Modern Money

By the time of the U.S. presidential election in November 2020, historical experience and the condition of global money markets suggest that the current global economic boom will probably have run its course. While the latest government economic figures show the current boom continuing in the United States and Europe, serious crises have already hit the currencies of Argentina and Turkey.

The dollar after a period of weakness has begun rising against the euro and other currencies and against gold. This sudden dollar strength is not only the result of rising U.S. interest rates. Trump’s threat to impose high tariffs on a whole range of commodities starting on July 6 has set off a flight into the dollar due to its role as the international means of payment. We have seen many such flights into the dollar over the years whenever a crisis threatens, whether political, military or economic.

If no compromise is reached by July 6 and Trump’s tariffs – and the retaliatory tariffs of competing nations – go into effect, it is possible that some commodity sales will fall through, which could trigger an international credit crisis. If severe enough, such a crisis would quickly throw the global capitalist economy into recession. This is all the more likely given the very late stage in the current industrial cycle, which has made the global credit system increasingly fragile even in the absence of a trade war. Whatever happens in the short run, Trump’s economic nationalist “America First” policies are undermining the entire world order that has prevailed since 1945. But that is the subject for another post.

Because capitalist economic crises tend to manifest themselves first in the spheres of currency and then credit, many reformers have sought cures for crises through reforms to the currency and credit systems. This creates the illusion in the minds of middle-class reformers, who stand between the two main class camps of modern society, the capitalist class and the working class, that the contradictions of capitalist society can be overcome through reforming the credit/monetary system. The U.S., in particular, has produced numerous monetary reform movements.

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