THE Bank of England delivered its first announcement of 2017 on the economy yesterday, claiming that British capitalism had defied all expectations of a slowdown after the Brexit vote.
According to the bank’s governor, Mark Carney, the economy had grown by 0.6% in each of the last three quarters and he optimistically predicted that the UK economy will ‘power ahead’, forecasting economic growth over the next three years of 2% in 2017, 1.6% 2018 and 1.7% 2019.
Undermining his heady optimism, however, was the decision of the bank to keep interest rates frozen at 0.25%. There is to be no let-up of the cheap money being flooded into the UK economy to keep it going through massive accumulation of debt.
Although Carney won’t admit it, he knows cutting off this supply of paper money will crash the banks and the whole economy. Carney was even more optimistic when it came to the question of inflation saying: ‘We think this is the month where inflation comes back to target.’
In fact, inflation has leapt this month from 1.6% to 2%! All the indicators are that inflation will rise even more steeply as the pound continues to crash pushing up the cost if imported goods, and slashing the value of wages.
Carney’s optimism reached even giddier heights when it comes to the crisis of household debt. The Bank’s inflation report revealed that the savings ratio, the amount households have in savings as a percentage of their incomes, has fallen sharply.
But Carney isn’t worried – yet.
He said, ‘Those who are saving less of their incomes are making a judgement on their future incomes.’ This is rubbish, Carney had earlier admitted that low pay rises, in effect pay cuts, at a time of increasing inflation have led to ‘materially weaker household real income growth over the coming few years’.
Workers are not spending their savings because they believe that their pay will rise in the future; they are using savings and building up debt just to survive. This accounts for the massive expansion of borrowing on credit cards and pay-day loan sharks, which Carney dismissed insisting, ‘This is not a debt-fuelled consumer expansion.’
His optimism smacks of desperation. He is desperate to try and maintain the fiction that bankrupt British capitalism is on the verge of pulling back from the fiscal cliff. In fact all this contrived optimism cannot disguise the truth. The entire capitalist system is on the point of collapse as the world economic crisis rips it apart.
The EU itself, from which MPs appear to believe they can peacefully negotiate an exit over two years, is finished; there soon won’t be an EU to exit. This is clear from a report this week from Italy’s Mediobanca which states that Europe’s third largest economy has reached the point of no return, sinking under colossal debt running at 153% of Italy’s GDP and with a banking system that is completely bankrupt.
The only option left open to Italy, and the option that the growing anti-austerity parties in the country are demanding, is that Italy leave the eurozone immediately – a move that will collapse not just the currency union but the entire EU.
That is not the EU’s only problem. President Trump has included Germany in his list of nations he intends to wage a currency war against. Along with China and Japan he is blaming these countries for deliberately holding down the price of their currencies in order to flood America with cheap imports.
The stage is set for a bitter and destructive trade and currency war that will smash the weak EU and British capitalism. This crisis places before the working class of Britain and Europe the immediate issue of taking revolutionary action to fight for their own class interests through the overthrow of capitalism, the bringing down of the EU, and the establishment of the Socialist United States of Europe.
In Britain, this calls for the organisation of a general strike to bring down the Tory government and then advancing to a workers government and socialism that will fight for the Socialist United States of Europe.
