THE war between the governor of the Bank of England, Mark Carney, and Tory prime minister Theresa May was stepped up on Wednesday when Carney issued a paper rubbishing May for her speech at the Tory party conference where she talked of the bad ‘side effects’ of the policy of Quantitative Easing (QE).
William Hague also joined the action saying QE had now become ‘unpopular and counter-productive’. In his paper, Carney defended QE saying the surprise announcement extending Quantitative Easing after the Brexit vote had been beneficial to the UK economy.
Carney claimed that this emergency action of the Bank, in printing more money to give to the banks in order that they could buy government bonds, in effect saved the UK economy from the catastrophe after the Leave vote that he had predicted.
Carney is virtually alone in believing that QE is anything more than a total failure that has done nothing to stimulate a bankrupt capitalist system. Everyone else, from the IMF to the Bank for International Settlements, has damned QE for playing a major role in driving global debt to a record and unsustainable level ($158.8 trillion and growing) making a new and bigger financial crash certain.
The whole premise of QE is that central banks can stimulate capitalism by injecting ‘money’ into the commercial banks in return for them buying government bonds. The Carney myth is that you ‘print money’ and hand it to the banks who then lend this ‘money’ to moribund businesses and manufacturers who will use it to expand, create jobs, increase wages and generally create wealth and prosperity for all.
None of this has happened anywhere. QE failed because the banks had no interest in investing in industries that were going bust already. With no profit to be made from investing in industry, the banks found it much more profitable to invest in a massive round of speculation; buying and selling bonds, stocks, real estate and currency speculation.
Awash with trillions of free money, electronically created out of thin air by the central banks in the US, UK and Europe, the bankers have created a huge bubble of debt. All the valueless money either created by the printing presses, or simply summoned up electronically, went straight into the pockets of the bankers, none of it ‘trickled down’ to the working class.
On the contrary, what we have seen across the world is the most dramatic increase in income inequality, with real wages and salaries falling in both the US and the UK where QE has dominated. In Britain in 2016, figures showed that the richest 10% of the UK population own over half the country’s total wealth and that the richest 1% own nearly a quarter, while the poorest 20% of the population (13 million people) share just 0.8% of the country’s wealth between them, levels of inequality that have not been seen since the Victorian era.
QE has worked to increase this gulf to the epic proportions of today – enriching the bankers who caused the economic crash in 2008, while impoverishing millions of workers through cuts to wages, benefits and services to pay for the bail-outs the bankers demanded to keep them from going bust.
This is very rapidly forcing millions of workers and youth to reach the conclusion that capitalism holds no future and that getting rid of it is not just a good idea but an absolute necessity for their lives to continue. It is this movement that the Tories, led by May, fear and are trying to appease and pacify with words of sympathy.
In defending QE, Carney is representing the requirements of the bankers, who today can only carry on via injections of more and more free money with which to speculate and build an even bigger debt bubble that must soon burst and bring the whole pack of cards down with it on an even greater scale than before.
The feeble British capitalist system is now on the brink of another disaster, this time even bigger than the banking crash of 2008. It is this prospect that is driving forward this war between May and Carney and reflects the crisis and the splits that grip the ruling class. The time has come for the working class to put an end to the misery of capitalism through organising the victory of the socialist revolution.