LAST Friday, Fitch ratings agency became the second of the world’s three big credit agencies to strip Britain of its top notch triple-A credit rating; Moody’s agency downgraded the UK economy last February and the third, Standard & Poor’s, is set to follow suit in the near future.
The importance of these ratings is that any downgrade signifies to the international financiers that buy up government bonds, and so finance the huge government debt, that their chances of being repaid are getting smaller by the day as the economy slides into complete bankruptcy.
A senior Fitch analyst, David Riley, went further and warned that the UK could be downgraded even further if the economy ‘fails to pick up’ or the UK sovereign debt stays higher for longer ‘than expected’.
With British capitalism heading down towards a ‘junk’ rating, the International Monetary Fund has become vocal in expressing its fears about the impending collapse.
Last week, the head of the IMF, Christine Lagarde, issued Osborne with a warning that he should ‘rethink’ his austerity strategy.
The IMF’s chief economist was more direct, warning Osborne that he was ‘playing with fire’ if he carried on with the present slash-and-burn policies.
In the past, the IMF has been the principal cheerleader for the coalition’s policy of slashing wages, driving up unemployment and attempting the destruction of the entire Welfare State. This about-turn indicates differences in the ranks of the bourgeoisie over the question of how best to dump the capitalist crisis on the backs of the working class.
For some time now, Lagarde has voiced growing concerns that the austerity war against workers across Europe and the entire capitalist world, in particular the creation of millions of unemployed youth, is driving the working class along the road to revolutionary conflict with the capitalist class and the bankers.
In calling for governments to pull back from the most vicious attacks, Lagarde is promoting a different approach to driving the working class to the wall. She is now calling for ‘unconventional’ policies to ‘kick-start growth in economies.’
The most unconventional policy that has emerged recently is that of the ‘helicopter drop’ of money by central banks.
Under this scheme central banks move on from just electronically producing money out of thin air to give to the banks, as they do under Quantitative Easing, and literally print money which they then drop into the coffers of capitalist enterprises and businesses.
The idea is to bypass the banks, who used all the billions they got from QE just to speculate even more in risky financial deals and create even more ‘bubbles’ that are soon to burst.
Given that capitalism only produces for profit, central banks can print as much worthless bits of paper as they like to shower on manufacturers, builders etc., but they will not produce for the simple reason that there is no profit to be made.
What it will do is inevitably drive up inflation as paper money becomes more and more worthless as large amounts of it chase fewer and fewer goods driving up their price to astronomical levels.
Overnight, workers and vast sections of the middle class will discover that their wages and savings are worthless as hyper-inflation runs riot precipitating a revolutionary confrontation.
The IMF’s call for an easing of austerity is, therefore, no solution to the world crisis of capitalism or the panacea that the Labour Party leadership claim.
There can be no solution to the crisis outside the revolutionary struggle by the international working class to smash this bankrupt capitalism system and advance humanity to a socialist system that produces for need not for profit.
This requires above all the building of the revolutionary party as a matter of the gravest urgency – join the WRP today.