BANK OF ENGLAND Governor King looked into his teacup yesterday morning at his press conference and all he could see was leaves, leaving him none the wiser about what was about to happen to British capitalism.
Clinging onto a tiny increase in GDP he said: ‘In the past year, our economy has begun to recover’. He however added ‘But whether that recovery will be sustained depends heavily on developments in the rest of the world, as domestic spending, especially by the public sector, is likely to grow more slowly looking ahead. And given the scale of the fall during the recession, the level of output is likely to remain weak.’
There is therefore going to be no recovery, export led or otherwise.
But this was just an introduction to the disaster that is British capitalism.
He added: ‘Despite weak demand, inflation remains more than a percentage point above our 2% target. There is no shortage of explanations for the current high level of inflation. The exchange rate, on average, remains around 25% below its level in mid-2007; there have been sharp gyrations in global commodity prices and sizeable changes to VAT. It is not surprising that the combined effect of all of these factors has led to movements in inflation that are larger than those experienced in the period 1992-2007.’
So it is to be deflation in relation to production and employment, combined with a galloping inflation in food, clothing and other necessities.
Concretely as to what is to happen, King admitted he was reduced to guessing. ‘Given the quantitative importance of the different influences buffeting the economy at present, it is hard to judge how inflation will evolve in the medium term, and there are sizeable risks in both directions.’
He added describing this struggle of opposites: ‘On the one hand, slack in the economy is likely to reduce inflationary pressure. Unemployment, at almost 8%, is high, and growth in money wages has been subdued at around 2%. If the weakness in wage growth were to continue, then once the temporary effects of higher import prices and VAT wane, inflation could move substantially below the 2% target.’
However: ‘On the other hand, inflation has been above the target for much of the past three years. It is possible that additional import price pass-through or commodity price rises will push up further on inflation. And if the period of above-target outturns causes medium-term expectations to drift up, then the inflation outlook could be significantly higher.’
His analysis stopped at this description. he was unable to resolve the contradiction. He states: ‘Towards the end of the forecast, the Committee judges that it is about as likely that inflation will be above the target as below it. . . We cannot be sure which of the big risks to the outlook will materialise.’
Making some attempt at a conclusion he states: ‘At present, there are large upside and downside risks to inflation. Monetary policy has to balance these risks. Only with hindsight will it be clear which has predominated.’
So it’s to be hold on to your hats and hope for the best.
The chief high priest of British capitalism has no understanding of the laws of the development of capitalism and its crisis as developed by Karl Marx in his three volumes of Capital.
He is again stumbling in the dark and living on hopes.
For Marxists, the contradiction between deflation with its rising and heavy unemployment, and a rapidly rising inflation in food and other prices will be resolved through the socialist revolution to bury capitalism and replace it with a planned socialist economy that is not the master of humanity but its servant.
