Trump’s Islamophobic demagoguery and the New Zealand massacre
On March 15, the world was shocked when a far-right gunman killed 50 Muslim worshipers and injured many others at two Mosques in Christchurch, New Zealand. The gunman hailed U.S. President Donald Trump as “a symbol of renewed white identity and common purpose,” but complained that he is not a good “policymaker and leader.”
This fascist terrorist mass murderer put his finger on the relationship between “Trumpism” and the growing fascist “white nationalist” movement, which if it should win state power in a major imperialist country would put in the shade the crimes of its 20th-century predecessor.
Trump lacks a mass movement organized not only as a political party but as a mass armed militia based on middle-class youth driven to desperation by a crisis of monopoly capitalism. Such a movement, once it reaches a certain degree of development, is capable of launching a civil war against the organized workers’ movement and its allies as well as “racial” and religious minorities of all classes. Once a fascist movement becomes powerful enough to wage a civil war, it always does so in the interest of its finance-capital masters. From the viewpoint of today’s fascists, since Trumpism is only preparing the way for the real thing, Trump falls short as a “policymaker and leader.”
But Trump is preparing the way for 21st-century fascism through his role as a “symbol of renewed white identity and common purpose,” not only in the U.S. but in all the imperialist countries. Our hearts must go out to the victims of this unspeakable crime, casualties of Trump’s racism and the capitalist system that breeds it.
We must fight Trumpism and all it stands for with all our strength. But to do this effectively, we must also fight the Party of (the current imperialist world) Order, which is doing all it can to cripple the fight against Trumpism by usurping the leadership of the “resistance” to Trump from within.
A frustrating month for Donald Trump
The last month has been a frustrating one for Donald Trump. The plans to overthrow the democratically elected (1) anti-imperialist government of Nicolas Maduro ran into an obstacle unexpected by the Trump administration – and the leaders of the Democratic Party – the resistance of the Venezuelan people. Trump and the Democrats had counted on the years of grinding economic crisis that began with the shift from the high-price to low-price phases of the oil price cycle. This change is in turn linked to the decision of the U.S. Federal Reserve System – the global central bank under the dollar system – starting in 2015 to halt for the time being its creation of additional U.S. dollars after seven years of unprecedented “quantitative easing.”
The Obama administration used this development to launch an economic war against Venezuela in the form of sanctions that greatly intensified the country’s economic crisis. The economic war begun by Obama has escalated under Donald Trump into a full-blown economic blockade. Then, on January 23, the Trump administration, supported by the “anti-Trump” Party of Order media, appointed the little-known right-wing Venezuelan politician Juan Guaido as “interim president” of Venezuela.
However, the administration – and Guaido – carried out their attempted coup in an extremely clumsy way. The Trump administration instead of staying discreetly in the background – which would have allowed the imperialist media to paint the coup against the democratically elected government of President Nicolas Maduro as an effort by the “opposition” to restore freedom and democracy and instead exposed its hands and real aims from the beginning.
Juan Guaido declared himself “interim president” a day after consulting with Trump’s super-reactionary vice president, Mike Pence. The administration then recognized – and had its imperialist satellite countries and stooge Latin American governments of the “Lima Group” recognize – Guaido as the legitimate “president” of Venezuela, though the Guaido “government” didn’t control a single square millimeter of territory. (2)
Then the administration announced it was offering Venezuela “humanitarian aid” at the very moment it was freezing financial assets of the legitimate Venezuelan government in order to make it virtually impossible for the government to purchase food and medicines on the world market. Evidently, the plan was to have Guaido drive across the Columbia border into a Venezuelan province that already had a right-wing governor to deliver “aid” to people willing to acknowledge the authority of the Trump-appointed “president.”
The Trump administration – and its Democratic supporters – were counting on at least a portion of the Venezuelan armed forces and militia defecting, which would have allowed Guaido to take control of a province already governed by the right wing. The Party of Order as well as the pro-Trump media did its part by painting Maduro as a cruel tyrant who refused to accept desperately needed aid for his starving people. If this had been successful, the Guaido “government” would have been in control of at least some Venezuelan territory and the “color revolution” against the Chavistas would have been on.
The plan required that a significant section of the Venezuelan armed forces defect to, or at least not resist, Guaido’s puppet government. But with only a handful of individual exceptions, the Venezuelan armed forces stood firm. Guaido and his Washington masters were forced to retreat. Frustrated, Guaido went on a tour of Latin American countries under right-wing governments begging for U.S. military intervention. By doing this, he proved to be a dangerous embarrassment for these reactionary governments.
These governments had gotten elected in the first place because of frustration with the “pink tide” governments rooted in their inability to handle the growing dollar shortage and its negative economic and social consequences. The dollar shortage, which is spreading recession throughout Latin America, is in turn rooted in the Federal Reserve System’s decision to stop creating new U.S. dollars and instead move toward destroying existing dollars – reducing the Fed’s balance sheet – in the name of “normalizing” monetary policy. (3)
The fact that the recession is not confined to Venezuela but has been spreading throughout South America – for example, Brazil and Argentina have been hard hit – shows that the economic crisis in Venezuela is not rooted in the “mistakes” of Maduro. If the crisis was caused by Maduro’s mistakes – a purely local factor – it should have remained largely confined to Venezuela. True, the crisis in Venezuela has been aggravated first by the monocultural nature of the Venezuelan economy – itself the heritage of the imperialists’ oppression of Venezuela – and by the economic war begun under Obama and greatly escalated under Trump. But its roots lie elsewhere.
The immediate cause of the economic crisis that brought down the “pink tide” governments was the dollar shortage. The dollar shortage was as we saw above caused by the Federal Reserve Board’s decision to cease creating new dollars. This step was in turn required to prevent a run on the U.S. dollar that would strike at the financial basis of the U.S. world empire. As soon as the Fed ended the creation of new dollars, interest rates – particularly short-term interest rates – started to rise on the New York money market. This, in turn, attracted “hot money” away from Latin American countries to New York.
The inflow of money to the U.S. – and other imperialist countries – triggered monetary shortages in South America leading to recessions in those countries but staving off recession in the United States and the other imperialist countries. However, as the Federal Reserve Board has continued to shrink the quantity of U.S. dollars in the world – again necessary to stabilize the dollar after the massive quantitative easing that began with the 2008 panic, it is only a matter of time before the recession in South America and other “emerging markets” spreads to the United States and the other imperialist countries. This may occur when “hot money” flows back to South America to take advantage of much higher interest rates there and other “emerging markets.”
We know, however, that recessions – and the sharper crises such as the one that occurred in 2008 – are ultimately rooted in the inability of the capitalist economy to expand the market as rapidly as production expands, inevitably leading at periodic intervals to general overproduction of commodities. Progressive – and even some would-be Marxists – who insist that the crisis in Venezuela is the fault of the Maduro government or the Chavistas as a whole, even if they don’t realize it are simply echoing imperialist propaganda.
The leaders of these reactionary governments know that if they are seen supporting a U.S. military attack against another Latin American country they will face massive resistance from their own people. This is all the truer because it is becoming clear that the right-wing governments are no more able to deal effectively with the recession-breeding dollar shortage than their “pink tide” predecessors. The right-wing governments of the Lima Group had to explain to the Trump administration that they have already spent their spare political capital by recognizing the U.S.-appointed Guaido “government” and that they will be in deep trouble with their own people if Trump launches a massive military invasion of Venezuela.
It now seems that the Trump administration, running into political obstacles to the launching of a traditional military invasion, has decided to employ a uniquely 21st-century form of warfare – cyberwar. The Trump administration has apparently deployed malicious computer code to shut down Venezuela’s computer-controlled power plants. The shutting down of power plants is more than an inconvenience. It further reduces the export of oil from Venezuela, further aggravating the dollar shortage and thus worsening the economic crisis. In this way, Trump and his supporters – which in this context include the Democratic leaders of the “resistance” to Trump – hope that the Venezuelan people and members of the armed forces will be worn down to the point where they will carry out Trump’s demands to oust President Maduro, or failing that, at least allow an outright U.S. invasion and occupation of Venezuela with minimal resistance.
For now, Guaido and the right-wing political opposition that have been gaining some support among less politically aware sections of the Venezuelan population have been thoroughly exposed as the stooges of “Yankee Imperialism” that they are. The result has been a patriotic upsurge in the support for President Maduro and the Chavistas and a drop in support for the pro-imperialist right wing.
As the Venezuelan crisis unfolded, Trump was frustrated in his Korean policy as well. He spoiled his second summit meeting with Korean leader Kim Jong-un held in the Vietnamese capital of Hanoi by listening to his Party of Order national-security advisor, the arch warmonger John Bolton. Following Bolton’s and the Party of Order’s advice, Trump demanded that Kim Jong-un agree to give up all of North Korea’s nuclear weapons as the precondition for the “modification” of any of the economic sanctions, which like with Venezuela and Cuba amount to a full-scale economic blockade.
Kim and the North Korean leadership are well aware that the only reason Trump agreed to a summit meeting in the first place was fear that the Koreans are developing the capacity to deliver nuclear weapons to U.S. cities if the U.S. should ever again launch a military attack against North Korea. This raises the prospect that in the next Korean War it will not only be Korean cities that are reduced to smoking radioactive ruins.
It was only this prospect that bought Trump to the bargaining table in the first place. However, if the North Koreans agree to give up their nuclear deterrent in exchange for the “relaxation” of sanctions, they will immediately lose their newly won bargaining power. U.S. imperialism – not only under Trump but under all U.S. presidents – respects only strength. Just ask Saddam Hussein and Muammar Qaddafi who agreed to disarmament measures – giving up chemical weapons in the case of Saddam – and ending Libya’s own nuclear weapons program in the case of Qaddafi. Wait a minute, we can’t ask them because both Saddam and Qaddafi are dead, murdered at the hands of pro-imperialist forces. (4) In light of these facts, Kim had no choice but to walk.
Bad news for Trump on the economic front
Trump has also received bad news on another front vital to his re-election hopes – the economy. According to Fergal O’Brien, writing in Bloomberg, “The global economy’s loss of momentum has left [the] expansion now looking like its weakest since the global financial crisis, a development that’s already sparked a dramatic shift among central banks.” The current global slowdown in the rate of economic growth is widely attributed by the anti-Trump Party of Order to the protectionist policies of Trump aimed at China but also at its West European “allies.” This doesn’t explain, however, the crisis of 2007-09, which far exceeded the severity of the current slowdown and occurred at a time when “liberal” trade policies championed by the Party of Order were solidly entrenched.
In reality, after the decade of cyclical expansion that followed the crisis of 2007-09, the upward phase of the industrial cycle is approaching its inevitable end. Once again, capitalist production is running into the contradiction that has plagued it since the end of the first quarter of the 19th century. Since that time, the industrial capitalists have had the ability to increase production of commodities faster than the markets for the commodities can grow. As a result, every 10 years or so the world market becomes glutted with unsalable commodities. This forces the industrial capitalists to reduce production, and unemployment rises
until the markets clear.
Has a U.S. recession already begun?
The U.S. Labor Department reported in March that only 20,000 new jobs were created in the U.S. in February. This is a dramatic slowdown compared with the 200,000 plus jobs that the department reported being created in recent months. However, employment and GDP estimates are often distorted by winter storms and cold waves, so these figures are not by themselves enough to conclude that a new U.S. recession has begun.
However, the California Employment Development Department reported that in January – California employment reports lag a month behind the federal data – employment in the Golden State also slowed dramatically. Unlike most of the U.S., lowland California, where most economic activity takes place, does not suffer from winter blizzards and extreme cold waves. So it seems likely that there is more than the weather behind the slowdown in the growth of employment. As signs of an economic slowdown both in the U.S. and other countries keep mounting, the financial press is using the term “synchronized slowdown” as opposed to a slowdown confined to certain countries or industries.
Because economic statistics issued by capitalist governments, even if they were totally trustworthy, of necessity lag behind changes in the industrial cycle, we never know in “real time” when the industrial cycle enters its recession phase. Changes in the phases of the industrial cycle can be determined only in retrospect.
While it is possible that a U.S. national recession and a world recession is already underway, it is still quite likely that the U.S. national and the international industrial cycle remains in the “critical phase” that precedes the recession proper. During the pre-recession critical phase, interest rates rise, credit tightens, and the sales of credit-dependent durable consumers goods such as autos and houses start to slow. During the critical phase, economic growth is slowing but credit is not quite tight enough to force the merchant capitalists as a whole – outside the durable consumer goods sectors – to shift from accumulation to liquidation of inventories. The commercial sector is still building “inventory” – unsold commodities – in anticipation of rising sales that may or may not occur. It is only when the liquidation of inventories by the merchant capitalists becomes general that the recession phase proper begins.
The gold markets react to employment report
The reaction of the gold market to the unexpectedly weak employment numbers was interesting in this regard. The dollar price of gold rose $12.50 on March 8, a rather large change for a single day. While daily movements in the dollar price of gold are not that significant, this one is illustrative. Once it becomes clear that the critical phase has given way to recession proper, we would expect the price of gold to drop as the dollar’s role as the world’s main means of payment asserts itself. The reason is that as sales slow, creditors call in loans and demand payment. And under the dollar system, the chief means of payment on the world market is the U.S. dollar.
However, assuming we are still in the critical phase rather than the recession proper, the “danger” remains that the Federal Reserve will “prematurely” increase the quantity of U.S. dollars in order to keep nominal prices rising at the Fed’s target annualized rate of 2 percent and avoid a deeper than necessary recession. If the Federal Reserve System increases the quantity of U.S. dollars before the recession is clearly underway, instead of the U.S. dollar asserting itself as the world’s chief means of payment, the danger is that gold will instead assert itself as the means of protecting the value of capital – means of hoarding.
This actually happened to a certain extent in the period leading up to the panic of 2008 and to a much greater extent in 1979-80. If this were to happen in the current cycle, the dollar-centered international monetary system would once again sink into crisis.
One piece of good news for Trump
All has not been gloom and doom for Trump, however. Much to the dismay of the progressive wing of the Democratic Party, House Speaker Nancy Pelosi announced that she is opposed to the impeachment of Trump. Pelosi apparently has reason to believe that the so-called Mueller report, which is expected to be completed in the coming weeks, will not contain evidence that Trump is a spy or agent of Russia. So Pelosi and the Party of Order that she represents have decided that unless something unexpected happens Trump will be in control of the oval office to at least January 20, 2021. The multi-millionaire Pelosi, as a leader of the Party of Order wing of the “resistance,” not only supports Trump’s brazen acts of war against Venezuela but also supports Trump remaining in control of the White House right down to January 20, 2021. Some resistance!
One possible development, however, that might change Pelosi’s – and Wall Street’s and the Party of Order’s – mind about keeping Trump in power would be if Trump moves against the “independent” Federal Reserve System. This would especially be the case if any move by Trump in this direction were to provoke a run against the U.S. dollar.
Left-wing and right-wing populism and MMT
Back in the 1890s, the U.S. Populist Party made the fatal mistake of endorsing the Democrat William Jennings Bryan’s 1896 campaign for the presidency. The Populist program, though mixed reflecting as it did the class contradictions within its farmer/small-business base, included many progressive demands.
Among these was an eight-hour working day, a progressive income tax, the nationalization of the means of transportation and communication, and public works programs to provide jobs for the unemployed. But it also included a demand for resumption of the free coinage of silver at a ratio 16 to one. Bryan as the Democratic presidential candidate ignored the truly progressive demands in the Populist program, instead concentrating on the resumption of the free coinage of silver, which had been abolished in 1873 due to a sharp decline in the value of silver relative to gold.
The free coinage of silver meant that any owner could present silver bullion to the U.S. Mint and have it minted free of charge into legal-tender silver dollars, with the silver dollar a huge clunky coin weighing exactly 16 times that of the far smaller and lighter gold dollar coin. Not surprisingly, among the most enthusiastic supporters of the demand for “free silver” were the industrial capitalists engaged in silver mining.
If this demand had been carried out, it effectively would have established 16 x 1/20.67th of a troy ounce of dearer gold as the definition of the U.S. dollar in place of the 1/20.67th of a troy ounce of dearer gold. The supporters of this demand reasoned that a cheaper dollar would raise the depressed prices of farm produce and thus make it easier for indebted farmers and other small businesspeople to repay their debts. What they ignored was that a devalued dollar would mean an increase in costs for farmers and other small business people in terms of devalued dollars, as well as higher, not lower, interest rates as foreign and for that matter domestic capitalists charged U.S. borrowers higher interest rates to protect themselves as the value of silver continued to fall against gold.
The supporters of resuming the coinage of silver at a ratio of 16 to one also tried to gain the support of wage workers by arguing that the increase of the number of dollars in circulation would increase the demand for industrial commodities and thus increase the number of jobs available. They supported “Keynesian” economic policies before Keynes. (5) In reality, the reduced flow of capital from London that a falling U.S. dollar implied would have reduced the rate of growth of U.S. industry, leading to fewer not more jobs for U.S. industrial and other workers.
Understandably, industrial and other wage workers were opposed to the devaluation of the medium in which they were paid – U.S. dollars. The workers preferred to be paid in the more valuable gold dollar as opposed to the cheap silver dollar. As a result, no matter how much progressives deplored this, right down to the present day, it is understandable why most of the workers who participated in the 1896 election voted for the conservative “gold Republican” William McKinley.
“He,” Wikipedia writes, “was building a coalition [Wikipedia should have said was attempting to build] of the white [emphasis added] South, poor northern farmers and industrial workers, and silver miners against banks and railroads and the ‘money power.’ Free silver appealed to farmers who would be paid more for their products but not to industrial workers who would not get higher wages but would pay higher prices.” (6)
There was another and even larger downside to the Bryan campaign. The Populist movement in its best days had attempted to unite the small white farmers with the newly freed African slaves – for example, by advocating that large landed estates of the former slave owners be distributed among the free slaves and the poor white farmers. William Jennings Bryan, in contrast, never advocated anything like this nor did he ever speak out against racism or support the rights of African-Americans.
This was not surprising, because he was running as a Democrat, a party that in those days depended on the racist votes of the South as well as white European immigrants – the forerunners of today’s “Reagan Democrats” – who feared competition with low-wage African-American workers. As a result, poor immigrant white workers were all too receptive to the racist demagoguery the Democratic Party specialized in. In this way, the radical and even class-conscious socialist traditions that European immigrant workers often brought with them were dissipated as they became “Americanized” in the racist U.S. political climate.
Parallels between Bryan and Trump
Though political conditions and the currency system itself have changed in many ways since the days of the Populist Party and William Jennings Bryan, some interesting parallels can be discerned in the evolution of the “Bryanism” of old and the “Trumpism” of today. One parallel involves the role of racism. The “modern” Republican Party is heir to the racist base of the old Democratic Party, both in the South and the North. Trump won the Republican primaries partially because he outdid the “dog whistle” racism that Republican politicians have specialized in since the days of Barry Goldwater and Richard Nixon.
But there was more. While Trump ran well to the right of mainstream Republicans on the issue of race, he ran to the “left” of the GOP – and many Democrats – on economic issues. For example, Trump claimed that unlike other Republicans he would not cut Medicare or Medicaid. Though vague on the details, Trump promised he would replace Obamacare, which left about 27 million Americans without medical insurance, with a program that would provide medical insurance for all.
Trump pointed out during the campaign that despite the claims of the media and (bourgeois) economists that the U.S. had returned to “full employment” during the weak Obama-era upswing, in reality, as Trump rightly observed, millions of people were still either completely unemployed or lacked decent full-time jobs. Trump, in sharp contrast to Hillary Clinton and the Democrats, promised to bring back relatively well-paid industrial jobs.
In addition, Trump indicated that he would launch a massive $500 billion infrastructure program, which is indeed desperately needed and would if actually implemented bring many additional jobs. Trump also said that he was for a tax cut that would favor the “middle class” while closing tax loopholes for the rich. He claimed that as a rich man himself he would lose money as a result of his proposed tax reforms but realized – or so he claimed – that fairness required nothing less.
These progressive-sounding promises contrasted with the other Republican candidates, who were demanding cuts in “entitlements” such as Medicare and Medicaid and regressive tax cuts that would favor the rich and corporations. The “neo-liberal” economics of the other GOP candidates proved unpopular with the part of the Republican base that extends beyond the wealthy business people and country club coupon-clippers, the core of the Republican Party.
And Clinton, unlike McKinley in his campaign against Bryan, didn’t even promise to see to it that workers are paid in gold dollars that would offer some protection against a return to inflation. Not surprisingly, Clinton, again unlike McKinley, did poorly in the old industrial states of the “rust belt” that she had to win if she was to carry the electoral college. What votes she did win in those states came largely from workers of color, who for good reason feared Trump’s racism.
But once Trump became president, all his “progressive positions” on health care, taxes, infrastructure, and unemployment vanished. What did remain was his over-the-top racist demagoguery. Trump endorsed the health care proposal of then-Republican Speaker of the House and Ayn Rand-admiring Paul Ryan and a similarly reactionary proposal introduced by the Republican Senate Majority Leader Mitch McConnell.
The plans Trump endorsed would have added an estimated additional 14 million people to the 27 million people left uninsured by Obamacare. And many of the private insurance plans that would be available under “Trumpcare” would provide so little coverage that with their high deductibles and co-pays they would prove worthless in practice.
All of Trump’s budget proposals feature cuts to Medicare, Medicaid and Social Security programs that seniors and the poor depend on. Trump’s so-called infrastructure plan turned out to be little more than a series of tax cuts that would supposedly encourage private industrial capitalists to build toll bridges and toll roads. When he was running, Trump at times indicated that he was not as hostile to Planned Parenthood as his Republican rivals. But as president, Trump has supported ending federal funding for Planned Parenthood that many people in the U.S. depend on not only for family planning but their general health care.
And as soon as he was elected – even before he assumed office – Trump discovered that the U.S. economy was booming as never before and that “full employment” had been achieved, which the president-elect took personal credit for!
His tax cut legislation turned out to be a typical GOP tax cut for the rich. It did not eliminate the tax loopholes that often allow huge corporations to pay no tax at all. Far from sacrificing in the name of “fairness,” Trump and his family are very much benefiting from his tax cut, as all the loopholes for big business and the rich were retained. It turns out that Trump has turned out to be in regards his concrete tax, health and general economic proposals just another “pro-business” right-wing Republican in the tradition of Barry Goldwater and Ronald Reagan.
But interestingly enough, Trump has retained one aspect of the traditional “populist” program that is very much in the tradition of William Jennings Bryan. The “populist” policy that he continues to support – at least in words – is monetary inflation. During his campaign, Trump, who in his business career was known for his reliance on credit – at least until the banks cut him off – and his frequent bankruptcies, remarked that the federal government could ignore its debts or simply “print” money to repay it.
This caused waves of dismay on Wall Street, driving many Wall Streeters who normally back the Republicans to support the conservative Democrat Hillary Clinton. Other Wall Streeters, however, backed Trump anyway, assuming that he either did not mean any of the “progressive” things he was saying – which proved correct – or that he would appoint solid GOP conservatives who would determine concrete policy. For example, Trump supported the conservative Republican Jerome Powell as Federal Reserve chairperson in place of the “liberal” Democrat Janet Yellen. Powell is, by the way, the wealthiest person to have ever served as Fed chief.
However, as the Federal Reserve Board progressively raised its target for the federal funds rate and continued with the policy of quantitative tightening – the destruction of a so far relatively small portion of the dollars the Fed created during and after the 2008 panic, Trump began attacking Powell in public. Trump claims U.S. economic prospects are “tremendous” now that he has made “America Great Again,” with decades of recession-free growth ahead along with record profits.
But there is one fly in the ointment. “Jay” Powell threatens to ruin everything through raising interest rates and his quantitative tightening policies. During the sharp December stock market decline, reports circulated that Trump was making inquiries about whether he could fire Powell. This set off alarm bells on Wall Street.
Throughout the history of the capitalist system, various proposals for monetary reform have been suggested that supporters claim would solve the problem of recurrent crisis-depression cycles and ensure permanent prosperity and “full employment.” These monetary reform proposals fall into two main families. One – favored by many on the right wing of the Republican Party – is so-called “hard money” reforms. These revolve around various proposals to restore the gold standard and even go back to the “free banking” of the pre-Civil War period.
Under the “free banking system,” there was no central bank such as the present-day Federal Reserve System, and commercial banks issued their own banknotes that were only backed by the often dubious credit of the banks that issued them. The federal government only coined money – both small-denomination coins made of base metals and large-denomination gold and silver coins. In this era, the federal government did not issue “paper money.”
The demand to return to free banking is supported by the extreme neo-liberal Austrian School of some in the far right wing of the Republican Party. These include the medical doctor – and amateur economist – “libertarian” Texas Republican Ron Paul. Paul’s proposals are supported by a few fanatics of the Austrian School but are otherwise not taken seriously by other economists. Also inspired by the Austrian School is the current fad for “virtual currencies” such as bitcoin favored by many right-wing libertarian “techies.”
Another family of monetary reform proposals has often found support among non-Marxist progressives. These involve various proposals to increase the means of circulation not backed by increased quantities of gold – inflation. If this is done it is claimed, effective demand would be increased and unemployment crises-depressions would be avoided. William Jennings Bryan’s demand for the free coinage of silver at a ratio of 16 to one is one example of an inflationary monetary reform. Today, the main inflationary monetary reform proposal revolves around Modern Monetary Theory, or MMT. Like the “free silver” demand of Bryan’s day, MMT supporters promise to end unemployment by increasing the means of circulation. The supporters of MMT are working hard to gain support among the new generation of non-Marxist – for now – progressives. (7)
At bottom, all inflationary monetary-reform schools appeal to “common sense.” The central government, they virtually all claim, creates as much money as it wants because it is the government that creates and issues “the legal-tender currency.” If only the government creates enough money, the supporters of inflationary monetary reform proclaim, the economy will boom and jobs will be plentiful. Today, MMT holds that the central government has unlimited spending power and can create as much demand as it wants to all the way up to full employment by simply crediting the bank accounts of its employees and suppliers.
Trump the monetary radical
In a rambling address delivered to the annual meeting of the American Conservative Union, President Trump sounded at times like William Jennings Bryan had risen from the grave. “We,” he told his audience of assembled GOP reactionaries, “have a gentleman that likes a very strong dollar in the Fed” – a clear reference to Fed chairman Jerome Powell, who Trump himself nominated. He continued: “So with all of those things – we want a strong dollar but let’s be reasonable – with all of that, we’re doing great. Can you imagine if we left interest rates where they were? If we didn’t do quantitative tightening? I want a dollar that’s great for our country but not a dollar that’s prohibitive for us to be doing business with other countries.”
In so many words, Trump is demanding that interest rates should not rise during the rising phase of the industrial cycle even though the economic laws that rule the capitalist economy dictate that interest rates must rise during the rising phase of the cycle. As the 1970s showed, if the central bank attempts to override economic laws that dictate the rate of interest by creating additional means of circulation, interest rates will rise even more. This too is a basic economic law that Trump, Bryan in his time, and MMT supporters today ignore.
Could Trump in the coming months actually attempt to fire Powell and in effect put the Federal Reserve System under the executive branch? If one thing – Nancy Pelosi’s recent comments notwithstanding – might lead to Trump’s impeachment and conviction in the Senate or removal through the 25th Amendment, an attempt by him to seize control of the Federal Reserve System might be it.
It seems quite possible that Trump in effect made a deal with the Party of Order that includes keeping Powell in place in return for the Democrats – and uneasy Republicans – “taking impeachment off the table.” Trump is free to attack the Fed chief verbally – though Wall Street and the Party of Order would wish he wouldn’t – as long as he doesn’t take any concrete action against Powell.
After the December 2018 “mini-crisis” in the stock market, it seems that Trump’s advisors convinced him that the economy is doing well and that either he will not have to fire Powell or otherwise move against the Fed’s independence in order to ensure prosperity for his 2020 election campaign. But what would happen if the economy should “unexpectedly” slide into recession? What would Trump do then? (8)
Very likely, he will do nothing, beyond some demagogic speeches trying to load all the blame on the Fed and Powell. But can we – or Wall Street – be sure? If Hillary Clinton were president, Wall Street – and world money markets – would have little to fear from this direction. But with Trump, you never know.
Trump, the power of the purse, and the wall
For example, let’s examine Trump’s demand to Congress that it allocates billions of dollars to build a wall along the entire Mexico-U.S. border to deal with the “emergency” of hordes of “brown” people trying to enter the U.S. By the way, Trump and the Democrats have ignored the fact that if their bi-partisan Venezuelan policy succeeds, the flow of desperate “brown” people trying to enter the U.S. will greatly increase. Trump’s claims include not only Latinx people but “Middle Easterners” – presumably Muslim “terrorists” – financed by the liberal Jewish billionaire George Soros.
Trump had earlier indicated that he would declare a “state of emergency” if Congress balked at financing “the wall.” Trump has discovered that the racist demand to “build the Wall” galvanizes the reactionary crowds at his campaign-style rallies. However, congressional Republicans including Senate Majority leader Mitch McConnell urged Trump to take another path. Congress has – or is supposed to have – the power of the purse.
The power of the purse has deep roots in English history. England, of course, was the “mother nation” from which the white U.S. colonial-settler nation branched off in the 18th century. Before this, English history is in a sense U.S. history as well.
During a centuries-long transition, the power of money and finance gradually eclipsed the power of landed property as England transitioned from the largely natural feudal economy to a capitalist money-commodity economy. Parliament engaged in a century-long struggle for power with the executive power – the Crown. As of the 1780s, when the U.S. Constitution was written, the Crown still controlled the executive power but Parliament controlled the power of the purse. For example, the king might start a war but the war couldn’t continue unless Parliament agreed to finance it. This division of power forms the basis of the doctrine of separation of powers continued in the U.S. Constitution. In the U.S. Constitution, Congress replaces Parliament and the president replaces the king or queen.
Little by little, the presidency has been eating away at Congress‘s power of the purse. One example is tariffs. Since tariffs are a form of tax, they fall within the jurisdiction of Congress. However, the president can impose tariffs without consulting Congress if “national security” requires it. Riding through this loophole, the Trump White House has effectively taken over the power of the purse in this respect.
Trump is determined to “build the wall” because he knows that it inspires his racist base. He hasn’t kept any of his promises as regards health care, public works, or a fairer tax code, but he will give his base “the wall” that it hopes will keep “brown” people out. But though the president can propose building a wall on the southern border, it is Congress that has the power of the purse that must allocate the money. If Congress refuses, Trump’s proposal should be dead.
However, again there is a loophole. The president can declare a “state of emergency” and re-allocate money that Congress has allocated for other purposes to deal with the “emergency.” Trump indeed claims that there is an “emergency” as the U.S. faces a virtual “invasion” of brown-skinned people. But this claim is so ludicrous that it would be laughable if the potential consequences weren’t so serious.
Trump realized there was no chance the Democratic House would vote to fund the wall. The Democrats are now far too dependent on “brown and black” votes to support such a blatantly racist proposal. To get around the Democrat-controlled House, Trump considered declaring a state of emergency. Now it was Republicans in Congress such as Mitch McConnell who were alarmed. If Trump – and the Executive in general – can take away Congress’s power of the purse on the flimsy excuse of a completely made-up “national emergency” resting on conspiracy theories about “Muslim terrorists” financed by liberal Jewish billionaires, it could do so in other cases. The president would not only wield the executive power but the power of the purse as well. Congress would then be rendered completely powerless – which is exactly what its position would be under a fully developed Bonapartist system.
McConnell and other congressional Republicans, already alarmed by Trump’s clearly “Bonapartist” tendencies, convinced the president to take another road. A bill to allocate funding by the federal government beyond late December would be postponed leading to a “partial government shutdown.” After a few weeks, a compromise would be worked out that would allow Trump to inform his racist base that “the wall will be built” and that would be the end of it.
But a compromise that would be enough to satisfy Trump’s racist base without doing damage to the Democrats among their “black and brown” voters turned out not to be so easy to achieve. The Democrats were forced to stand firm on “the wall” that Wall Street itself sees as a complete waste of money. After a 45-day shutdown, Trump was forced to sign a bill to fund the government that contained very little funding for “the wall.” It seemed to be over, with Trump’s “wall funding” falling victim to Congress’s long-established power of the purse.
But then Trump suddenly announced that he would declare a national emergency after all. The Democratic House duly exercised its power of the purse by passing a bill that in effect cancels the “national emergency,” and the Republican-controlled Senate did likewise. While most Republican Senators voted with Trump, some Republicans – with the exception of Susan Collins of Maine – who are not facing re-election in 2020 voted with the Democrats to nullify Trump’s declaration.
Trump then promptly exercised his veto power. With Republican House members, all of whom will face re-election in 2020, joined by Republican senators who will also face re-election in 2020, unwilling to alienate the racist Trump-loving part of the Republican base, whose votes they need to win re-election, there are simply not enough votes to override a Trump veto. The question will now be decided in the courts – the third branch of government under the U.S. Constitution. In the end, this comes down to the Supreme Court, which has a majority of highly reactionary Republicans including the newly appointed for life Justice Brett Kavanaugh, who is known to take an “expansionary view” of Executive power.
Trump has shown a willingness to back down from his most “Bonapartist” moves when he thinks he can afford to. But if he feels cornered – as he does on the question of “the wall” – he sticks to his guns. If the financial markets continue to be relatively stable – no stock market panic – and the dollar does not decline much if at all, and the economy does not fall into recession with sharply rising unemployment – Trump will in all probability keep his attacks on the Federal Reserve System and “Jay” Powell purely verbal.
But what will happen if economic or political events led to a sharp decline in the U.S. dollar against gold and other currencies leading to a sharp spike in the dollar prices in primary commodities and the Powell Fed feels obliged to raise its target for “fed funds” and possibly accelerate the rate at which it is destroying dollars created during the quantitative easing in order to defend the dollar. Or what is more likely, the U.S. and the global economy enters into recession and the unemployment rate starts to climb sharply just as the 2020 presidential election campaign hits high gear.
Would Trump suddenly revive his idea of “firing Jay Powell” just like he revived his idea of declaring a state of emergency when his government shutdown policy to force Congress to vote money for “the wall” failed? This would almost certainly lead to a major political and constitutional – and possibly financial – crisis and in the most extreme but not impossible case bring down the financial foundation of the U.S. empire.
Inflationary monetary radicalism and the far right
Trump’s use of inflationary monetary “radicalism,” even if it only remains verbal, reminds us that radical-sounding inflationary monetary schemes can be used not only by progressives but also by reactionaries like Trump. These points were made by the Marxist economic writer and journalist Doug Henwood in his critique – one of the very few from the left so far – of the growing support for MMT that has been sweeping the non-Marxist and quasi-Marxist left. Henwood’s critique appeared in the February 21, 2019, edition of the democratic-socialist magazine Jacobin.
Henwood’s article does not dig deeply into Marx’s theory of value, price and profit, which proves scientifically why the proposals of MMT – and any other monetary reform school whether of the left or the right – will not solve the contradictions of capitalism. However, Henwood’s article is must reading for all Marxist political activists who run up against the growing number of MMT supporters on the left.
Henwood quotes a tweet from The New York Times journalist James Wilson: “The speed with which young activists on both left and right [emphasis added – SW] are migrating toward MMT is going to have a profound effect on US politics in the 2020s and 2030s.”
Wilson’s mention of “young activists of the right” points out that fascist tendencies can make use of proposals for inflationary monetary reform as well as progressives, as the history of the German National Socialists – the Nazis – illustrates. In our own U.S. history, we have the example of Father Charles Coughlin, the pro-fascist, anti-Semitic “radio priest” of the 1930s. As part of his attacks on “Jewish Wall Street bankers,” this fascist demagogue championed silver-based inflationary monetary reform that went far beyond Roosevelt’s own somewhat inflationary monetary reform program. And Father Coughlin was not alone in this among the fascist organizers and demagogues of the Depression decade.
“Its earliest precursor, Henwood explains, “is The State Theory of Money by the right-wing [emphasis added] German economist Georg Friedrich Knapp, published in 1905.” So what we now call Modern Monetary Theory being marketed as the key to progressive reform began in Germany’s political right. “Although the politics of MMT lean left,” Henwood observes, “the angle of the tilt is hard to measure precisely. Mosler [a hedge fund manager who is a leading supporter of MMT – SW] was described by a colleague as ‘politics agnostic’ [and] by Yves Smith of Naked Capitalism, a promoter of the school, as a ‘conservative’. Wray has said MMT is compatible with a libertarian, small government view of the world.”
In other words, MMT can very well be used by right-wing, especially fascist, movements. Indeed, in the final analysis, because it is based on the false, unscientific theory claiming that capitalism can be retained and only the monetary system needs to be reformed, MMT is best suited to serve the interests of reaction.
The dollar and Mr Trump
The February 22 edition of The New York Times features on the front page an article entitled “Staying Mighty, Dollar Fortifies Trump’s Power.” The very title of the article suggests that it was published in part at least to warn Trump against interfering with the Federal Reserve System and its chairman Jerome Powell. Written by Peter S. Goodman, the article, though written in a boastful chauvinist way, is important because it admits many facts about the dollar system and the U.S. empire generally hushed up.
“It [the strong U.S. dollar – SW] has enabled his Treasury to find buyers for government saving bonds at enviously cheap rates, even as his $1.5 trillion worth of tax cut added to the debt.” Goodman goes on: “It has reinforced Mr. Trump’s authority in imposing [emphasis added – SW] his foreign policies on an often reluctant world by amplifying the power of his trade sanctions – especially against Iran and Venezuela.” And further, “Because banks cannot risk jeopardizing their access to the plumbing of the dollar-based global financial network, they have taken pains to steer clear of nations and companies deemed pariahs in Washington.”
Of course, this can be read in reverse. Anything that undermines the dollar’s role as the world currency undermines Mr Trump’s power – in reality, the power of U.S. imperialism as a whole – in all the above ways. It seems quite likely that the Goodman article was published as a not too subtle warning by the Party of Order to “Mr Trump” to respect the power of “Mr Powell.”
At a summit meeting between Chinese President Xi Jinping and Trump held in Argentina in December, an agreement was reached to declare a truce in the American-Chinese trade negotiations for 90 days. The truce was set to expire on March 1. As March 1 approached, the deadline was dropped. This indicates that talks are not theatrical but deadly serious.
The inability to meet the March 1 deadline indicates that they face major difficulties due to the fundamental economic contradictions between the economic interests of the U.S. and Chinese capitalists. The Wall Street Journal published an article in March claiming that the two sides aim to complete a deal by the end of March. If such an agreement is reached by that date, we will be able to examine it in next month’s post. In addition the Fed has just announced that will end its quantitative tightening in September – earlier than had been expected – as recession looms. In any event, there is still much to be discussed on the question of the evolving economic and political conjuncture.
To be continued.
1 Even if Venezuela was ruled by a brutal dictatorial government – which is not remotely true – the attempt by the U.S. government to overthrow the government of
another country, and an oppressed country at that would be completely unjustified. It would the elementary duty of all small “d” democrats, not to say socialists, to do all in their power to oppose it. (back)
2 This is one of the reasons why the U.S. ruling class might want to see the brazenly racist Trump surrounded by Republican reactionaries with their crude colonial mentality replaced by a slicker Democrat who would also do everything possible to overthrow the government of Venezuela and any other government that shows the slightest independence from U.S. imperialism. Here it is worth recalling something that Obama said right after Trump won the electoral college.
Obama – this is not an exact quote – said in effect that “We” – meaning the U.S. ruling class – wants Trump to succeed because to the extent Trump succeeds “we” all succeed. Privately, the Democrats may think that Trump and Bolton are thoroughly botching the war – that is what it really is – against Venezuela. However, so far – and this could change – they are not saying this publicly because they don’t want to encourage the developing movement in opposition to the war against Venezuela. But whether they agree with Trump’s methods or not, they still want Trump to succeed in his war against Venezuela, because this what their class interests dictate.
However, we the working class and our allies in regard to Venezuela – and every other way as well – unlike Obama want Trump to fail completely. When Trump fails, we the working class and our allies all win! (back)
3 The recession has already begun in what the business press like to call the “emerging markets” such as Latin America and Turkey. We do not, however, have enough evidence yet to say the recession proper has begun in the United States or Europe. (back)
4 Saddam was executed in 2006. The George W. Bush administration, violating international law, handed over Saddam, a prisoner of war, to Iraqi collaborators who carried out the execution. Qaddafi was tortured and murdered by a pro-imperialist mob in 2011. The Trump administration is clearly threatening Maduro and members of the Venezuelan military who remain loyal to the Venezuelan president and Constitution with a similar fate. (back)
5 Keynes did not “discover” nor was he the first to advocate “Keynesian” policies like expanding the “money supply” and increased government spending financed by
borrowing to accelerate the pace of business. All these policies were known by the mercantilist economists of the 17th and 18th centuries.
What Keynes really did was attempt to reconcile the advocacy of these policies with neo-classical marginalism – which Keynes confused with the classical school of bourgeois political economy. The neo-classical marginalist economists claimed they had “proven” that the only possible equilibrium point for a capitalist economy with “perfect competition” was “full employment.”
Therefore, the marginalists reasoned, as long as the economy was reasonably close to “perfect competition” no depression could last for very long. The way to fight a depression, according to the neo-classical marginalists, was to bust unions and force people to work by refusing to give aid to the unemployed. As long as these policies were followed, the economists insisted, the unemployed would be forced back into the labor market and would quickly find jobs ending the depression.
Keynes was considered a “radical” only because this bourgeois economics professor acknowledged what every worker but not the professional economists already know – that there is such a thing as “involuntary unemployment.” (back)
6 Was William Jennings Bryan a progressive figure in the U.S. politics of his time, or was he reactionary even by the standards of his day? In recent decades, the role of that historical U.S. political figure has played has been subject to revision as the African-American liberation movement has grown with all its inevitable ups and downs.
Most recently, the African-American struggle has surged in the form of the Black Lives Matter movement against the constant police killings of African-Americans. This has led to demands that statues that honor Confederate “heroes” be removed.
Traditionally, liberal and even “progressive” white historians have grouped Thomas Jefferson, Andrew Jackson and William Jennings Bryan as men – again all men – who played progressive roles in U.S. history. However, Jefferson was the leader of the Southern-based slave-owning class and Andrew Jackson was the most racist president in U.S. history, who not only owned slaves – like Jefferson – but also like Jefferson represented the slave owners politically. In addition, Jackson supported and signed the “Indian removal act” of 1830, which led to the “trail of tears” and the deaths of 4,000 Native Americans. Can it really be said that Jackson played a progressive role in U.S. history?
Certainly, most African-Americans, Native Americans and Latinx people who have a considerable amount of Native American ancestry would answer no! However, Jackson has at least one prominent fan. That fan is Republican President Donald Trump, who considers Andrew Jackson – considered along with Jefferson the founder of the Democratic Party – a great president and prominently displays his portrait in the oval office. But it wasn’t that long ago that Democrats held Jefferson/Jackson dinners to honor the founders of the Democratic Party.
Woodrow Wilson was the most racist president – with the possible exception of Trump – since the Civil War, whose historical stock has been going down as well. Until recently, however, Wilson was considered a great and progressive U.S. president among U.S. liberal and progressive white historians. He was praised by these historians for his “internationalism” because in defiance of his re-election slogan that he “kept us out of war” he declared – or technically proposed that the U.S. Congress declare – war on Germany, which it promptly did. Wilson was already looking forward to the era of the U.S. world empire. However, much to the frustration of Wilson, its actual achievement had to wait until the next Democratic president, Franklin D. Roosevelt.
After 1896, Bryan ran two more times for the presidency and was defeated each time by the Republican candidate. He served for a while as secretary of state in the racist Woodrow Wilson administration. However, Bryan, who considered himself an “anti-imperialist” – resigned in protest against the warmongering policies of Wilson. Bryan had no arguments with Wilson’s racism, but he was opposed to U.S. participation in World War I.
Again, there is a curious parallel here with Trump, who has indicated opposition to the endless wars that the U.S. has been involved in. He recently announced his plans to withdraw all 2,000 U.S.troops from Syria. However, it has now been revealed that several hundred of these troops will remain after all. According to press reports, Trump has reached an agreement with the Taliban – or a section of it – to end the 18-year Afghanistan War. Whether this will actually happen, however, remains to be seen. Trump has even wondered whether NATO – the military core of the U.S. empire – should be dissolved.
According to Wikipedia, at the 1924 Democratic convention, the last that he attended, Bryan “helped defeat a resolution condemning the Ku Klux Klan because he expected that the organization would soon fold; Bryan disliked the Klan but never publicly attacked it.” Even if it is true that Bryan privately held this belief, this is hardly the action of a true “progressive.”
Finally, much to the embarrassment of his latter-day liberal and progressive admirers, was the role Bryan played shortly before his death as the prosecuting attorney in the Scopes trial. The defendant was John T. Scopes, a substitute high school biology teacher in the Jim Crow state of Tennessee. Just like is the case today in many Southern states, what is now called the “Christian Right” – Bryan had been a fundamentalist Protestant Christian since his teens – played a huge role and did all they could to ban the teaching of Darwin’s theory of evolution in the public schools.
Just as Bryan supported the unscientific claim in economics – dis-proven by Marx’s scientific theory of value, money and price as well as concrete economic history – that the free coinage of silver at a ratio 16 to one against gold could solve the problems of ruinous low prices for farmers’ produce and mass unemployment for workers. Bryan also opposed Darwin’s theory of evolution based on natural selection in biology.
In light of all this, how can it be said that Bryan played a progressive role in U.S. – or world – history? (back)
7 Eugene Debs and William Z Foster in his youth – future leaders of the Socialist and Communist Parties, respectively – were like many young white workers at the time supporters of William Jennings Bryan. However, Debs, who learned especially through his leadership of the railroad strike of 1894, and Foster, who learned as the leader of the steel strike of 1919 and from the leaders of the Russian Revolution as well, left the “Bryanism” of their youth far behind them. Despite some similarities between Bryan and Trump in terms of their demagoguery and obvious racism, virtually no progressive supports Trump today.
However, most young progressives do admire and many look for leadership to the Vermont “independent” – but closely allied to the Democrats – Senator Bernie Sanders. Sanders has just announced his candidacy for the Democratic nomination for president in 2020.
Though Sanders has not put an emphasis on Modern Monetary Theory – the inflationary successor to the “resumption of the free coinage of silver at a ratio of 16 to one,” his economic advisors are MMT leaders. A growing number of progressives and democratic socialists are getting the impression that to be a progressive or a socialist today means supporting MMT. The Monthly Review School of Keynesian-Marxist long-time belief inherited from its Keynesian side that under capitalism government spending on a sufficient scale can always solve the problem of stagnation and unemployment creates a bridge between the non-Marxist radicalism of MMT advocates and Marxism. I remember that in my own youth I believed that all reasonably progressive people supported Keynesian economics.
The belief held by most academic Marxists – even those who oppose the Monthly Review School – that “modern money” is non-commodity money opens the door to MMT’s claim that the problems of crises, depressions and mass unemployment can be solved by reforming the monetary system while retaining all the other aspects of capitalist production.
However, there is every reason to believe that a portion of the new generation of progressives and democratic socialists will learn, both through study and above all concrete participation in the class struggle in all its many forms – not just the trade union struggle – and will leave MMT far behind them, just as an earlier generation left the “free coinage of silver” behind them. In the final analysis, the struggle against the reformist illusions bred by inflationary monetary nostrums such as MMT is part of the class struggle. (back)
8 When the economy does fall into recession, the Fed’s ability to create additional dollars without triggering a run on the dollar will increase in proportion to the severity of the downturn. As we have seen, the critical point where the currency is somewhat shaky is succeeded by the recession, where the currency recovers its strength. The crisis of 2007-08 provides a classic illustration of this law.
However, few cycles are as clearly defined as the extraordinarily severe cycle of 2007-08 was. During the Volcker shock of 1979-82, the economy actually shifted erratically from the critical stage to the recession phase before it finally definitely entered the recession phase in the fourth quarter of 1981. It is therefore quite possible that the U.S. economy could enter the recession phase but shift back to the critical phase if Trump should fire Powell and seize control – or attempt to seize control – of the Federal Reserve System. (back)