THE BANK of England is due to meet this week to announce an increase in interest rates, with ‘experts’ predicting an increase of 0.5% pushing them up to 4.5%.
This will be the tenth successive increase in the past year, with interest rates in the UK now at the highest level since the 2008 world banking crash.
The era of near zero interest rates was coupled with central banks printing trillions of dollars, pounds, and euros which were then pumped into the world financial system to keep the banks from going bust.
All this worthless paper money – which was supposed to rescue financial capitalism from bankruptcy and ‘kick-start’ a promised economic revival – found its way entirely into the pockets of the bankers, hedge fund operators and speculators who used the free money and ultra-low interest rates to embark on an international debt-fuelled binge.
Paper billionaires were created overnight, along with the so-called ‘zombie’ companies that barely made enough profit to pay the near zero interest on their debts and which now face collapse as interest rates are hiked up.
But the result of all this money printing and low interest rates is to drive inflation through the roof across the world.
In Britain, inflation was officially recorded as reaching 11.1% at the end of last year but this does not take into account the real cost-of-living crisis faced by workers. Food inflation in the UK reached a record high of 13.3% in December and is predicted to go as high as 19% in early 2023.
Average energy bills will rise by £900 a year as government support for the price cap is reduced.
Over two million households will move to more expensive mortgages as they reach the end of fixed terms.
This will cost the average fixed rate homeowner another £3,000 a year. These increases will also be reflected by private landlords driving up rents to cover the increased cost of borrowing.
The Resolution Foundation think tank is predicting that these massive increases, along with wages being held down way below the inflation rate, mean that living standards will fall by 3.8% in 2023 – a bigger drop than that in 2022.
The thinking behind this is that this will actually increase prices, cause ‘zombie’ companies to go to the wall thus driving up unemployment, all of which means the working class will have much less money to spend while increased unemployment can effectively be used to discipline workers and hold down wages.
This, the central bankers believe, will magically reduce inflation by driving the working class into starvation levels of poverty where workers can’t afford to pay for food, energy or keep a roof over their heads.
The Bank of England is caught in a trap – push up interest rates in the hope of curbing inflation or continue with lower levels and risk inflation drowning the UK economy.
Neither of these options can halt the drive into recession that even the Bank has been forced to admit is raging in the UK. Whatever the Bank decides, the bankers, bosses and Tory government are determined that the working class will pay the cost of the capitalist crisis.
With no economic way out this crisis, it can only be resolved in a fight to the finish between the two classes – between the working class that is demonstrating its determination not to accept being driven into poverty and a capitalist class that can only survive by dumping its crisis on workers’ backs.
In this struggle, the leadership of the TUC is conspicuous by its absence. It is calling for a national day of protest tomorrow against Tory union-busting laws but then refusing to organise anything, preferring to go into hiding when it comes to a fight against this weak Tory government.
These TUC leaders must be forced to call a general strike to bring down the Tories or be removed and replaced with a leadership prepared to carry out the demand for a general strike that already has the support of the overwhelming majority of workers and young people.
Kicking out the Tories and bringing in a workers’ government and socialism is the only way forward today.
