Bank and government split as crisis deepens

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THE decision of the governor of the Bank of England, Mervyn King to name and shame the Chancellor of the Exchequer, Darling, as the man responsible for the run on the Northern Rock bank, and by implication for the subsequent share falls of Barclays and other banks, has shocked the ruling class and its propagandists.

Never has there been such an open display of fecklessness and demoralisation as the public scrap between the government and the bank over who is to blame for the crisis.

It was a public exhibition of just how unnerved the ruling class is in the face of its ship going down.

Its servants are turning on each other and behaving like headless chickens.

In fact, the Bank’s refusal to act makes nonsense of its much proclaimed independence from the government. In reality, it cannot be independent of it, since it is the state bank, whose funds are provided by the government.

The government’s refusal to act, or to publicly guarantee the deposits of the Northern Rock bank, showed their paralysis in the face of the crisis. In fact no government can take responsibility for the crisis of the capitalist system, whose oceans of debt no government on earth can bail out.

The crowds queuing to get their cash back from the Northern Rock bank understood this basic fact, and were thus completely unwilling to believe any assurances made by the government or the bank. They wanted their money safe in their own hands.

In the end both the government and the bank of England were unwilling to allow the laws of the capitalist crisis free rein to destroy the weak and the bankrupt so that the fittest could survive.

They opted to increase the mountain of debt, and are about to reap the consequences with a massive deepening of the crisis of the capitalist system to a new qualitative and more destructive level.

When they have to face this crisis the headless chickens will be in an even greater panic.

Today the statistics of the crisis speak for themselves.

Due to the disappearing dollar, the pound sterling, representing the even weaker and debt ridden British capitalist economy, has been pushed up to a dollar price of $2.10.

Oil has now reached $98 a barrel while gold has leapt up to $842 an ounce, revealing itself once again to be the only real money, as the pieces of paper, promises to pay, become more and more worthless.

The collapse of the dollar has only just begun.

Already it is being taken for granted that the Chinese government has been forced by the dollar collapse to begin ditching its multi-billion dollar holdings of US Treasury bonds, that finance the US government deficit, and buy gold instead, threatening the USA with state bankruptcy.

Petrol is now above £1 a litre, driven on by the prospect of revolution in Pakistan and war in oil rich northern Iraq.

Meanwhile mortgage interest rates, and food prices, are being driven remorselessly upwards, while the government battles to cut public sector pensions and pay.

The prospect is that the interpenetration of the US sub prime mortgage crisis, with the collapsing dollar and massive oil price hikes is going to bankrupt a number of US banks and industries leading to a deeper international crash.

Even the governor of the Bank of England has warned about something of what’s ahead for debt ridden Britain. During his blame game clash with the Treasury he warned of imminent dangers.

He said: ‘There is always, in a period like this, the possibility of a shock from outside the UK, one from the world economy, might create further fragilities.’

The deepening of the world crisis is going to lead to a run on the British banks and the pound sterling, that no government will be able to halt, not even with massive interest rate rises.

At this point the bourgeoisie will seek to form a national government to impose the entire burden of the crisis onto the working class and the middle class.

Faced with this prospect the working class must bring down the Brown government and go forward to a workers government that will expropriate the bourgeoisie and bring in socialism.