THE Swiss based Bank for International Settlements (BIS) has just issued its starkest warning yet that the entire debt fuelled international banking system is heading for an immediate collapse.
The BIS, which is often called the ‘bank of central bankers’, was established in 1930 with the remit of acting as an early warning system against future economic crashes like that of 1929 and to prevent ‘instability’ in the capitalist financial markets.
Referring to the panic which has gripped stock markets around the world in recent weeks as it became clear that the Chinese economy was slowing down, the head of BIS’ Monetary and Economic Department, Claudio Borio, said: ‘We are not seeing isolated tremors, but the release of pressure that has gradually accumulated over the years along major fault-lines’.
The pressure that Borio is talking about is the huge levels of debt across all the major regions of the world economy. The BIS has calculated that the combined public and private debt in the developed economies of the world has shot up by 36% since the debt crisis first began to emerge in 2007 with the collapse of the sub-prime mortgage industry in the US – this represents an increase to 265% of the Gross Domestic Product (the total wealth produced) of these countries.
The BIS firmly point their finger at the disastrous effect of printing money through Quantitative Easing (QE) and the near zero interest rate policy of the US and other central banks, including the Bank of England and the European Central Bank (ECB).
The effect of flooding the world with cheap or even free money to try and overcome the banking crisis, as the BIS acknowledges is to fuel a massive expansion of credit, which is simultaneously debt, across the world – driving debt levels up to unsustainable heights.
This international debt bubble has grown to such a level – much higher than that which precipitated the crash in 2008 – that the slightest interest rate rise in the US will have a catastrophic effect. With almost the total of the world debt being in dollars even a slight increase in interest rates will mean bankruptcy and collapse across the world.
Britain has been with the US one of the main drivers of this colossal expansion of debt. The economic ‘recovery’ the Tories claim exists is entirely dependent on the massive credit and debt that has been piled on to the working and middle class. At the end of July this year working people in the UK owed £1.443 trillion – an extra £604 per adult over the figure for last year – including mortgages.
Unsecured debt was £173.38 billion – an increase of £223.10 for every adult in the past 12 months. Still the banks and financial institutions are intent on driving increasing levels of un-repayable debt onto the backs of workers and families, with deals that offer cheap credit or mortgages which turn into mountains of debt repayments and inevitable destitution when the interest rate rises.
While the BIS is good at warning of a catastrophic and impending collapse it naturally offers no solutions, all it can say is that capitalism will have to swallow bitter medicine – in other words capitalism will have to solve its historic debt crisis by destroying all this artificial money through a crash of epic proportions.
The brunt of this crash will fall, as far as capitalism is concerned, on the backs of the working class through mass unemployment, starvation and homelessness along with wars abroad. Certainly there is no solution in the policies being put forward by Corbyn and the lefts in the Labour Party of printing even more valueless money in the form of QE for the people.
Capitalism cannot be rescued, as millions of workers across the world are being forced to recognise only by overthrowing this bankrupt system and going forward to a socialist society that will expropriate the bankers and bosses can a future be secured.
The urgent task of the hour is to build the revolutionary leadership required to take this historic struggle for the socialist revolution forward to victory.
