THE Bank for International Settlements (BIS) this week issued a warning that governments across the world are at risk of imploding unless they deal with the massive national debts that are spiralling out of control.
The BIS (the central bank for central bankers) has long been warning that highly indebted countries must take action to reduce their national debts but this warning has taken on a new urgency as it warns that the governments of major capitalist governments are at risk of being brought down.
The BIS warns that the international financial markets, who fund government debt through buying bonds, will shortly wake up to the fact that countries are bankrupt and unable to pay the exorbitant interest rates being charged, let alone repay the debt in full.
Cladio Borio, an economist at BIS, said: ‘Government debt trajectories represent the most serious threat to macroeconomic and financial stability longer-term.’
He went on: ‘At some point, and we cannot tell when, financial markets will no doubt pay even more attention, unless authorities correct their course.’ He added: ‘It takes time for policymakers to adjust policies, and if they wait for the markets to wake up, it is going to be too late.’
In plain language, what Borio and the BIS are warning, is that for the time being the world capitalist money markets are happy to lend billions to keep countries from collapse as long as they can increase the interest on these ‘loans’ and make even bigger profits for their investors.
When they finally wake up and realise that these countries simply cannot afford to meet these debt repayments, then the financiers pack up and flee leaving entire nation states to collapse into bankruptcy. The BIS is urging governments to wake up before this happens and come up with plans to slash their national debt before it is too late.
Borio pointed, as an example of what will happen – the financial earthquake that followed the mini-budget of the then Tory Prime Minister Liz Truss in 2022, when her unfunded tax cuts to the rich threatened to push up UK debt to levels the markets determined were unrepayable.
Only the intervention of the Bank of England buying up government bonds on a massive scale prevented the UK economy from crashing overnight.
Slashing the national debt can only be achieved by the most savage austerity cuts imposed on the working class.
This is an absolute necessity, the BIS insists, but also it contains a massive risk to governments in the form of workers refusing to passively accept being driven into the gutter of poverty, and seeing all their rights destroyed under the instruction of the bankers.
In France last week, the government of president Emmanuel Macron collapsed after an insurgent working class pressurised MPs to vote a motion of no confidence over his plans to cut the French national debt through spending cuts and tax increases.
In Britain, the Starmer-led Labour government is embracing the same programme of cutting the UK national debt – currently about £2.8 trillion on which it paid £9.1 billion in interest in one month last October – through below inflation pay offers to public servants, along with a policy of cutting 20,000 civil service jobs.
This is on top of Chancellor Rachel Reeves’ budget which increased taxes on companies that will be passed on to the working class through wage cuts to employees and increased prices for everyone.
The BIS is worried about governments being brought down by a world debt crisis, but the real issue for these governments and the capitalist system that they they serve is that they face being brought down by the working class in a socialist revolution that will put an end to the capitalist system and relegate its crises to the history books.
The essence of the situation is that the bankrupt capitalist system is in its death agony, and the powerful working class will never allow itself to be dragged down into the gutter with it.
In fact, the only way forward for the working class in the UK, Europe and US is clear.
It is that the current reformist trade union leaders must be replaced and that the unions must call indefinite general strikes to bring down their governments and bring in workers governments that will expropriate the bankers and bosses and bring in a nationalised planned socialist economy worldwide, dumping crisis-ridden capitalism into the dustbin of history.
Carrying out the World Socialist Revolution is the only way for workers and youth to resolve the capitalist debt crisis.
Now is the time to build the WRP and the Young Socialists on a massive scale to organise the victory of the British socialist revolution, and to assist in building sections of the International Committee of the Fourth International worldwide.
Capitalism worldwide has reached the end of its road. Now is the time to build the Fourth International in every country to organise the victory of the world socialist revolution and dump capitalism into the dustbin of history.
