ADDRESSING a press conference yesterday afternoon, the governor of the Bank of England, Mervyn King, said that ‘Tackling the symptoms of the crisis without resolving the underlying causes, by measures such as providing liquidity to banks or sovereigns, offers only short-term relief. Ultimately, governments will have to confront the underlying causes.
‘A loss of external competitiveness in some euro-area countries has led to current account imbalances and large build-ups of private and public debt, much of it external. The problems in the euro area are part of the wider imbalances in the world economy.
‘The end result of such imbalances is a refusal by the private sector to continue financing deficits, as the ability of borrowers to repay is called into question.’
The end result is insolvencies and state bankruptcies of the type that are taking place in the EU, leading to the collapse of the euro, the eurozone and the qualitative deepening of the crisis of near-bankrupt states such as the UK which have a great dependency on the eurozone.
Beginning to eliminate the ‘imbalances’ and becoming competitive to match the competitiveness of the Asian economies means enormously increasing the exploitation of the working class, using every weapon in the bourgeois arsenal to try to do so, including deregulation, privatisation, scrapping health and safety laws, mass unemployment, savage cuts and new anti-union laws to drive down wages (the cost of labour power) and drive up the amount of surplus value that is taken off the working class.
This is what the Tory-led coalition is now endeavouring to do.
King then made the point that this is a world crisis that has to be resolved on a world scale, not by central banks juggling with liquidity but by governments and their actions.
He said that ‘Resolving these wider problems is beyond the control of any UK authority. The responsibility of the Financial Policy Committee is to focus on measures that can protect and enhance the resilience of the UK financial system in this threatening environment, and ensure it is better equipped to counter even more serious potential problems further down the road.’
It is not a liquidity crisis, it is a crisis of the capitalist system.
King added that for the protection of the UK financial system, the ‘Committee recommends that, if earnings are insufficient to build capital levels further, banks should limit distributions and give serious consideration to raising external capital in the coming months.’
There is, however, a proviso that ‘It is important that attempts by banks to improve resilience by adjusting their asset holdings do not reinforce the strains in financial markets or threaten the supply of credit to businesses and households.’
King is emphasising that he is merely advocating the best way to hold the fort with very limited measures, he is not providing a solution.
He adds in like manner: ‘Therefore in its second recommendation, the Committee reiterates its advice to the FSA to encourage banks to improve the resilience of their balance sheets without exacerbating market fragility or reducing lending to the real economy.’
He concluded: ‘The crisis in the euro area is one of solvency and not liquidity. And the interconnectedness of major banks means that banking systems, and hence economies, around the world are all affected.’ It is a world crisis of capitalism.
‘Only the governments directly involved can find a way out of the crisis. But here in the UK, we must try to bolster the resilience of our financial system, better to withstand the storms that may come in our direction.’
Deputy governor Paul Tucker described the situation as ‘exceptionally perilous’ and warned that ‘anything could happen’ including a complete collapse of the euro and eurozone.
King, in spelling out the limits of the power of the central bank, is hinting at the truth: that the only way out for UK capitalism is civil war at home against the working class and driving forward internationally to re-conquer whole areas of the the world for super-exploitation of their peoples and resources to restore a worldwide imperialist balance.
The response of the working class of the world must be to carry out its own worldwide solution, to smash capitalism and imperialism on a world scale through the victory of the world socialist revolution.
