YESTERDAY, the Bank of England hiked interest rates up to 4.5%, the twelfth consecutive increase in a row, pushing up borrowing costs to the highest level since October 2008.
The rationale behind these increases is that they are necessary to bring down inflation by making debt more expensive, giving people less money to spend on food, heating, energy and rent.
None of the twelve rate increases have had the slightest effect on the inflation rate which is over five times higher than the Bank target of 2%.
This stark fact has not deterred the Bank which ascribes the ‘stubbornness’ of inflation to the refusal of the working class to submit to having its wages slashed to keep capitalism staggering on from one crisis to the next.
This was spelt out recently by the Bank’s chief economist Huw Pill, who bluntly told workers they must accept poverty and ‘stop trying to maintain their real spending power’ by demanding wage rises.
In other words, the massive inflationary crisis of British capitalism will not be ‘solved’ through interest rate manoeuvres by the central bank but through driving the working class into extreme poverty through a class war.
A class war that the Tories have prepared with their anti-strike bill, soon to become law.
In the US, the crisis is fast reaching the point of explosion that will bring down the world capitalist economy.
Yesterday, an increasingly panicking US Treasury Secretary, Janet Yellen, repeated her warnings from last week, that unless the US Congress agreed immediately to raised its debt ceiling, America would default on all its debts as the government runs out of cash on June 1st.
Speaking at a meeting of G7 finance ministers and central bankers in Japan, Yellen reiterated that if the current debt ceiling of $31.4 trillion (£25.1 trillion) isn’t increased a default would bring on an ‘economic and financial catastrophe’ that would trigger a global economic downturn and ‘risk undermining the country’s ability to provide global leadership’ and ‘raise questions about our ability to defend our national security interests’. She warned last week that a default would wipe out 8 million jobs in the US and cut the value of the stock market in half.
America’s national security is reliant on being able to borrow unlimited money from overseas based on the supremacy of the ‘almighty’ dollar and it ability to weaponise the dollar against its enemies.
What is panicking Yellen, is that countries and investors are increasingly seeing the US not as a ‘safe’ repository for their money, but a treacherous snake being crushed by a massive debt crisis.
Increasing the debt ceiling has been held up by the Republicans, who hold a slim majority in the Congress, who are demanding president Biden make savage cuts to Federal spending.
Their resolve would have been stiffened by former US president and frontrunner for the Republican presidential nomination, Donald Trump.
Answering questions from voters on CNN, Trump insisted Republicans should refuse to raise the debt limit unless Biden agreed ‘massive’ spending cuts.
Bourgeois media have been quick to dismiss Trump as deranged and his televised appearance as yet another lying rant by a megalomaniacal fantasist.
This is a mistake, Trump in fact is speaking on behalf of the capitalist ruling class with no option but to fight it out with the working class.
A ruling class attacked on all sides by successive crises, from bank collapses and inflation, now faces the prospect of the biggest capitalist economy in the world being threatened with bankruptcy in a matter of weeks, bringing the entire capitalist system crashing with it.
The only way out for capitalism, as Trump and the Bank of England agree, is to force the working class to accept being driven into the gutter of recession and another Great Depression.
The undefeated and powerful working class in America, Britain, Europe and across the world will not allow their lives to be destroyed by a capitalist system that has reached the end of the road and is plunging into economic and social collapse.
The urgent task today is for the working class to take action to end the capitalist crisis with the victory of the world socialist revolution.
This is the only way forward!