THE BRITISH pound is facing an ‘existential crisis’ that is only going to get worse according to the Bank of America and the outlook is ‘grim’.
With the price of oil driven through the roof this week, and set to soar even further following the EU announcement of further bans on Russian oil and gas supplies yesterday, the collapse of the pound on international markets is a reflection of the fact that the UK economy as a whole is crashing.
The pound has fallen by 6.6% against the dollar this year making it one of the world’s most unstable currencies. In a note to investors, Kamal Sharma, a strategist for the Bank of America, said: ‘Sterling’s fall from grace has been epic given last year’s euphoria and in many ways has caught the investor community by surprise.’
Sharma is worried that the Bank of England (BoE) has lost the plot saying: ‘We sense something changing in the UK with the BoE increasingly hard to decipher and less transparent.’
Faced with inflation spiralling out of control, the BoE has pushed up interest rates to 1% and it is widely expected that it will increase rates five more times this year. This is clearly not enough for Sharma and the Bank of America whose analysts are ‘increasingly sceptical’ that rate increases can ‘come to the rescue of the pound.’
Sharma went on to warn that the international money markets and investors are increasingly talking about the pound becoming as volatile as currencies of emerging countries.
He said: ‘Whilst not wishing to over-exaggerate (the pound’s) predicament as some kind of “end of days” scenario, we are concerned that the increasing politicisation of UK policy undermines GBP (the pound).’
British capitalism today is being lumped in with so called ‘third world’ countries which the finance capitalists have dismissed as economic basket cases whose currencies are so unstable they won’t touch them with a bargepole.
What Sharma is really getting at when he talks of the ‘increasing politicisation’ undermining the pound is a demand for the bankers to take charge and impose discipline on the country.
The Tory government, in his view, have exerted political pressure on the BoE to only increase interest rates in small steps – out of fear that a massive increase would drive up the cost of debt and plunge the country into outright recession.
With the working class in Britain asserting their determination not to be thrown into the gutter of destitution the BoE, in the words of its boss Andrew Bailey, is walking a ‘fine line’.
It is trying to hold back inflation through interest rate increases that are completely ineffectual out of fear that a more aggressive increase will be catastrophic for a terminally weak British capitalist economy.
The Bank of America clearly believes that Bailey and the rate setters at the BoE need to assert themselves, take charge and push interest rates up dramatically although they clearly also believe that it is too late to save British capitalism and the pound.
According to a report yesterday in the Byline Times newspaper, global banks and investment firms ‘are bracing themselves for an “unprecedented” upsurge in civil unrest in the US, UK and Europe’ and ‘dangerous levels of social breakdown in the West are now all but inevitable’ as the impact of the cost of living crisis hits the working class across the capitalist world.
The global banks are preparing for civil unrest as workers across the UK, Europe and the US are rising up and refusing to see their lives destroyed to keep the bankers and bosses in profit.
The working class must make its own preparations to put capitalism out of its misery.
On June 18, the TUC has called a mass demonstration over the cost of living crisis.
Workers must prepare for this to be the day when a general strike is called to kick out the Tories and replace them with a workers’ government that will expropriate the bankers and bosses and build a socialist planned economy.
Putting capitalism out of its misery with socialist revolution is the only way forward today.