THE Bank of England governor, Mervyn King got ready for a somersault in economic policy yesterday, when he told the Treasury Select Committee that the UK’s quantitative easing programme may be restarted if the UK economy takes another downturn.
Quite clearly the ‘recovery’ has not begun!
The last meeting of the Monetary Policy Committee decided to halt the monetary easing (printing money) programme in the hope that the UK economy and the world economy were beginning to move forward.
Since then the Greek crisis has plunged the eurozone half way over the precipice, the German economy has stalled and the euro has fallen against the dollar, dragging the pound down with it.
Addressing the committee, King stated: ‘My particular concerns at present derive from the state of the world economy and our largest trading partner, the euro area . . . that will inevitably have an impact on the UK and we are already seeing that despite the depreciation of sterling, we haven’t so far seen much evidence of a pick up in net trade, which is an important part of our rebalancing.
‘Recovery in our largest export market – the euro area – appears to have stalled.’
Going into soothsayer mode, and gazing into his crystal ball he added: ‘This nascent recovery is fragile. . . . The tensions that underlay the build-up of large world imbalances have not been resolved.’
He also revealed that the machinations of the ratings agencies, who are continuing to predict the demise of sterling, were getting to him, saying that ratings agencies were also looking for a ‘detailed explanation’ of how Britain intended to reduce its budget deficit.
In other words, they are spelling out that the only way that sterling can survive is through drawing the blood of the working class and the middle class through savage cuts.
The Governor also stated that he was struck by the mood at a recent meeting of G7 finance ministers and central bankers in Canada, ‘where several of the major economies said quite openly that they were relying on external demand growth to generate growth in their economy.’
His general nervousness about the situation proved to be catching.
As he addressed the committee sterling fell 1.3 cents to $1.5451.
It continued to fall when David Miles, a fellow member of the Bank’s Monetary Policy Committee, said his vote to stop the committee’s £200bn quantitative easing programme in February had been a very difficult and ‘pretty finely balanced decision’.
In fact, King’s nervousness is more than justified since the EU states and banks will face the problems of a colossal indebtedness in 2010. They will not be leading a recovery.
Over 500bn euros of EU bank debt matures in 2010 and a further 500bn euros in 2011, while Citigroup has warned that Europe’s 24 largest banks will have to raise 720bn euros over the next three years, and that the collapse of Greek finances could prove to be the beginning of a ‘contagion’ that will destroy the European Union.
There is only one way forward for the British ruling class and the ruling classes of Europe and that is to take on the working class and force it to pay for the crisis and its further development.
The comic aspects of the forthcoming British general election, including the attempt to indict Brown as a bully, when the entire system is based on ruling class bullying and exploitation of the working class, as we see at BA, show the desperation of the ruling class to bring forward a government able to conduct a war on the working class.
The task that faces the working class in this situation is the building up of the revolutionary leadership of the WRP, to lead the socialist revolution to put out of date capitalism into its grave, and to go forward to socialism, and a socialist planned economy.