STOCK markets in the US ended the week sharply down following tough comments by Jerome Powell, head of the country’s central bank, the Federal Reserve. He said the bank must continue ‘forcefully’ to raise interest rates to stop inflation from becoming a permanent aspect of the US economy.
During his highly anticipated speech at a conference in Wyoming on Friday, Powell said the ‘hard truth’ was that the Federal Reserve would probably impose further interest rate hikes in the coming months and could keep them high ‘for some time’.
Investors are concerned that if economic growth falters, higher interest rates will increase the likelihood of a stock market crash developing into a 1930s-style slump.
Powell conceded that getting inflation under control would come at a very high cost to American households and businesses, but he argued that the cost is a price worth paying. The truth, however, is that when the US catches a cold the rest of the capitalist world tends to get pneumonia!
He had to admit: ‘While higher interest rates, slower growth and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses,’ adding: ‘These are unfortunate costs of reducing inflation but a failure to restore price stability would mean far greater pain.’
Writing in the Mail on Sunday, the UK’s ex-PM Johnson said his successor would deliver a ‘huge package’ of support, despite the fact that the Bank of England is signalling that there will be more interest rate rises, making big business borrowing from the banks much more difficult, and bringing in the prospect of a run on the pound, a financial collapse and a slump.
On Friday, the energy regulator hiked the price cap on household bills by 80%, meaning the typical household gas and electricity bill will rise to £3,549 a year from October.
Save the Children warned the rise would immediately put young people’s health at risk with families unable to afford to heat their homes, while money expert Martin Lewis predicted grave consequences without more state help. ‘I am begging and praying and pleading that there is more government help this winter so that people do not die,’ he said.
In his Mail on Sunday article, Johnson said the months ahead are going to be ‘tough, perhaps very tough’.
‘Our energy bills are going to be eye-watering. For many of us, the cost of heating our homes is already frightening,’ he wrote.
In fact, almost three quarters of the annual state pension will be eaten away by soaring energy bills next year amid forecasts that the energy price cap will breach £6,000, as experts have already warned.
Once pensioners’ bills have been paid they will be left with just £3,000 to live on per year from the state pension. Caroline Abrahams, Charity Director at AgeUK, has warned of a truly terrifying energy crisis for elderly people.
She said: We are fast approaching a national emergency that will leave a significant proportion of the population unable to afford even a basic standard of living.’
Already, many people receive less than the full allowance as they will not have contributed to the National Insurance for the required number of years.
British capitalism is now in a desperate crisis as it breaks at its weakest links.
There is only one way forward for the working class as this crisis of capitalism deepens. This is to use its enormous power now, while it still has it.
Workers and youth must join the WRP and the YS and lobby the TUC Congress on Monday September 12 to demand that the TUC call a general strike, to bring down the ruling class of bosses and bankers in a socialist revolution that will establish a workers government based on Councils of Action, that will nationalise the banks and the major industries and put them under workers’ management in a socialist planned economy.
Only the WRP and its youth section the Young Socialists are fighting for the British socialist revolution as part of the worldwide socialist revolution. Join the WRP and the YS today!
