THE worldwide capitalist crisis drove the pound down on Friday into an unprecedented collapse.
The pound slumped 9.6 US cents to $1.52 at one stage, after official figures showed that the British economy had contracted into recession by a far bigger than expected 0.5 per cent in the third quarter of the year.
The whole of the motor industry in the UK is now on short-time working with rumours abounding that Nissan, Honda and GM are on the brink of mass sackings or closures, while large numbers of smaller businesses are sinking without trace.
On Friday, sterling recovered some of its losses to finish around $1.58. It is not so long ago that the £ was priced at $2.08, meaning that a gigantic sterling collapse has already taken place.
Wall Street’s Dow Jones index closed 372 points down at 8378 points, making for a 30 per cent loss on share prices on the exchange since its high point.
Friday’s early collapse of sterling was the biggest one-day decline ever. At closing, the FTSE 100 index fell by 204 points to 3883 pts, with £45 billion lopped off share prices. The banks made some of the biggest losses, with HBOS continuing to crash, despite all of the government aid, down 13.5 per cent.
To make sure that it was understood that it is indeed every man for himself time, the Opec oil cartel ignored the pleadings of Bush and Brown and lowered oil production by 1.5 million barrels a day.
Opec opinion is that if this is not enough to reverse the momentary fall in oil prices, it will further cut production so that oil will reach a ‘viable’ $100 a barrel price.
Meanwhile, the Brown government is still ranting that it intends to spend its way out of the recession, whilst the CBI and the TUC are urging the government to do this by cutting interest rates by between one or two per cent.
UK domestic debt is now running at £1.4 trillion. Government borrowing reached £37.6 bn during the period from April to September 2008 (Darling had previously forecast £43bn of government borrowing from April to March 2009!). This is the highest figure for government spending since 1944.
The national debt is now growing rapidly because of the billions that the government has handed to the banks.
Meanwhile, unemployment is rushing upwards as the debt-based, industry-light, consumer economy collapses. Unemployment will reach two million by December 2008, and three million by December 2009.
Industry, the CBI and the TUC are screaming for a cut in interest rates of between one and two per cent to try and prevent the collapse of thousands of businesses.
However, further cuts in interest rates will see further record-breaking plunges of the pound sterling. This is being treated as the lesser evil, with some saying that record-breaking price inflation is better than seeing more businesses collapsing like packs of cards.
The reality is that further interest rate cuts run the risk of beginning a really major run on the currency that will only be stopped by ultra-high interest rates and/or by state bankruptcy, with very large numbers of people losing their jobs, homes, and pensions.
The working class and the middle class have no future under this completely bankrupt and out-of-date society, which is solely run in the interests of the bankers and the bosses, and which is on the brink of a massive destruction of the productive forces in a recession that will develop, if it is allowed to, into a depression. Then a war to redivide the world, World War Three, will be the only option for the imperialist gangsters.
What is required is working class action to resolve this crisis. The trade union leaders must be made to call a general strike to bring down the Brown government and to bring in a workers’ government that will nationalise the banks and the major industries and bring in a socialist planned economy.