THE Bank of England yesterday maintained its interest rate at 0.5 per cent and decided to step up its money printing programme to give a further £25bn to the banks, making for £200 billion handed over thus far.
The Bank’s statement said that output had fallen ‘by almost 6 per cent since the start of 2008. Households have reduced their spending substantially and business investment has fallen especially sharply. GDP continued to fall in the third quarter.’
It added that ‘While CPI inflation fell to 1.1 per cent in September, having been 5.2 per cent a year earlier. Inflation is likely to rise sharply to above the 2 per cent target in the near term, reflecting higher petrol price inflation and the reversal of last year’s reduction in VAT.’
We are living in a period of savage deflation yet inflation is going to rise with the ‘medium term prospects’ to be determined by ‘two opposing set of forces’.
The chairman of the Bank of England has stumbled on the unity, and conflict of opposites, leading to he knows not what, but in reality to their interpenetration and their revolutionary transformation.
He states: ‘On the one hand there is a considerable stimulus still working through from the substantial easing in monetary and fiscal policy. . . . On the other hand, the need for banks to continue the process of balance sheet repair is likely to limit the availability of credit. And high levels of debt will weigh on spending.’
There is going to be lots of cash in the banks, but they are going to hang onto it because of their colossal indebtedness.
The Bank adds about the outcome of this situation: ‘On balance the Committee believes that the prospect is for a slow recovery’, meaning no recovery, ‘so that a substantial margin of under-utilised resources persists. That will continue to bear down on inflation for some time to come, offset in the short run by the impact of the past depreciation of sterling.’
In other words despite the no recovery situation, the weakness of sterling will still produce a powerful inflationary pressure.
The degree of the bankruptcy of capitalism, and its inability to stand up on its own two feet, and its need for permanent life support was emphasised by the government on Wednesday, when it was forced to mount an even bigger second rescue of the banking system.
In his statement to MPs Chancellor Darling outlined that his second rescue operation would involve handing Lloyds Banking Group and the Royal Bank of Scotland £39bn, while the government took the responsibility for £282bn of the Royal Bank of Scotland’s toxic debt.
This brings the gifts, loans and guarantees handed out to the super sick banks and bankers to over £1.4 trillion, equal to the UK’s GDP!
As part of the latest deal the RBS and Lloyds are being made to sell almost a thousand branches which will cost the jobs of some 25,000 bankworkers.
The unity, conflict and interpenetration of opposites, between the needs of the productive forces to develop, including the working class the most important part of the productive forces, and the private ownership of the means of production is reflected in Governor King’s struggle between inflationary and deflationary forces.
This is leading to a revolutionary transformation of the class struggle, which will erupt in a revolutionary leap.
In the words of Sir Michael Rose the M&S boss, ‘The UK is skint’. He calls for 20 per cent VAT, and the need to refill the coffers of the bankers and bosses.
This can only be done by robbing the working class of its jobs, wages and pensions and by turning the Welfare State including the NHS into rubble.
The gains of the working class can only be defended by revolutionary action of the masses and by consigning the capitalist system to its grave, replacing it with socialism.
This is the essence of the struggle that has begun.