Blowback: The 1997 East Asian Financial Crisis

When I picked up Chalmers Johnson’s Blowback: The Costs and Consequences of American Empire what I was expecting was an elaboration of the term ‘blowback’ and some examples of the negative consequences of US military operations.  What I got was much more.  The book shines when it dies into financial machinations centered in the East Asian pacific region, blending gruesome stories of what goes on in US military bases with complex currency manipulations designed to keep those countries from growing too strong economically.  Written before the events of September 11th, 2001 and the subsequent war on terror the book lets us see the workings of US imperialism from a less spectacular era.  The Cold War having been won and US global dominance assured, the full power of dollar diplomacy and economic intervention is brought to the fore.

Continue reading “Blowback: The 1997 East Asian Financial Crisis”

Socialism and/or Populism in America

Both Socialism and Populism have been invoked during Bernie Sanders’ presidential campaign run and this has led to no small amount of conceptual confusion among the American people – myself included.  His rhetoric and record as a senator has been overwhelmingly anti-Wall Street, pro-worker, and, well, popular, so when I heard the label “Socialist” coming from the more conservative side from the mainstream media I thought it was another scare-tactic and then embraced it as a possible cure for our neoliberal malaise of debt-fueled Superimperialism [Michael Hudson’s latest on US Neoliberal Empire].  His brand of Socialism isn’t the type that conservatives would have you believe though, many avowed Socialists have even distanced themselves from Sanders.  It came as somewhat of a surprise, but more of a moment of clarity, when Douglas Edwards (@SebastosPublius) tweeted to me that he is not in fact a Socialist but still demands support from the left in the way he steers the conversation in the media away from compromise with wealthy financiers and corporate giants embedded within the political process [How Wall Street Is Burning Democracy]. Continue reading “Socialism and/or Populism in America”

Fringe Finance – International Debt: Polarities of the Debt-System

I did a brief speech at the latest debtors’ assembly for Strike Debt Bay Area on both Fringe Finance and International Debt. With the time allotted I couldn’t get to nearly as much as I wanted to, so I will reproduce my notes here:

Fringe Finance

The Debt-System effects everyone, even people outside of the traditional banking system. It costs people who don’t have a bank account (the unbanked or underbanked) more money just to use their own money.

People choose not to use banks mainly because they don’t have enough money to meet the minimum balance requirements of banks and have had bad experiences with overdraft charges. They are primarily poor people.

The un- and under-banked people make up about one-quarter of Americans, that’s 25% of all people in America not being served by the banking system. These people must turn to Alternative Financial Services.

Check Cashing Outlets

Check Cashers take out about 4% of your pay check. For someone who uses Check Cashers their entire life, the average amount given over their lifetime is about $40,000.

Check Cashing stores have more than doubled in number this century, and the cost for using them has gone up by about 75% in the period 1996-2006.

Pre-Paid Cards

Pre-Paid Cards have been getting popular, they are used by 13% of people in the US. They also charge you to access your own money, though a but cheaper than check cashers.

Examples of Pre-Paid Cards: GPR Cards and EBT Cards.

GPR (General Purpose Reloadable Cards) have many fees: monthly fees, activation fees, inquiry fees, and more.

EBT (Electronic Benefit Cards) are for funds given by governments to cut down on paper use (and extract fees). They are better for you when from the federal government than the state (like with Food Stamps and Unemployment Benefits). In California, fees and other costs of use are better than other states, but they’ll still hit you with lots of fees.

Welfare recipients paid $17 million plus in fees and ATM surcharges in CA alone in 2012. So fees add up with Pre-Paid Cards.

Pay Day Loans

12 million people took out a Pay Day Loan in 2012 and they’ve been getting more and more mainstream since the 2008 financial crash.

In the early 1990’s, there were less than 200 Pay Day Lenders, now there are 23,000 – that’s more than McDonalds for some perspective.

Pay Day Lenders give you money you need now at very high interest rates. Borrowers often end up paying back the Pay Day Lenders many times more than the original loan.

Most people (69%) take our Pay Day Loans to meet everyday expenses. So it’s not just emergencies that lead to Pay Day Loans, as some people believe.

The Pay Day Lenders’ game plan is to keep you in their Debt-Trap and keep the interest rolling over. They call it “Churning”: they don’t want you to pay do back the loan ASAP (only 2% of borrowers actually do). 75% of Pay Day Loans are for the purpose of this Churning and it nets them $3.5 billion.

Pay Day Loans are unsecured, meaning if you default they can’t repossess anything you own. No Debt Collectors, so don’t be frightened by them. They can contact a Credit Reporting Agency and lower your credit score, but they mostly use this as an empty threat.

There are also Pawn Shops, Auto Title Loans, and Rent-to-Own Stores which are more fringe finance institutions that extract fees, interest, and possessions primarily from poor people.

Solutions to Fring Finance:

Community Check Cashing exists in Fruitvale area if you can travel there conveniently. CCC works on a non-profit model which we are trying to extend in our working group. Join us if you like!

Postal Banking is the big one. It has already worked for over 50 years in the twentieth century very well. Postal Banking could perform just about all of the fringe finance business’ but on a cheaper public model, without the fees and usurious charges. Postal Banking is used in many countries now successfully, it is a kind low-level but far-reaching public bank.

Fringe Finance is perhaps the lowest level of the debt-system. People outside the banking system still get caught up in the debt-trap and are hit especially hard.

At perhaps the highest scale of the debt-system there is International Debt – the opposite extreme where entire countries are put under the control of financiers who weaponized debt.

International Debt

This is how the standard explanation goes: A sovereign country must borrow money and go into debt if it spends too much money and doesn’t collect enough taxes.

But they do this because central banks and other international institutions prevent them from issuing their own currency and controlling its supply, so that these countries cannot control the supply and creation of their own currencies.

Control of the money in a country is in almost every case now controlled by private banks and their willingness to lend.

The Bank of International Settlements (the BIS) in Basel, Switzerland sets the rules of the global financial game for most of the countries on the planet. It was set up in 1929 as a way to shore up the power the international bankers were losing during the beginning of the Great Depression.

But it was right after a World War II that the main standards of the global financial system were set at the Bretton Woods Conference in 1944. This is where the IMF and World Bank were established.

When a country needs money to expand its economy, repay a previous debt, or gain more foreign currency reserves, it must appeal for credit from the IMF or World Bank, or issue bonds (92% of bonds are issued/sold at New York or London).

When countries take out loans from the IMF or World Bank, they must grow their economies mainly by increasing exports. This allows them to match their debt repayment with profits from exporting to consuming nations. If they cannot repay all of the debt from those loans by competing on the global export market, they are caught in the debt-trap.

The IMF and World Bank then impose structural adjustment programs that slash public institutions, public benefits, and public infrastructure. They force countries to privatize public goods like land and industry, because they have to pay the debt instead of their own people.

Privatizing public goods, land, and services gives countries a one-time boost in profit but cancels all further public profit to governments and the free use of the commons.

So, this is all about control, and debt-based finance is perhaps the primary tool for control today besides military intervention.

Any country that tries to break free and play by their own rules can attacked with currency raids and short selling on the foreign exchange market – which devalues an entire worth of a country’s economy.

Nations led by the US can also impose sanctions, saber-rattle, and fund revolutions within the dissenting country to establish sympathetic military rulers (or Juntas).

This is what happened in Chile in the 70’s, Libya a few years ago, what’s happening in Syria and Venezuela now, and what they are trying to do to Iran and Russia. There are many other examples in South and Central America, the Middle East, and Africa.

A good example with a happy ending is Argentina. 70’s – military dictatorship. 80’s – Neoliberal regime that led to a hyperinflation scenario of too much money borrowing. 90’s – massive privatization of natural resources (oil, roads, and banks). The interest in the loans and austerity conditions attached to them meant an uncompetitive, depressed economy.

So, in 1995, there was a run on the banks and massive capital flight out of the country – a major depression.

Now for the good part: without any kind of decent banking system, people turned toward alternative currencies (local communities made-up their own money).

Propel conducted massive, sustained protests that delegitimized the entire Argentinian government and made them fear for total loss of control. “Que se Vayan Todos” – “They can all go (to hell)” was their main slogan.

This pressure from below forced the Argentinian government to default on its International Debts. By re-nationalizing it’s once privatized industries, doubling social spending, and public investment, Argentina’s economy grew rapidly in the 2000’s. They went from negative growth to over 8% per year growth.

Recap on Argentina: by walking away from its debts, brought on by massive popular protest, and a re-nationalization of privatized goods, services, and land, Argentina saw major economic revival.

They were able to restructure their debt to far less than the original amount and paid off their IMF debt altogether. They did this by *issuing their own currency under their own control* and boosting public investment.

In the 2000’s, Argentina saw poverty drop from over 50% to under 15%.

Vulture funds bought some debt and refused to renegotiate it down, and there is an ongoing court battle over these culture funds right to collect the entirety of the debt that they bought from someone else.

Solutions:

The big one is Sovereign Money: to allow treasuries to print their own national currencies without borrowing it first from Private Central Banks or issuing bonds. The Central Banks would be public and under public control vs. for-profit private banks.

It happened in America during the civil war when Lincoln printed Greenbacks, which are the original design for the dollars we use today. Now, however, they are federal reserve notes, not treasury notes).

Canada is under a court battle for this right now and Iceland gained this after their revolution…

And Finally, Public Banks

Public Banks put money earned from interest on loans (profit) into the accounts of city and state governments instead of private banks because it would be a municipal, state, or regional bank.

They would partner with local banks and credit unions not compete with them.

Luckily we have one already in the State of North Dakota. The Great Recession and bank failure of 2008 had no effect on their economy whatsoever.

Most all major successful economies around the world today have a strong public banking sector: China, India, Brazil, Russia, and Germany (plus more).

Wrap up:

The debt-system effects us all from big to small, from those outside of the banking system to entire countries, Fringe a Finance to International Debt. There are alternative models and solutions at each step, but we need major public pressure to recapture public goods, services, and land before these solutions can be put in place – like in Argentina.

The sources for this speech were The Debt Resistors’ Operations Manual [link], The Public Bank Solution by Ellen Brown [link], and The Democracy Project by David Graeber (for the bit about Argentina’s massive public protests of delegitimization)

Schizoanalysis as Anthro-Ecology

Another must read from Edmund Berger. A quick outline:

From Guattari’s (and Deleuze’s) Ecosophy – to Cybernetics – to anarchic war machines – to animism and aboriginal cosmology.

synthetic zerØ

WILD ECOLOGIES - Featured Post #3: Edmund Berger with an in-depth 
analysis of Guattari's 'ecosophy' and possible points of connection, 
overlap and divergence from anarchist thought.  

BillStereoLoop

How does one begin to broach the question of linkage, passage, and reflexivity to be found in the theories and practices of anarchism, the radical post-psychoanalysis of Felix Guattari, and the ontological framework that has been ushered in the necessity of acknowledging the forces that we label “the Anthropocene”? The overlaps between each are undeniable: in was ecological concerns that late in his life Guattari turned his mind to; the field that his work is commonly situated – the school of post-structuralism – is often affiliated with anarchism of the so-called “post-left” variety. That Guattari was closely aligned with the Italian Autonomia, which the post-left anarchists owe much of their discourse to, is no passing coincidence. We can also note the presence of “green anarchism”…

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The Boy the Earth Talks to: Gold and Progress in Deadwood

I gave a show called Deadwood a chance a few weeks ago and was swiftly plunged into television series binge-mode. The addicting nature of Deadwood comes from the carefully worded script illustrating the political forces acting on and inside a town that suddenly emerged and rapidly expanded its commerce on the borders of the American federation. The show depicts a camp out in what will soon become a part of South Dakota where people flock to mine gold during America’s westward expansion era. The economic-political dynamics of a not-yet-town in a “lawless” region are interesting enough, but what lit my curiosity up was the end of season 2 when a major capitalist finally came to Deadwood in order to establish scaled-up mining production with an imported labor force. Until then, men had mostly paned for gold and spent the plentiful bounty in the camp on food, alcohol, tools, clothing, property, and whores. But with the coming of the gold-mogul George Hearst, the times of freedom from the law and riches for all (European men) would come to a close.

What gives these people the drive to set off on a journey across the continent is the prospect of riches: the officially recognized currency is just waiting to be plucked from the earth. People say “money doesn’t grow on trees,” but it was once freely gathered from rivers, streams, mountains, and the ground. Gold is advantageous to be used as money for many reasons, and American expansionists lucked out when a commodity that would spur commerce appeared in its desired territories. Take away the convertibility of American and European money into gold and the movement westward, with its instantly flourishing commerce and activity, would never had been accomplished so rapidly and with such excitement. The people of Deadwood find money so easily that exchanging goods and services is intensified, simultaneously spreading the American population throughout the continent and increasing the money supply for fortunes to be made. The possibilities for furthering both Capitalists’ interests and American imperial ambitions in their bordering territories were overwhelming and after the first wave of entrepreneurial miners and military battles against Indians, the next phase of large scale production and low-waged labor now seems all but destined to spread across the continent.

George Hearst first sends his close advisor and chief geologist Wolcott to oversee the purchasing of other’s claims, drawing the land under his ownership and away from the less sophisticated miners. One character remarks, “Pretty soon, this’ll be a company town,” and that’s the design: one town owned by one company owned by one man. Wolcott sees this coming and repeatedly speaks about “inevitable change”, which he helps move along by working for Hearst. In challenging the current manager of the largest gold producing comstock in the camp on its site, he says “the noise is terrible isn’t it… like fate.” Wolcott is the agent of the transformation in America that the viewer already knows will happen: the frontier adventure in the edge of civilization will give eventually way to streamlined production and tightly managed labor.

As the character representing this transformation, Wolcott must be a truly horrible man. He speaks not as a common, “low-born” man with the usual outpouring of obscenities and the ease of transition from casual encounter to a heated confrontation. He holds back his expression without a hint of his inner feelings, but not with the aristocratic elegance of the other characters who fit the sophisticated model. When other well-schooled, upper class characters speak they speak in an excess of coded language to make conversation a game and an art. The dizzying flurry of pretty words with an accompanying sensitivity to inflection conceals the simple meaning of the sentence and forces the interlocutor to carefully decipher it. This is a major marker of class difference between those who can follow the train of thought in the conversation and those left dumbfounded by all of those long and confusing-sounding words. The tensions that so easily boil over with the lower classes and their readiness to project their emotions onto the other party is channeled by the upper class into word-play and a kind of conversational poetics. This dynamic is handled beautifully in Deadwood, with the rapidly spoken obscure words contrasting with the angry crude words, a distinction that signals who is capable of planning ahead and likely scheming in one direction or another.

Wolcott fits in an odd place in this dynamic: he speaks much more like a sophisticate, but also directly and without the radiance of the others. He gives simple commands that speak exactly to his interests without any of the masks that must have made conversation so enjoyable. He does not visibly express himself and offers very little bodily gestures to hint at his meaning. He prefers to speak only to other individuals and not in crowds or groups, giving instructions or listening to new information. He only wants to work with a selection of individuals with major stakes in the camp on a singular basis as he does with his employer. He is merely an officer sent to perform a task for his extremely wealthy employer.

The worst instance of Wolcott character comes in the violence he unleashes upon women. It seems all of the reserve he maintains in his affairs becomes concentrated, and when he becomes frustrated or disadvantaged he takes it out on whores by slitting their throats. It is one of the more gruesome scenes in Deadwood when he takes out three women without any cause other than his own pent up rage. It has happened before in Mexico, so we know this is a character flaw that recurs: he is overcome by an urge to inflict death and dominance over those he can without conflict. His cold and unflinching disposition is suddenly reversed in an explosion of violence.

Might this dangerous flaw be connected to his occupation under the capitalist Hearst? Or perhaps his knowledge and foresight of the direction of the macro-level of the economy brought him to a resigned despair? His murderous actions themselves where predictable – a matron of a high-end brothel knows of his propensity to kill women, but cannot stop him from accessing his favorite whore. He eventually kills her along with the matron and another woman, suggesting that the fate of Wolcott’s favorite whore was already sealed. But is the doom of the young and beautiful whore connected with the foreseeable expansion of mechanical production and proletarianization of the population?

I’ll leave that question unanswered and point to a conversation that Wolcott has with Hearst when Hearst arrives to Deadwood to take control of it. Hearst proclaims an interesting relationship with the earth: he believes the earth speaks to him and that “she tells me where to dig into her.” Spending his life mining for gold has made Hearst extremely wealthy, and his fame is enhanced with such sayings like this. He believe he is listening to the earth and that this intimate relationship with it allows him to find “the color.” When Hearst learns of Wolcott’s murderous tendencies he confronts him:

Wolcott: “As when the Earth talks to you particularly, you never ask its reasons?”
Hearst: “I don’t need to know why I’m lucky!”
W: “What if the Earth talks to us to get us to arrange its amusements?”
H: “Sounds like god-damned non-sense to me.”
W: “Suppose to you it whispers: “You are king over me. I exist to flesh your will.””
H: “Nonsense.”
W: “And to me, there is no sin.”

[Hearst then severs their relationship]

Hearst: “Does some spirit overtake you, is that what you mean by the talk?”
Wolcott: “No.”
H: “Tells me where the color is, that’s all it tells me.”

There is a great confusion about the Earth and God in this conversation. Hearst has personified the Earth in his labors as a miner, propagating the myth that it speaks to him and tells him where to find gold. Wolcott observes Hearst’s relationship with the Earth as one of subjection. In the absence of The Lord God in heaven above, the Earth below becomes for Wolcott the replacement God, yet one that is vulnerable. A wealthy man like Hearst can listen to the Earth and digs into it, extracting its precious metals and in effect becoming lord of the Earth by freely picking at it.

The relationship between a single great God with all power and knowledge and creation in it and the individual human worshiper is a relationship that could only be one of dominance. The voice of the Earth is taken by Wolcott to be like the voice of God, yet also the voice of a slave-body to be drilled into and harvested for its valuables. In the absence of a master-God (which in the later 19th century was becoming a greater cause for concern in European culture than it had been before) the great voice in the cosmic sky above fell mute with but only the Earth beneath our feet to remain attached to. The relationship of power, however, remains only reversed: the great Capitalist owner of the land and producer of goods becomes The Lord of the Earth. The Voice can no longer speak of correcting wayward souls or offering guidance, instead the security of God is replaced with the subdued body of the Earth. He will not talk to the sinners and provide assurance of the moral value of actions, instead, She will be dissected and exploited for what is universally valued in commerce: gold/money.

So is nihilism and the disgust at the sight of a subdued Earth the cause for Wolcott’s horrifying murders? The unstoppable force of Capitalist progress? His inability to take pleasure in the conversational habits and games of the well-to-do? One is about a great loss of meaning both personally and culturally, the next is about the sweep of history and the material conditions that seemed inalterable, the last is about the simple enjoyment of other’s company – the little twists and turns of the conversation that could either enflame our body into passionate action or create lasting bonds in the face of another’s skill and grace. In understanding the death of God, the subjugation of the Earth, and the coming age of mechanical production, Wolcott finds no comfort in the company of others. He repeatedly tells people not to touch him. These issues are connected in Deadwood as a show and as a artwork; stepping outside of it, we can say that keeping up the pleasures of our bodies in the company of friends (verbally and with proximal remove as well) can have an effect on the other issues that would drive a man to death and despair.

befitting his character, Wolcott hangs himself at the end of season 2 after being fired and during a wedding. Nobody seemed to notice.

The BRICS Bank and Dollar Hegemony: the Importance of Geopolitics

Michael Hudson and Leo Panitch had a spirited debate at the Real News Network recently that brought to light two different views on the strategies for resisting Capitalism. Watch it hear and follow along with the transcript:

Is the BRICS Bank a Challenge to US Financial Power?

The BRICS Development Bank (Brazil, Russia, India, China and South America) was just announced and is an attempt to subvert America’s dollar hegemony or, what Hudson calls, Super Imperialism. They will make loans outside of the dollar system, which coerces/persuades countries that receive loans from the IMF to keep their currencies pegged to the dollar, and issue loans to countries in their own currencies. This, Hudson believes, will be a major geopolitical move by countries extremely frustrated by the Washington Consensus in America and will provide an alternative to the broken philosophy of neoliberalism and its Trojan Horse policy of forcing countries to accept austerity, privatization, and cheap asset sell-offs to private companies when sovereign countries cannot pay back their debts. Rather than write down debts that cannot be repaid, the IMF and World Bank (who accept and champion the dollar standard) demand “developing countries” who cannot keep up with entrenched global corporations on the world market sell away their natural resources, privatize public services and industry (including pensions and health benefits), and generally accept nation-wide austerity when the interest on the loan bloats the bill too high.

A recent case of this comes from Argentina. Argentina was going to write down its debts so that it could repay without crippling its economy until the “Vulture Firms” who bought up some of its debts at very low, distressed prices and demanded they be relayed in full. A New York judge decided that Argentina must make the Vulture Firms whole, with many big Wall Street Banks owning stakes in these vultures. Such is the logic of debt intoxicating countries under financial imperialism, demanding all debts be repaid. Whole peoples wealth and well-being can be sacrificed, but heaven forbid an investor should not get the full amount of capital returned on his investment!

Leo Panitch, however, believes that the significance of the BRICS Development Bank in combating US led neoliberalism is overblown. These five countries all themselves operate as Capitalist economies, forcing their population into low-waged labor and engaging in land purchases around the globe. Oligarchs dominate Russia, ghettos abound in Brazil, Indian farmers have been committing suicide by the thousands, and everyone must submit to the toil of the work day for their livelihood. These aren’t Socialist countries we’re talking about.

Why is the issuing of loans in the currency of a sovereign nation instead of dollars so important for opposing neoliberalism and, eventually, Capitalism itself?

It depends on how much you think American foreign policy and its war machine is bound up with the character and functioning of global economies – whether they could go Socialist or whether they would still choose by themselves to remain fully Capitalist. Does the “room for maneuver” that Panitch says the BRICS alliance is seeking create a whole new place where countries can more democratically reorganize or are they merely jockeying for more of the Capitalist pie?

Hudson emphasizes the Geopolitical where Panitch emphasizes the social forms; I would like to explain why geopolitics (the position of nations on the Earth, the resources they contain, their strategic location for war and trade routes, etc.) is crucial in determining the course of action that a country can take. Countries’ decisions on how their goods and services will be distributed are not merely internal decisions based on voting or their succumbing to the overarching logic of Capitalism. Monetary flows that are unleashed on markets and colonial histories play a major role in shaping the options a country has in taking on the social form it has at any given time. One might call them “external pressures”, but monetary flows and debt levels operate with fluidity and course through countries boundaries according to policies and decisions made at the IMF, World Bank, and Washington DC. If a new development bank would appear that would be more willing to cancel debts and make low interest rate loans, a fundamental shift could occur that would free up a countries’ ability to change its socials forms. The big question, yet to be answered, is whether the BRICS Development Bank will be willing to cancel/write down debt, i.e. whether the credit that is pumped into global markets will be for the purpose of productive works and projects that people need or for making a return at all any “external” cost. Will they be neoliberal financial parasites by another name?

The blight of austerity ravaging the world, of which there seems no end in sight, is largely driven by American Politics: which has been captured by the financial interests of Too-Big-To-Fail Banks and extractive parasites. Their main weapon is debt and interest. The dollar standard ensures that, internationally, sovereign nations must keep their currencies at a fixed rate to the dollar or else leave those currencies open to crippling currency raids and Short Sells. Here is Ellen Brown:

“[After the dollar was taken off of the gold standard] Currencies were now valued merely by their relative exchange rates in the “free” market. Foreign exchange markets became giant casinos, in which the investors were just betting on the relative positions of different currencies. Smaller countries were left at the mercy of the major players – whether other countries, multinational corporations or multinational banks – which could radically devalue national currencies just by selling them short on the international market in large quantities. These currency manipulations could be so devastating that they could be used to strong-arm concessions from target economies. (Web of Debt, p.207)”

Hudson in The Bubble and Beyond writes about the constraining system set up by the dollar standard:

“A double standard has been implicit in the world’s economic rules since the dollar was decoupled from gold in 1971, when the U.S. trade deficit of $10 billion was the equivalent of more than half the U.S. gold stock. But today there is no gold convertibility and hence no major constraint on U.S. spending abroad or at home. The United States has not subjected itself to any of the distressing fiscal conditions that all other countries feel obliged to follow. What makes this asymmetry so ironic is that it was made possible by what seemed to be a financial defeat for the United States. Once America stopped paying gold, there was not much that other central banks could ask for as they found themselves flooded with dollars obtained by private-sector exporters and asset sellers in excess of their need…

…Now that gold had been demonetized, all that foreign central banks can do with their excess dollars is to send them back to the U.S. Government by buying Treasury bonds. If they do not do this, their currencies will surge against the dollar, threatening to price their manufacturers and food exporters out of foreign markets.” (p.368)

The United States of America is an a unique, privileged position in the geopolitical dynamic of forces: it alone gets to run up its debt without limit and maintain a “balance-of-payment” deficit without ever having to pay its debt back. The interest that it must pay for the Treasury bonds it issues are simply added to the debt pile it already has built up. The U.S. Federal Reserve can keep printing dollars and issuing Treasury bonds to match them (the government must borrow in order to create new money), while other countries must use their dollars to buy more Treasury bonds. The Treasury bond nets its buyers money on interest, but that interest paid out by the U.S. comes from printing more money – issuing more T-Bonds.

This “recycling process” fuels U.S. National debt and at the same time ensures that other countries keep using dollars that they obtain from selling their exports to America, foreign company buy-outs, and IMF loans. In international finance, America has become a black hole of debt: other nations receive a glut of dollars must “send them back to the U.S. Government by buying Treasury bonds. If they do not do this, their currencies will surge against the dollar, threatening to price their manufacturers and food exporters out of foreign markets” (Hudson, TBaB p.368). These are currency wars performed almost entirely on computer screens and with the frightening threat of falling to the bottom of a hostile world market when your currency becomes over-valued (relative to the dollar and the value of goods). Suddenly all of the work your country has performed to create products and grow food will be un-tradable because it will cost to much for other countries to convert their own currency into yours for the exchange. This is constraining force burdening the “developing countries” (“developing” because they must export to “developed” countries or else face default or the impending hostile military takeover) to use dollars and continue to finance the U.S. and its war machine.

Michael Hudson is one of the few people to understand this mechanism and has been yelling about it since the early seventies. Few others understand it, but when you do, the importance of not using the dollar – freeing up the room to use one’s own currency for receiving loans and trade with other countries not denominated in dollars – becomes a huge move to open up possibilities for economic activity.

David Graeber writes about this mechanism at the end of his book Debt: The First 5,000 Years:

“Because of the United States trade deficits, huge numbers of dollars circulate outside the country; and one effect of Nixon’s floating of the dollar was that foreign central banks have little they can do with these dollars except use them to buy U.S. Treasury bonds. This is what is meant by the dollar becoming the world’s “reserve currency.”…

…The effect, though, is that American imperial power is based on a debt that will never – can never – be repaid…
…At the same time, U.S. policy was to insist that those countries relying on U.S. Treasury bonds as their reserve currency behave in exactly the opposite way as they did: observing tight money policies and scrupulously repaying their debts.” (p.366-7)

Both realize that this is a special position for the U.S. to be in and reinforces imperial authority in a very efficient, monetary way. Capitalism might have spread throughout the globe, with countries and their ruling classes forcing their people into a reserve of cheap labor and the strict adherence to property rights among other coercions, but the method used for getting new countries to accept this state of affairs is an age old tactic: interest and debt. More from Graeber:

“The new global currency is rooted in military power even more firmly than the old was. Debt peonage continues to be the main principle in of recruiting labor globally: either in the literal sense, in much of East Asia or Latin America, or in the subjective sense, whereby most of those working for wages or even salaries feel that they are doing so primarily to pay off interest-bearing loans.” (p.368)

Getting out of the Capitalist trap will involve financial maneuvering in the national-geopolitical landscape as much as labor struggles because the power of the logic of debt is so great, taking its most global and destructive manifestation to date with American Super Imperialism or Dollar Hegemony. The linking of the influence of debt and military might means that whenever a country attempts to get out of the debt/dollar system, the military steps in to enforce U.S. interests. Saddam Hussein’s Iraq stopped trading in dollars and went for euros in 2000 as well as Iran in 2001. As long as dollars are used in the deal America will win, but if anyone steps out of line and rejects the dollar the hammer comes down. This is why only a large block of high producing nations can legitimately challenge dollar hegemony, unless America’s corporate media is so thoroughly corrupt that it can convince its people a war on China, Russia, Brazil, South Africa and India. It is already demonizing Russia and China the best it can, the two largest players…

Both Hudson and Panitch are anti-Capitalist political-economic thinkers. They both wish to see a Socialist government that can restructure economies to stop apocalyptic climate change and promote prosperity absent the dominance of Capital. Hudson, though, is peering deeper into geopolitics and the forces moving and controlling nations to act in certain predictable ways to find a way out of Imperial U.S. led global Capitalism. A new development bank, though not as uplifting and energizing as a revolutionary uprising, is a glimmer of hope that will change the dominant forces operating all around the Earth if the BRICS countries do it right. All that is left is to see if the BRICS Development Bank will use money and credit solely as a means to serve their Capitalist classes vs the U.S.’s or whether the credit they lend will allow countries the means to invest in national infrastructure that will stop climate change and provide for the public health and food security.

Guattari’s Schizoanalytic Cartographies

Brian Holmes navigates global cybernetic capitalism with the help of Guattari’s Schizoanalytic Cartographies.

Continental Drift

or, the Pathic Core at the Heart of Cybernetics

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[This text was developed through a large number of improvised presentations. Thanks to all who listened and responded. The very first, in Chicago at the invitation of Jon Cates,  is archived here. – BH]

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A desiring mind seeks infinity, and finds it today in a proliferation of signals: electromagnetic waves beaming down from the skies, fiber-optic cables emerging from the seas, copper wires woven across the continents. The earthly envelope of land, air and ocean – the realm of organic life, or biosphere – is doubled by a second skin of electronically mediated thought: the noosphere. It’s a vast, pulsating machine: a coded universe grown complex beyond our grasp, yet connected at every pulse to the microscopic mesh of nerve cells in our flesh.

Such is the contemporary circuit of communication. Its existence raises two basic questions. What…

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The End of Growth

I’ve been making my way through Richard Heinberg’s The End of Growth for over a year now and it raises some very pertinent concerns about a Capitalist economy and the energy that sustains it. Thanks to the people over at Occupy Educated, I was intrigued into getting it and has been a good source of alternate analysis to the status quo “everything is fine unless you stir things up” discourse of the mainstream. In seeking a range of economic backing to address worries over the viability of our social order, the peak oil theorists seem to deserve a look, especially considering their popularity.

The question nagging me with the fury of a bee protecting its hive is: “does our economy – whatever that is – need a material increase in energy and speed to keep growing?” And then to follow that up, “without a growth based economy moving goods around with increased efficiency, does the whole system just collapse in spectacular chaos?”

I am convinced that an economy based on the principles of Capitalist organization, as this increasingly global one surely and without question is, demands growth in some form or another. The imperative to make more and more money, to have your money become a means to acquire more money somehow, necessitates a growth based economy when extended outward into the social field as a whole – playing the dominant role in our relationships with one another. Where that growth comes from (commodity exchange, financial securitization, lifelong debt slavery, or just plain old wage slavery) is important in the narrowing down of capital’s function into more specific contexts, but the big problem that must be thought here is this: without some kind of economic growth, do we really get doom and gloom, chaos and destruction, fantastical apocalypse?

Or is that a mere blocking device characteristic of our collective imagination mediated by those in charge of government and the spectacle?

First of all, let’s bring in Heinberg on growth based economies:

…we have created monetary and financial systems that require growth. As long as the economy is growing, that means more money and credit are available, expectations are high, people but more goods, businesses take out more loans, and interest on existing loans can be repaid. But if the economy is not growing, new money isn’t entering the system, and the interest on existing loans cannot be paid; as a result defaults snowball, jobs are lost, incomes fall, and consumer spending contracts – which leads less businesses to take out loans, causing still less new money to enter the economy. This is a self-reinforcing destructive feedback loop that is very difficult to stop once it gets going.

In other words, the existing market economy has no “stable” or “neutral” setting: there is only growth or contraction. (p.6)

If what Heinberg writes is true, then business as usual means the large economies of the world continue steamrolling with capital expansion in a positive feedback loop or it rapidly disintegrates in the opposite direction and we have a depression. This probably the most basic and essential logistical fact of the last 150 years or so of human history. A strategy of continual and material expansion has developed and found its way into the central aspects of society. Without it, we are plunged into uncharted territory; something we cannot predict and have an extremely hard time imagining must take its place. But this exercise in the imagination does take place and for a reason: we are very much culturally aware of this system’s limitations and the cliff that it is bringing us closer and closer to.

The main message to take home about “economic growth” – a phrase uttered repeatedly in high political discourse – is that it needs, requires, demands, and cannot exist without the complementing energy to move around material goods. This has been taken for granted in the last 150 years and we’ve hit a wall. The fossil fuels supplying this energy will not only peak and destroy a growth based economy, they will destroy the non-growth based ecology of the biosphere. A fundamental restructuring of the economy is the only thing that will stop those expecting returns on their investments in a monetary scheme (capitalists) from ruining it for all of the rest of us, most living organisms included.

Skipping ahead in the book, after his more thoroughgoing analysis of the bubble burst of 2008 and how growth and the economy in general cannot return, Heinberg explains the wall we’ve hit:

We have accumulated too many monetary-financial claims on real assets – consisting of energy, food, labor, manufactured products, built infrastructure, and natural resources. Those claims, essentially IOUs, exist in the form of debt and derivatives. Our debt cannot be fully repaid: every dollar saved in the past is owed ever-multiplying returns in the future, yet the planet’s stores of resources are finite ands shrinking. Claims just keep growing while resources keep depleting – and real prices of energy and commodities have begun rising. At some point it will become clear that this vast ocean of outstanding claims will never be honored, and the result could be a tidal wave of defaults and bankruptcies that would sweep away most of the economy. (p.236-7)

What we are experiencing now is this in slow motion. The Fed policies that funnel credit to giant banks hoping that tried-and-true methods will “revive” the economy fail to take the material aspect of energy and resource depletion. The plan so far from our insular elites is to inject more credit into this system from the top to get things moving as they once were – without any fundamental restructuring of wealth or value. This economy is dying and can only die more or less slowly. Considering the violent domineering that militaries have enacted on the behalf of economic growth, I hope it will die quickly and without to much “fuss”.  Transitioning away from the growth-based model might require a slower, steadier work to avoid the confusing shocks that go to the benefit of the military.

The great question that will define our age and also the fate of all subsequent ages so long as they are able to retain an historical memory is: how best can we transition from this devouring monster of a system into another more ecological system? How can we slay these vampire squids and stop the zombie apocalypse? If we cannot answer these question and/or reorganize ourselves against economic growth, the preventable consequences will be horrifying, but very much imaginable.

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Manuel DeLanda Lecture on the City and Capitalism

Here is a video of Manuel DeLanda giving a talk about the network of cities and trade in Europe for the last 500 years or so. His use of Assemblage Theory here diagrams how Capitalism was born of a stabilization of symmetrical trading between territories. Before getting to Fernand Braudel and his version of capitalist economic history, he maps the town/city nodes from the big cities to the smaller provinces according to Walter Christaller.

This lecture is especially noteworthy because DeLanda explains his adherence to Braudel’s work in contrast to Marx when it comes to how value is created. With DeLanda and Braudel, economic value is inseparable from the vast interconnected web of trade. The flow of goods between disparate territories connected by trade routes is essential to the rise of modern capitalism.
These sovereign territories include a capital city and a port city, the latter acting as a hub of trade and the former being the diplomatic entity uniting nations and solidifying borders. The capital city is the center of culture and has the ultimate decision-making ability in war, but the port cities are equally important in the economic wealth of a nation in creating value by increasing the flow of trade.

DeLanda breaks with Deleuze and Guattari and his Marxist past and attacks Marx’s labor theory of value and surplus extraction. Braudel gives him a base for this attack. *This gets really interesting after the first hour*. The labor of the workers, which is exploited by bourgeois capitalists, is not the source of value here. DeLanda includes the machines of production along with the humans in creating value. A dialectical collapse of capitalism’s own contradictions misses a fundamental mistake of Marx’s pinpoint the source of value creation in human labor and the accumulation of surpluses.

After the American and French Revolutions, a system of mass production was streamlined in the military. France’s method of fashioning inter-changeable parts and automated processes was copied by Thomas Jefferson in America far sooner than Henry Ford. This allowed for a seemingly unceasing increase in economic growth when coupled with the capital-port city duality of secure, non-confrontational cross-cultural exchange.

Brian Holmes: Silence = Debt

Here is a link to a teach-in that Brian Holmes did with Occupy Chicago.

He researched the giant scheme of the Universities with the Banks to impose escalating debt levels on college students which cannot be relinquished. His talk demonstrates the privatization of public universities and the transformation of public Universities into private Capitalist profiteering machines.