Who’d be an economics forecaster at a time of chaos and
crisis? Only six weeks ago, Bank of England experts thought they had the
situation covered. Now they’ve ripped up those forecasts and are starting
again.
Admitting they have no idea about what is going on, and even
less about what to do, the worsening crisis in the eurozone led Mervyn King,
the BoE’s governor, to excuse their astonishing bewilderment when he appeared
before the Commons treasury committee:
“It is impossible to imagine a situation in which you just
do not know what the situation will be in a part of the world that is close to
you and is half of your trade”, he said. “And that makes it impossible to
engage in any sensible forecasting.”
So for King and his colleagues, the laws of economics appear
to have broken down. And there’s nothing in the history books to provide any
insight.
Ever since the crisis erupted in Greece , European leaders, together
with the heavy hitters from the IMF have attempted Herculean feats to keep it
isolated, with firewalls and barriers of all kinds.
But the crisis has morphed. Strongman Hercules has given way
(temporarily) to Sisyphus – the king punished by being compelled to roll an
immense boulder up a hill, only to watch it roll back down, and to repeat this
action forever.
Forever? Well, it certainly seems this way in the other
illuminating comment from King - a weird, contradictory warning to the public against
seeing any end to the crisis.
“When this crisis began in 2007-2008, most people including
ourselves did not believe that we would still be right in the thick of it” [he really,
really said it], “in the middle of it, quite this late,” King told MPs. “All
the way through, I’ve said to this committee that I don’t think we are yet
half-way through – I’ve always said that and I’m still saying it.”
So, if we’re to understand this correctly, the longer the
crisis has gone on, the end disappears into infinity as “half-way” fades into
the distance. He’s not wrong. On the same day, figures for the UK ’s state
borrowing showed that the deficit is still growing. Tax revenues are falling
and unemployment has driven up welfare spending. Chancellor Osborne had to
postpone a 3p petrol duty rise for fear of sending the economy over the edge.
That’s how precipitate things are.
After taking a quick look at the books, Vassilis Rapanos,
64, the finance minister of the newly
elected Greek coalition government, resigned on Monday due to ill health.
Also on Monday, Spain
and Cyprus
became the fourth and fifth casualties in the 17 country eurozone forced to
admit bankruptcy and beg for help. Eurozone finance ministers are meeting today
to consider the appeals. Spain
is asking for €100 billion. Estimates put the cost of a bailout for Cyprus as high
as half of its €17.3 billion economy.
The reaction from credit ratings agency Moody’s was
predictable, whatever Mervyn might say. They downgraded the ratings of 28 of 33
rated banks, by one to four notches, following a cut to Spain 's
sovereign rating to just above junk status earlier this month.
With Germany ’s
Chancellor Angela Merkel refusing to share the total eurozone debt burden “as
along as I live”, the struggle playing out in Europe ,
as in the rest of the world, is the endgame between national sovereignty and
the transnational cabal of giant corporations and the investment funds that
largely own them. They also have the World Trade Organisation and International
Monetary Fund on their side.
A conspiracy? Yes, indeed, but one that results from the
objective logic of the system of debt-fuelled profit-seeking growth known as
capitalism. With its markets for commodities and credit super-saturated, its
logic now demands contraction by up to 90% of pre-crisis levels and the
destruction of public spending.
The interconnectedness that resulted from three decades of
global expansion provides the path of transmission for the debt contagion. But
in the right social hands, the technology, the infrastructure, the corporations
themselves, are the source of the solution.
Gerry Gold
Economics editor
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