The Central Bank induced recession to come

Central Banks across the globe are seeting course to break inflation by inducing a recession while trying to blame workers for price rises.

The New Zealand ResBank increased the official cash rate 50% to 1.5% today.

The return of inflation across the globe has become entrenched. The financial aristocracy who determine Central Bank policies is determined to break inflation because it reduces their wealth.

Agustin Carstens, the general manager of the Bank for International Settlements(BSS) , the umbrella organisation of the world’s central banks, declared war on working people in a recent speech by claiming there was a “dangerous wage-price spiral.”

This was echoed by the New Zealand Reserve Bank statement today “that inflation is above target and employment is above its maximum sustainable level. As such, the Committee confirmed that further increases in the OCR are needed in order to meet their 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 this does not mean it is not “sustainable”.

This is the capitalist economist’s way of blaming workers for price increases deliberately created by the central bank policies over the last few years.

But we all know that the sudden surge in inflation rates over the last few years has had nothing to do with a sudden surge in wages. Prices surged above wages everywhere in the advanced capitalist world. The reason for that is simple – central banks everywhere printed trillions of dollars to rescue their system from collapse when Covid hit.

There is simply no other reason.

Yet Carstens of the BIS, and our own central bank governor Adrian Orr tried to deny any responsibility.

Carsten made the following extraordinary admission: “The shift in the inflationary environment has been remarkable,” he said. “If you had asked me a year ago to lay out the key challenges for the global economy, I could have given you a long list, but high inflation would not have made the cut.”

So the people responsible for monetary policy worldwide have no idea what is happening or why.

Nearly every economist in the capitalist world is either a Keynesian (associated with easy money policies) or a monetarist (associated with tight money policies). Neither understand inflation and its causes properly. That is why governments and central banks simply use one or the other to justify whatever policy they are implementing now. So we saw the monetarists become Keynesians overnight to justify policies they thought necessary to save their system in recent years.

Now the monetarist rhetoric (cut government spending, cut the money supply to kill inflation) will become the new mantra.

In 2008 and 2020 world capitalism faced massive crises. Each time the capitalist system bailed itself out by printing money and creating massive amounts of debt. That extend and pretend policy for the world is coming to an end. Rising interest rates to break inflation means many indebted companies (Evergrande, Softbank) governments and countries (Lebanon, Sri Lanka), and the banks and insurance companies they owe money to will come crashing down.

Working people will be forced to pay the price for the failures of the capitalist system through a surge in unemployment while being told it’s their own fault.

We should demand that money and its creation be turned into a public service under democratic planning and control. We can’t do worse than those in charge at the moment.

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