US inflation rockets up – world sitting on a ‘time bomb’

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US INFLATION rate hit 7% last month – the highest since Ronald Reagan was president in 1982 – making it the seventh consecutive month in which inflation has gone above 5% and it is causing panic in the Federal Reserve Bank.

In the past, the US central bank has dismissed inflation as transitory caused by disruption in the supply chain due to excessive demands following the mad rush to reopen the US economy in the middle of the raging Covid pandemic.

Now the Fed and its chairman, Jerome Powell, have been forced to acknowledge that inflation is not just here to stay but growing at a massive rate.

This was forced on Powell by figures that showed that even when the so-called ‘volatile’ elements in the Consumer Price Index (CPI), like fuel and food increases, then core inflation was still running at an annual rate of 5.5%.

Of course, for workers and their families massive increases in fuel and energy along with food are not volatile elements that can be disregarded but a massive attack on their lives.

For the Fed and central banks in the UK and Europe this is a minor consideration compared to the shock of discovering that inflation is now out of control and cannot be wished away as ‘fleeting’.

Now the Fed has made it clear that it intends to attempt to hold back inflation by pushing up interest rates and ending the flow of free money.

Quantitative Easing (QE), that is printing trillions of worthless paper money to prop up bankrupt banks, and companies and that has supplied Wall Street with unlimited supplies of cheap loans to speculate with on the stock markets, is now replaced with Quantitative Tightening (QT).

The effect of QT along with the increase in interest rates, which some experts predict will be increased at every meeting of the Fed in the coming year, will crash not just the US economy, but explode the stock market bubble and devastate the entire capitalist world economy.

This was set out in an article this week in The Daily Telegraph by its economic commentator Ambrose Evans-Pritchard who posed the question ‘is the world now sitting on a time bomb?’ following the Fed’s abrupt change to QT and interest rate increases.

The answer to this question is a resounding: Yes!

Capitalism is sitting on a massive debt time bomb that has been inflated beyond belief through the years of QE and the ‘liquidity supernova from central banks’ as Evans Pritchard calls it.

The interest rate increases by the Fed will hit millions of US workers but already they have made it plain that the working class is at least partly responsible for inflation and need to bear the brunt of the crisis.

The line articulated openly by the Fed and increasingly by the Bank of England and bourgeois economists is that wage increases are a driver of inflation – the wages push theory.

In fact, figures show that wages in the US are growing by only between 3%-4% at a time when prices are shooting up by 7% annually.

The real wages of workers in the US, UK and Europe have fallen dramatically since the 2008 world banking crash. Wage increases do not play any part in fuelling inflation but on the contrary increased wage demands are the response of workers to inflation destroying their lives.

The growing demands from the central banks for the working class to pay for the inflationary crisis resulting in their attempts to keep capitalism from collapse through QE and zero interest rates is in preparation for an all-out war to make the working class pay for the crisis through cuts to wages and benefits.

With workers in the US taking mass strike action to demand pay rises a confrontation between the two classes has reached the point of revolutionary explosion in the most powerful capitalist economy in the world.

The immediate task ahead in the US and throughout the world is the building of revolutionary sections of the Fourth International to lead the fight to put an end to bankrupt capitalism through the victory of the socialist revolution.