King wanted to print even more paper money!


WHEN the Monetary Policy Committee (MPC) decided two weeks ago to print £50 billion more for its stimulus programme binge, the City, which was basking in the news that the ‘green shoots of recovery had been sighted’, reacted as if a tub of ice-cold water had been poured over it.

The situation has now gone from bad to worse with the news that the Governor of the Bank of England, King had been voted down 6-3, because his faction wanted to print £75bn more, and not just the £50bn that was agreed by the majority.

Even the £50bn leap into the dark took the Bank £25bn past the target that it had set for ‘easement’.

King’s argument was that a £50bn addition was not enough to raise inflation to its 2% target and that the UK economy would continue to be mired in slump unless the bank was able to buy at least another £75bn of dodgy bankers’ assets.

A Commerzbank spokesman commented that ‘It was surprising we had three members looking for £75bn’. He added: ‘This clearly suggests the bank is leaving the door open for additional measures should they feel the need . . . Quantitative easing is still very much in play.’

The Societe Generale spokesman commented on the obvious, that ‘The minutes underline the fact that a significant faction of the MPC is still very concerned about the weak growth prospects.’

David Kern, chief economist at the British Chambers of Commerce, commented that ‘The minutes highlight an appreciation from the MPC of the severe recessionary threats still facing the economy.’

However, it is not just the British ruling class that is being given the shivers by the contradictions of the capitalist crisis.

Germany’s economics ministry is drawing up a table of special measures with the Bundesbank to head off a fresh financial crisis, fearing that the loan squeeze by struggling banks will set off an extremely serious chain of bankruptcies next year.

The prospect is that companies will find that they may not be able to renegotiate loans as they become due in the period ahead, and that there will be dozens of major bankruptcies.

Axel Weber, Bundesbank chief and a key figure at the European Central Bank, has issued a grave warning.

He said: ‘I must warn that it is too early to talk about the end of the financial crisis. Unemployment is going to rise as firms prove unable to keep idle workers on their books. He continued to warn that ‘All the banks, even the biggest, must strengthen their defences. They need higher capital buffers, greater liquidity cushions, and better risk management.’

As it is, German unemployment is set to rise by another million to 4.5 million by late next year.

The common refrain is that ‘At the end of the day, there is not going to be any durable recovery until we see a revival in credit.’

However, there cannot be a revival of credit unless it is backed by a guaranteed value. Large numbers of paper promises to pay do not constitute value.

For value to emerge there will have to be a colossal destruction of the productive forces and all paper values, as was seen in the period from 1931 to 1945, a period of slump and world war.

This is the crisis that the printing of new mountains of fictitious value – hundreds of billions of paper notes – is ushering in.

Humanity knows only one way out of this world crisis that capitalism has produced. This is through socialist revolutions to overthrow the capitalist ruling classes of the world in order to bring in a planned worldwide socialist economy where production is based, not on the needs of profiteers, but on the requirements of the people.