This year’s budget was the most severe and deflationary of any since the end of the last war. Altogether, it withdrew nearly £1,000 million of spending power from the economy—an unprecedented amount. The devaluation of last November, the January cuts in Government spending, and the budget in March may produce a fall in living standards of the British working class of an order not seen since the 1920’s. Estimates of the rise in the cost of living arising from devaluation ranged from 3½ to 5 per cent. The budget has added further considerable burdens; estimates of the overall cost of living increase for 1968 are now in the order of 8 or 9 per cent. One only has to contrast this with the Government’s norm for wage increases—3½ per cent. Even allowing for the expected 5 per cent rise in wage rates in the first six months of this year (due to the bulge arising from the period of restraint last year) this will not compensate for the increase in prices. Of course wage rates and earnings are not the same thing. Only a minority of wage earners today take home wages as low as the official minimum rates—their take home pay depends on bonus, piece rates and so on. In the coming months there is every possibility that these take-home wages will either be stable or fall. Therefore the price increases will hit harder than bourgeois economists would have us believe. Nor is this all. Along with the slowdown in housing and other social services, there is the threat of unemployment for those in work and little prospect for those now unemployed of finding work. The British working-class is going to suffer.

How does gold come into the picture? The recent turmoil that led to a two tier system of prices for gold may be seen as an indication of the international character of the crisis besetting capitalism. There can be little doubt that the long boom enjoyed by capitalism since the begining of the fifties is now over, and capitalism is once again displaying most of the features that bourgeois pundits claimed it had lost. Rising unemployment, reduction of the social services, and government retrenchment are now common to many capitalist countries, not something peculiar to Britain. They have been accompanied by persistent international inflation. The usa has contributed to this problem by its massive balance of payments deficit. This deficit arises from two sources: a) the export of capital, much of it to Western Europe and b) its overseas military expenditure. It has been financed by other capitalist countries holding dollar reserves. So long as such (paper) dollars were assumed to be as good as gold, i.e. interchangeable with gold, there was not too much concern. However, over the last few years the us gold stock has been steadily drained by conversions, thus throwing into question the ability of the us to meet its obligations for gold. Hence the flight from the dollar into gold (which of course put further pressure on the dollar). This flight was not so much precipitated by the devaluation of the pound, rather it was accelerated and thus reached crisis proportions earlier than might have otherwise been the case. Since both the pound and the dollar have acted as the twin international currencies since 1945, the pound acted as the first line of defence for the dollar.