THE LATEST economic forecasts for the UK released yesterday revealed that Britain’s economy is collapsing at an unprecedented rate this month.
The Purchasing Managers’ Index (PMI), which tracks the country’s economic activity in manufacturing and service, slumped to just 12.9 for April – down from 36 in March – making it the worst crash in manufacturing and service industries ever recorded.
Any PMI figure below 50 shows a contraction in the economy, and 12.9 is not just unprecedented but was described by one commentator as ‘Depression-level stuff’.
This catastrophic collapse of manufacturing and service industry was recorded across Europe, with the Eurozone economy also suffering the biggest falls ever recorded in business activity and employment this month as country after country dives from recession into depression.
The PMI for France fell to 11.2 while the German economy sank to just 17.1 in March.
In a speech delivered yesterday, one of the Bank of England’s top policymakers warned that the UK could be suffering its worst economic shock in several hundred years.
Jan Vlieghe, a member of the BoE’s interest-rate setting committee, said that the UK was experiencing economic contraction that is faster and deeper than anything seen in the past century, or possibly several centuries.
Vlieghe went out of his way to attempt defend the only response that capitalism has to this historic crisis, namely to try and print its way out of a depression by artificially creating trillions of valueless paper money.
Already the Tory government has announced plans to borrow another £225 billion from international investors over the next four months to fund massive payouts to businesses and corporations to prevent them from immediate bankruptcy from the coronavirus lockdown.
Even this huge amount of borrowing is now seen as totally inadequate to keep capitalism from going bust leaving the only option to turn on the money taps through more Quantitative Easing including the Bank buying £200 billion of government debt and allowing the government virtually unlimited credit underwritten by the Bank.
Vlieghe is well aware that this is the inevitable path to creating hyperinflation but, he insisted, the BoE is not acting like Germany’s central bank during the money-printing days of the Weimar Republic, or that of Zimbabwe.
Vlieghe said: ‘Let us focus on what really worries (some) people: Is this all going to end in inflation, or even in hyperinflation, as in the Weimar Republic or Zimbabwe? When people worry about monetary financing, these historical parallels are often what they have in mind.’
But not to worry because, according to Vlieghe, this time the printing of money is being done with the best of intentions by the Bank of England and not the government! He writes that the big difference between the Weimar Republic in the 1920s and Zimbabwe in 2007 which used the printing press to pay off their massive national debts ‘is that the BoE is taking these decisions independently – Westminster is not calling the shots’.
Vlieghe in a convoluted attempt at reassurance says: ‘If we were the central bank of the Weimar Republic or Zimbabwe, the mechanical transactions on our balance sheet would be similar to what is actually happening in the UK right now. That is not where you would find the smoking gun.
‘The difference would be that government would be telling the central bank what to do, implicitly or explicitly, in order to achieve fiscal objectives while subordinating any inflation objectives, a situation also known as fiscal dominance.’
Basically what he is saying is that the Bank of England is doing exactly the same as Weimar Germany and Zimbabwe but that is OK because it is the Bank that is doing it and not the government.
This ridiculous argument falls flat on its face – regardless of who authorises the unleashing of trillions of pounds of worthless paper money the result is the same, hyperinflation with the currency becoming worthless overnight.
With capitalism internationally plunging into another Great Depression and hyperinflation, the only future for the working class is to seize the power and put capitalism out of its misery through the victory of the socialist revolution.