THE INTERNATIONAL Monetary Fund (IMF) made a wildly optimistic prediction yesterday that soaring UK inflation would become nothing more than a historical blip in the very near future.
Once inflation has magically disappeared, the IMF predicts that the era of the Bank of England pushing up interest rates will also end. Since December 2021, the Bank has increased borrowing costs by increasing the rate of interest from 0.1% to 4.2%.
Now the IMF is confident that: ‘When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels.’
‘Pre-pandemic levels’ refers to the near zero interest rates that have been a main feature of the desperate bail-out of the banks following the world capitalist banking crash in 2008.
To avert the collapse of the banking system, the central banks in the US, UK and EU resorted to printing trillions of pounds, dollars and euros in a Quantitative Easing (QE) programme backed up by zero interest rates that made debt cheap for the capitalist financial world.
Entire industries, corporations and governments existed entirely through debt while the bankers made billions on a credit-based boom in prices.
With the growing realisation by the central banks that flooding the world with worthless paper money was driving inflation QE was abruptly replaced by Quantitative Tightening (QT), and near zero interest rates were driven up.
This cutting off of free money had a catastrophic effect on the banks. Last month saw the collapse of three large regional banks in the US – SVB, Signature, and Silvergate – with a further 100 coming under pressure as investors scramble to withdraw their deposits.
In Europe, the giant Credit Suisse bank collapsed and the German Deutsche Bank came close to folding. In each case the central banks and governments quickly reversed the policy of QT and were forced to bail out the depositors and shareholders with taxpayers’ money. The bankers are in charge, and are demanding an end to QT and for the money taps to be turned on again. The IMF’s latest statement is clearly meant to justify this abrupt U-turn.
It now turns out that the major factor in bringing down inflation is an ageing population and declining birth rates along with an increase in mortality rates! Growing old and dying early is a positive boon for capitalism. Life expectancy in England is at the lowest in a decade with the UK falling to 29th in the world ranking, a decline attributed by experts to the massive growth in income inequality in the years of savage austerity cuts to wages, benefits and public services like the NHS.
Older people spend less, so inflation will automatically fall, while falling productivity in the UK will also be an ‘important force’ in reducing inflation – according to the IMF. A collapse in manufacturing and a recession are now seen as the answer to inflation by the IMF.
Only two weeks ago, the governor of the Bank of England, Andrew Bailey, was blaming the elderly and ‘economically inactive’ for causing inflation forcing the Bank to push up interest rates.
Now the IMF is hailing them as the reason why the money taps can be turned on again to keep the banks from collapse.
Despite the contradictory positions advanced by Bailey and the IMF they are united in the belief that the working class must pay for capitalism’s crisis.
For the IMF, the way to combat inflation is to let recession rip and turn millions of workers into becoming economically inactive through mass unemployment.
Bailey is advocating cuts in wages and forcing people of retirement age into low-paid gig-economy work.
What is clear is that neither the Bank nor the IMF has any economic solution to the crisis, and that capitalism can only hope to survive by driving the working class and youth into the gutter of poverty.
The powerful working class in Britain, America and Europe are refusing to see their lives destroyed to keep the banks from collapse and the bosses in profit.
The immediate issue before the working class today is to put an end to this bankrupt capitalist system through the victory of the world socialist revolution.
