YESTERDAY, the Bank of England announced that it will be keeping interest rates on hold at the historical low of 0.1%.
This was the unanimous vote of the Bank’s Monetary Policy Committee (MPC) which also voted to keep on with its Quantitative Easing (QE) programme of pumping out £745 billion to hand out to ‘stimulate’ a bankrupt British capitalist economy.
QE has increased by £300 billion since March precisely to keep interest rates low and to provide cheap loans to finance government borrowing.
In other words, the bank is effectively printing worthless money out of thin air to stop the country from going bankrupt, along with all the companies that rely on cheap loans just to pay off the interest on their existing massive debts.
At the same time it provides cheap money for the hedge fund speculators and international investors to splash out buying shares and driving the world’s stock markets to record high levels.
Even this £745 billion will not be enough, as City analysts expect the Bank to add a further £100 billion to the QE programme when it meets in November.
Andrew Wishart, an economist at the consultancy Capital economics, said: ‘As the MPC is wary of the side-effects of negative interest rates on banks, we think that will come in the form of a further £100bn instalment of QE.’
This would indicate that the Bank is worried that an interest rate of 0.1%, while propping up industry and keeping the government from going bust, has seriously impacted on the profits of the banks.
If they can’t charge high interest rates on their loans where will they make the huge profits they rely upon?
The Bank was following the lead given earlier this week by the US Federal Reserve Bank. On Wednesday, the Fed pledged to continue to support the US economy for at least three years by keeping interest rates to near zero.
Last month, the Fed announced it was abandoning its long held policy of managing inflation by increasing the rate if prices rise and unemployment falls. Instead, it has obeyed the demands of Wall Street in guaranteeing a never-ending supply of virtually free money to pile upon the world debt.
In addition to near-zero interest rates, the Fed has taken ‘forceful’ steps by buying up $2 trillion in US government debt. After the world banking crash of 2008, the Fed and the Bank of England along with central banks across the world embarked on a programme of QE and low interest rates.
These, they assured, were temporary emergency measures necessary to stop the worlds banks from collapsing and would be ended once capitalist normality returned and a miraculous economic recovery occurred.
There was no economic recovery. In fact, capitalism has spiralled out of control ever since, kept going only through eye-watering amounts of debt.
All the free money pumped out by the central banks went not into reviving industries that produced virtually nothing and certainly not the profits demanded by the capitalist class but into the pockets of the super-rich to vastly increase their wealth through ‘investments’.
According to the Swiss bank UBS over three-quarters of the world’s richest people have since increased their fortunes despite the coronavirus pandemic.
While workers and the middle class have seen their jobs destroyed and their pensions collapsed the ‘investment portfolios’ of the super-rich (with average fortunes of £1.6 billion) have rocketed.
The fact that the Fed and the Bank of England are forced to carry on with their ‘emergency’ measures of QE and zero interest rates proves that there is no ‘bounce back’ for capitalism.
This debt mountain run up to ‘save’ capitalism will have to be repaid and the capitalist class are determined that it will be paid for by the working class through mass unemployment and wage-cutting. This will not be carried out peacefully but through a massive class war against the working class.
The way for the working class to win is to use its huge strength bring down the Tory government, seize power and put an end to this bankrupt capitalist system through the victory of the socialist revolution.