‘Let them go bust’ says Bank of England chief

0
1182

THE governor of the Bank of England, Mervyn King, in a letter to the House of Commons Treasury select committee has warned that efforts by the other central banks to pump ‘liquidity’ into the financial system to shore it up ‘will sow the seeds of a future financial crisis’.

He said that this approach would encourage ‘excessive risk taking.’

On a day when the European Central Bank put £51 billion into the financial system, King warned: ‘The provision of large liquidity facilities penalises those financial institutions that sat out the dance, encourages herd behaviour, and increases the intensity of future crises.’

He gave his opinion after the high interest rates for longer term interbank loans were revealed to be driving up mortgage interest rates to positions where the repossession of tens of thousands of homes was inevitable.

His message was that the laws of the capitalist crisis must be allowed to unfold, and to destroy all of the fictitious values that have emerged during the inflationary boom through the activities of the ‘risk takers’.

He added that any attempt to counter this inflation of fake value by further inflations, would create an even greater catastrophe.

He told the select committee that ‘The path ahead is uncertain.’

This is the same select committee that the former Chancellor of the Exchequer, Gordon Brown, had boasted to, that he had resolved the boom to bust cycle of the capitalist system.

King continued that injections of liquidity should only be made ‘at an appropriate penalty rate’ (at steep interest rates), or else ‘they would encourage in future the very risk-taking that has led us to where we are.’

Previously the propagandists of the bourgeoisie have glorified the ‘risk taker’, and the venture capitalist as the source of all wealth, now they are reviled as the bringers of disaster.

King conceded that if the system went into unstoppable free fall, that action ‘might’ have to be taken.

King said: ‘All central banks are aware that there are circumstances in which action might be necessary to prevent a major shock to the system as a whole.’

At that point of course it would be absolutely too late.

King comments that ‘Balancing these considerations will pose considerable challenges, and in present circumstances judging that balance is something we do almost daily’.

He renewed his warning to the US, EU and Japanese central banks: ‘If risk continues to be under-priced, the next period of turmoil will be on an even bigger scale.’

So there is nothing to it but to tough the capitalist crisis out, see entire industries go bust, and hundreds of thousands (millions in the US) lose their homes, since any attempts to cheat the laws of the capitalist crisis, first elucidated by Karl Marx, only intensify the scale of the crisis.

When King says ‘there are circumstances in which action might be necessary to prevent a major shock to the system as a whole’ what he is really hinting at is that at a certain moment of the developing crisis, emergency measures will be necessary to dump the whole of the crisis onto the backs of the working class and the middle class.

These will necessitate a crisis government and a crisis programme that will ruthlessly slash wages and jobs and pensions, raise taxes and cut government expenditure.

Brown is already preparing for this type of government by bringing in leading Tories as advisers.

Yesterday the new Chancellor of the Exchequer, Darling called on the banks to be more cautious with their lending. This is after ten years of Labour governments that have presided over the building up of £1.3 trillion of domestic debt.

The only way forward for the workers movement is to take action to bring down the Brown government, to bring in a workers government that will expropriate the bankers and capitalists and resolve the capitalist crisis by bringing in socialism.