ANDREW Bailey, the governor of the Bank of England, used an interview on the BBC yesterday to once again insist that British capitalism is not fast going over the cliff of collapse, and that the Bank is ‘not out of firepower’ in defending the economy.
This was just the latest of the increasingly desperate attempts by Bailey to convince the public that there is ‘light at the end of the tunnel’ for the UK economy.
Bailey did admit, however, that he is looking at ‘new tools’ to deal with the UK’s biggest economic crash in 300 years. In fact, the only new tool that Bailey mentioned was negative interest rates – although he was quick to stress that this was a last resort, saying that, while negative interest rates could be included, ‘that’s not a view on whether we will use them or not’.
Negative interest rates mean that anyone putting money into a savings account or lending it out, instead of receiving interest, actually has to pay for the privilege.
The justification for using this extraordinary measure is the claim that charging people or financial institutions to park their cash in a bank will encourage them to go out and spend or invest.
Exactly the same claims were made by the central banks about Quantitative Easing (QE), namely that these banks printing trillions of worthless currency, and handing it to the bankers and bosses, would ‘stimulate’ capitalism out of its crisis.
QE was supposedly a temporary emergency measure when it was introduced in 2008 to prevent an international banking collapse – but it has never ended only grown to gigantic proportions.
QE has become the sole method of keeping the economy from collapse, as the Tories have relied on the Bank to buy up the government debt in order to finance government spending. At present, the Bank of England buys about £4.4 billion of government bonds a week to keep the Tories from going bust.
According to a recent article in the Financial Times there is ‘tension’ between financial markets, who believe QE is the only thing keeping the government alive, and Bailey, who insists he ‘is not in the business of using central bank money to finance the government’.
There is a very good reason why Bailey is so adamant in denying what is clear to everyone else – financing government spending by relying on the central bank just printing money leads inevitably to currency collapse and hyper-inflation. This is exactly what happened in Germany in the 1920s, and more recently in Zimbabwe.
Unable to face the truth, Bailey is reduced to parroting that British capitalism is set to experience a massive ‘bounce back’ once Covid restrictions are lifted – although he did add the rider that a new variant of the virus could ‘pose a risk’ to the recovery.
This is the line being pushed by the Tories, that once restrictions are ended millions of people will pour onto the streets desperate to spend all the money they have allegedly stashed away during the lockdown.
In fact, it is estimated by the Institute for Public Policy Research that nearly 600,000 firms are at risk of collapse when the support schemes end in September throwing millions out of work. A study of British adults last December showed that, on average, everyone ended 2020 with £9,246 of total debt.
For the millions of workers forced to subsist on 80% of their wages under the furlough scheme, and the hundreds of thousands sacked during the pandemic, there is no light at the end of the tunnel – only mass unemployment and wage cutting.
These are the only ‘tools in the box’ for capitalism – to impose their crisis onto the backs of the working class. Workers will indeed pour onto the streets rising up in defence of their jobs and wages.
The only burning issue today is for the working class to build a new revolutionary leadership throughout the unions that will mobilise the strength of the working class to put an end to this bankrupt capitalist system through the victory of the socialist revolution.