[Translated from a radio broadcast by Gegenstandpunkt-Verlag / Kein Kommentar! January 10 2001]
Once again, there is fear of crisis. The financial markets are “nervous” because they hear a “weakening of the American economy” in the ringing bell; more and more companies announce so-called “profit warnings”; an “open recession” is even possible. Once again, the machinery for increasing capitalistic wealth is plagued by the absurd concern that there is too much of its wealth: more and more companies can't fulfill the coercive capitalistic law of investing their capital with the prospect of increased profits – they do not expand it, they have too much of it, they have produced too many commodities that they can't get rid of on overcrowded and increasingly competitive markets; although they would certainly make for nice use values, if no one can pay for them, they are just junk; on the stock markets and money markets, money and credit roam around for which it is ever more difficult or risky to find investment opportunities – there is an overabundance of money too. And because this is all just too much, the other capitalistic coercive law steps forth ever more threateningly: then all this stuff is worth nothing and must be scrapped.
As anxious as entrepreneurs, stock traders, and ultimately politicians are, they have of course no time and no immediate interest in asking where this absurdity comes from and why after every upswing their wealth, apparently according to laws of nature, is again and again squeezed like this. As men of action, they cannot twiddle their thumbs. Their task is to “get a grip” on the crisis before it erupts as such and has to be declared an “official recession.” How can this be done? America shows the way. The world's supreme monetary authority, the American Federal Reserve, takes responsibility and lowers its key interest rate by 0.5 percent. The economics editor of the Süddeutsche Zeitung is in agreement:
The central bank certainly cannot and will not prevent the downturn in the economy; but it will do its utmost so that the slowdown does not become an official recession because of a tight money supply. How effective the tools of monetary policy are in the current situation, no one can say exactly, but ... (SZ, Jan. 4 2001)
An interest rate reduction is in every respect a curious “tool of monetary policy.” First, it is a “tool,” but unlike a hammer or a stethoscope, no one can say exactly whether and how it will work “in the current situation.” Secondly, this “tool” is supposed to prevent a “tight money supply” – when the expansion of the existing capital is the problem. Thirdly, this “tool” exhibits a puzzling effect:
The American central bank has again justified its reputation for always doing the right thing at the right time ... Because the step took the financial markets completely by surprise, its effect was decisive: the stock markets turned into a plus ... the floor of Wall Street turned into euphoria ... the central bank has managed to transform the gloomy mood in the financial markets with one blow.
“Doing the right thing at the right time” therefore shifts the financial markets into “euphoria.” A rate cut, and the gentlemen on the stock market feel better – why, and why is this important? And then one still has to find out that it is not the lowering of interest rates themselves that has this effect, but the timing of their announcement: the lords over the trillions may indeed have expected a rate cut, but this took them “completely by surprise” and was therefore “decisive.” The “euphoria” arises because the Fed has played a prank on them!? An economics editor will spout such nonsense. In truth, the stock brokers have already understood how the surprise coup is meant: with the premature and – by normal standards – high interest rate cut, the Fed announces that it wants to avoid a “tight money supply,” sending – as it is called in these circles – a “positive signal.” The substance of it is: if troubled times come upon the financial world, the Fed will use its “tools” with all its power to preserve their money and credit from a decline in value. This gives a go-ahead for the “euphoria.”
In the next moment, however, exactly this reassuringly meant “signal” gives rise to concern, and the next day and in the same place, the SZ reports “setbacks” and “falling prices.” And this is also completely logical. If the central bank of the world’s stock market promises assistance, it underlines how important this institution is for the functioning of the whole capitalistic business. It says, however, that the institution is in danger – with possibly bad consequences for this same capitalistic business. This interpretation, which is inferred from the exact same lowering of interest rates, has the less “euphoric” brokers beginning to wonder whether or not outstanding debts will soon need to be finally repaid; whether the Fed's surprise coup is not more of a “panic reaction”; and whether the lowering of interest rates doesn't ward off a dangerous situation as much as lay it bare and aggravate it.
The speculators are free to construe one and the same set of facts in completely opposite ways; in their language: to attach quite different “expectations” to it. The more optimistic trust the interest rate cut will have all kinds of positive effects; the pessimistic interpret it as an expression of an already dangerous situation. Neither faction commands any knowledge, but they are the world champions of assessment, the stupid activity which they inflate into a talent given only to a few for feeling out future developments. They assess according to their information – and this is what they are so proud of – the “risks of uncertainty.” That is exactly what “speculation” signifies. At the same time, however, they also want to collect a lot of clues and hints as to how “safe” their appraisals are – nobody knows, but they all know the market well, and in the end, for all intents and purposes, a well-founded shot in the blue should hit it. When the Fed wants to influence the speculators, the speculators ask themselves how it is meant, and then whether it does influence them. Then they ask the Fed whether it now believes that it has had an influence, what it will likely do next, whether it will then confirm them – the speculators – in their optimism or in their pessimism, etc. An absurd but also an amusing dialogue continues between the Fed and the speculators about how it is to be taken; as in, for example, the following quote:
The upswing in stocks should be sustainable if the impression is solidified that the rescue operation of the American central bank does not come too late, that a recession can be avoided. (FAZ, February 2, 2001)
A classic circle: the central bank would like to do something to counter the “gloomy mood” on the stock market in order to avoid a “recession” – it succeeds if the stock market is of the opinion that is successful. The “tools of monetary policy” are therefore only effective if they are perceived to be effective; they prevent the great crash when the speculators believe that they have prevented it – if they do not believe it, it occurs. In this very reasonable way, the central bank speculates on the speculators and the speculators speculate on the central bank.
If, after all the “tools of monetary policy” are fiercely applied, the “economic cooling down” becomes a frost, then of course the search is on for the blame. The Fed already has good prospects in mind: their rate cut probably came too early or too late or was too high or too low, which then can be combined arbitrarily. If they were rational, they would in silence blame this on themselves and correct their ineradicable childish belief: that crisis is only attributable to errors and is only a matter of proper management.