Inflation continues to soar. Yesterday, US data showed its CPI rising by 8.5% over the last year, and 1.2% in the month, meaning that, projected forward a year, inflation, a year from now, of 14.4%. Today, UK CPI came in at 7%, and up 1.1% on the month, meaning 13.2% a year from now, if it continues at this rate. Using the old RPI, the situation is even worse, it came in up 9%, and its on the basis of that number that students are facing an interest rate of 12% on student loan repayments in the Autumn. In fact, as I have pointed out before, all of these numbers are an understatement of the real level of inflation facing working-class families, which is already well in excess of 10%.
One of the main factors has been energy prices, which was up 28% over the last year, and that is before the 54% rise in the price cap this month enters the data. But, that 54% increase will itself seem minor when the latest increases in energy prices are taken into consideration when the next revision occurs in the Autumn. As I set out a while ago, as a result of the economic war conducted by NATO imperialism against Russia and China, now being played out in an actual shooting war in Ukraine, energy prices have soared. The EU has seen its gas prices rise from €16 per megawatt hour a year ago, to €335 per megawatt hour, and UK gas prices have risen by 1,000%! If all of that were to be passed on, it would mean a ten fold increase in household bills for gas.
Similarly, oil prices have risen sharply, pushing up petrol prices. The hapless conservative social-democrats, like Biden, have responded, as they face elections later this year, which they look like losing badly, by releasing large amounts of oil from strategic reserves. However, over the longer-term, those releases are a drop in the bucket, compared to global oil production. At some point, they will also have to replenish them. And, as I said at the weekend, it now appears, in Britain, as though the petrol shortages, seen last year at filling stations, are back. The media is keeping it out of the headlines given that last time they were blamed for causing panic buying, so it was a big surprise to me to find when I came to fill up that the supermarket had been out of fuel for two days. For me it didn't matter, as I wasn't empty, but as the attempts to ban Russian oil take hold, its obvious that these shortages are going to intensify, as well as causing rising petrol prices. On top of that is all of the rising prices and shortages caused by the madness of Brexit, which is also beginning to be seen at ports and airports, though again the media have tried to minimise the reporting of it.
The media have again emphasised that wages are not rising as fast as prices, meaning that this higher inflation will have a depressive effect on demand. That is what they hope, because, as mouthpieces of the ruling class, they are desperate for anything that will prevent sharply rising economic activity, which will result in rising interest rates and a consequent global financial crash. The data certainly does show wages so far failing to match the rise in prices. However, what is already seen is that setting on wages have risen sharply, as firms have to compete for increasingly scarce supplies of labour. That does not feed through into headline numbers at first, because it applies only to these workers being set on. But quickly other workers see these higher wages, and begin to demand something comparable. We have yet to see the big wage bargaining rounds taking place, but already we have seen a significant increase in unionisation, both in Britain and in the US, and a willingness of workers to engage in industrial action.
Moreover, many workers still have savings accrued during lockdown, when they were prevented from spending on many items, and that is now being mobilised to continue consumption. The UK GDP number for February was poor, but that reflects the continued impact of ridiculous COVID restrictions, as well as a precautionary response to war hysteria over Ukraine. Economic activity is likely to pick up again sharply, and rising wages will also feed into that. So all the talk of stagflation is likely to be wrong, and there will just be increasing levels of inflation, as workers eventually catch up to sharply rising prices, and then, because central banks will continue printing money tokens to prevent profits being squeezed by rising wages, prices will again take another twist higher on the inflationary spiral.
Central banks are saying they will raise their policy rates, but they are massively behind the curve. Besides, raising policy rates from these artificially low levels will do nothing to restrain inflation, if at the same time they continue to produce excess money tokens. The fact is that the Federal Reserve and Bank of England, and the ECB, are still engaged in QE, increasing the supply of money tokens, and so pushing up inflation, by devaluing currencies. Even when they end QE, they will not be reducing the supply of money tokens quickly, though Federal Reserve members have said they will do so at a faster rate than they did in 2018. However, given the QE undertaken since 2019, and especially in response to lockdowns, even this more rapid shrinking of the Fed's Balance Sheet will take some time to reduce it even to the level of 2018, let alone before the start of QE.
Inflation is here to stay at these and higher rates for some time, and interest rates are rising along with it, and will rise faster as soon as the limiting effects on economies of lockdowns, and war hysteria are lifted. A look at bond markets shows that process is already well under way, but again it has a long way to go, and that implies some much sharper moves than households or financial markets are currently prepared for. The last time UK inflation was at this level, in December 1990, the Bank of England's Base Rate was at 13%, and mortgage rates higher still. With inflation at 9%, even a positive rate of interest will require something similar, and as soon as economies begin to expand, finding outlets for the employment of capital that will provide an even higher rate of return than that will not be hard, so that banks will have to raise their deposit rates simply to attract cash. In fact, anyone with savings accounts will have seen in recent weeks, that the rates on them have now increased a couple of times in a matter of weeks, and they are trying to attract savers into committing to fixed rate deposits for a year or three years, which no one would be wise to do, at a time when variable rates are going to rise very quickly.
The consequence of this is that the balance of power is going to shift in favour of labour in coming months, and will be manifest not just in rising wages, but in increased industrial action and organisation. The focus of the labour movement will shift decisively to this direct action, and will by-pass the political organisations of the labour movement such as the Labour Party, or the Democrats in the US. Indeed, given the extent to which those political organisations are currently firmly in the grip of right-wing, conservative social-democrats, like Biden and Starmer, they will be an impediment to workers struggle. It will be up to Marxists in those organisations to turn them outwards, at a grass roots level, to this increasing level of industrial activity, and, in turn, to draw new layers of industrial militants into the political organisations of the working-class, which again need to be rebuilt and renewed to be adequate for the class struggle ahead.
We can expect all of the Bonapartist mechanisms that have been created over the last two years, with the active support of social-democrats and sections of the statist left, to be mobilised against workers as they engage in this increased level of struggle, and it will again be a necessity for Marxists to emphasise the need to respond to it, by insisting upon the independence of the working-class, and the development of its self-activity and self-government. Building that now, in the face of the collapse into social-patriotism, an social-pacifism by sections of the Left, is preparation for such struggle, and will act as a dividing line, much as did WWI, in demarcating the Zimmerwaldists from the rest.
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