A FIFTH of all UK small and medium sized businesses are set to close permanently over the next four weeks as they run out of cash, according to research published yesterday.
Between 800,000 and a million will collapse as the banks refuse to give them the emergency loans which they believed would be available following Tory chancellor Rishi Sunak’s pledge two weeks ago, that they would be able to walk into the banks and negotiate Coronavirus Business Interruption loans of up to £5 million to save them during the shutdown.
It now turns out that there is no cash for these firms, who are told by the banks that they are ineligible for loans or that any loan made comes with conditions that make it impossible for them to accept.
Banks are demanding that the directors of any business wanting to borrow more than £250,000 must act as personal guarantors for the loan, meaning that if the company goes bust then their homes and personal property will be repossessed by the banks.
Small or medium sized businesses employ 23 million workers across the country and their collapse will throw millions out of work.
All along, Sunak only intended to borrow billions to bailout the giant corporations and industries while throwing the petit bourgeois small businesses and the millions of workers they employ to the wolves – sacrificed to ‘save’ the big bourgeoisie.
Even Sunak’s pledge of £350 billion to rescue British capitalism is doomed to failure according to Charles Bean, a former deputy to governors at the Bank of England.
This money, according to Sunak, would be obtained by borrowing on the open market but, as Bean pointed out yesterday, it will be difficult, not to say impossible, to borrow £200 billion and more in the markets over a very short space of time.
What Bean doesn’t explore is the simple fact that, like the banks being reluctant to give loans to companies floundering into bankruptcy, so the international money markets are loath to hand money to countries like the UK that are plunging into recession and are no longer considered ‘safe havens’ for their cash.
To overcome this, Bean proposes that the Bank of England simply prints all the banknotes needed to pay for all the government spending and fund the government debt.
Under Quantitative Easing, the fiction that central banks were not just printing worthless paper money, was maintained by these banks only ‘digitally’ printing new money which was then used to buy bonds from the banks and other financial institutions, which in turn made loans to the government using this money.
Now Bean is proposing to end this fiction and for the Bank of England to crank up the printing presses.
Bean is aware of the danger as history has provided a number of examples of the result of bankrupted capitalism resorting to printing huge amounts of worthless paper money to finance its debt, notably in the German Weimar Republic in the 1920s and more recently in Zimbabwe, where it led to hyperinflation which devastated both countries.
In Germany, the Weimar Republic, unable to pay the crippling war reparations demanded by the allies, resorted to printing money to pay off its debts. The currency became worthless overnight with the German mark quite literally not worth the paper it was printed on and German workers starving on the streets. Bean wrote: ‘Some readers will no doubt worry that such “monetary financing” is putting the UK on the road to high, or even hyper, inflation.’
The UK, along with the rest of the capitalist world, is already far down the road of economic collapse and hyperinflation, as the ruling class has no option but to attempt to pour even more worthless paper money into a system already drowning under the weight of debt.
The only way forward in this crisis is for the working class to put an end to bankrupt capitalism by building a revolutionary party that will force the trade unions to organise a general strike to bring down the Tories and then bring in a workers government.
Under a new revolutionary leadership, the working class will then expropriate the banks and major industries, placing them under the control and management of the working class as a whole, paving the way for the building of a socialist society.