Inflation? Deflation? Staglation? Or all three?

Is the “r” word, now being bandied about by Wall Street pundits, morphing into the “d” word? Depression raises the specter of the 1929 crash followed by 10 years of hardship, sacrifice and struggle before the capitalist economy recovered—primarily due to the stimulus of World War II. The workers of many countries paid the staggering price for that imperialist war—tens of millions dead and maimed.

Following the 2001 recession, a depression—loss of jobs and income—came early for many workers and oppressed nationalities. But the bankers and bosses, who called it a “jobless recovery,” quickly recovered their profits.

Seven years later, multinational workers face a debacle far worse than 2001. A Nov. 8 New York Times editorial referred to “surging joblessness and shrinking incomes. ... The job numbers for October, released by the government on Friday, leave no doubt that the nation is in a recession that will be deep and painful.”

For 10 months now, there have been mass layoffs and lost wages. Full-time workers couldn’t keep up with rising inflation even as the government—the Treasury Department and the Federal Reserve—pumped at least a trillion dollars into the financial system to bail out the bankers, attempting to restore liquidity and credit.

Part-time and temporary workers looking for full-time jobs also suffered. Young workers and people of color have been hit the hardest.

Since the beginning of the year more than 10 million workers have swelled the unemployment lines. One in five, more than 2.3 million, haven’t had jobs for six months or more. And those grim statistics are understated and outdated.

Foreclosures and evictions are on the rise. Health care is beyond the reach of 47 million uninsured workers. The scourge of capitalism has swept down on the masses with a vengeance, even though the depression is still in its earliest stage.

Recently the stock market dropped nearly 1,000 points over a two-day period. Never in the recorded history of market highs and lows have the losses come so quickly and sharply. It was literally a crash—one of many in recent months.

Wall Street and the apologists for the capitalist system defined this crash as a “correction,” exacerbated by fear and panic. In recent years the Dow Jones Industrial Average has plummeted from 14,000 to nearly 8,000, wiping out a huge amount of workers’ wealth in savings, pensions and other retirement funds invested in the stock market.

In February 1988, less than four months after the October 1987 crash, Sam Marcy, founding chairperson of Workers World Party, wrote the pamphlet “Wall Street Crash—What does it mean?” It dispelled the illusion that the stock market is driven by emotions. He documented with Marxist clarity the relationship of the stock market to the capitalist economy, noting that “It tends to concentrate all industry, agriculture, commerce and the means of production in the hands of stock exchange operators.” (Full text online at workers.org.)

Powerful transnational monopolies like ExxonMobil and the agribusiness barons are desperately trying to maintain a stable price structure for their products. Companies with less capital are forced to lower their prices as buyers wait for prices to fall. As workers find it more difficult to buy what they need to subsist, markets become glutted, profits shrink and dry up, plants close, unemployment deepens, investment gets too risky and companies and banks go belly up.

The word for this chilling process is deflation. Deflation accompanied the 1930s Great Depression. Economists like Nouriel Roubini of the New York University Stern School of Business, one of the many economic advisers to President-elect Barack Obama, warned months ago of a financial crisis and the threat of deflation. He, like all supporters of capitalism, believes there are reforms that can surmount these crises.

However, these reforms, called “priming the pump,” intensify inflation. The government is already printing dollars in the trillions and accumulating new debt. Exacerbated by the huge sums spent on the military-industrial complex, total government indebtedness has grown to more than $10 trillion.

Ultimately, debasing the dollar creates havoc in global currency markets and in trade and commodity relations. The panic has quickly spread as dozens of countries, particularly the emerging economies, are sliding into financial and economic crisis. The economy of Iceland, a NATO ally, has collapsed. Hungary and Poland are seeking financial bailouts from the International Monetary Fund.

More than 125 years ago, Frederick Engels, co-thinker and collaborator of Karl Marx, described the course of a capitalist crisis and collapse in his “Socialism: Utopian and Scientific.”

“[S]ince 1825, when the first general crisis broke out, the whole industrial and commercial world, production and exchange ... are thrown out of joint about once every 10 years. Commerce is at a standstill, the markets are glutted, products accumulate, as multitudinous as they are unsalable, hard cash disappears, credit vanishes, factories are closed, the mass of the workers are in want of the means of subsistence, because they have produced too much of the means of subsistence; bankruptcy follows upon bankruptcy.”

The obscene bailout, in which the capitalist parties agreed to spend billions to save Wall Street bankers and their army of predators, will awaken the masses of workers and the oppressed nationalities. In the rapidly growing mass movement that brought about the historic Obama victory, can we see a glimmer of the classwide struggle that will be necessary to bring about revolutionary change? Such slogans as “a job is a property right,” which grew out of mid-1930s struggles, will resonate as capitalism unwinds.

Referred to earlier, Marcy’s 1988 analysis is a perfect fit for 2008: “The prospects are not just for a rerun of earlier economic collapses, but for one that could be on a profounder and deeper level even than 1929. Regardless of its dimensions, however, it will reopen the struggle of the working class and change the character of the entire international situation.”