LAST WEEK it seemed for a moment as if the Confederation of wishes were coming true. Interest rates fell for the fourth time this year; another cut in mortgage rates was said to be on the way. mysterious financial totem, the Dow Jones Index, saw biggest American interest rates, the cause of anguished squeals from every treasury in Europe, were going to fall.
Was this the light at the end of tunnel? Was John Wayne finally going to rescue the world from recession?
Not quite. On Friday, the Financial Times reported that the government 'received three pieces the economy figures published yesterday'. These were:
Capital investment (already al an all-limne Iow) fell again this quarter.
Manulacturing myestnichl fell most sharply at 4.5 per cent, concentrated in new plant, which registered a 7 per cent drop.
Manufacturers stopped restocking, which generally signals downturn.
• Cyclical indicators, which predict future economic activity, turned down in July, having risen since last autumn.
Nor is America doing so wonderfully. The shares boom relates, not to its Industry's dearest Share prices boomed on Wall Street; that one-day leap ever.
strength, but weakness. The boom followed pronouncements by Dr Henry Kaufman, the so-called 'guru of the bears who, having predicted high interest rates for most of this year, has now changed his mind.
Because things are worse lan ne nougal they were. In a Seatoman Saloman Brothers, his company, he explained that the pected business recovery of 1982 is now less likely to materialise'.
August growing suspicion that the wait will be a long one.
Economist Intelligence Unit, in its latest savs Enal here was slight rise beginning of this vear but that 'the impetus has now ended, however, and we do further OCC stimulus to overall output occuring until early 1983'.
The Unit expects this recovery to be deepened by Conservative-LiberalSDP coalition 1984. This will really set us on the road to riches with an ligure 'only' 2.7 million by 1986. This is 'optimistic' forecast. We won't go into the pessimistic one.
these developments discern the outlines of something very important: the ugly shape of the postmonetarist economy.
In reality, interest rates have not fallen. They have adjusted to a lower infla831.2 tion rate. The 'real' interest rate (interest minus inflation) is no lower than Does this signal last ycal. recovery? Neither has inflation been conquered, nor has the basis for recovery been laid. pansion. As Kaufman recognised, the relative adjustment prices and bank 70771211 00 COL a permanent phenomenon.
une snares not a surge of confidence in indust cas a tremo! of suspicion about the banks. There is no better proof that monetarism cannot 'control the money supply' than has been happening in international banking markets. International lending has fantasy proportions: the fantasy ended last week in Mexico City The problem facing Friedman's aisciples that we live in a private economy. Decisions lend money are ultimately The privale goy not control, credit, credit, Control. bank lending and hence so-called 'money creation' by private concerns. make money not by borrowing but by lending In the fairy story of capitalist CCOHONSE does money create wealth on its own.
Ultimately, banks grub in the same trougn as all other capitalists: the exploitation of your labour and that of your sisters and brothers to absorb 'hot' honey Mexico reached that top The terrifying prospect of a banking collapse now hangs over the imperialist economies. They cannot afford this: the Financial Times now speaks of international banking 'suspending reality and of the "delicate task of bringing it gently down to earth But what are the pro-
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Dow Jones average