YESTERDAY, the Bank of England (BofE) hiked up the interest rate by 0.25% to 1.25%, its highest level in 13 years – the first time the rate has gone above 1% since January 2009.
Following the world banking crash in 2008, the capitalist central banks cut interest rates to zero, at the same time printing trillions of worthless money to be handed out to keep the banks and industries from bankruptcy.
The massive debts run up by the bankers, bosses and government to keep world capitalism from collapse, has created an inflationary spiral that is now raging out of control.
Added to this crisis, has been the inevitable driving up of energy and food costs resulting from the imperialist war on Russia.
In a desperate attempt to try and control inflation, the BofE has followed the lead of the Federal Reserve Bank which hiked US interest rates by 0.75% on Wednesday – the largest increase by the Fed since 1994.
The ‘theory’ behind pushing up interest rates is simply that increasing the amount of interest repayable on loans, mortgages and credit will make borrowing more expensive and so encourage people to spend less and bring down inflation.
Working class families need no encouragement to spend less – millions can’t afford to pay for essentials like food, heating and rent already.
Families that have just survived through taking out loans or maxing out on credit cards, will find repayments shooting up and the bailiffs knocking on the door.
All the zombie companies that have survived through taking on massive debt at zero level interest will be thrown into bankruptcy while the debt repayments by the Tory government on the massive £2.3 trillion national debt will soar.
Tory Chancellor Rishi Sunak will be demanding even more savage austerity cuts to pay for the increased repayments on the £2.3 trillion debt run up bailing out a collapsing British capitalist system.
What is absolutely clear is that increases in the interest rates, either in the UK or US, will do nothing to dent inflation but only accelerate the drive into collapse.
Unable to avoid this economic collapse through trying to manipulate interest rates, capitalism has no alternative but to survive through making the working class pay by driving it into the gutter of poverty and unemployment.
The US Fed chair Powell came close to admitting this on Wednesday.
While still insisting that interest rate increases might, just possibly, ‘tame’ inflation he confessed that it would hit US workers hard by leading inevitably to a sharp increase in unemployment.
Powell said: ‘We never seek to put people out of work’ before adding: ‘You really cannot have the kind of labour market we want without price stability.’
The kind of labour market Powell and US capitalism wants is one of mass unemployment and conditions where workers are driven into low paid jobs to try and survive.
The BofE and the Tories intend exactly the same for workers in the UK.
In Britain, Mervyn King, former governor of the Bank of England, wrote that both Bailey and Boris Johnson ‘must come clean’ with the public about how the crisis will lower living standards and that the UK faces ‘a difficult couple of years, reminiscent of the 1970s’.
In fact, it’s time for the TUC to come clean with the working class and declare that appeals to the Tories and bosses for ‘real pay’ rises for every worker will get nowhere in the face of the greatest crisis of capitalism ever.
The working class has demonstrated conclusively that it is not prepared to be forced back to the poverty of the 1930s but will fight.
With RMT preparing to take national strike action and unions across the country being driven by their members to take action in the fight for inflation-busting pay increases, the time has come for the trade unions to mobilise the full strength of the working class.
The TUC must declare that Saturday’s march and demonstration in London must become the start of an indefinite general strike to kick out the Tories and bring in a workers’ government and a socialist planned economy. This is the only way forward.