THE world’s banks have now lost £1.8 trillion the Bank of England has reported in its Financial Stability Report.
This is as a result of the continuing economic crisis, which began with the unlimited and unrestrained lending by banks, and culminated in their bankruptcy, via the US sub-prime mortgage crisis.
£1.8 trillion is a truly vast amount, but it is nothing compared to the £5 trillion that the world’s governments and central banks have handed over to the world’s bankers to keep them and their system barely afloat, again according to the Bank of England.
While these banks are seeking to build up their deposits, in a situation where the amount of their indebtedness is just beginning to emerge, the capitalist world is sinking into a depression with gigantic productive forces such as the world’s motor car industry starting to shut down.
The Bank of England itself estimates that six of the British banks, Barclays, HBOS, Lloyds TSB, RBS, HSBC, and the Nationwide Building society have still a lot of debt left to declare.
It estimates that these six banks will suffer further losses of over £160bn in the next five years.
The plain fact that the banks and the bankers thought that credit, and promises to pay were as good as cash, and that even gold was no longer a measure of value, or even that value itself was a convention, emerges with force when the Bank of England’s Financial Stability Report is able to show that while in 2001, UK customer lending was comparable to customer deposits, by the first half of 2008 the surplus of lending over deposits – ‘the customer funding gap’ – was £700bn.
Only last week Bank governor Mervyn King admitted to the obvious when he said that the British banking system had been closer to collapse earlier this month than at any time since the start of World War I. He was in fact saying that this crisis is more serious than the 1929 crash and the situation that emerged out of it.
Now with house prices crashing the Bank of England is warning that 1.2 million homeowners in the UK now face going into negative equity and face the prospect of repossession and becoming homeless.
For the working class as a whole the unfolding crisis will mean huge job losses, cuts in benefits, wages and pensions, at the same time as £5 trillion has been handed to the world’s banks.
There is now a hue and cry from the CBI and the TUC for the slashing of interest rates so as to help business to stay afloat and last out for a little longer.
Trade union leaders are straining to assist the bosses by agreeing to wage cuts and short-time working supposedly to try and save jobs – in the face of the biggest economic crisis of the last 100 years.
The pound has already experienced historic plunges as the crisis hits Britain, which is now termed a ‘consumer society’ since Thatcher and then Blair folded up manufacturing industry, leaving a service economy and workers that are particularly vulnerable to inflation.
Major cuts in interest rates will in fact lead to the greatest collapse of the pound that has ever been seen, and if it stops short of national bankruptcy will see the cost of living escalate out of sight when every commodity that is imported into the UK increases astronomically in price, shattering the purchasing power of workers’ wages.
The question for the working class is not whether interest rates should rise or fall, but that the time has come to get rid of the completely bankrupt capitalist system with its parasitic bosses and bankers who cannot survive without massive state subsidies, while the working class carries the full burden of the crisis.
For this to happen the working class needs to build up the revolutionary leadership inside the trade unions to replace the discredited reformist trade union leaders who have become servants of capitalism.
There must be an indefinite general strike to bring down the Brown government and to bring in a workers government that will nationalise the major industries and the banks and bring in socialism.