Bernanke declared that the QE program would start to be pulled back only if there was an improvement in real economic conditions. But the reaction of the markets to this suggestion indicates that were it actually carried out there would be a full-scale collapse. In other words, financial markets can no longer survive under what were once considered “normal” conditions.
This is the expression of a profound disintegration in the very process of capitalist production itself. In so-called “normal” conditions, money is invested in the means of production and used to employ labour to produce commodities which are then sold to generate a profit. At least part of this profit is then used to finance further investment, generating further production and economic growth.
However, this process has broken down. Profits are being accumulated, but increasingly they do not result from an expansion of the economy as a whole, but rather from cost-cutting, wage reductions, such as in the US auto industry, or the development of new technologies that drive competitors out of the market.
Economic stagnation and contracting markets mean that profits are not reinvested, but lead to the accumulation of large cash balances on the books of corporations—estimated to be as much as $2 trillion in the US economy—which are then used for speculative operations in financial markets.
The violent reaction to the possibility that quantitative easing might be cut back shows the extreme dependence of the capitalist economy on this form of economic parasitism.
It is, of course, not possible to predict the exact form the next stage of the breakdown of the global capitalist economy will assume. But the perverse logic of the market gyrations is very revealing.
The panicked response to the suggestion of even a partial return to what were once were considered “normal” economic conditions signifies that the “health” of the financial markets depends on the continued impoverishment of the working class and the mass of the population.