Tuesday, August 4, 2020
US credit outlook rated “negative” as concerns mount over dollar’s global role
https://www.wsws.org/en/articles/2020/08/03/doll-a03.html
By Nick Beams
3 August 2020
In another sign of concern over the stability of the US dollar, under conditions where the Fed is pumping trillions into the financial system, the Fitch credit rating agency has placed a question mark over the credit worthiness of the United States.
The agency downgraded its outlook for US credit to “negative” from “stable” on Friday, while retaining its AAA rating—the top grade—for the credit of the US. The agency raised issues about whether the US would be able to contain rising deficits as the government continues its corporate bailouts.
In a statement announcing the downgrade, the agency said the US sovereign rating was supported by “structural strengths” and benefited from the role of the dollar as the world’s preeminent currency. However, the outlook had been revised to negative “to reflect the ongoing deterioration in the US public finances and the absence of a credible fiscal consolidation plan.”
Fiscal deficits had already been on a rising path before the economic shock delivered by the COVID-19 pandemic and they had started to “erode the traditional credit strength of the US,” Fitch declared. Now, there was a “growing risk that US policymakers will not consolidate public finances sufficiently to stabilise public debt after the pandemic shock has passed.”
Articulating the class interests of the financial oligarchy in the US and internationally, it made clear where such “consolidation” should take place—not in reductions to the corporate bailouts or a reversal of the massive corporate and personal tax cuts for higher income earners enacted by Trump at the end of 2017.
With one eye clearly fixed on the development of the class struggle, Fitch said: “Having laid bare inequalities in the provision of health care and exacerbated widening wealth inequality… the crisis could also lead to pressure for higher public spending, greater state involvement in the economy, redistribution of incomes and moves to strengthen workers’ bargaining power.”
It left no doubt about how such issues should be dealt with. “The economic crisis has likely brought forward the point at which social security and healthcare trust funds are exhausted, demanding bipartisan legislative action to sustainably fund or reform these programs,” it said. In other words, there should be an assault on spending for basic social services.
Pointing to what it called the “exceptional financing flexibility” of the US—the borrowing by the US government of $3 trillion from February to June and the interventions of the Fed to “backstop financial markets”—Fitch raised the longer-term consequences of these actions.
In what appeared to be a concession to so-called Modern Monetary Theory, which maintains that as the US is the issuer of its own currency it can never run out of funds—a theory widely promoted in pseudo-left circles—it said: “It is a truism that the US government can never run out of money to service its debts. However, there is a potential (albeit remote) risk of fiscal dominance if [debt-to-GDP] spirals, posing risks to US economic dynamism and reserve currency status.”
Concerns about the global role of the dollar as a result of the rise of government debt and the expansion of the Fed’s financial asset holdings, which have increased from under $1 trillion on the eve of the 2008 financial crisis to around $7 trillion today, go well beyond Fitch and other agencies.
In an editorial published at the weekend, the Financial Times warned that the world economy “is in a dangerous place.” Pointing to the resurgence of COVID-19 infections in Europe, Australia and Japan, where the virus had appeared to be contained, it said: “This was the week when hopes for a short lockdown followed by a swift resumption of economic activity were dashed once and for all.”
This meant, the editorial continued, that it was likely governments would have to continue to borrow and spend. The implications were examined in a separate article titled “Dollar blues: why the pandemic is testing confidence in the US currency.”
The article noted that since the initial scramble for dollars in the crisis that hit financial markets in mid-March as the pandemic struck, the dollar has been falling in currency markets, recording its biggest monthly decline for a decade in July.
The Financial Times wrote that the 5 percent fall in the US currency over the month “might sound modest but in the relatively stable foreign exchange market that counts as dramatic.” It added that such a sharp move “inevitably raises questions that go to the heart of the global financial system and the unique role that the US currency plays.”
Those questions are increasingly coming into prominence because of the rise in the price of gold, now trading at a record high of between $1,900 and $2,000 per ounce. Investors, the article noted, are seeking an alternative to the US currency, and as American politics becomes increasingly dysfunctional, “some are openly asking… whether US institutions are now too weak for the world to rely on the dollar.”
Opponents of the view that the dollar could lose its privileged status maintain there is no possibility of it being replaced as the world’s reserve currency, either by the euro or the Chinese yuan. This is because the financial systems of both the euro zone and China are nowhere near large or sophisticated enough for their currencies to play the global role of the dollar.
That analysis is correct as far as it goes. But it does not go far enough. A dollar crisis will not bring about its replacement by the currency of another country or region. Rather, it will set off a crisis of confidence in all fiat currencies and a breakdown of international trading and financial relations.
The FT article cited remarks by David Riley, a chief investment strategist at BlueBay Asset Management in London. He noted that the US government bond market, where yields on 10 year bonds have gone negative when inflation is taken into account, “is reflecting the fact that the US outlook is weakening.”
“There’s going to have to be more stimulus,” he said. “This is where the gold bug view comes in, where sooner or later this is a debasement of the global reserve currency. So you go into gold.”
There are decisive implications flowing from the weakening position of the US. The role of the dollar as the world currency and the decisive importance of US financial markets for every major corporation provide US imperialism with enormous power as it pursues its geostrategic interests.
For example, it is the reason it has been able to impose sanctions against Iran despite opposition from Europe, by threatening to exclude companies that break them from the global flow of finance, or to hit companies backing the Nord Stream 2 pipeline project to transport gas from Russia to Germany.
In response to the deepening crisis of its financial system, triggered and accelerated by the COVID-19 pandemic but not caused by it—the underlying tendencies were already well advanced before the virus struck—US imperialism is going to intensify attacks on the working class at home while pursuing ever more aggressive measures internationally, including war, as it seeks to maintain its global dominance.
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Concerns mount over financial stability as US dollar falls and gold price soars
[28 July 2020]
Families fight for justice for five workers killed by wall collapse at UK Hawkeswood Metal recycling plant
https://www.wsws.org/en/articles/2020/08/03/shre-a03.html
By Tony Robson
3 August 2020
The families of five workers, killed four years ago at Hawkeswood Metal recycling in Birmingham when a wall collapsed in its storage yard, are still fighting for compensation and for the company to face criminal prosecution.
On July 7, 2016, five men, employed as agency staff on zero-hour contracts, were buried under the debris of a collapsed concrete wall and metal in the storage yard of the recycling centre in the Nechells area of Birmingham, owned by ShredMet Ltd.
Ingots of scrap metal had been stored in the adjacent bay, piled at double the recommended height. The wall consisted of interlocking concrete blocks without any mortar and had no foundation. It had been loaded on one side with 263 tonnes of metal, resulting in a collapse bringing the metal and concrete crashing down on the workers cleaning a storage bay.
All the victims died of blunt force injuries. The combined weight of the metal and concrete was the equivalent of 15 double decker buses. The work of retrieving the bodies from the wreckage took the emergency services several days.
Four of the men were from Gambia—Almamo Jammeh, 45, Bangally Dukuray 55, Saibo Sillah,42 and Muhamadou Jagana, 49. The fifth was from Senegal, Ousmane Diaby, 39. A sixth man from Gambia, Tombong Conteh, was the only survivor. He sustained a major injury to his leg, which has restricted his mobility ever since and has been unable to work.
The men came to the UK as Spanish nationals after they were no longer able to find regular employment in Spain. Birmingham is home to a community of around 10,000 from Gambia. For their work at the recycling centre the men received just over the minimum wage and from this meagre pay they sent remittances home to their families. According to one estimate in 2017, a fifth of Gambia’s GDP consisted of such remittances.
To this day, the bereaved families have not even received interim compensation from the company, adding financial hardship to the grief of losing their loved ones.
The inquest into the fatal workplace incident held in November 2018 came to a verdict of accidental death, even though the wall collapse was described as a “foreseeable risk”. The jury found that the risk had not been identified and it “caused or contributed to” the loss of life of each of the men.
Health and Safety Executive (HSE) investigator Paul Cooper stated categorically that the risk of the wall collapse could have been identified and it would have in fact been “common sense”. The inquest also heard from the health and safety officer employed by the company that he had no knowledge of the wall, what its purpose was and how long it had been there. It had not been risk assessed and neither had the activities concerning clearing out the bays by workers in its vicinity.
The HSE, which has been in charge of the criminal investigation, has failed to bring charges against ShredMet Ltd. It has reneged on its commitment to announce its decision on whether to prosecute by the time of the fourth anniversary of the fatal incident.
ShredMet Ltd had been found guilty of health and safety violations at the site prior to the wall collapse, the biggest loss of life at a recycling plant in the UK. In 2012, the company was fined £50,000 in relation to a worker whose arm became trapped in machinery. The HSE did not conduct any subsequent inspections.
In February 2016, there was a large fire at the site after 100 tonnes of shredded scrap metal went up in flames. The waste and recycling industry is one of the most dangerous sectors to work in the UK, with 16 times more fatalities in 2017/18 than the average across all industry, according to the HSE.
The bereaved families decided to mark the fourth anniversary with a public protest outside the recycling plant. A statement issued by the families explains:
“On 7 July 2020, it will be the fourth anniversary of the deaths of our husbands and the fathers of our children. The anniversary should be a day to remember our husbands and to reflect on our loss with our families. This will not be possible as we continue to have justice and accountability for the deaths of our loved ones denied; we remain without any compensation and we are made to wait longer for a decision as to whether those responsible will be held to account. We cannot grieve and move on.
“Instead, we will mark the anniversary of their deaths by holding a public protest outside the gates of Shredmet recycling centre, where our husbands were killed.”
In reference to the failure of the HSE to bring charges it continues:
“We cannot understand the delay as it is obvious that the company failed to protect our loved ones. The Inquest, which was held two years ago, showed the inexcusable and gross failings of the company which led to the deaths of our loved ones on 7 July 2016.
“This delay cannot be allowed to continue. We hope that our protest will show that we have not forgotten what happened, and we will not allow society to forget. We demand recognition for what happened to our husbands.”
In their fight for justice, the families have had to wage a struggle with the support mainly from their friends, local community, and public appeals. Two crowd funding appeals raised thousands of pounds towards funeral expenses and other support to the families, as well as legal costs. This struggle has been waged independently of the Labour Party and trade unions, who must take primary responsibility for the isolation of the brave resistance they have shown.
Labour MP for Ladywood, Shabana Mahmoud, has gone no further than issuing pro forma letters of protest to the government and HSE, which she acknowledges have produced zero results.
The Labour Party and trade unions are preoccupied with supporting the Johnson government’s homicidal return to work policy under conditions of a resurgence of the pandemic. They are prepared to prop up a government responsible for the highest number of COVID-19 deaths in Europe and has transformed workplaces across the country into a breeding ground for the virus, in which workers have been denied protection and live with the constant fear of infection and death.
The Socialist Equality Party calls on all workers to support the fight of the families of the five workers killed at the Hawkswood recycling plant, as part of a broader struggle to end the corporate criminality which is being intensified by the pandemic, based upon the calculation that workers lives are expendable but wealth accumulation is sacrosanct.
Vietnam struggles to contain rapid resurgence of COVID-19
https://www.wsws.org/en/articles/2020/08/03/viet-a03.html
By Owen Howell
3 August 2020
The unexpected emergence of a coronavirus cluster in the Vietnamese city of Da Nang has led to a rapid transmission across the country. Though previously lauded as a “success story” in the international press, having recorded no new local infections for 99 days, Vietnam has now detected cases in the capital, Hanoi, as well as Ho Chi Minh City, and throughout the Central Highlands region.
The first new case appeared in Da Nang Hospital on July 25, before the virus spread through the building, resulting in 15 confirmed cases over the next three days. The source of the cluster apparently remains unknown, though some government officials have claimed it originated outside the country. Vietnam has remained shut to most foreign travellers since late March.
The Health Ministry has registered 173 local cases since the new outbreak began, 120 of which were found in Da Nang. Besides the country’s two major cities, the virus has reached the provinces of Quang Nam, Thai Binh, Quang Ngai, Dak Lak, Dong Nai, and Ha Nam.
With 29 local cases discovered yesterday, the tally has grown to 620 infections, as well as five deaths, all of which were recorded since Friday. The victims were all elderly with pre-existing medical conditions.
Local newspaper Thanh Nien revealed the most recent death was an 86-year-old woman who suffered heart and kidney failure. She was admitted to Da Nang Hospital on July 16 and then transferred to a hospital in Quang Nam two days later. This suggests that she contracted COVID-19 in Da Nang at least one week before the first case was confirmed, and therefore that the virus had been circulating in the hospital undetected for a considerable time.
Nearly all of the cases last week were people above the age of 60. However, the 29 cases yesterday included a number of asymptomatic young people, including a 23-year-old health worker and four children below the age of 14. Due to the abrupt and widespread nature of the transmission, medical experts believe the real infection numbers may be far higher than the official figures.
Da Nang, a seaside resort, is a popular holiday destination for Vietnamese tourists on summer vacation. Since early July, over 800,000 people have visited Da Nang. The Vietnamese government fears that tens of thousands of tourists leaving the city after the cluster emerged could cause a disastrous transmission across the country.
On Wednesday, four days after the first case, a lockdown was established and checkpoints set up to prevent people from leaving or entering the city. Thousands of national police and military personnel were deployed in Da Nang, state-run paper Nhan Dan reported. By this time, however, thousands had already left the new pandemic epicentre.
Ho Chi Minh City had recorded 18,000 people returning from Da Nang on Tuesday. Hanoi has received around 54,000 returnees since July 25. Over 21,000 of these are suspected COVID-19 carriers waiting to be tested, as the city’s testing capacity is as yet unable to meet the large requirements.
Vietnam has 118 testing laboratories, of which only 66 are capable of testing samples for coronavirus. The nation’s capacity is 31,000 tests per day—a marginal increase on April’s average of 27,000 a day. But unless it dramatically expands, the testing could soon prove inadequate as the virus surges through a densely populated country of 97.3 million people.
In Da Nang, hospitals and health centres are fast reaching full capacity. Recently, a makeshift coronavirus hospital was installed inside a soccer stadium. The government has sent a contingent of more than 1,000 health workers to Da Nang.
Partial lockdown measures are being implemented in areas where coronavirus cases are appearing. Local authorities in Ho Chi Minh City have placed an apartment building under lockdown since Friday, as two residents had returned from Da Nang and were suspected to have the virus. The building houses 328 residents, but only 26 have been tested.
Tran Van Tan, Vice Chairman of Quang Nam province, imposed blockades on several rural villages and urban neighbourhoods, most of them overcrowded working-class districts. These include the Luu Minh residential area, in Thang Binh district, with 96 households and 384 people. Ostensibly under lockdown because of three confirmed cases there, no testing has yet been organised. With social distancing all but impossible in such locations, they will inevitably become incubators for the virus to grow.
It is now over a week since the Da Nang cluster surfaced, yet the Vietnamese government is reluctant to close businesses and halt production, despite the rapid spread of the virus.
Hanoi has closed its bars and roadside stalls and banned large gatherings. Restaurants and shopping malls, on the other hand, are permitted to remain open. Factories and other large-scale production facilities will continue to operate.
Prime Minister Nguyen Xuan Phuc’s warned on Wednesday that every province and every city was at risk. “We have to act more swiftly and more fiercely in order to control the outbreak,” Phuc told an online conference of government officials.
Ho Chi Minh City Party Secretary Bguyen Thien Nan also expressed concern that the situation is becoming far worse than the country’s first wave of infections, pointing to similar resurgences in Italy, Hong Kong, and Australia.
After suspending international travel on March 22, and introducing restrictions, Vietnam appeared to have contained the coronavirus. Like its counterparts in other countries, the government pushed ahead with a reopening policy to reverse the economic damage, particularly focussing on the revival of domestic tourism.
On June 1, the Vietnamese Ministry of Culture, Sports, and Tourism launched a new program aimed at galvanizing domestic tourist demand. The result was that people flocked to Da Nang from June onward, drawn by discounted flights, hotel bookings, and travel deals.
As with other Southeast Asian nations, Vietnam is heavily dependent on its tourist sector. The renewed spread of the virus is being viewed by the government primarily as a setback to their plans to reopen international travel and address the slowing economy.
In a report released on Thursday, the World Bank assessed that Vietnam’s economy would grow at around 2.8 percent in 2020, its slowest rate in 35 years and significantly lower than pre-pandemic levels. This finding, moreover, was based upon the situation before the resurgence in Da Nang.
Desperate to reverse the slowing economy, Prime Minister Phuc on Saturday approved the development of the country’s “night-time economy.” It will allow non-essential activities to occur overnight in major tourism zones and cities, many of which have witnessed new COVID-19 cases. Night markets, discos, karaoke parlours, retail stores, public transport, and other services are expected to generate profits unimpeded, despite the immense risk of accelerating the spread.
Hong Kong delays legislative elections amid crackdown on democratic rights
https://www.wsws.org/en/articles/2020/08/03/hong-a03.html?pk_campaign=newsletter&pk_kwd=wsws
By Ben McGrath
3 August 2020
One month after Beijing passed its new national security law for Hong Kong, authorities have stepped up their attack on democratic rights in the city, including by announcing that they would postpone September’s Legislative Council (LegCo) elections for one year. Opposition activists and politicians have also been barred from running for office and some have faced arrest.
On Friday, Hong Kong’s Chief Executive Carrie Lam announced she would use the 1922 British colonial-era Emergency Regulations Ordinance to delay the upcoming legislative election citing the danger posed by a resurgence in COVID-19 cases. Lam stated it was necessary to “ensure fairness and public safety and health and the need to make sure the election is held in an open, fair, and impartial manner.”
Lam, whose decision was backed by Beijing’s Hong Kong and Macau Affairs Office, absurdly claimed, “This postponement is entirely made based on public safety reasons, there were no political considerations.”
The number of COVID-19 cases have grown sharply in Hong Kong throughout July, including a record high 149 new patients last Thursday. Lam’s assertions, however, are simply untrue. In local elections last November, the official opposition grouped around the pan-democrat bloc took control of 17 of 18 local councils, winning 390 out of 452 available seats. The opposition again hoped to capitalise on widespread anger towards the government to win a majority in the LegCo.
Prior to its postponement, Hong Kong authorities also banned 12 opposition candidates from running in the election. This included well-known activist Joshua Wong and other younger candidates. Four members of the pan-democrat Civic Party were also banned.
The authorities outlined the sweeping grounds on which candidates would be barred, effectively making any opposition illegitimate. These include: promoting Hong Kong independence, soliciting the intervention of foreign powers, expressing opposition to the new national security law, or being deemed likely to vote against government bills to press for their demands.
On Wednesday, four students were also arrested in the first police operation under the new national security law. “Our sources and investigation show that the group recently announced on social media to set up an organization that advocates Hong Kong independence,” said Li Kwai-wah of the new national security unit inside the Hong Kong police.
The four were connected to a group called Studentlocalism, which advocated Hong Kong independence before being disbanded in June. Tony Chung, a former leader of the group, was accused of “inciting secession” through a Facebook post.
Beijing is not primarily concerned about the establishment pan-democrat opposition grouping in Hong Kong but rather the potential for renewed protests against the attack on democratic rights and the deteriorating social conditions. Last summer’s mass protests by legislation allowing extradition to China drew in millions of people concerned about Beijing’s undermining of democratic rights and deteriorating social conditions. While the movement was hijacked by opposition parties and figures calling for the intervention of US and British imperialism, none of the underlying issues have been resolved.
Hong Kong ranks as the sixth most unequal city in the world. It is home to 64 billionaires while the broad masses struggle to survive with low paid jobs, stagnant and declining wages, widespread poverty, and lack of access to safe, affordable housing.
These conditions are replicated throughout China. In May, an estimated 80 million Chinese workers did not have employment, in part due to the COVID-19 pandemic, and an additional 600 million workers earned just $140 a month. Beijing ultimately fears that renewed protests in Hong Kong will resonate with the rest of the Chinese working class and lead to an explosion of social anger, threatening the Chinese Communist Party’s hold on power.
Beijing is also concerned that the United States will foster separatist sentiment in Hong Kong and also exploit the protests to ramp up its aggressive confrontation with China.
Washington’s concern for democratic rights is utterly hypocritical. Even as Trump was suggesting that the US elections could be delayed, White House Press Secretary Kayleigh McEnany condemned the decision to postpone the Hong Kong election, declaring that it “undermines the democratic processes and freedoms.”
In a speech on July 23, US Secretary of State Mike Pompeo delivered a keynote speech that denounced the Chinese Communist Party in Cold War terms as a “tyranny” and a threat to the “free world” that had to be stopped. The condemnation of China and its police state methods comes as the Trump administration is trampling on democratic rights including through the dispatch of federal agents to violently suppress protests in Portland and other cities.
Two days prior to his speech, Pompeo was with Nathan Law, another prominent Hong Kong activist in London at the residence of the US ambassador to the United Kingdom. Pompeo was reportedly “very keen” on meeting with Law, and discussed not only Hong Kong but also Tibet and Xinjiang where the US has also been encouraging separatist groups.
The Trump administration is not concerned about democratic rights in Hong Kong or anywhere else in China. Rather it is mounting another of its phoney “human rights” campaigns as a pretext for its escalating conflict with China.
Any fight to defend democratic and social rights in Hong Kong must involve a turn to the working class throughout China on the basis of a struggle for genuine socialism against the Beijing regime that is responsible for restoring capitalism and represents the interests of the ultra-rich oligarchy.
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