IN THE week that Boris Johnson boasted that the lifting of coronavirus lockdown measures heralded the start of the economic ‘bounce back’, it became crystal clear that British capitalism is in fact bouncing over the cliff into an economic crash.
Such is the depth of the crisis that the Bank of England is quite literally tearing itself apart over how to try and cope and avert a crash.
On Monday, the governor of the Bank of England (BoE), Andrew Bailey, admitted for the first time that in mid March the economy stood on the brink of economic disaster, as investors in the world money markets sold off UK government bonds on a mass scale.
The reason for this panic sell-off and desperate rush for cash, was that they could see the UK economy nose-diving into recession and wanted no part in financing a government crashing into bankruptcy.
The government finances all its spending by selling off these bonds and with nobody willing to buy them, the country goes bankrupt overnight.
At this point, the BoE was forced to step in to pump £200 billion into the markets to restore the confidence of the speculators that it would act as a guarantor against state bankruptcy.
The £200 billion however was not enough and last week the BoE Monetary Policy Committee was forced to announce a further £100 billion in order to stave off another round of panic selling, as it became clear that the country’s industries and businesses will not be ‘bouncing back’ but are heading for a gigantic crash.
What is terrifying Bailey is that the BoE has been forced to act as a perpetual money tree for the Tories and the bosses and bankers – as one commentator put it, ‘no more than the government’s piggy bank or cash point in the sky’.
Bailey made a desperate attempt to warn the Tories that the BoE would not tolerate being used as a piggy bank funding their massive debt. In an interview with Bloomberg this week he insisted that the latest round of QE was ‘exceptional and time-limited’.
Bailey fears that inevitably the central bank is losing its facade of independence from the government and has become nothing more than a printing press churning out billions upon billions of worthless paper money to pay off the debt mountain run up by the Tories.
The great fear is that, as history has taught, this is the way to hyperinflation. It was precisely what happened in Germany in the 1920s when the Weimar government took control of the central bank and used it to print money to pay off war reparations.
The fact remains that all these billions, already artificially created by the latest Quantitative Easing, have been used to prop up companies and businesses that will never re-open and will never repay the massive bail-out loans handed to them by the banks and backed by the government.
Nearly £40 billion has been handed to over 800,000 small businesses, according to official figures, by the banks with the guarantee that taxpayers will foot the bill if, or rather when, they default.
In a fine example of capitalist criminality, car dealers and estate agents around the country are reporting a surge in bosses attempting to use these loans to put down deposits on property and expensive cars.
They know the economy is crashing and are determined to steal as much as possible before it goes down, leaving the working class to pick up the bill.
Bailey and the BoE are caught in a vicious trap. They must either allow British capitalism to go broke and be prepared to immediately fight it out with the working class or keep on churning out the money to avoid immediate state bankruptcy, knowing that they are ushering in a Weimar-type hyperinflation.
Both inevitably lead to the complete crash of British capitalism, and a situation where the working class, to save itself and its families, has to take the power.
For the working class, there is only one way out of this crisis and that is to bring down the Tories and advance to a workers government that will nationalise all the banks, including the BoE, along with industry and place them under the management of the working class.
Only the overthrow of bankrupt capitalism through a socialist revolution can provide a way forward for the working class today.
