Archive for the ‘Direct Prices’ Category

The Federal Reserve’s Open Market Committee Meets

June 27, 2021

On June 16, the U.S. Federal Reserve’s Open Market Committee concluded its two-day meeting and announced its decisions. The FOMC consists of the seven members of the Board of Governors, the head of the Federal Reserve Bank of New York, and (on a rotating basis) the heads of four of the 11 other Federal Reserve Banks that make up the Federal Reserve System. The four Federal Reserve Bank presidents serve one-year terms.

The only concrete decision announced was a rise in the interest rate Federal Reserve Banks pay on the deposits commercial banks keep with them, from 0.10% to 0.15% per year. This represents a very slight “tightening move.” However, as is usually the case, more attention was paid to the tone of the FOMC report than on any concrete decisions made.

Speculators in the gold market, commodities markets, bond market, and stock market hang on every phrase of Federal Reserve statements. The general reaction was that the FOMC indicated that it would move to “tighten” its stance sooner than had been expected. As a result, the price of stocks fell while the U.S. dollar rose sharply against gold.

The Fed’s leadership is nervous about the dollar’s recent weakness against gold and a surge in primary commodity as well as wholesale and consumer prices. Though the FOMC repeated its belief that the current surge in inflation will soon taper off, it no longer seems so sure. As I explained last month, Fed leaders cannot ignore the very real danger that dollar weakness and rising inflation could signal a return to “stagflation” over the next several years and the sharp rise in interest rates and deep recession that inevitably follow.

The Federal Reserve System’s leaders hope to guide the U.S. and world capitalist economies onto a path of a sustained rise in the global industrial cycle, which would normally be expected to last about nine years. They hope that the cyclical upturn will be stronger than the one that followed the Great Recession. But they have to reckon with the very real danger that the current apparent upturn in the worldwide industrial cycle will abort if the Fed allows the dollar to plunge against gold causing inflation and interest rates to rise.

This would make a deep global recession with soaring unemployment inevitable, perhaps before the end of Biden’s four-year term. Far worse from the viewpoint of U.S. imperialism, it would endanger the dollar system, which forms the foundation of the U.S. global empire.

Ultimately, the decisions of the Federal Reserve and its Open Market Committee are constrained by the economic laws that govern the circulation of money. This is why Pichit Likitkijsomboon’s article in Monthly Review critiquing what he calls the “anti-quantity theory of money” takes on special importance. Before we continue our examination of his critique, let’s take a brief look at the current economic situation.

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Analyzing Currency Circulation

May 30, 2021

On May 20, a ceasefire was announced between the Hamas-led government of Gaza and Israel. The truce followed an 11-day pounding of Gaza’s 2 million-plus residents by Israeli bombers and rockets. Residents of Gaza, described as the world’s largest open-air prison, are not allowed to leave. According to Gaza’s Ministry of Health, total deaths among Gaza residents — or perhaps we should say inmates — were at least 248. Of these, 39 were women and 66 were children. An additional 1,910 people were wounded. According to UN officials as a result of the Israeli assault, 800,000 people in Gaza do not have access to clean water. All of this is amid the COVID-19 pandemic, which has swept through Gaza as it has through the rest of the world.

According to the Israeli government, Israeli casualties from rockets fired from Gaza include 12 deaths, of which two were children. Israel is well supplied by the United States with bombers and highly accurate computer-guided missiles, while Gaza residents have only highly inaccurate missiles that can only be shot in the general direction of their targets. In addition, most of the Gazan missiles have been shot down by the Israeli military using the U.S.-provided Iron Dome anti-missile system. As a result, physical damage done to Israel by Gazan missiles has been minimal.

The accuracy of the U.S.-provided bombs and missiles is illustrated by the destruction of a Gaza high-rise that housed both the Al Jazeera news agency and the U.S.-based Associated Press. The Israeli government gave journalists minutes to leave claiming that the building was being used by Hamas, the elected governing party in Gaza. However, AP claimed there was no evidence that Hamas used the building.

What is true is that the high-rise provided an excellent view of Gaza and therefore of the toll the Israeli assault was taking on the besieged city. Perhaps the Israelis were more concerned about Al Jazeera than they were about AP. Still, the attack on the building was a clear attack by the Israeli government on journalists and freedom of the press.

AP was therefore forced to protest. However, the next day AP under right-wing pressure fired an American journalist, Emily Wilder, for pro-Palestinian tweets when she was a college student as if that is a crime. Wilder was active as a college student in the Jewish Voice for Peace and so happens to be Jewish.

She is not alone in the American Jewish community. Increasingly, younger Jews have come to oppose the actions of the Israeli government, which claims to represent all Jews, including those who do not live or wish to live in Israel, but not its Arab citizens. Most of the American Jewish community opposed the administration of Donald Trump, not least because Trump’s racist demagoguery was reminiscent of the ideology that eventually led to the Third Reich in Germany. Indeed, extreme antisemitism is widespread among Trump’s supporters.

This did not prevent Trump from claiming that he was the most pro-Israel president ever. He pointed to his decision to move the U.S. embassy from Tel-Aviv to Jerusalem. The former president when speaking to Jewish-American organizations repeatedly described Israeli Prime Minister Benjamin Netanyahu as “your prime minister,” which drew protests even from docile (to American imperialism) pro-Zionist Jewish organizations. This did not prevent these same organizations from coming out once again in support of the latest Israeli war against the Palestinian people.

Netanyahu and most of the Israeli population, in contrast, strongly supported Trump. The racist rhetoric of the former — and possible future — U.S. president was music to their ears. The latest crisis broke out when the Israeli government moved to evict some four Palestinian families from their East Jerusalem neighborhood of Sheikh Jarrah to make room for Jewish settlers in the historically Arab area. The Zionist propaganda machine claimed that this was a routine eviction case involving the fact that the Arab residents had not paid rent for 39 years to Jewish landlords who the Zionists claim had owned the apartments since the 1870s.

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The Second Trump Impeachment Trial

March 7, 2021

Former President Donald Trump was acquitted on an insurrection count on Feb. 13 in his second impeachment trial, though 57 senators out of a hundred, including seven Republicans, voted to convict him. However, this was short of the two-thirds’ majority required to convict a federal official or ex-official on an impeachment count.

Senate Republican minority leader Mitch McConnell admitted that, while Trump was guilty, it was unconstitutional for the Senate to try a former official on an impeachment count after the official had left office. This was despite the fact that there was precedent to do so.

In the days leading up to the five-day impeachment trial, Trump had blackmailed the Republicans by threatening to form a new far-right “Patriot Party.” Such a party would split much of Trump’s MAGA base away from the Republicans, which would make many, perhaps most, Republican politicians unelectable.

Besides the acquittal, the trial was notable not only for its brevity — particularly considering the gravity of the count — but by the agreement between the Republicans and Democrats to not call witnesses.

The issue was not simply Trump’s incendiary speech to a MAGA crowd of tens of thousands gathered in front of the White House on Jan. 6. It could be argued that Trump’s speech, however despicable its content, was protected speech under the First Amendment. You can be sure that if a U.S. president can be convicted in an impeachment trial for exercising his right of free speech, Black Lives Matter activists, leftists of all types, trade unionists, and other progressive activists can be convicted at a criminal trial for exercising the same right.

What made Jan. 6 a failed putsch rather than a right-wing demonstration that got out of hand was not the content of Trump’s speech. It was the fact that National Guard and police forces were withheld for hours even though the Pentagon and FBI as well as the police knew that a dangerous armed demonstration was planned. Indeed, Washington, D.C., Mayor Muriel Bowser had specifically requested on Jan. 5 that National Guard forces be called to the capital in case needed to prevent the impending violence.

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The abortive 18th Brumaire of Donald John Trump

February 7, 2021

Joseph Biden was sworn in as the 46th president of the United States and Kamala Harris as vice president on Jan. 20, 2021. But it was an inauguration unlike any other. Washington was occupied by 20,000 National Guard troops. Nobody without a pass was allowed anywhere near the ceremony. One reporter on the eve of Biden’s inauguration said something to the effect that on Jan. 20 Washington did not look anything like America. But the point is this is exactly what the United States of America looks like now. The real questions are, how did the U.S. get this way and where is it going?

Four years earlier, the capitalist ruling class looked on with a mixture of great hope and some trepidation as Donald John Trump was sworn in as the 45th president of the United States. On one hand, Trump was a brazen amateur compared to even the least prepared of his predecessors. He had never served in the armed forces or held an elective office, nor had he served in a U.S. cabinet or any other government post. Indeed, he never held any job outside his family business besides his role as a TV showman.

Once in office, Trump wasted no time in starting a trade war with China but also with the U.S.’s imperialist satellite “allies” such as Germany and the other EU countries. There were fears in the ruling circles that this was endangering the world order that had emerged out of the U.S. victory against Nazi Germany and Imperial Japan. This world “order,” which Joseph Biden is now trying to reinvigorate, was based on a compromise agreement between the victorious U.S. and its defeated imperialist rivals that emerged after World War II.

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The Putsch of January 6, 2021

January 10, 2021

Normally, after my draft returns from the editors, I make a few last-minute changes, sometimes correct factual errors, and then send it back for final editing and posting. In this post, my deadline for the initial draft was Jan. 4. I considered updating the draft to cover the events of Jan. 6 but it was clear that would involve changes way beyond the usual last-minute updates I sometimes have to make. I therefore decided to leave the post as is, minus some minor editorial changes, but add this special section. The following post should be read as a description of the U.S. political situation on the eve of the attempted putsch of Jan. 6. There will be more on this subject in next month’s post.

After the the Electoral College elected Joseph Biden and Kamala Harris to the presidency and vice presidency of the United States on Dec. 14, Trump appeared to be out of legal options in his attempt to cling to office. But there was one more legal hurdle to clear before the presidential election was formally complete. This was the counting of the electoral vote and announcement of the results to a special joint session of the House of Representatives and Senate by the president of Senate, which was Trump’s vice president, Mike Pence.

At this point, if a member of the House mounts a challenge to the electors of a given state and is backed by a member of the Senate, both houses of Congress have to vote on the challenge. If the challenge is approved by both chambers, the electoral vote of that state is declared invalid. This year, a number of extreme right-wing Republican congressman and some senators announced that they would indeed mount such challenges in a series of swing states that were carried by electors pledged to the Harris-Biden ticket.

Such challenges, though they have occurred occasionally, have always been overwhelmingly voted down. This year, it was clear that the challenges would also be defeated. First, because as far as the Senate is concerned, they did not have support of Republican leader Mitch McConnell, and second, because the Democrats have a majority of the House of Representatives. Trump not only would have had to overcome McConnell’s resistance but split off some Democrats in the House to have any chance of prevailing.

But Trump hoped that the Electoral College vote could be nullified on Jan. 6, which would then move the election to the House of Representatives where Trump would be “elected” to a second four-year term. Or perhaps Trump hoped Vice President Mike Pence could simply announce that not Biden-Harris but Trump-Pence had carried the Electoral College.

When Pence tried to explain to him that the vice president has no such power under the U.S. Constitution, Trump was reportedly enraged and came to view Pence, who had hoped before the Nov. 3 election to become Trump’s anointed successor in four years, as a traitor just as Trump views so many other high officials who have come and gone over the last four years.

With time rapidly running out, Trump decided to play one final card. In the preceding weeks, thousands of MAGA supporters had arrived in Washington waiting to act on the president’s command. On Jan. 6, the command came. As the two houses of Congress were convening in the Capitol to carry out their ceremonial function of certifying the presidential election, Trump addressed a crowd of assembled fascists, some armed with guns, in front of the White House. He announced that they would march to the Capitol. Trump, however, instead of joining them retreated to the White House to watch the show on TV. The fascist mob not only marched to the Capitol, it stormed the Capitol.

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The Crisis (Pt 11)

June 28, 2020

Is capitalism approaching its limits?

In the first years of the 20th century, Rosa Luxemburg expressed great alarm when she discovered that Marx’s formulas of expanded reproduction in Volume II of “Capital” suggested that capitalism can in principle go on forever. These formulas appeared to contradict Marx’s famous Preface in “A Contribution to a Critique of Political Economy.” There Marx wrote: “No social order ever perishes before all the productive forces for which there is room in it have developed [my emphasis — SW] and new, higher relations of production never appear before the material conditions of their existence have matured in the womb of the old society itself.”

If, however, capitalism can engage in expanded reproduction without limit, how can capitalism ever develop all the productive forces “for which it has room”? Didn’t Marx himself mathematically demonstrate that capitalism can develop the productive forces without limit? However, a closer look reveals this apparent contradiction to be an illusion.

In the Volume II formula, the productive forces expanded only quantitatively but not qualitatively. There is no growth in labor productivity or what Marx called the organic composition of capital — the ratio of constant capital, which does not produce surplus value but merely transfers its value to the commodities it helps produce, and variable capital, the sold labor power of the workers, which replaces its value and produces additional surplus value.

It is also assumed that the correct proportions of production, including the correct proportions between Department I, which produces the means of production, and Department II, which produces the means of consumption, are maintained without explaining how they are maintained. And — almost always overlooked — among the correct proportions between the various branches of production that must be maintained is that between the production of money material and all other branches of commodity production.

In reality, the concrete history of capitalism has been marked by growth in labor productivity. The rate at which productivity grows is largely regulated by the competition between the industrial capitalists and the workers. To maximize their profits, the industrial capitalists as the buyers of labor power try to pay the workers the lowest possible wage. The workers as the sellers of labor attempt to get the highest possible wage right up to the mathematical limit where surplus value — and therefore its monetary form, profit — disappears altogether.

If Marx’s formulas show expanded capitalist reproduction running forever, it must be assumed that the quantity of auxiliary materials and the ores out of which money material is produced, and the supply of labor power that produces the means of subsistence for the workers, must be available in infinite quantities. If this is true — which it obviously is not — then the population, including the fraction of the population that consists of workers, can grow to the mathematical limit of infinity and capitalism can indeed go on forever. Otherwise, it can’t.

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Political and Economic Crises (Pt 11)

September 15, 2019

Trump versus the Fed

On Sept. 3, the U.S. Institute of Supply Management reported that its widely watched index, based on a survey of industrial purchasing managers, had dropped to 49.1 percent. Any number below 50 indicates a declining trend in U.S. industrial production. The index has not been so low since September 2009, when the U.S. industrial economy was near the trough of the Great Recession.

The ISM reports: “Falling orders among foreign clients dragged on overall new business growth and producer confidence. The degree of optimism about the year ahead hit a fresh seven-year series low amid growing business uncertainty. As such, employment was broadly unchanged and spare capacity was used to clear backlogs of work.”

This is just the latest in a series of reports indicating that the U.S. and world capitalist economies are on the brink of recession. The Trump White House and the electoral wing of the Republican Party fear that Trump will face the reelection in November 2020 amidst full-scale recession conditions, dramatically reducing Trump’s chances of winning a second term.

Trump has responded by stepping up his public attacks on Jerome Powell, the conservative Republican banker Trump himself nominated to head the Federal Reserve System. In the wake of the annual August meeting of bankers at Jackson Hole, Wyoming, Trump declared Jerome Powell to be worse for the U.S. economy than even Chinese President Xi Jinping.

Trump is pursuing two aims here. First, he hopes that the Federal Reserve and its Open Market Committee will lower its target for federal funds and flood the banking system with newly created U.S. dollar reserves that will at least postpone the arrival of a full recession and mass cyclical unemployment until after November 2020. If this happens, Trump will be able to run as a “prosperity president.” Experience shows that U.S. presidents have a tough time winning second terms when they have to run for reelection near the low point of the industrial cycle.

Secondly, if a recession does arrive by election day, Trump wants to be able to point to a scapegoat — in this case, the Federal Reserve Board and the “international financial elites” out to destroy his nationalist “Make American Great Again” policies.

Jerome Powell, for his part, has promised that he will act “as appropriate” to keep the expansion going. The key words here are “as appropriate.” Powell is indicating to the markets that he will not jeopardize the dollar and the dollar system in an attempt to “keep the expansion going” like Trump is demanding. Somewhat reassured, investors caused the dollar price of gold to fall after Powell’s remarks, while interest rates on government bonds have rebounded.

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Political and Economic Crises (Pt 9)

July 21, 2019

Scandals that rocked the Trump administration this month included sex scandals involving both the current president and former President Bill Clinton. Another scandal involved “detention centers” for immigrants, which are finally being called by their right name — concentration camps. The prisoners held in these camps are desperate people — men, women, children and infants — forced to flee desperate conditions in Central America created by U.S. imperialism under both Republicans and Democrats.

Particularly outrageous is the detention of children and even infants, who are held in cages and go without basic medical care (resulting in some children dying in the camps), toothbrushes, and bathing. The conditions in which these concentration camp victims are held would be scandalous even if they involved adult prisoners convicted after fair trials of terrible crimes. When the victims are children and infants, even the term popularized after the post-WWII Nuremberg Trials of German Nazi leaders for “crimes against humanity” seems somehow trite.

Trump supporters claim it is outrageous to call the detention centers concentration camps, pointing out there are no gas chambers or crematoria in these camps. This much is true. However, there were no gas chambers or crematoria in the Nazi concentration camps of the 1930s. There were also no children in the 1930s-era Nazi concentration camps. That did not prevent the Nazi government, which originally held “only” adult Communists, trade unionists, and some Social Democrats in “protective custody,” from calling them concentration camps. It was only during World War II that non-political women, children and infants — most Jews and Roma people — were taken to concentration camps equipped with gas chambers and crematoria.

As these revelations became known, a growing movement has emerged demanding that the concentration camps be shut down. On July 12, reports circulated that ICE, the U.S. federal secret police agency in charge of enforcing immigration laws, were planning massive raids on Sunday, July 14. In response, a series of demonstrations swept the U.S. demanding that the concentration camps be shut down and immigrants be allowed to stay.

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Political and Economic Crises (Pt 3)

January 21, 2019

On Dec. 20, 2018, it was announced that U.S. “Defense” Secretary James “Maddog” Mattis was resigning. Mattis resigned in protest over President Trump’s decision to withdraw 2,000 U.S. troops fighting in northeast Syria and cut in half the number of U.S. troops fighting in Afghanistan.

It was originally announced that Mattis would stay on until Feb. 28, which would allow time for President Trump to nominate a successor and for the successor to confirmed by the Republican Senate. Within days, however, it was revealed that “Maddog” would at the president’s insistence leave by Jan. 1. Mattis was replaced “on a temporary basis” by Patrick Shanahan, a former Boeing executive. Shanahan’s official title will be “acting” secretary of defense. Unlike Mattis, Shanahan is a civilian who comes from the industrial capitalist side of the military-industrial complex.

Since he assumed office on Jan. 20, 2017, Trump had been surrounded by a ring of generals, the most prominent of which was Mattis. General Mattis was known to be an enthusiastic supporter of the war in Afghanistan as well as all the other colonial wars the U.S. has been fighting around the world, including the war in northeastern Syria. Even more important, he is a strong supporter of NATO, which acts as the military wing of the U.S. world empire.

Trump, in contrast to Mattis and other generals who have surrounded Trump until recently, has expressed skepticism about continuing the wars in Afghanistan and Syria. According to the U.S. government, U.S. troops are in Syria to fight the remnants of ISIS and protect “our allies” the Kurds against NATO member Turkey.

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Three Books on Marxist Political Economy (Pt 17)

June 3, 2018

Apartheid planet and the new racism

John Smith in his “Imperialism in the 21st Century” sees imperialism as evolving towards a form of global apartheid. Under the rule of the U.S. world empire, the freedom of capital to move across national boundaries in its endless search for the highest rate of profit has expanded. However, workers do not have freedom to cross national borders in search of the highest wage.

Since World War II, the nation-state, the cradle of the capitalist mode of production, has been in decline. One example of this decline is the limited sovereignty of Germany and especially Japan since World War II. Even the sovereignty of countries that were allies of the U.S. in World War II, Britain and France, has been severely restricted within the NATO “alliance,” and in the case of Britain within the “special relationship.”

The U.S. and its imperialist satellite states of Western Europe and Japan have opposed every attempt to establish new strong independent nation-states – though with mixed results – since World War II. In the pre-war era, the then-politically divided imperialist countries sometimes gave limited support to nationalist movements in their rivals’ colonies and semi-colonies. Since World War II, the entire imperialist world has been united against national liberation movements in the oppressed world.

Taking the world economy as a whole, the productive forces have long outgrown the nation-state. This was already shown by the outbreak of World War I more than a hundred years ago. In recent years, the revolution in communications represented by the rise of the Internet and the smartphone is increasingly breaking down global, linguistic, and cultural boundaries.

But the nation-state has refused to peacefully fade away into the sunset as the productive forces have outgrown it. In the period between the two world wars, there emerged within the imperialist world a counter-tendency of resurgent economic nationalism, which found expression in increased tariff and other trade barriers. Economic nationalism was accompanied by growing political nationalism, racist anti-immigrant movements, and racism within the imperialist countries. These trends found their most extreme manifestation in Nazi Germany.

Today in the imperialist countries, we once again see a rise of economic and political nationalism accompanied by anti-immigrant movements and growing racism. This extremely dangerous tendency is currently represented by President Donald Trump and his supporters in the U.S., where it is now in power; the current government of Austria; the National Front in France; the Alternative for Germany in Germany, where it is the official opposition party; and their counterparts in other imperialist countries. Though they are not imperialist countries, similar movements dominate governments of many of the ex-socialist countries of eastern Europe such as Poland, Hungary and the Czech Republic

Trump’s recent decision to move the U.S. Embassy in Israel to Jerusalem and recognize Jerusalem as Israel’s “eternal” capital was accompanied by Israeli massacres that have left more than a hundred Palestinians dead and thousands wounded in Gaza. Trump’s move cannot be separated from the broader racist trend that Trump personifies.

Israel itself is the product of an earlier wave of racism that accompanied the economic and political nationalism of the period between World War I and World II that ended with Nazi Germany’s attempt to physically exterminate the entire European Jewish population. Zionist Israel, therefore, links the “old racism” with the new.

Is a kind of global apartheid system emerging, as Smith suggests, that is replacing the increasingly outmoded bourgeois nation-state? Today’s political and economic trends suggest the answer could be yes if the coming period does not result in a victory of the global working class.

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