PM Brown has reacted to the Bank of England chief’s public admonition that the next Budget must not plunge the UK into another flood of state debt, through ‘fiscal stimulus’.
Brown responded by claiming that there was ‘far more agreement’ than had been claimed.
BofE chief King is determined that the next budget must not see another flood of money printing, adding greatly to the quantity of state debt that is currently driving down the pound sterling, and parliament is abuzz that he has the Treasury, and even Darling, on his side against Brown.
‘Given how big these deficits are’, King said, ‘I think it would be sensible to be cautious about going further in using discretionary measures to expand the size of those deficits.’
He added, taking direct aim at the April 22 Budget: ‘that’s not to rule out targeted and selected measures. . . . But I think the fiscal position in the UK is not one where we could say, well, why don’t we just engage in another significant round of fiscal expansion?’
The IMF now thinks the UK will have a deficit of 11% of GDP in 2010.
UK, borrowing has risen by 6% of GDP per year, on average, between 2007 and 2010.
The pound is already collapsing with food price inflation rampant.
Brown was however unrepentant when he spoke at a Wall Street Journal function, part of his worldwide campaign to drum up support at next week’s G20 summit for the fiscal stimulus policy of President Obama.
He said that he hoped the G20 would see agreements on help for central and eastern Europe, which had been hard hit by the economic crisis, a ‘continuation of a co-ordinated approach to fiscal and monetary policy’ and international agreements on the supervision of the financial system.
Brown is pressing the case for ‘wealthy countries’ to bring forward big fiscal stimulus packages to refloat the economy.
He is at one with President Obama, who has just written in an article circulating worldwide, that he wants to see the EU back bold action to kick-start the global economy, including what he called a ‘robust’ and ‘sustained’ fiscal stimulus.
In his speech in Washington DC, Obama lectured the EU and China stating that all countries must share the burden of rescuing the global economy from its worst crisis in decades.
‘We don’t want a situation in which some countries are making extraordinary efforts and other countries aren’t, with the hope that somehow the countries that are making those important steps, lift everybody up.’
This Obama offensive was not greeted with praise throughout Europe.
The Czech PM Mirek Topolanek, whose government has just lost a no-confidence vote, said the US recovery plans for printing trillions of dollars, were the ‘way to hell’. He added his full support for the EU’s rejection of Obama’s policy.
Earlier in the week the head of the international Monetary Fund, Strauss-Khan said of the fiscal stimulus policy: ‘You can put in as much stimulus as you want, it will just melt in the sun as snow if, at the same time, you are not able to have a smaller but healthy financial sector at work.’
The capitalist powers are now splitting up into mutually hostile blocs, propagandising for free trade, but in essence preparing for slump and trade wars.
However, the issue is not either fiscal stimulus and rampant inflation leading to state bankruptcy, or savage deflation and massive industrial collapses leading to hundreds of millions of unemployed.
The answer to the crisis of capitalism is the organisation of the world socialist revolution to get rid of bankrupt capitalism, replacing it with a socialist society based, not on the profit motive, but on the satisfaction of people’s needs.