Jeremy Hunt has become UK Chancellor, appointed by Liz Truss, who sacked her Kamikwarzi Chancellor, for implementing her Reaganite, Voodoo Economics, after global financial markets showed just who does have control over Brexit Britain. Its clear, now, that Truss is Prime Minister in name only, just as Britain has Brexit in name only, and national self-determination in name only. Its Hunt who is in charge, and he is, now, the instrument of those global financial forces that have far more power than any individual nation state. He has staunched the flow of financial and political blood, for now, but the underlying wounds remain open, providing the basis for a Red October on many levels.
October, throughout history, has been a Red month. It is the month of the Russian Bolshevik Revolution, and it is the month that has seen most of the world's biggest financial crashes, such as that of 1929 and 1987, when the financial ledgers were flooded with red ink. The former is unlikely, this October, but the second looks highly probable, as stock and bond markets have already fallen by around 35%, in real terms, from their highs, and look set to collapse further, as interest rates continue a relentless move higher. One reason for that, is that, although proletarian revolutions look unlikely – indeed undesirable given an inadequate degree of preparation – across the globe, workers have sensed a changed condition, as labour shortages abound, and, for the first time in 40 years, the advantage lies with workers to press for higher wages and better conditions, and as they do so, and firms, desperate for labour, to meet the needs of expanding demand for their goods and services, pay up, workers themselves are rebuilding their own organisations from the ground up.
No wonder, some Tories are looking at the benefit of handing over the reins to Starmer's Blue Labour Party, because, can there be any doubt that right-wing, pro-capitalist politicians like Starmer and Reeves, would follow in the footsteps of Callaghan, and attempt to do what the Tories, are unlikely to be able to do, in imposing swingeing austerity and wage cuts on British workers? By ending the energy subsidy in April – a subsidy that Starmer had called for – an election before then would put Starmer in the position of saying whether he would reinstate it, and, given the extent it wrecks the UK's books, if he did, the £ would again tank, and interest rates surge. In 1979, Labour Party conference, itself, undermined the anti-working class measures that Callaghan sought to inflict by its involvement in pay negotiations, such as those at Fords, by passing a resolution by 4 million to 2 million, insisting the government keep its nose out of wage negotiations. But, today, Starmer has carried out a Kinnockite neutering of the Labour Party membership and democracy, first using largely bogus claims about anti-Semitism, as a vehicle for expelling oppositionists, and then simply expelling thousands of members for even questioning those actions, including the suspension of Jeremy Corbyn as an MP.
Hunt has reversed the Brexitory budget tax cuts, and has now also cut down the subsidy to energy suppliers, which will now end in April 2023. That was needed, because, in reality, although the Brexitory tax cuts, proposed in the budget, added salt into the wounds, and provided the spark for the sell-off of British government debt, they were minor compared to the open ended spending commitment involved in the gas price cap, and the same applies to that being proposed across the EU. That cap only shifts the burden from appearing directly in energy bills to appearing indirectly in higher taxes, higher borrowing, and, thereby, higher interest rates. The real issue, here, is the soaring cost of energy resulting from NATO imperialism's boycott of Russian oil and gas, as part of its global economic war against Russia and China. Until those boycotts are lifted, that underlying cause will not go away, but will only deepen, as the Winter proceeds.
The consequence of that is going to be that millions of small businesses will also see their ledgers filled with red ink as they are hit by rising wages, and energy bills, rising costs of materials, as inflation continues to rise relentlessly, as well as rising interest charges on their debts, and as Hunt tries to balance the books, higher taxes. Already, around 1 million of these zombie companies, in Britain, are said to be on the verge of bankruptcy. As I have set out before, that is no bad thing. These small firms, which exist only because of their ability to impose low wages and poor conditions on their workers, supplemented by a welfare state that subsidises those low wages, via the benefits system, and, thereby, itself holds back development in the rest of the economy, are also the social foundation upon which the growth of the reactionary petty-bourgeoisie, since the 1980's, has arisen, and which is the source of the growth of those reactionary ideas, and their domination of the Tory Party, reflected in Brexit. The death of those small businesses will reverse that process, and, in freeing up their capital and labour, will make it available to larger firms, in which workers can more easily organise into trades unions.
That will only strengthen the position of more advanced sections of the working-class, already mobilising in action for higher wages, and better conditions, in response to the inflation caused by the massive printing of money tokens by central banks, and increased costs of food and energy caused by NATO imperialism's economic war against Russia and China, and in Britain, by the idiotic economic nationalism of Brexit that has created borders and costs where none previously existed, between Britain and its major trading partner, the EU. And, recognising that, the Tories are seeking to impose even more restrictions on workers rights and freedoms to resist. They must be encouraged by the fact that, for the last two years, they have done that, massively via lockdowns, which were, themselves, encouraged not only by the abominable Starmer, but even by sections of the Left itself.
Hunt and Truss propose further restrictions on the right to strike, and the imposition of minimum service levels and so on. However, this is not the 1980's, or the period, thereafter. Workers have seen the blood of the Tories in the water, which runs red, from the dead and wounded Tory politicians that continue to fall. Workers have the bit between their teeth, and the red mist in front of their eyes, as they drive forward emboldened by the momentum now in their favour. They are doing so not just in Britain, but by rolling mass strikes of millions of workers in France, Germany and the rest of the EU, indeed, across the entire globe, and the Stalinists in China, as they meet in their sham congress, must be looking on in fear and apprehension, as they try to hold the line on their ridiculous fig leaf of the zero-Covid lockdowns that they are next, and likely to be swept away by it.
For, when the Chinese Stalinists are forced to abandon those lockdowns, the demand from Chinese workers will rise sharply, and Chinese interest rates will follow suit. Currently, the Chinese Stalinists are producing a surreal policy of locking down the economy to prevent its expansion, combined with huge amounts of liquidity injections to buy up worthless paper assets, and to finance periodic sham fiscal expansions on infrastructure projects. It is a recipe for hyper inflation, but the Stalinists are forced into it, because, if they abandon lockdowns, and the economy expands, as interest rates rise, the Chinese property bubble, already kept going by the state, but only just, will burst in spectacular fashion, with global ramifications, and will take down the rest of the Chinese, serial asset price bubbles with it, with even more global implications, especially if it coincides with the ending of similar policies that have been implemented in Japan for the last 30 years, as it too sees inflation rise, and the Yen collapse.
Starmer and the like have no answer to any of that. On the contrary, they are a big part of the problem not the solution. It is their conservative social-democracy that is the root of the idea that wealth could come from inflating asset prices, over the last 30 years that led to QE, and inflation, especially combined with their other idiotic ideas that flowed from it, that it was possible to stop real wealth creation, via lockdowns, whilst printing additional bits of coloured paper and calling it money, and then handing it out to people to spend on goods and services they had prevented being produced! It is Starmer and other right-wing capitalist politicians that have promoted the economic war against Russia and China, and so the surge in energy and food prices.
But, disastrously, sections of the Left have also acted as cheerleaders for those actions too. Now, as workers across the globe begin to protest at those rising prices, and the consequences of NATO's war in Ukraine against Russia, some of those sections of the Left, having made the main bogey Putin, and the red-browners that have attached themselves to him, are more concerned to attack the latter, as they begin to position themselves at the head of those workers' protests, than they are to themselves provide such leadership. As with liberal, pro-imperialists like Paul Mason, they have tied their colours to the mast of that “democratic-imperialism”, in such a way that they are, now, unable to attack the anti-working class policies of Biden or Starmer, at the very moment when such sharp criticism of their politics is required! Once again, they leave a rising proletariat leaderless, at the moment they could most urgently require it.
The speculators, and conservative governments, like the Chinese Stalinists, need to suppress economic growth, but conditions have changed. Instead of rising living costs suppressing spending, it is just encouraging wage demands, and union organisation. Central banks are raising their interest rates, but with inflation in double digits, everywhere, those rates remain massively negative, and if rates rise, asset prices will crash, as stock and bond prices already have, and property markets are close behind, as estate agents report enquiries have disappeared. Brian Moynihan of Bank of America, reports that, in the US, consumer spending continues to be around 10% higher than in the same month last year, and yet, cash flows into bank accounts continue to rise. That shows what I have said before that, hourly wages are not the end of the story. What counts is hours worked, the number of people in the household in full-time employment, as well as movement from lower paid to higher paid employment, and so on. The same story applies in Britain and Europe.
And, this is the basis of the other aspect of a R.E.D. October, or perhaps R.E.D. 2 October. That is Rallies Extremely Dangerous. In July, after stock markets had fallen between 20-30%, in nominal terms, they began to recover, rising by around 20%, which prompted speculators and financial pundits to talk about it being a new bull market. In fact, as I'd said at the time, it was only a bear trap, a bear market rally, drawing the unsuspecting back in, only for them to lose even more money. Sure enough, stock and bond markets sold off again in the last few weeks. A 50% fall, requires a 100% rise to get you back to where you started, so the 20% rise in the Summer, did not even recover all of the 20-30% of earlier losses. With stocks and bonds having fallen by around 20%, again, they are now into even lower territory.
As the global financial markets have now made clear just who it is that controls Britain – and every other nation state, including the biggest – and with Hunt acting as their compliant instrument, the immediate panic has subsided. The £ has risen, bond yields have fallen, as bond prices have risen, and on the back of it, share prices have recovered slightly. But, such a rally is again extremely dangerous, just as it was in the Summer. The fundamental reality has not changed. It isn't inflation that causes interest rates to rise – though higher inflation causes higher nominal rates – but an increase in the demand for money-capital relative to its supply from realised profits. Increased economic growth increases the demand for capital, and so pushes interest rates higher. With labour in short supply, increased growth also pushes wages higher, and so pushes realised profits lower, reducing the supply of money-capital, and so again pushing interest rates higher.
Conservative governments may want to slow economies to avoid that, but unlike the Stalinists in China, who continue to use zero-Covid lockdowns for that purpose, they are out of options, and their past use of such options have simply exacerbated the problems once they are ended. October is set to be a RED month, and there will be no need to launch a hunt for it.
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