THE OFFICIAL annual rate of inflation leapt in February, according to the Office of National Statistics (ONS).
Figures published yesterday showed that the Consumer Prices Index (CPI), which excludes housing costs, reached 2.5 per cent in February, up from 2.2 per cent in January. The Retail Prices Index (RPI), which includes housing, stood at 4.1 per cent.
Everyone knows that these figures do not give a real measure of the rise in the cost of living for workers and middle-class people, who spend most of their income on housing, food and energy.
Recently the energy monopolies raised electricity and gas prices by up to 15 per cent. The prices of bread and milk have rocketed by 15 per cent in the past year, while eggs are up 30 per cent and cheese up 10 per cent.
These inflation figures are directly related to the falling exchange rate of the dollar and the pound, undermined directly by cuts in interest rates by the US Federal Reserve Board (FRB) and the Bank of England (BoE). The Fed has reduced its base rate from 5.25 to three per cent since last September and a further cut was expected yesterday.
Alongside huge increases in the prices of basic necessities, the immediate fall-out from the capitalist crisis and the present so-called ‘credit crunch’ are the huge losses of the banks.
The government gave Northern Rock £25bn and was forced to nationalise it last month to defend the whole banking system.
The Fed provided Bear Stearns with $30bn last week to prop it up, before J P Morgan took it over for $115m, a fraction of its $20bn price in January.
The newly-nationalised Northern Rock announced yesterday it will slash its operations by half and that 2,000 jobs, out of 6,500, will go.
In addition, two of the largest American banks published their figures yesterday revealing a huge drop in profits. The largest investment bank, Goldman Sachs, reported that its profits were $1.5bn in the first quarter of 2008, compared with $3.2bn in the same period last year.
The world’s largest banks have lost billions in bad debts in the American sub-prime mortgage market since last summer. However, Bear Stearns’ losses occurred, not on sub-prime mortgages, but normal ones. As one New York banker admitted yesterday: ‘We’re all sub-prime now.’
The debt crisis is endemic and chronic. It is a manifestation of the crisis of capitalism in its death agony. What happened to Bear Stearns in the past week shows that all the rate cuts of the Fed, European Central Bank and the BoE, have had no impact on the momentum of this crisis and more banks will go bust.
The fall-out from capitalism’s huge debt crisis is growing day by day – job losses, homelessness and a rocketing cost of living.
There is no capitalist solution to this crisis that will permit the working class and middle class to keep their jobs, homes and living standards.
Workers must demand the trades unions fight for a sliding scale of pay, with wages rising automatically in line with the real cost of living, as calculated by the unions.
All the major banks must be nationalised, under workers’ control and without compensation to shareholders, while guaranteeing deposits.
The answer to closures and mass sackings must be the establishment of work-place committees to organise occupations to defend equipment and go forward to the nationalisation of these assets, under workers’ control and without compensation.
Councils of Actions must be set up in areas where a number of struggles are taking place to unite and strengthen these struggles of workers to take control of everything that affects their lives.
The Workers Revolutionary Party is engaged in the struggle to build a new revolutionary leadership in the unions, to replace those leaders who are collaborating with the employers and the government, and to fight for this socialist programme. Join the WRP today!
Mass industrial and political action by the whole trade union movement is necessary to remove Prime Minister Gordon Brown’s bankers government and replace it with a workers government to defend workers and middle-class people from the capitalist catastrophe.