QE2 another leap into the dark

Marxist Analysis · 2026-05-13

Core Argument

The article argues that quantitative easing (QE2) is not an exceptional emergency measure but has become a normalised tool of capitalist crisis management, reflecting the depth and persistence of the economic contradictions that exploded in 2008. The central thesis is that neither the US strategy of continued monetary stimulus nor the European strategy of austerity can resolve the underlying crisis; both are attempts to make the working class pay, and both will fail. The US policy merely postpones the necessary adjustment by re-inflating asset bubbles, while European cuts destroy demand and accelerate the downturn. The real function of QE2, the article contends, is to debase the dollar and gain competitive advantage in the emerging currency wars — a protectionist manoeuvre that intensifies inter-imperialist rivalry.

Theoretical Grounding

The analysis is rooted in the Marxist theory of capitalist crisis, specifically the understanding that recessions are not malfunctions but the system's brutal mechanism for restoring profitability through the destruction of capital values and the devaluation of labour power. The article draws on the classical Marxist distinction between the surface phenomena of credit and finance and the underlying dynamics of production and accumulation. The reference to the 1920s German hyperinflation invokes the Marxist analysis of fiat money and the limits of state intervention when the real basis of value creation has been undermined. The argument that neither stimulus nor austerity can work reflects the Marxist position that capitalism has no painless exit from crisis — only different distributions of the pain between classes and between competing national capitals. The piece sits firmly within the tradition of Marxist political economy that sees state intervention not as a corrective to capitalism but as an expression of its contradictions, with central banks acting as the political instruments of finance capital.

Conjunctural Relevance

The article was written in November 2010, at a specific conjuncture: the US Federal Reserve had just announced $600bn in additional quantitative easing, the British coalition government was implementing its austerity programme (which The Economist had branded "Radical Britain"), and the Greek debt crisis had triggered mass unrest across Southern Europe. The article correctly identifies the emerging "currency wars" — the competitive devaluation struggle between the US, Europe, and China — as a key feature of the post-2008 landscape. It notes that the dollar had fallen 9% against the euro since September 2010, wiping out the competitive advantage European capital had gained during the Greek crisis. The piece also captures the split within the ruling class: the City of London's City AM attacking Bernanke for postponing the "painful process" of adjustment, while European governments pressed ahead with cuts that had already sparked strikes and demonstrations in Greece, Spain, and France. The article's prediction that neither policy would work and that both would attack working-class living standards has been borne out by the subsequent decade of stagnant wages, precarious employment, and repeated financial tremors.

Where the Argument Continues

This article opens several lines of analysis that are developed elsewhere in the IDOM corpus. The question of whether quantitative easing constitutes "printing money" in the Marxist sense — and the relationship between fictitious capital and the real economy — is explored in greater theoretical depth in other pieces on the nature of money and credit under capitalism. The theme of inter-imperialist rivalry and currency wars is taken up in subsequent articles on the US-China trade conflict and the geopolitical dimensions of the crisis. The argument that austerity and stimulus are two sides of the same coin — both serving to restore capitalist profitability at working-class expense — is a recurring thread in IDOM's coverage of the European debt crisis and the British austerity programme. The article's reference to the "re-inflation of the bubble" anticipates later analyses of asset price inflation, stock market bubbles, and the growing disconnect between financial markets and productive investment. Readers should look to Against the Stream episodes from 2010-2012 for the political conclusions drawn from this economic analysis — particularly the strategic orientation for building revolutionary leadership in the labour movement.

Connections

The article connects to several key Marxist texts and contemporary analyses. The theoretical framework echoes Marx's analysis of credit and fictitious capital in Volume III of Capital, particularly the sections on the role of the banking system in postponing crises and the limits of such postponement. The analysis of currency wars and competitive devaluation draws on Lenin's Imperialism, the Highest Stage of Capitalism and its understanding of inter-imperialist rivalry as an inevitable feature of the monopoly stage. The argument that neither stimulus nor austerity can resolve the crisis is consistent with the Marxist tradition's rejection of both Keynesian demand management and neoliberal austerity as viable long-term solutions. The article's treatment of the ruling class split between US and European strategies connects to the broader Marxist analysis of uneven development and the different forms of crisis management adopted by different national capitals. Readers should also consult IDOM's earlier analysis of the 2008 crash and the subsequent articles on the European debt crisis for the full picture.

Key Quotes

1. "What was once an extraordinary measure has now become something of the ordinary, which reflects the fact that the economic difficulties of the capitalist economy are far from over."

2. "By massively printing money, the Federal Reserve is debasing the dollar, meaning that US exports become cheaper and imports dearer. Thus, the effect of the US policy is precisely the same as the Chinese one, which the US ruling class has spent so much time over the last six months complaining about."

3. "Alistair Heath is attacking the US ruling class from shirking from the necessity of making the working class pay for the crisis. He is of course correct – from a purely capitalist point of view – but there is more to the story."

4. "It is also true, as Alastair Heath points out, that the US policy will merely re-inflate the bubble, causing asset prices to rise as investors attempt to shield themselves from inflation, leading to another crash in the future."

5. "European capital has started down the road of an all-out assault on the gains of the working class in the past, with severe cuts in public spending, while the US bourgeois, at the federal level, are still putting off the evil day, desperately trying to stimulate growth. Neither policy will work, and both involve major reductions in the standard of living of ordinary working people."