A VERY nervous House of Commons Treasury Select Committee has just asked the Bank of England to clarify its role in ensuring that the coalition government’s Help to Buy mortgage purchasing scheme does not lead to an even bigger property bubble than the one that burst so disastrously in 2008.
The US and UK banks collapsed with the housing bubble, requiring the pumping of trillions of dollars and pounds of taxpayers’ money into the same banks to keep them afloat, plus the establishment of a quantitative easing money printing scheme that has since then been keeping the same banks on life support, at the expense of the US and UK national debts that have now reached unheard-of heights.
The US government debt limit is now $17.1 trillion. This was upped from $16.7tn in October after a shutdown of the government brought the USA to its knees.
This crisis will erupt again in February, when the Republican Party will once again demand the most savage cuts in US history, or else refuse to raise the US government’s debt limit again, meaning that the US is under a permanent threat of state bankruptcy.
The rumours that the US Federal Reserve is now contemplating an end to the $87bn a month of quantitative easing are sending the US banks into a state of panic.
This continuing desperate crisis is ripping through every capitalist country. That the Tory-led UK government has embarked on the same type of mortgage lending scheme that brought down the Lehman Brothers bank (allegedly too big to fail) on 15th September 2008, and ushered in the current crisis, is a barometer of just how desperate the Tory Party and UK ruling class are, and just how unresolvable is their economic catastrophe.
In September, Chancellor George Osborne asked the Bank to take a bigger role in ensuring the ‘Help to Buy’ scheme did not fuel a property boom.
The first phase of the Help to Buy scheme in England started in April, when buyers of newly built homes were eligible for a 20% equity loan from the government on top of their 5% deposit.
Under the second phase, buyers across the UK only need to provide a small deposit, with the government offering a guarantee of 15% of the loan to the lender – for a fee – to encourage the bank or building society to offer the loan.
A host of big mortgage lenders have started, or promised to start, new products under the scheme, although the UK’s biggest building society – the Nationwide – has refused.
It has already been pointed out that these products will fuel an artificial housing bubble. Now the government is doing a Pontius Pilate and handing to the Bank of England the responsibility for preventing the inevitable collapse!
The chairman of the Treasury Committee, Andrew Tyrie, has now written to the Bank’s governor, Mark Carney, urging that ‘The scope and limits of the Bank’s role in this scheme need a good deal of clarification, both to safeguard the Bank’s authority to act in fulfilment of its statutory responsibility for financial stability and to safeguard its independence.’
Meanwhile, the economic and political crisis continues to develop. The boss of Nissan-Renault, Ghosn, has warned the UK government that any exit from the EU by the UK will lead to the carmaker having ‘to reconsider its strategy’, ie consider the closure of its Sunderland plant.
Prime Minister David Cameron has already promised a public vote on EU membership in 2017 if the Conservatives win the next general election, while a number of leading Tories want to see a referendum before the 2015 general election.
As well, the breakdown of the industrial economy continues with the body-blow of BAE Systems closing down the Portsmouth dockyard, and with the UK trade gap growing.
The only way to end the UK crisis is for the trade unions to bring down the Tory-led coalition with a general strike that brings in a workers government and socialism. Capitalism is a system that cannot be patched up, and whose collapse threatens the living standards of the entire British working class and middle class.
