The Central Bank induces the coming recession
Central banks around the world are gearing up to smash inflation by causing a recession while trying to blame workers for rising prices.
The New Zealand Reserve Bank raised the official cash rate from 50% to 1.5% on April 13.
The return of inflation across the world has taken root. The financial aristocracy that determines the policies of the Central Bank is determined to break inflation because it reduces its wealth.
The Financial Times reported on April 6 that: “Consumer prices in the world’s 30 richest countries already rose at an annual rate of 7.7% in February, compared to just 1.7% in the same month last month. last year and the highest since December 1990, the latest OECD data released on Tuesday.
Agustin Carstens, the chief executive of the Bank for International Settlements (BSS), the umbrella organization for the world’s central banks, declared war on workers in a recent speech, saying there was a “dangerous spiral in wages and price “.
This was echoed by the Reserve Bank of New Zealand’s statement today “that inflation is above target and employment is above its maximum sustainable level.” As such, the Committee has confirmed that further OCR increases are necessary to fulfill its mandate. Why the current level of 3.2% unemployment is considered too low is never explained. Of course, the bosses hate low unemployment because it increases workers’ bargaining power. But that doesn’t mean it’s not “durable”.
It is the capitalist economist’s way of blaming workers for the price hikes deliberately created by central bank policies in recent years.
But we all know that the sudden surge in inflation rates over the past few years has nothing to do with a sudden rise in wages. Prices jumped above wages all over the advanced capitalist world. The reason is simple: central banks around the world printed trillions of dollars to save their system from collapse when Covid hit.
There is simply no other reason.
Yet BIS Carstens and our own central bank governor, Adrian Orr, have tried to deny responsibility.
Carsten made the following extraordinary admission: “The change in the inflationary environment has been remarkable,” he said. “If you had asked me a year ago to outline the main challenges facing the global economy, I could have given you a long list, but high inflation would not have been enough.”
Thus, monetary policy makers around the world have no idea what is happening or why.
Almost all economists in the capitalist world are either Keynesian (associated with easy money politics) or monetarist (associated with tight money politics). Neither correctly understands inflation and its causes. This is why governments and central banks simply use one or the other theory to justify the policy they are currently implementing. We have therefore seen the monetarists become Keynesian overnight to justify the policies they deemed necessary to save their system in recent years.
From now on, monetarist rhetoric (reduce public spending, reduce the money supply to kill inflation) will become the new mantra.
In 2008 and 2020, global capitalism faced massive crises. Each time, the capitalist system bailed itself out by printing money and creating massive debts. This policy of extension and simulation for the world is coming to an end. Raising interest rates to break inflation means that many indebted corporations (Evergrande, Softbank), governments and countries (Lebanon, Sri Lanka), and the banks and insurance companies to which they owe debt money will crumble.
Workers will be forced to pay the price for the failures of the capitalist system through increased unemployment while being told it is their fault.
We should demand that money and its creation be transformed into a public service under democratic planning and control. We can’t do worse than those in charge right now.