THE UK’S Bank of England yesterday followed the lead of the US Federal Reserve Bank whose Chairman Bernanke had on Tuesday said that any economic recovery was likely to be ‘more moderate’ and that it would reuse its quantitative easing programme to buy more long-term US government debt. There is no US recovery.
But, even before BofE governor King got to his feet there was a bolt out of the blue from the Irish Republic, once known as the ‘Celtic Tiger’.
This was that the European Commission had approved the Cowen government’s plan for another ten billion euros injection of state aid to the Anglo-Irish bank. This will bring the total taxpayers’ bill for rescuing the bank to 24bn euros, and push Ireland’s deficit to 20 per cent of GDP, almost seven times the EU’s three per cent limit for such deficits.
The desperate crisis of the European Union can be seen in the fact that this busting apart of the EU is being done with its own blessing, out of terror that a refusal would see a far bigger banking collapse emerge.
Surrounded by these mountainous seas, and in quite a little, leaky boat, Bank of England governor King, always a master of understatement, had to concede that the situation was ‘choppy’.
He said ‘whereas crises occur suddenly, they fade only gradually. It will take many years before bank balance sheets and fiscal positions return to anything like normal.’
He added that these were ‘headwinds to the recovery’, while monetary easing (printing money) ‘and the earlier depreciation of sterling will act as tailwinds’.
Here we had the Bank chief talking down his own currency. He forecast hard times saying: ‘Looking ahead, the UK economy is facing a major rebalancing away from private and public consumption and towards net exports’ making for a ‘choppy recovery’ that was already proving to be ‘particularly volatile’.
A choppy recovery is a risky business. He added: ‘But there are clearly risks: business and consumer sentiment have shown signs of softening, measures of financial fragility remain elevated, and there is great uncertainty about the outlook for both the United States and our most important trading partner, the euro area.’ From this admission, it is not clear just what and to where will the UK be exporting.
He admitted that he had underestimated inflation. ‘Inflation has been volatile in recent years. On average, it has been above target and is likely to remain so until the end of next year.’ That is until 2012. He had to revise downwards production predictions.
He tried to insist: ‘The Committee’s central view remains that, once the effects of the price-level shocks – including the forthcoming increase in VAT – drop out of the twelve-month comparison, inflation will fall back, probably to below the target, reflecting the influence of spare capacity in the economy.
‘Slack in the labour market – where there are around a million more people out of work than in the period prior to the crisis – already seems to have been pushing down on pay.’ Unemployment is clearly very welcome to a banker.
In fact, he has to conclude: ‘Monetary policy can do little about short-run movements in inflation and must reflect a judgement about the balance of risks to inflation in the medium term. Short-run volatility is making that balancing act more difficult. But in whichever direction monetary policy moves over the next few months, it will reflect the MPC’s judgement about the actions necessary to meet the inflation target in the medium term.’
The Governor of the Bank of England does not know in what direction monetary policy will move over the next few months. He is a blind man leading a blind bourgeoisie, lemming-like to the precipice.
The working class, however, does know what has to be done. British capitalism must be overthrown to go forward to socialism.
