REALLY behind the crisisThe thing is, the interest rate doesn't matter. The interest rate is the COST of credit, but the cost doesn't matter a bit if the banks don't think that the businesses they are investing in... Er, 'providing credit to', will turn enough of a profit to stay afloat and pay back the loan. Just look at Japan, which has had a stagnant economy for a decade and interest rates near zero percent.
The reason we have this global financial crisis is entirely independent of the interest rate. In capitalism, workers work raw material and capital to produce commodities that the capitalists sell on the market. The thing is, workers aren't paid the same as they produce (how could the bosses make a profit if they did?), so workers can never buy up all the stuff they make. At the same time, newer technologies and training come out which make production quicker. With less time, resources, and effort needed per product, prices drop. The thing is, as prices drop, the cost of the new machinery and training go up. The RATE of profit falls over time, even though the AMOUNT of profit may increase. This comes into conflict with increasing rates of technological progress, meaning that the business has less and less time to pay off the current technology before the next tech comes along. And if they DON'T get the new tech, then their competitors will, and it will drive them out of business. So eventually we come to a situation where it is harder and harder for businesses to expand. Banks become wary and stop giving credit. Those companies can't continue, they crash and burn. Any banks they owe money to also suffer. Banks are forced to look into other forms of business to invest in. Now they start investing in property, but that has its limits as well, as we've seen in the American property crisis and the looming australian property crisis.
So what can business do? If it just sits on its money, then it just stays the same size. If they want to increase their money a little bit, they have to inest. But where? Well, the only options available are areas where there's not been investment, so we get privatisations, in order to provide an outlet for investment. we get private toll roads. We get companies going to other countries, or even just out back, and stealing land off locals in order to mine, dig oil wells, put up power plats, or wind turbines. We get wars in which the defeated country is given money for reconstruction, but that money must be used to pay for the services of companies in the attacking country. Sometimes they don't bother beating around the bush and just give outright access to the vanquished country's resources, banking, and labour market.
All these things are an effort to stave off economic crisis, and they work for a time. But each crisis means new measures are needed to push it back, to start over. And as this happens, the total ability of capitalism to crawl back from the brink is lessened.
The problem isn't the interest rates. The problem is that capital is private property, and it is invested according to the short -term profit interest of each owner. What is needed is a RATIONAL investment of capital, based on human need, not profits on investment. And that won't happen as long as capital is private property.
Reply
