Testifying to MPs at the Treasury Committee yesterday, Andrew Bailey, governor of the Bank of England, issued a sharp rebuke to Labour chancellor Rachel Reeves’ pledge to the banks and financial bosses that she would tear up all the banking regulations supposed to curb their ‘risk taking’.
Bailey warned MPs of the economic catastrophe that he predicted would emerge from Reeves’ plan, saying ‘there isn’t a trade-off between financial stability and growth’ and that he was ‘exasperated’ with those who say that the international banking crash in 2008 is ‘deep in the past, and solved, so we can move on.’
‘Success in financial stability is when nothing happens,’ Bailey told the committee.
Bailey may be praying for a quiet life but the reality is that capitalism across the world is crashing into bankruptcy.
In the UK yesterday, it was announced that last month UK government borrowing jumped to £20.7 billion, the second highest since monthly records began in 1993 – the highest was in June 2020 when the Covid pandemic drove up government spending.
Driving this jump was higher interest payments on the UK national debt, as investors buying up government bonds demanded more for a ‘risky’ investment in a UK economy diving into recession.
What has spooked these financial bond ‘vultures’, is the abject failure of the Labour government to impose cuts to disabled benefits in the face of a mass uprising from workers and youth who are not prepared to accept the ‘sacrifices’ Reeves and the Labour government are demanding to rescue the bankers’ and bosses’ profits.
The same explosive turmoil is emerging with a vengeance in the US, where the stability Bailey craves has been shattered by the economic crisis and the extremely unstable attempts by Trump’s administration to find a way out.
On the surface, the Wall Street banks are enjoying bumper profits after the initial shock of Trump’s tariff war on the rest of the world. But beneath the surface, the financial pages are full of ominous warnings about an impending crash.
One of the biggest indicators of a financial disaster fast developing, has been the quiet actions of Warren Buffett, boss of the giant US investment company Berkshire Hathaway.
Buffett is held to be the most successful investor of all time, described by the Daily Telegraph as having ‘a reputation for being preternaturally gifted at foreseeing market trends.’
The trend that Buffett is seeing is the US banking system heading into another crash even bigger than 2008, and since the start of the year he has been selling off his holdings in US banks and financial companies.
Buffett has just sold $100 billion in bank and financial company shares, sending shockwaves through Wall Street.
As the Telegraph article ‘Warren Buffett has set alarm bells ringing on Wall Street’, says, Buffet is not alone in dumping shares in banks in favour of hard cash.
Jamie Dimon, boss of the investment bank JP Morgan, ‘sold around $31.5 million of his holdings in the investment bank in April.’ He had previously sold shares in his company worth $125 million last year.
When the world’s leading investor and the boss of the giant US investment bank sell off their shares and head for the safety of hard cash it is clear they see the writing on the wall for the US and world capitalist banking and financial system.
What is also very clear is that the capitalist class will be determined to inflict their catastrophic banking crisis and another Great Depression on the backs of the working class in the US, UK and Europe, in a class struggle that will be fought to the finish.
Workers and youth will never passively accept being driven back to the Depression era of the ‘Hungry Thirties’ to pay the debts of capitalism.
The working class has the power to resolve this crisis.
Capitalism will not depart the scene of history peacefully it must be brought down by the working class taking power.
This demands building sections of the International Committee of the Fourth International in every country to provide the leadership necessary for victory of the world socialist revolution.
This is the way forward.
