THE governor of the Bank of England, Mervyn King, finally admitted publicly that British and world capitalism faced their ‘worst crisis ever’, a crisis that far outstrips the great depression of the 1930s in both its depth and its international character.
King was speaking out on Thursday following the announcement that the Bank was resorting to the desperate measure of printing a further £75 billion of worthless paper money to inject into a bankrupt banking system that is rapidly collapsing.
This £75 billion will join the £200 billion printed electronically in 2009 in an equally desperate attempt to stave off a banking collapse at that time.
£200 billion was not sufficient to stabilise capitalism two years ago and a further injection of £75 billion is already being judged as too little to stop a complete melt-down of the banks. Bourgeois ‘experts’ are talking about £500bn plus being needed.
On the same day as King issued his warning, the credit rating agency Moody’s downgraded twelve UK banks and building societies including Lloyds TSB, Nationwide and Santander UK.
The downgrading of their credit ratings was due, Moody’s explained, because it believed that the UK government was ‘less likely’ to support them, i.e. it has run out of taxpayers’ money to put in to stop their collapse, without touching off a mammoth sterling crisis.
In fact, it is not a question of what the government likes or doesn’t like: the reality is that paper notes are no longer trusted as money, as all eyes turn to gold!
What is certain is that by printing, or rather electronically creating vast amounts of promise-to-pay notes, not backed by any value (since the heady days when Brown sold off the gold reserves to try and prove that there was no such thing as value and that he had mastered the crisis), the Bank is ensuring an explosive leap in inflation.
This was explicitly acknowledged by King in interviews given to explain this abrupt decision but was dismissed as a price worth paying for bailing out the banks.
King said that the problem faced by British capitalism was different from the days when there was too much money flowing round the economy and driving up the cost of living. Now ‘there is not enough money’. He added: ‘That may seem unfamiliar to people.’
Having huge amounts of fictitious currency sloshing around is by definition inflationary and this latest desperate move by the Bank can only drive the cost of living sky high for working people far beyond pay or benefit levels.
Already, inflation in Britain is running at 4.5%, twice the target set by the coalition government. By the Bank’s own calculations this level was set to increase to 5% in the next month, a figure that will now rise dramatically as a result of this new round of conjuring money out of thin air.
We are on the verge of experiencing the type of hyper-inflation last seen in Weimar Germany in the 1930s, where it was literally true that paper money had such little value that it was cheaper to paper your walls with it than to buy wallpaper.
The conditions are being created where the cost of living will go through the roof and even those in employment will find it impossible to buy even the basic necessities of life, like food and shelter.
None of this worries King or the government. Responding to a question about pensioners and other workers who were having to use any savings they may have just to survive, King replied that it was ‘more important’ to support the ‘wider economy’ than to support savers.
The message couldn’t be clearer: propping up the banks is more important to the ruling class than families starving and losing their homes.
The only way out of this crisis for capitalism is through dictatorship at home and a new war to redivide the world at the cost of mountains of corpses.
For the working class the issue is equally clear-cut. Only by smashing capitalism and advancing to socialism, via a socialist revolution, can workers and youth have a future.
