THE dollar has continued to collapse against the other major capitalist currencies leaving the pound at its highest price against the dollar since Britain was forced out of the ERM on Black Wednesday 1992.
The US housing market is in decline and the crisis of the major US industries, the giants of the US capitalist economy, is growing with many tens of thousands of workers losing their jobs and large numbers of plants being closed as uneconomic.
These developments have brought the contradictions of the US economy to their sharpest point of transformation.
The US trade deficit is heading for a record $800 billion plus this year, while the government spending deficit is heading towards a record $600 billion. Thus far, the badly holed US economy has been kept afloat by the Japanese banks and the Chinese government purchasing billions of dollars of US Treasury bonds.
Yesterday, former Tory Chancellor Norman Lamont, who presided over ‘Black Wednesday’, said that his fear was that ‘The dollar might collapse. People are worried that the Chinese will stop financing the US deficits since it is likely that they already have more dollars than they want.’
In fact, Chinese and Japanese banks have begun to buy gold, which is rocketing upwards in price.
A collapse of the US dollar will bring with it a collapse of the world monetary system, and a massive worldwide slump, with capitalism returning to a primitive barter system.
Already, with the pound priced at $1.9697 British commodities are being shut out of the giant US market.
The crisis of the US economy and the crisis of the dollar comes at a time when the British capitalist economy is in desperate straits.
Unemployment is now rising rapidly, with the state relying on this growing unemployment plus the presence of hundreds of thousands of migrant cheap labourers to keep wages down in the face of rising inflation at 3.7 per cent officially, but if calculated in relation to a family’s basic needs is more like 22 per cent.
The Labour government has been relying on cheap unlimited credit for years to keep what is left of the British capitalist economy going. A result of this is that household debt has now reached £1.3 trillion, at the same time as the economy faces a record trade deficit of £60 billion plus.
With interest rates going up all over the world, millions are facing a situation where they cannot pay their mortgage repayments and they cannot pay even the interest on their unsecured credit card debts.
From a nation renowned for saving, the crisis of British capitalism has transformed Britain into a nation of debtors.
The Governor of the Bank of England has spoken up about this crisis.
Mervyn King said that more than one million of the 14 million mortgage holders cannot keep up their mortgage repayments. This is a rise of 100,000 in the past year.
Another rise in interest rates will see the house repossession figures rocket upwards!
King said that as far as he was concerned the real problems were not in the mortgage market but in the unsecured debt market, where numbers of people have got themselves into ‘desperate trouble’.
As a banker, he means that mortgage holders who cannot carry on with their repayments will lose their property to the banks.
He is worried that as far as unsecured loans are concerned, the banks will not be able to get their pound of flesh back, and will be left holding the baby of hundreds of billions of unsecured debt.
As the crisis of capitalism worsens bourgeois parties will move to put the whole burden of this developing economic catastrophe onto the backs of the working class and the middle class.
The working class will get massive wage and benefit cuts while the middle class will face complete ruination.
The only way out of this crisis is through a socialist revolution that will abolish the mountains of debt by expropriating the banks and the major industries and replacing the anarchy of capitalism with a planned socialist economy.