SIR Jon Cunliffe, Deputy Governor of the Bank of England, is a very worried man – with good reason. What is keeping him awake at night is an unfolding banking crash that is dwarfing that of 2008 and which will drive British capitalism into the abyss.
Cunliffe’s latest warning – delivered on May 1st to the ‘Worshipful Company of International Bankers’ dinner in London – was about the dangers inherent in skyrocketing house prices in Britain, a ‘boom’ as far as the speculators and the ‘worshipful company’ of bankers are concerned, but a boom which is inevitably leading to a bust of gigantic proportions and one which Cunliffe fears will destroy the entire financial system of capitalism.
According to the Nationwide Building Society, the number of homes in London costing more than £500,000 has shot up from the peak experienced during the last housing bubble in 2007 by 12%, while the number of houses in the capital that cost over £1 million has more than doubled over the same period.
One in fifteen homes in London are now selling for a staggering £1 million or more, according to figures released on the day of Cunliffe’s speech. Although London is extreme in the high price of housing, the same percentage increases are occurring across Britain.
The factors behind this housing bubble include the government’s Help to Buy scheme, which was recently extended to cover every borrower, and not just first timers, and every house (not just new build) worth up to £600,000. Under this scheme, building societies and banks are encouraged to lend to buyers with as little as a 5% deposit.
What is terrifying Cunliffe and others, is that this scheme is driving up house prices to unaffordable levels, and at the same time vastly increasing the personal indebtedness of house buyers to the extent that, according to the housing charity Shelter, four million families are in such a perilous financial state that they are ‘just one pay cheque away from losing their homes’.
Cunliffe, of course, didn’t put it quite so plainly, he said the risk was of a ‘major overshoot in prices and buildup in debt followed by a sharp correction with negative equity and an overhang of debt for many households’, before adding: ‘Unfortunately, there are more precedents in the UK for periods of a rapidly growing housing market to end in this way.’
However it is dressed up, the stark fact remains, that the policy of the Tory-led coalition – of destroying council and social housing and forcing workers and the middle class to take on exorbitant mortgages; coupled with house prices being driven through the roof by ‘buy to let’ speculators and the hedge funds gorging on the free money pumped out to keep the bankers in profit – has created a housing bubble even greater than that of the 2008 sub prime mortgage collapse in the US.
That collapse brought on a banking crisis that engulfed the world and has led to six years of savage austerity across the world, with workers and their families being forced to pay for the banking collapse through wage cuts, unemployment and attacks on the Welfare State.
This latest manifestation of the crisis will, as Cunliffe is clearly aware, bring about a banking collapse that will eclipse anything that has gone before. With the working class up in arms over the present cuts, the coming crash will release a revolutionary tide of anger that even the trade union bureaucracy will be hard put to contain.
It is this spectre of unfolding revolution that is haunting Cunliffe and the other bankers. The urgent task of the hour is the building of a revolutionary leadership that is trained and prepared to lead this revolution to take the working class to power and to the establishment of a socialist society.
Only the Workers Revolutionary Party is building this leadership, join today.
