ON WEDNESDAY Andy Haldane, outgoing chief economist at the Bank of England (BoE), delivered a message of doom for the British economy in a speech marking his departure from the Bank after 32 years.
Haldane delivered a stark warning about the dangerous increase in inflation and the risk that the BoE had sacrificed any semblance of independence from the government through its massive programme of printing worthless money.
The Bank portrays itself as completely independent, making fiscal decisions for the benefit of the British economy and all citizens, and not as the creature of government and solely working in the interest of the ruling capitalist class.
This fiction has been shredded, as Haldane laments, by the world economic crisis. The BoE has, throughout the crisis that started with the world banking crash in 2008, acted under instructions to print billions of ‘free’ money to prop up bankrupt British capitalism.
It has driven the policy dictated to it by the bankers and bosses of imposing zero rate interest charges to keep the repayments on loans as low as possible, fuelling the massive explosion of debt.
Haldane told his audience that a ‘dependency culture around cheap money has emerged over the last decade’ and that that along with a sharp increase in inflation, is threatening to cause a ‘Minsky moment’.
A Minsky moment refers to a crash in the global markets brought on by reckless speculative activity by investors and hedge funds that push stock markets and asset prices to unsustainable levels causing a massive crash on the world stock markets.
Along with this, Haldane pointedly condemned the surrender of the facade of BoE independence creating fictitious money through Quantitative Easing and using this to buy up the debts of the state.
Almost half of government debt is ‘owed’ to the BoE – in other words the Tories are printing money to finance government spending.
As Haldane insists, this cannot go on and a crunch time for British capitalism is fast approaching, especially now that inflation has started to spiral out of control and predicting it would jump to 4% from its current level of 2.1%, twice the BoE’s target of 2%.
What is worrying Haldane is that rising inflation will force the Bank to ‘execute an economic handbrake turn’ which would sharply increase borrowing costs for households, businesses and governments.
Servicing the huge debts run up by corporations, business and the government will become unaffordable, inevitably leading to massive closures and bankruptcies, including the bankruptcy of the British state!
Haldane of course has no answer for the crisis he so clearly sees except the forlorn call for a ‘fundamental rethink’ by the Bank.
In stark contrast, Tory chancellor Rishi Sunak gave a speech yesterday to a crowd of bankers and financiers at London’s Mansion House.
Sunak wooed the bankers with a pledge that there would be no increase in the tax rate on UK banking profits saying: ‘Financial services don’t just generate prosperity at home. They give us the economic power to project our values on the global stage.’
Ignoring the fact that the UK economy is going bust, that thousands of companies will go bankrupt and close when furlough ends and the entire debt time-bomb explodes, Sunak enthused about the billions in profit to be made by UK banks and speculators paid for by the working class.
While Sunak was promising unlimited profits for the bankers, back in the Tory Treasury he is preparing a massive austerity assault on workers in the form of pay freezes and savage cuts to public spending in order to ‘balance the books’.
Haldane has no answer to the capitalist crisis, but the working class certainly does.
The working class is infinitely more powerful than this weak, bankrupt ruling class of bosses and bankers.
The time has come for it to use its strength by organising a general strike to kick out the Tories and go forward to a workers’ government that will expropriate the capitalists, nationalise the banks and major industries and placing them under the management of the working class as part of building a socialist planned economy.
The issue today is building the revolutionary leadership of the WRP to lead this struggle for socialist revolution to victory.