THE governor of the Bank of England, Andrew Bailey, this week issued another warning that the UK economy risks being in a ‘vicious circle’ of rising borrowing costs on its national debt standing at £3 trillion.
Speaking this week at a committee in the House of Lords, Bailey emphasised that the increased interest charged by the international financiers who buy up government debt will derail all Labour chancellor Rachel Reeves’s plans for the public finances.
This will in turn create a vicious circle by undermining any confidence by the hedge funds and financial speculators in the capacity of the Labour government to ‘manage’ the collapse of British capitalism in a way that ensures they get all their profits back.
Bailey told his audience: ‘You could imagine, in the worst of all worlds, you get this reinforcing circle where, because the cost of debt servicing goes up, that strains the fiscal rule, the consequences of that strain causes more loss in fiscal policy which puts the cost of debt up, and you are in a sort of vicious circle at that point.’
Former governor of the Bank of England, Mark Carney, once famously described the situation of government spending relying on debt to finance public spending, as ‘depending on the kindness of strangers’.
Carney was being deliberately cynical, knowing full well there is not a shred of ‘kindness’ amongst the financial vultures and parasites. They are driven by profit and nothing else.
In Britain, the interest rates on its massive national debt have risen, by more than any other nation in the G7 list of ‘advanced countries’.
Even before the US-Israeli unprovoked war on Iran, the UK government was projected to spend over £100 billion a year on debt interest.
Today that figure will soar as the failed war by US imperialism to obliterate Iran and seize its oil wealth flounders with the vital Strait of Hormuz still firmly under the control of the Islamic Republic and energy costs driving inflation across the world.
In answer to the question about whether there was a potential ‘limit’ to the size of the national debt, Bailey said, ‘practically, there is’ as rising interest costs would eventually overwhelm the state.
‘Overwhelming the state’ means a future where all government spending on the NHS, social services, benefits, education and all the gains of the welfare state are wiped out in order to repay the capitalist bankers and international finance speculators.
While British capitalism is the weakest of the major capitalist economies, the most powerful, the US, is at the centre of the global crisis.
In the past, the US was seen as cast iron investment for central banks who bought up America’s bonds and piled billions into propping up a US economy, and financed its massive spending.
In March 2026 the US national debt officially increased to over $39 trillion for the first time in history and it is increasing dramatically by the day.
The US national debt is outstripping demand for its bonds, and is increasing faster than the American economy.
The debt now stands at over 120% of the US Gross Domestic Product (GDP), the total economic output of America.
This has led to central banks across the world to ditch US bonds in favour of holding gold.
The European Central Bank (ECB) said the central banks were using gold to shore up their balance sheet against the headwinds of ‘geopolitics’ – a polite way of saying American imperialism under Donald Trump is rampaging around the world with wars and tariffs, along with threats to invade other countries.
World capitalism has indeed entered a vicious circle of debt. It can only try and escape it by forcing the working class back to the starvation conditions of the 1930s Great Depression era.
The working class is rapidly reaching the conclusion that capitalism must be overthrown and replaced by a world socialist economy. The most urgent issue today is building sections of the International Committee of the Fourth International in every country to provide the leadership to organise the victory of the world socialist revolution. There is not a moment to lose!
