The crisis of bourgeois economics

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Re: The crisis of bourgeois economics

Post by blindpig » Wed Feb 23, 2022 3:43 pm

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Financialization at heart of economic malaise
Posted Feb 23, 2022 by Anis Chowdhury, Jomo Kwame Sundaram

Originally published: JOMO (February 20, 2022 ) |
Economic Theory, Financialization, Global Economic Crisis, StagnationGlobalNewswirecoronavirus, COVID-19, pandemic
SYDNEY and KUALA LUMPUR: COVID-19 has exposed major long-term economic vulnerabilities. This malaise–including declining productivity growth–can be traced to the greater influence of finance in the real economy.

The deep-seated causes of the current resurgence of inflation, inequalities and contractionary tendencies have not been addressed. Meanwhile, reform proposals after the 2008-2009 global financial crisis (GFC) have been largely forgotten.

Declining productivity
Productivity growth has been declining in major economies since the early 1970s. As the World Bank noted, well “before the … pandemic, the global economy featured a broad-based decline in productivity growth”.

World labour productivity growth slowed from its 2007 peak of 2.8% to a post-GFC nadir of 1.4% in 2016, remaining under 2.0% in 2017-2018.This slowdown has hurt over two-thirds of advanced, emerging market and developing economies.

Except for a brief productivity spike in some countries around the turn of the century, labour productivity growth in developed Organization for Economic Cooperation and Development (OECD) countries was declining, with trends low, but stable after the GFC.

Why the slowdown?
For Robert Gordon, this was mainly due to declining total factor productivity growth (TFP)–or slower technical innovation, organizational improvements and labour skill growth–in recent decades, particularly in industrial nations.

For the World Bank, reduced investment and TFP growth deceleration have been roughly equally responsible for the productivity slowdown. Slowing working age population growth and limited education progress have also contributed.

The United Nations noted, “as firms around the globe have become more reluctant to invest, productivity growth has continued to decelerate”. It blamed the slowdown on reduced investments in machinery, technology, etc.

Slower transitions to more diverse and complex production have also delayed progress. Some supply shocks due to ‘natural causes’–of which 70% were climate change related–have also hurt productivity growth.

Growing inequality has weakened demand, slowing economic and productivity growth. As workers’ spending declined with labour’s income share, demand has been sustained by more public and private borrowing.

The International Monetary Fund (IMF)’s April 2017 World Economic Outlook confirmed this trend. Productivity growth declines have lowered real incomes, reducing consumer spending, demand and growth.

A joint report of the Bank of International Settlements (BIS), OECD and IMF also blamed unconventional monetary policies–very low, even negative real interest rates, and corporate bond purchases. Thus, corporate financial fragilities have weakened investment and productivity growth, especially since the GFC.

Deeper malaise
More sustainable and inclusive growth policies can help increase productivity. But blind faith in ‘market solutions’ since the 1980s has worsened resource misallocations, sectoral imbalances and job-skill mismatches.

One-sided demand stimuli–through more deficit spending or monetary expansion, without complementary supply-side measures–have only made limited impact. Also, supply-side measures to enhance growth need appropriate regulatory reforms–not wholesale deregulation.

Deregulation has often strengthened product market oligopolies while labour’s bargaining strength has generally declined. Growing corporate power has reduced labour income shares as executive salaries have risen since the 1980s.

Paranoia viz deficits and debt has cut public spending. Public investment remained flat during the early 2000s, rising slightly after the GFC, before declining until the pandemic. Worse, public spending cuts have not been offset by more private investment.

Slower capital stock increases cut potential growth in advanced economies from the 1980s. Debt and deficit paranoia has cut public services, social protection, public education and healthcare–hurting the vulnerable most.

Negative externalities
Markets have also failed the environment, undermining sustainability. Inadequate investments in renewable energy and sustainable agriculture have resulted in food and energy shortages–now exacerbating inflationary pressures.

Financialization, tax cuts and deregulation have also encouraged speculative activities, share buybacks and other portfolio purchases. Unconventional monetary policies have also enabled unviable ‘zombie’ firms to survive.

Thus, there has been rising protectionism and harmful beggar-thy-neighbour policies–such as competing corporate income tax rate cuts while weakening environmental protection and labour rights.

Meanwhile, much needed productive investments, especially in infrastructure, technology and innovation, remain underfunded. National problems have been worsened by failure to improve multilateral economic governance.

Financialization
Declining productivity growth was due to finance’s creeping dominance over the real economy from the 1970s. With banking more internationalized and concentrated, traditional financial intermediation by commercial banks has been undermined by market allocation and ‘universal banking’, combining both commercial and investment banking services.

Financialization has thus subverted economic motives, markets and institutions, adversely affecting progress, balanced development and long-term productivity growth in various ways:

· Corporate decision-making and firm behaviour are increasingly influenced by short-term financial market indicators, e.g., share market prices, rather than medium- and long-term prospects;

· Non-financial corporations increasingly profit from financial, rather than productive activities;

· ‘Non-traditional’ financial activities (e.g., stock market investments) of commercial banks have increased their exposure to systemic, including external risks;

· The distinction between short-term speculation and patient long-term investment has become blurred;

· Executive and even managerial remuneration has been increasingly linked to short-term profitability, as measured by share prices, not longer-term considerations.

Such features have adversely affected real investments and innovation, due to finance pursuing short-term returns. Thus, financialization has negatively affected investment, technology adoption and skill upgrading, with adverse consequences for productivity and decent jobs.

Misallocation
The financial system has also undermined the real economy by syphoning talent from it, with attractive inducements. Thus, talent has gone to finance at the expense of the real economy, especially harming technological progress.

James Tobin challenged,

throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to the social productivity.

Then American Finance Association president Luigi Zingales showed financial growth in the last four decades has basically been rent seeking, i.e., securing profits without adding any value.

Finance has captured rents,

through a variety of mechanisms including anticompetitive practices, the marketing of excessively complex and risky products, government subsidies such as financial bailouts, and even fraudulent activities… By overcharging for products and services, financial firms grab a bigger slice of the economic pie at the expense of their customers and taxpayers.

Banking abuses have been innovative, ranging from collusion, abusive practices, market manipulation, rigging interest, exchange and other rates, passing risk to unsuspecting customers, aiding and abetting tax evasion and money laundering.

Real economy drag

Finance has thus retarded development of the real economy in various ways. First, financial development has not been conducive to intermediating between savings and real investments. Markets allocate funds by criteria other than promoting investment in the real economy.

Second, financial markets and speculation do not generate or otherwise add real value. Third, financialization and regulatory failure have generated more frequent and damaging financial crises.

Seeking to maximize returns, fund managers and their ilk mainly invest in response to short-term financial trends. Presumed to be best left to markets, actual capital formation–increasing economic output–and productivity growth have slowed, to the detriment of most.

https://mronline.org/2022/02/23/financi ... c-malaise/

This is hardly news as Marx propounded on the inevitable conquest of the capitalist economy by finance and it's deleterious effects.
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Re: The crisis of bourgeois economics

Post by blindpig » Mon Feb 28, 2022 2:05 pm

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The wealth of nations
Posted Feb 26, 2022 by Michael Roberts

Originally published: Michael Roberts Blog (February 23, 2022 )

Marx’s first sentence in Capital Volume One is: “The wealth of those societies in which the capitalist mode of production prevails, presents itself as an “immense accumulation of commodities”, its unit being a single commodity.” (Moore and Aveling translation). So, from the beginning, Marx makes a distinction between wealth in societies and how it appears in the capitalist mode of production. And in Grundrisse, Marx explains what he means by ‘wealth’:

when the limited bourgeois form is stripped away, what is wealth other than the universality of human needs, capacities, pleasures, productive forces etc., created through universal exchange? The full development of human mastery over the forces of nature, those of so-called nature as well as of humanity’s own nature? (p488).

For the pioneer of capitalist economics, Adam Smith, the wealth of nations is to be found in the accumulation of commodities. But for Marx, wealth is more than just a collection of commodities owned by capital and valued in money. That is the form that wealth takes under capitalism. Wealth is the accumulation of products and activities that meets human needs; ie the accumulation of use values. And those use values include natural resources as well as the products of human labour.

Under capitalism, the meaning and substance of wealth is restricted to the value of commodities produced for sale and profit, accumulated as capital and measured in money -the universal measure of human labour time involved in commodity production. This meaning of wealth excludes human social needs as well as the impact on wealth from environmental degradation, pollution, exploitation and inequalities. These are not accounted for the capitalist accumulation of private wealth. Because of that, capitalist economies are not only destructive and wasteful; capitalism is unfit for the purpose of delivering real wealth to humanity.

Global warming, climate change, environmental disasters have become so serious that the contradiction between capital and wealth accumulation has become obvious. This has forced even mainstream economics to consider ways of measuring ‘wealth’ as opposed to the production of value (GDP) and its accumulation into capital.

Recently, the World Bank has tried to measure wealth. In its latest report, The changing wealth of nations 2021, it provides an analysis of the world’s wealth accounts spanning 146 countries, with annual data from 1995 to 2018. It also contains the widest set of assets covered so far, including the value of human capital broken down by gender, as well as many different forms of natural capital, spanning minerals, fossil fuels, forests, mangroves, marine fisheries, and more. Even so, the Bank’s analysis remains inadequate, leaving out the impact of climate change, the social impact of carbon emissions from fossil fuels and, as the report adds, “economic sustainability is not the same as human well-being.”

The Bank defines global wealth as ‘produced capital’ (the means of production, machinery, computers etc), renewable and non-renewable natural capital (the land, forests, water, mineral resources etc);, ‘human capital’ (what Marx called human labour power), and net foreign assets held by each nation.

Wealth (as the Bank defines it – MR), like GDP, “is intended to represent material well-being, not broader human well-being.” The Bank considers the contradiction. While “wealth accounting—the balance sheet for a country—captures the value of all the assets that generate income and support human well-being. Gross domestic product (GDP) indicates how much monetary income or output a country creates in a year; wealth indicates the value of the underlying national assets and therefore the prospects for maintaining and increasing that income over the long term.” So the Bank considers GDP and wealth as “complementary indicators for measuring economic performance and provide a fuller picture when evaluated together. By monitoring trends in wealth, it is possible to see whether GDP growth is achieved by building capital assets, which is sustainable in the long run, or by liquidating assets, which is not. Wealth should be used alongside GDP to provide a means of monitoring the sustainability of economic development.” If rising GDP today comes at the expense of declining wealth per capita, then prosperity will be unsustainable. Economic growth will erode its own base. So the measure of the change in wealth per capita over time is perhaps the most important metric to consider in addition to GDP and, according to the Bank, it provides an actionable way to track sustainability.

And what does the Bank find on that? That “our material well-being is under threat: from unsustainable exploitation of nature, from mismanagement and mispricing of the assets that make up national wealth, and from a lack of collective action at local, national, and regional levels.” Despite a global expansion in total wealth per capita between 1995 and 2018, many countries are on an unsustainable development path because their natural, human, or produced capital is being run down. In countries where GDP growth is being achieved by consuming or degrading assets over time, for example by overfishing or soil degradation, total wealth is declining.

Global total wealth grew significantly between 1995 and 2018. Global wealth grew 91 percent from 1995, reaching US$1,152 trillion by 2018. All income groups saw increasing total wealth and per capita wealth over the period. The strongest performance was found among upper-middle-income countries, which had increases in wealth of over 200 percent between 1995 and 2018. Low-income countries saw per capita wealth growth by less than the global average, at 22 percent compared with 44 percent. Between 1995 and 2018, low-income countries’ share of global wealth increased only from 0.5 to 0.6 percent.

The performance of lower middle-income countries was better, increasing in share from 5 to 7 percent by 2018. But this cohort only achieved this because of one country: China. China’s share of global total wealth transformed from a modest 7 percent in 1995 to 21 percent by 2018. The Bank concludes “This means that low-income countries are falling further behind the rest of the world, creating a significant divergence in global wealth per person.” This further proof that there is no ‘convergence’ between rich and poor countries globally and that imperialism is still with us.

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That’s the share of global wealth (as defined). But more important is what happened to wealth per person globally? On a per capita basis, average wealth grew from US$111,174 to US$160,167. This represents a real rate of growth of 2 percent per year. But 26 countries saw a decline or stagnation in per capita wealth as population growth outpaced net growth in asset value, especially in Sub-Saharan Africa.

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Over time, population growth affects per capita wealth, especially in low- and lower middle-income countries. Between 1995 and 2018, global wealth grew by 91 percent, but population grew by 32 percent, so that the net increase in per capita wealth was only 44 percent. Per capita wealth grew fastest in middle-income countries, raising their share of global wealth, but the largest growth occurred in upper-middle-income countries (at 179 percent), in part because of China. Low-income countries increased their total wealth by nearly 132 percent—more than high-income OECD countries or the global average—but only by 22 percent on a per capita basis because population growth was highest in those countries.

Large disparities in per capita wealth around the world persist. On average, an individual in an OECD country was implicitly endowed with US$621,278 in wealth at birth in 2018. For an individual born in a low-income country, the estimate was just US$11,462. I did a little exercise on comparing wealth per capita between various countries using the World Bank results.

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Source: World Bank Changing Wealth of Nations 2021, p94

The graph above shows the wealth per capita for various countries as measured by the World Bank. I have highlighted in red the G7 economies. You can see that the average wealth per capita in those countries is some six times larger than the selected so-called ‘emerging economies’ in this graph. And the latter includes China. The divergence in wealth (as defined) between the imperialist bloc and the rest is huge. For topicality, I included Russia and Ukraine. The US wealth per capita is five times larger than Russia, while in turn Russia’s wealth per capita is over three times larger than Ukraine – perhaps a measure of the relative strength of each country in the world order.

The measure above is in market dollar exchange rates (MER). The World Bank also measures wealth per capita in purchasing power parities (PPP), which supposedly provides a better measure of what can be purchased in each country with the wealth available. This produces higher wealth per capita results for some poorer nations. But it does not significantly alter the overall trends. So I have not done a PPP comparison (although the report does). Also, the MER measure is, in my view, a better international comparison measure of the economic strengths of countries relative to the US.

When we look at the composition of wealth as defined by the Bank (natural resources; human labour power; means of production and net financial assets), there are more revealing facts. Human capital remains the most important component of wealth. Its share in total wealth increased from 62 percent in 1995 to 64 percent in 2018. Produced capital’s share decreased from 32 to 31 percent. But note that produced capital (means of production) is largest as a share of wealth in the advanced capitalist economies. Natural capital represented just 6 percent of total global wealth in 1995 and 2018. This share was equally divided between renewable and non-renewable natural capital (3 percent each) in 2018 at the global level.

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Because low-income countries have so few other assets, proportionately, natural assets such as land and ecosystems are crucial for them, comprising around 23 percent of their total wealth. ‘Blue’ natural capital (mangroves and marine capture fisheries) are a critical part of total wealth for some countries. But blue natural capital fell by half from 1995 to 2018, as the value of fisheries collapsed by 83 percent. The main reason for the decline in the value of fisheries is a physical depletion of fish stocks “due to the failure to coordinate fishing activities between countries and the private sector.”

Low- and middle-income countries, where land accounts (forests, protected areas, and agricultural lands) are a large component of total wealth, have seen declining forest wealth but rising agricultural wealth. While forest wealth (timber plus ecosystem services) per capita decreased by 8 percent between 1995 and 2018, driven by population growth and a loss of forest area, agricultural land wealth (cropland plus pastureland) per capita has increased by 9 percent due to area expansion and increasing value per square kilometre. Industrial farming is replacing natural resources.

The Bank measures ‘human capital’ (as the Bank wants to call it in true capitalist fashion) as the value of earnings over a person’s lifetime. Self-employed workers account for 13 percent of global human capital, but a much larger share of the total in many low-income countries, where the agriculture sector and informal employment are significant. The slower annual wage growth in high-income countries (roughly 1 percent), combined with the aging of the labour force, reduces their share of global human capital. Meanwhile, higher rates of wage growth in some middle-income countries such as China (up to 4 percent) increases their relative share.

However, the World Bank admits that “Although the full, long-lasting effects of the COVID-19 pandemic are still unknown, the resulting economic downturn and associated unemployment and loss of earnings have already set back the long-term progress in poverty reduction, especially in low-income countries.” Sub-Saharan Africa and South Asia suffered the greatest setbacks, losing 15 and 7 percent of human capital.

There are huge gaps in the World Bank’s measure of ‘wealth’. It does not include the value of carbon retention or sequestration services as part of wealth embedded in biological ecosystems (for example, forests, soils, and oceans). Nor does it subtract the social cost of carbon from fossil fuels.

How can the wealth divergences globally be closed and how can the growing disaster of climate change and environmental degradation be averted? The World Bank’s answer is the conventional mainstream one. Having told us that the production of commodities for the market is not a proper reflection of wealth in society, it proceeds to offer market solutions to this contradiction. “Going forward, policy interventions—such as carbon taxes and payments for ecosystems services—are urgently needed to make market prices explicitly reflect the social cost of carbon dioxide emissions and the value of global climate regulation services provided by nature.” And it promotes the private sector as the funding source of policy action, arguing for “major progress on incorporating ESG considerations into investing choices.” This is ironic when the evidence of the failure of ‘ethical investing’ is growing by the day.

The World Bank sums up the issue. “Natural and human capital are therefore at the core of our prosperity, but few of these assets are accounted for in the national balance sheets and hence appear invisible or worthless to policy makers. When we think of wealth, most of us might think about financial assets, or companies, computers, and cars. But what about forests, mangroves, water, fish, or clean air? What about healthy people and their capacity for productive work? And can we cooperate when the challenges in managing our prosperity transcend national boundaries?”

https://mronline.org/2022/02/26/the-wealth-of-nations/

Crocodile tears from the World Bank, the mind reels... If they are so damn concerned why don't they try to mitigate in ways that do not turn a profit? 'Due diligence, that's why. The hypocrisy of these greedy fools will destroy us.
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Re: The crisis of bourgeois economics

Post by blindpig » Wed Mar 16, 2022 1:34 pm

Say Hello to Russian Gold and Chinese Petroyuan
Posted by INTERNATIONALIST 360° on MARCH 15, 2022
Pepe Escobar

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Russia says half its gold assets were frozen – is this for real or a slick play by Moscow? Photo Credit: The Cradle

The Russia-led Eurasian Economic Union and China just agreed to design the mechanism for an independent financial and monetary system that would bypass dollar transactions.

It was a long time coming, but finally some key lineaments of the multipolar world’s new foundations are being revealed.

On Friday, after a videoconference meeting, the Eurasian Economic Union (EAEU) and China agreed to design the mechanism for an independent international monetary and financial system. The EAEU consists of Russia, Kazakhstan, Kyrgyzstan, Belarus and Armenia, is establishing free trade deals with other Eurasian nations, and is progressively interconnecting with the Chinese Belt and Road Initiative (BRI).

For all practical purposes, the idea comes from Sergei Glazyev, Russia’s foremost independent economist, a former adviser to President Vladimir Putin and the Minister for Integration and Macroeconomics of the Eurasia Economic Commission, the regulatory body of the EAEU.

Glazyev’s central role in devising the new Russian and Eurasian economic/financial strategy has been examined here. He saw the western financial squeeze on Moscow coming light-years before others.

Quite diplomatically, Glazyev attributed the fruition of the idea to “the common challenges and risks associated with the global economic slowdown and restrictive measures against the EAEU states and China.”

Translation: as China is as much a Eurasian power as Russia, they need to coordinate their strategies to bypass the US unipolar system.

The Eurasian system will be based on “a new international currency,” most probably with the yuan as reference, calculated as an index of the national currencies of the participating countries, as well as commodity prices. The first draft will be already discussed by the end of the month.

The Eurasian system is bound to become a serious alternative to the US dollar, as the EAEU may attract not only nations that have joined BRI (Kazakhstan, for instance, is a member of both) but also the leading players in the Shanghai Cooperation Organization (SCO) as well as ASEAN. West Asian actors – Iran, Iraq, Syria, Lebanon – will be inevitably interested.

In the medium to long term, the spread of the new system will translate into the weakening of the Bretton Woods system, which even serious US market players/strategists admit is rotten from the inside. The US dollar and imperial hegemony are facing stormy seas.

Show me that frozen gold

Meanwhile, Russia has a serious problem to tackle. This past weekend, Finance Minister Anton Siluanov confirmed that half of Russia’s gold and foreign reserves have been frozen by unilateral sanctions. It boggles the mind that Russian financial experts have placed a great deal of the nation’s wealth where it can be easily accessed – and even confiscated – by the “Empire of Lies” (copyright Putin).

At first it was not exactly clear what Siluanov had meant. How could the Central Bank’s Elvira Nabiulina and her team let half of foreign reserves and even gold be stored in Western banks and/or vaults? Or is this some sneaky diversionist tactic by Siluanov?

No one is better equipped to answer these questions than the inestimable Michael Hudson, author of the recent revised edition of Super Imperialism: The Economic Strategy of the American Empire.

Hudson was quite frank: “When I first heard the word ‘frozen,’ I thought that this meant that Russia was not going to expend its precious gold reserves on supporting the ruble, trying to fight against a Soros-style raid from the west. But now the word ‘frozen’ seems to have meant that Russia had sent it abroad, outside of its control.”

Essentially, it’s all still up in the air: “My first reading assumed that Russia must be doing something smart. If it was smart to move gold abroad, perhaps it was doing what other central banks do: ‘lend” it to speculators, for an interest payment or fee. Until Russia tells the world where its gold was put, and why, we can’t fathom it. Was it in the Bank of England – even after England confiscated Venezuela’s gold? Was it in the New York Fed – even after the Fed confiscated Afghanistan’s reserves?”

So far, there has been no extra clarification either from Siluanov or Nabiulina. Scenarios swirl about a string of deportations to northern Siberia for national treason. Hudson adds important elements to the puzzle:

“If [the reserves] are frozen, why is Russia paying interest on its foreign debt falling due? It can direct the “freezer’ to pay, to shift the blame for default. It can talk about Chase Manhattan’s freezing of Iran’s bank account from which Iran sought to pay interest on its dollar-denominated debt. It can insist that any payments by NATO countries be settled in advance by physical gold. Or it can land paratroopers on the Bank of England, and recover gold – sort of like Goldfinger at Fort Knox. What is important is for Russia to explain what happened and how it was attacked, as a warning to other countries.”

As a clincher, Hudson could not but wink at Glazyev: “Maybe Russia should appoint a non-pro-westerner at the Central Bank.”

The petrodollar game-changer

It’s tempting to read into Russian Foreign Minister Sergey Lavrov’s words at the diplomatic summit in Antalya last Thursday a veiled admission that Moscow may not have been totally prepared for the heavy financial artillery deployed by the Americans:

“We will solve the problem – and the solution will be to no longer depend on our western partners, be it governments or companies that are acting as tools of western political aggression against Russia instead of pursuing the interests of their businesses. We will make sure that we never again find ourselves in a similar situation and that neither some Uncle Sam nor anybody else can make decisions aimed at destroying our economy. We will find a way to eliminate this dependence. We should have done it long ago.”

So, “long ago” starts now. And one of its planks will be the Eurasian financial system. Meanwhile, “the market” (as in, the American speculative casino) has “judged” (according to its self-made oracles) that Russian gold reserves – the ones that stayed in Russia – cannot support the ruble.

That’s not the issue – on several levels. The self-made oracles, brainwashed for decades, believe that the Hegemon dictates what “the market” does. That’s mere propaganda. The crucial fact is that in the new, emerging paradigm, NATO nations amount to at best 15 percent of the world’s population. Russia won’t be forced to practice autarky because it does not need to: most of the world – as we’ve seen represented in the hefty non-sanctioning nation list – is ready to do business with Moscow.

Iran has shown how to do it. Persian Gulf traders confirmed to The Cradle that Iran is selling no less than 3 million barrels of oil a day even now, with no signed JCPOA (Joint Comprehensive Plan of Action agreement, currently under negotiation in Vienna). Oil is relabeled, smuggled, and transferred from tankers in the dead of night.

Another example: the Indian Oil Corporation (IOC), a huge refiner, just bought 3 million barrels of Russian Urals from trader Vitol for delivery in May. There are no sanctions on Russian oil – at least not yet.

Washington’s reductionist, Mackinderesque plan is to manipulate Ukraine as a disposable pawn to go scorched-earth on Russia, and then hit China. Essentially, divide-and-rule to smash not only one but two peer competitors in Eurasia who are advancing in lockstep as comprehensive strategic partners.

All the blather about “crashing Russian markets,” ending foreign investment, destroying the ruble, a “full trade embargo,” expelling Russia from “the community of nations,” and so forth –that’s for the zombified galleries. Iran has been dealing with the same thing for four decades, and survived.

Historical poetic justice, as Lavrov intimated, now happens to rule that Russia and Iran are about to sign a very important agreement, which may likely be an equivalent of the Iran-China strategic partnership. The three main nodes of Eurasia integration are perfecting their interaction on the go, and sooner rather than later, may be utilizing a new, independent monetary and financial system.

But there’s more poetic justice on the way, revolving around the ultimate game-changer. And it came much sooner than we all thought.

Saudi Arabia is considering accepting Chinese yuan – and not US dollars – for selling oil to China. Translation: Beijing told Riyadh this is the new groove. The end of the petrodollar is at hand – and that is the certified nail in the coffin of the indispensable Hegemon.

Meanwhile, there’s a mystery to be solved: where is that frozen Russian gold?

https://libya360.wordpress.com/2022/03/ ... petroyuan/

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Saudi Arabia considers accepting yuan instead of dollars for oil sales, report says

Any move to conduct oil transactions with China in yuan would mark a profound shift for the energy market, where 80 percent of sales are conducted in the greenback

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A flame from a Saudi Aramco oil installation known as 'Pump 3' is seen in the desert near the oil-rich area of Khouris, 160km east of the Saudi capital Riyadh, on 23 June 2008 (AFP)
By MEE staff
Published date: 15 March 2022 19:15 UTC | Last update: 1 hour 26 mins ago

Saudi and Chinese officials are in talks to price some of the Gulf nation's oil sales in yuan rather than dollars, the Wall Street Journal reported Tuesday, citing people familiar with the matter.

The two countries have been in discussions about yuan-priced oil contracts since at least 2016, but they have advanced recently on the back of growing Saudi concerns over Washington's commitment to the kingdom's security.

The Biden administration is in the final stages of negotiations with Iran aimed at reviving the 2015 nuclear deal. Riyadh opposed the original agreement and backed the Trump administration's decision to withdraw from the accord in 2018, which saw Washington impose debilitating sanctions on Tehran.

Like other countries in the region, the Saudis have perceived the chaotic US withdrawal from Afghanistan and Washington's renewed focus on great-power rivalry with China and Russia as indications of a wider US disengagement from the region.

While many of these issues have been festering for years, such as when the Trump administration refused to respond to a massive 2019 attack on Saudi oil facilities, ties between the two allies have hit new lows under US President Joe Biden.

On the campaign trail, Biden pledged to make the oil-rich kingdom the "pariah that they are" for the murder of Middle East Eye journalist Jamal Khashoggi in 2018.

Shortly after taking office, Biden ruled out dealing directly with the country's de facto ruler, Crown Prince Mohammed bin Salman, who US intelligence authorities say ordered Khashoggi's killing.

Last month, as the administration scrambled to get Gulf states to increase oil production, the crown prince reportedly rejected the offer of a phone call from the US president, the Journal reported.

The Saudis have also been angered over what they see as the US's lack of support for their war against Iran-aligned Houthis in Yemen.

Saudi-China ties
While many analysts doubt China's appetite to replace the US as security guarantor for the region, economic ties between Beijing and Riyadh have grown.

China is the kingdom's largest trade partner, mainly because it purchases 25 percent of all of Riyadh's oil exports.

Saudi Arabia is also a central pillar of China's Belt and Road infrastructure initiative and ranks in the top three countries globally for Chinese construction projects, according to the China Global Investment Tracker, run by the American Enterprise Institute.

A move to conduct oil transactions with China in yuan would mark a profound shift for the oil market, where 80 percent of sales are conducted in dollars. All of Saudi Arabia's sales are exclusively done in dollars.

A departure from dollars in oil contracts would also aid China’s efforts to convince more countries and international investors to transact in its currency.

The US dollar has dominated the global financial system as a medium of exchange since the Second World War.

Besides allowing the US to print treasury bills and sell its debt globally, the supremacy of the dollar is a central reason why the US is able to impose powerful sanctions on countries such as Russia and Iran, cutting them out of international financial transactions.

Some analysts expect efforts to replace the dollar to gain more traction, especially amongst the US’s foes, following the unprecedented sanctions Washington and its allies imposed on Russia for its invasion of Ukraine.

As part of those efforts, Russia has been blocked from selling foreign currencies in its reserves stockpile.

According to the journal, the Saudis still plan to conduct most oil transactions in dollars.

Saudi officials who favour the shift to the yuan have argued the kingdom could use part of new currency revenues to pay Chinese contractors involved in mega projects within the kingdom domestically, which would reduce the risks associated with the capital controls Beijing imposes on its currency.

https://www.middleeasteye.net/news/saud ... -oil-sales
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Re: The crisis of bourgeois economics

Post by blindpig » Wed Mar 23, 2022 3:30 pm

Oxfam: Almost one-third of US workers make less than $15 an hour

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Nearly a third of all U.S. workers make less than $15 an hour, and women, Black and Hispanic workers are significantly more likely to earn low wages than white men, according to new research by Oxfam.

A report from the organization released Monday found that 31.9 percent of the U.S. workforce makes sub-$15 an hour wages, with broad racial, gender and geographic disparities that closely correlate to state-level policies.

Nationally, the report found that 40 percent of working women earn less than $15 an hour, compared to 25 percent of men in the workforce.

Racial and ethnic disparities are similarly striking: 26 percent of white workers make less than $15 an hour, compared to 46 percent of Hispanic workers and 47 percent of Black workers.

More than half of all working women of color make less than $15 an hour, according to the report.

Geographic differences are largely determined by state-level labor laws, as places that have enacted high minimum wage laws consistently have the lowest proportion of workers earning below-$15 wages.

Washington, D.C., the only jurisdiction whose minimum wage currently tops $15 an hour, leads in all categories, with only 9 percent of its workforce earning under $15, including 13 percent of Black workers and 15 percent of Hispanic workers.

While only 12 percent of women in the District of Columbia make less than $15 an hour, 17 percent of working women of color earn salaries below that benchmark.

Washington state and California round out the top three in all categories; Washington's minimum wage is currently $13.69 per hour, and California's is $13, according to the Department of Labor.

The jurisdiction with the highest number of low-earning workers is Puerto Rico, where 76 percent of all workers make less than $15 an hour.

A majority of Puerto Rican workers are Hispanic, although those who identify as white are less likely to earn below-$15 wages; nearly 67 percent of white Puerto Ricans still make less than $15 an hour.

While the Caribbean territory does not have large disparities in sub-$15 wages for Hispanics and women, a whopping 92 percent of Black Puerto Ricans and 89 percent of Indigenous Puerto Ricans earn less than $15 an hour.

Puerto Rico is joined at the bottom of the list by two of the poorest states in the union, Mississippi, where 45 percent of all workers make less than $15 an hour, and New Mexico, where 44 percent of workers fail to meet that benchmark.

Mississippi, which has no statewide minimum wage and adheres to the federal $7.25 per hour rate, also comes in second-to-last in nearly all categories of wage inequality measured by Oxfam.

While all Mississippians are more likely to make under $15, 55 percent of women in the state's workforce earn less, as do 63 percent of Black workers in the state, and 70 percent of working women of color.

Mississippi has a relatively small Hispanic workforce, of whom 59 percent earn less than $15 an hour.

In absolute terms, Texas has the largest workforce earning less than $15, with nearly 5.7 million workers below the benchmark. In Florida, nearly 4.5 million workers earn less than $15 an hour.

California, the country's most populous state, has 3.4 million workers who earn less than $15, and a handful of states, including New York, Pennsylvania, Ohio, Illinois, Georgia, Michigan and North Carolina each have around 2 million workers at a below-$15 salary level.

The Oxfam report advocates for the Raise the Wage Act, a bill proposed by Rep. Bobby Scott (D-Va.) last year that would increase the federal minimum wage, including for tipped workers.

The bill currently has 201 Democratic sponsors in the House.

The Oxfam report also rebuts a common argument against raising the minimum wage, that a low one allows teenage workers access to on-the-job training.

According to the report, 89 percent of U.S. workers earning less than $15 an hour are at least 20 years old, and 19 percent of workers over age 55 earn less than $15 an hour.

The report also found that 11.2 million single working parents, 57 percent of that demographic, earn less than $15 an hour.

https://thehill.com/policy/finance/5992 ... -hour?rl=1

Note to our capitalist overlords: When the dollar is abandoned by much of the world and the US economy is worse than 1930 'screens' ain't gonna save ya.
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Re: The crisis of bourgeois economics

Post by blindpig » Sat Mar 26, 2022 1:41 pm

Wall Streeters got record bonuses for 2021
By BELINDA ROBINSON in New York | China Daily Global | Updated: 2022-03-25 09:47

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Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in Manhattan in New York City, New York, US, in this Oct 26, 2020 file photo. [Photo/Agencies]

Bonuses for Wall Street securities industry workers last year jumped by more than 20 percent over 2020, with the average payout hitting $257,500, according to an annual report from the New York state comptroller.

The average salary including bonuses for New York City's securities workers also increased by 7.7 percent to $438,370 in 2020, nearly five times higher than the $92,315 average in the rest of the private sector.

The record bonuses came as 1.5 million New Yorkers faced a hunger crisis, with many struggling to find enough food to eat amid the fallout from the coronavirus pandemic, when many lost their jobs, according to City Harvest, the city's largest food rescue organization.

At least 1 in 4 children, or 462,000 children in New York, also experienced food insecurity, a 46 percent rise amid the pandemic, the organization found.

In 2021, the five biggest investment banks paid out $142 billion in compensation, approximately $18 billion more than in 2020.

But Comptroller Thomas DiNapoli and bank bosses warn that this year may be different.

"Wall Street's soaring profits continued to beat expectations in 2021 and drove record bonuses,'' DiNapoli said, but he also noted that recent events — the turbulence in markets and the Russia-Ukraine conflict — are "likely to drive near-term profitability and bonuses lower''.

"In New York, we won't get back to our pre-COVID economic strength until more New Yorkers and more sectors — retail, tourism, construction, the arts and others ¬¬— enjoy similar success," he said Wednesday in his report.

Bank executives have told employees not to expect the same compensation they had last year, as major stock indexes have been down since the start of the year.

Dennis P. Coleman, Goldman Sachs' CFO, told analysts in January that the bonuses were a one-off.

"To the extent the environment in 2022 shifts, that compensation model is highly variable," he said.

New York is the nation's headquarters for the securities industry, employing at least 180,000 people. They make up 5 percent of the private sector in New York and a fifth of all wages, DiNapoli's office said. He estimates that 1 in 9 jobs in the city are connected to the industry.

DiNapoli estimated that the securities industry accounted for 18 percent or $14.9 billion of state tax collections in the state fiscal year of 2021, and 7 percent or $4.7 billion of city tax collections in city fiscal year 2021, which should help New York City beat its expectations for income tax revenue, the report said.

Pay at JPMorgan Chase for investment bankers and traders rose 13 percent. Citigroup paid $3 billion more to its employees in 2021 than in 2020, despite revenue declining slightly from 2020. Goldman Sachs gave 400 partners half a billion dollars in special stock bonuses, according to The Wall Street Journal.

Despite the record bonuses, many securities industry workers have chosen to resign. The number of workers in the security industry was 5 percent smaller than in 2007 and 10 percent below its peak in 2000. The number was largely unchanged from the year before. The total share of jobs has declined from 33 percent in 1990 to 18 percent in 2021.

http://global.chinadaily.com.cn/a/20220 ... 533be.html

When you see the largess afforded their flunkies you can begin to imagine the obscene wealth of the Owners. All of the problems of the world that can be addressed with money could be ameliorated if not eliminated but for this insane and unjust distribution of wealth.
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Re: The crisis of bourgeois economics

Post by blindpig » Sun Apr 03, 2022 1:38 pm

Goldman Sachs warns
colonelcassad
April 2, 23:58

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Goldman Sachs warns

The US dollar may soon lose its dominant position in the world's foreign exchange reserves, Goldman Sachs warns investors. According to Insider, this is due, among other things, to the anti-Russian sanctions imposed by the United States, as well as their growing external debt.

The United States and its allies have deprived the Russian Central Bank of access to foreign reserves, which threatens to stop other countries from using the dollar, analysts at Goldman Sachs write in a research note. As Insider argues, countries are concerned about the power such widespread use of the dollar gives the US , and investors might take that seriously too.

According to experts,the dollar faced a number of problems that are similar to the situation around the British pound. It was also once the largest reserve currency, but in the middle of the 20th century it was surpassed by the dollar. This was due, among other things, to the debts that the UK had after the Second World War.

The same problem may await the United States today, because they also have a large debt associated with the fact that they are a large importer of goods. At the same time, they have a disproportionately small share in world trade, when compared with the dominance of the dollar in global finance. Their trade balance is skewed, while adding geopolitical problems associated with the situation in Ukraine.

IMF Deputy Head Gita Gopinath previously noted in an interview thatsanctions against Russia could cause the world system to become more fragmented, hurting the dollar. She also said that the increase in the use of other currencies in world trade will force the central banks of different countries to diversify their reserves in foreign currency to the detriment of the dollar.

However, many analysts argue that the dollar will retain its status as a global reserve currency for the foreseeable future. This is also due to the fact that now there is no real replacement for it, as was the case with the pound.

Goldman Sachs experts conclude that the fate of the dollar is in the hands of the United States itself. If the policy continues to maintain the current deficit, external debt and inflation in the United States are growing, then all this may lead to a transition to other reserve currencies, writes Insider.

https://russian.rt.com/inotv/2022-04-02 ... redil-chto - zinc
https://markets.businessinsider.com/new ... e-currency -risk-uk-pound-russia-sanctions-debt-2022-4 - original in English

PS. Just yesterday they were joking that we had finally lived to see the time when Khazin's forecasts about the dollar, at least in part, could be realized in the long term.

https://colonelcassad.livejournal.com/7535705.html

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Re: The crisis of bourgeois economics

Post by blindpig » Tue Apr 05, 2022 2:58 pm

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Sanctions and the World Economic Order: a conversation with Prabhat Patnaik
Posted Apr 04, 2022 by Cira Pascual Marquina

Originally published: Venezuelanalysis.com (April 1, 2022 ) |

Prabhat Patnaik, professor emeritus at the Centre for Economic Studies and Planning at Jawaharlal Nehru University in New Delhi, is a Marxist economist and political commentator. From June 2006 to May 2011, he served as the vice-chairman of the Kerala State Planning Board. Following the crisis of 2008, he was part of a Joseph-Stiglitz-chaired task force of the United Nations (UN) aimed at recommending reform measures for the global financial system. In this interview for Venezuelanalysis, we learn about the sometimes unanticipated effects of sanctions on Venezuela and other countries.

Cira Pascual Marquina: Why have sanctions become such an important weapon in the imperialist hybrid war against countries that refuse to follow the mandates of Western powers?

Prabhat Patnaik: The international economic order that prevails today is what makes it possible to use sanctions as a weapon against countries that defy imperialism. Imperialism has imposed this order on the world, and by doing so it has also opened up the world to imperialist arm-twisting through sanctions. Ironically, however, this is precisely what also undermines the prevailing world economic order. In other words, the very economic order that makes sanctions potent, also gets undermined by these sanctions. Let me explain.

After the Second World War, many Third World countries newly liberated from colonialism, semi-colonialism, and dependency, sought to delink themselves from the international economy, into which they had been integrated by the colonial order as primary commodity producers. They protected themselves against manufacturing imports from the metropolis, and pursued import-substituting industrialization as a means of diversifying their economies. And there was a Socialist Bloc of countries that was not part of the imperialist-dominated economic order and was willing to help these Third World countries assert their independence by diversifying their economies.

The imperialist-dominated order at that time, therefore, was not all-encompassing. Countries were attempting to diversify their economies, to become self-reliant, and to acquire control over their raw material resources from the clutches of metropolitan capital. Imperialism, still suffering from the debilitating impact of the Second World War, and having been forced to yield to the demand for decolonization (which arch-imperialist politicians like Winston Churchill were strongly opposed to), was not yet powerful enough to impose any economic order on the world.

The Bretton Woods System, under which countries could impose trade restrictions and capital controls, was too permissive to serve the purpose of imperialist domination. Imperialism of course sought to prevent “economic decolonization,” but not through the imposition of an economic order, which it could not; it sought to do so through coups such as those against Jacobo Arbenz in Guatemala and Mohammad Mossadegh in Iran.

In such a situation the imposition of sanctions could mean very little. If any country imposes sanctions against another, the latter would scarcely be inconvenienced by them because it could and would enter into all kinds of arrangements with other countries. Since there was no imperialist-dominated world economic order, a multiplicity of arrangements was possible. Hence no country could impose sanctions that would really bite.

But with the imposition of the neoliberal economic order under the aegis of international finance capital, which has meant relatively free movement of goods, services, and capital, including finance, across country borders, things have changed. The import dependence of countries has grown significantly. Likewise the reliance of countries, especially in the Third World, on direct foreign investment, has increased greatly, as has their reliance on financial inflows to sustain current account deficits on the balance of payments. Sanctions in this situation can really bite, and have become a powerful instrument. Import dependence, and dependence on capital inflows, make sanctions effective.

Let me give you an example. India has been under tremendous pressure from the United States through the World Trade Organization to abandon its food self-sufficiency and to shift land-use away from producing food crops toward producing those other agricultural goods that are demanded by the metropolis. India has resisted this pressure until now. But if India had actually succumbed to it, then it would have been extremely vulnerable to sanctions from the West. Many countries in Africa did succumb to this pressure and became dependent on imperialism for the import of even such an essential commodity as foodgrains; not surprisingly they became vulnerable to imperialist arm-twisting.

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Countries sanctioned by the U.S.: Afghanistan, Belarus, Burundi, Central African Republic, China (PR), Côte d’Ivoire, Crimea Region, Cuba, Cyprus, Democratic Republic of the Congo, Eritrea, Fiji, Haiti, Iran, Iraq, Kyrgyzstan, Laos, Lebanon, Liberia, Libya, Myanmar, North Korea, Palestinian Territories, Russia, Rwanda, Somalia, South Sudan, Sri Lanka, Sudan, Syria, Venezuela, Yemen, Zimbabwe. (SanctionsKill.org)

Thus, the vulnerability to sanctions, and hence the potency of sanctions has increased with the institution of the neo-liberal order.

CPM: Could sanctions be a way to impose a new world order that replaces “free trade” with channelled and controlled trade?

PP: Such replacement of “free trade” by “channelled and controlled trade” will not amount to the imposition of a new world economic order. In other words, the frequent use of sanctions will only push the world economy away from the neo-liberal order, not to some new order, but to a host of ad hoc arrangements, as had been the case in the fifties and the sixties. An “order” under capitalism necessarily entails domination by imperialism. I believe that the frequent use of sanctions by imperialism will push countries out of not just the neo-liberal order but from any imperialist-dominated arrangement altogether.

Sanctions imposed by imperialism undermine the imperialist-dominated order altogether. Let me give an example. Before India adopted neo-liberal policies, it had an arrangement with the Soviet Union and other Eastern European socialist countries called the “rupee payment arrangement” under which the main international reserve currency, the U.S. dollar, was used neither for settling transactions, nor even as the unit of account in terms of which the trade-related transactions were denominated. The dollar, in short, was used neither as the means of circulation, nor even as the unit of account under these “rupee payment arrangements.” Instead, bilateral trade was denoted in terms of Indian rupees (or Russian rubles whose exchange rate against the rupee was fixed); and the balances in trade that got built up in favour of one country against the other were not immediately settled. Further, the dollar did not even enter into the settlement of these balances, they got carried over and were bilaterally settled over a period of time.

The whole idea was to ensure that neither country’s export to the other was constrained by the absence of dollars. It was an eminently sensible arrangement. If country A has goods that country B needs, and vice-versa, then it seems absurd that each of them remains deprived of this mutually-beneficial exchange, simply because each has not made enough exports to country C to earn the needed dollars; that is, they do not have enough dollars through exports to the metropolis or to countries from which they can obtain dollars.

Neo-liberalism however is totally opposed to all such arrangements and insists on a “unified” exchange rate. It invariably favors a single price in any market including in the foreign exchange market. Accordingly, it put an end to all such arrangements once a country had adopted a neo-liberal regime. Of late, however, with the imposition of sanctions against countries that defy the dictates of the Western powers, such bilateral trade agreements have once again appeared on the scene as a way of by-passing sanctions.

The sanctions imposed against Iran led to their revival as Iran entered into such arrangements with some countries. And now with severe sanctions being imposed on Russia in the wake of the Russian invasion of Ukraine they are likely to assume a pervasiveness that they never had earlier. Putin’s warning that the U.S. and the Western powers did not constitute the entire world but only a small part of it suggests that, if pushed into a corner, Russia will enter into bilateral trade agreements with a large number of countries to beat Western sanctions.

The most biting of the sanctions imposed against Russia is the freezing of Russia’s foreign exchange reserves held in the West. This has immediately led to a depreciation of the rouble since Russia can now no longer defend the rouble’s exchange rate by using its foreign exchange reserves; and depreciation will obviously accelerate inflation in the Russian economy. Sooner or later therefore, if these sanctions continue, Russia will have to suspend the convertibility of the ruble, learn to do without foreign portfolio and direct investment, diversify its import sources, enter into bilateral payments arrangements, and take urgent steps towards technological self-reliance.

In short, it will have to move toward the kind of economic policy (not of course the kind of ownership pattern of assets) that the Soviet Union had, which will mean an end of the world economic order that prevailed until now in the neo-liberal era. This will no doubt cause inconvenience to Russia for some time, but it will be a major setback for imperialism, as it will smash the world order over which it presides at present, without substituting it with anything else under its domination.

The collapse of the existing economic order and its replacement by a plethora of regional, local and bilateral arrangements is not something that one should regret. The existing order is loaded against the working people of the Third World; and it is clearly discriminatory between the North and the South.

During the pandemic, for instance, while the advanced capitalist countries ran up large fiscal deficits to finance substantial relief-cum-rescue packages, the Third World was kept tied to fiscal austerity. Because of this, the packages provided to the people by Third World governments were minuscule. While the U.S., even under Donald Trump, had a package amounting to ten percent of its Gross Domestic Product, the package in India was less than two percent of GDP. For other Third World countries that wanted a roll-over of their external debt during the pandemic, matters were even worse, since the IMF insisted upon very tight fiscal austerity in their cases.

The institutionalization of such an international economic order is repugnant to me. I would not, therefore, shed any tears over its collapse; and any other “order” that succeeds it will be equally repugnant, as it too would be dominated by imperialism. In conditions of capitalism, the term “international economic order” necessarily means subservience to imperialism for the working people of the Third World. This is why I would welcome a multiplicity of local and bilateral arrangements, providing for “managed trade,” rather than any new international economic order.

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People queue up outside of a bank to get cash, Caracas, November 2019. Sanctions and the ensuing liberalization of the economy triggered hyperinflation. Getting cash for cash-only payments such as transportation has become an ordeal for working-class Venezuelans. (AP)

Also, in a situation where there is no “international order,” the nation-state will have some autonomy in pursuing economic policies of its choice (rather than policies that please globalized capital), so that if the working people capture state power in some Third World country, they can use it for making real progress towards their liberation.

CPM: In Venezuela’s case–as in most sanctioned countries–the sanctions haven’t succeeded at toppling the government, but they have brought about a de facto liberalization of the economy. If we look at the Cuban case, it is also obvious that more radical socialist policies were not pursued because of the sanctions, and sanctions may have even triggered the more recent reforms. Could “capitalist normalization” of an economy be the true objective (or one among others) of sanctions?

PP: We must draw a distinction here between countries like Venezuela and Cuba, on the one hand, and Russia, on the other. The former are socialist countries or countries moving in a socialist direction, but Russia is a country developing capitalism. At the same time, Venezuela and Cuba are small countries highly dependent on imports, while Russia is not only large but has also experienced over seven decades of substantial socialist development in order to build up its self-reliance in the face of encirclement and aggression. The difference in size between the two cases is supplemented also by the difference in the legacies they have inherited.

Sanctions against small relatively undiversified economies can have a devastating effect upon them, not just immediately but even over a period of time. It is not as if in response to sanctions they can, after an initial period of hardship, build up an adequate defence through import substitution. Their size rules it out. In their case, therefore, some amount of compromise, some degree of holding back in the movement towards socialism may become necessary, though, having said that, I must add that one cannot help admiring the resilience they have shown till now.

In the case of Russia, however, which was a socialist super-power until yesterday, matters are altogether different. Even if there is temporary inconvenience, this will be followed by a diversification of the production structure which the Russian economy is perfectly capable of undertaking. Such a diversification would require reintroducing some of the measures that characterized the Soviet Union. In other words, precisely because Russia is a capitalist economy, sanctions against it will have the effect of pushing it, if anything, in a socialist direction.

Let me give an example. Many foreign companies are leaving Russia in the wake of the Western sanctions against it. Russia will soon have to decide what to do with these companies’ assets. If a company leaves Russia, then immediately there may be no other alternative but to nationalize its assets. Now, nationalization is a patently socialist measure and the Russian ruling establishment may not have the faintest desire to nationalize anything; indeed it has been keen on privatizing the Russian economy. Yet circumstances may well force it to adopt, for some time at least, such a socialist measure.

Sanctions, therefore, do not always have the effect of producing “capitalist normalization.” They may have this effect in a country moving toward socialism, but if they are employed against a capitalist economy, then they may have the opposite effect of pushing it in a direction away from “capitalist normalization,” toward the adoption of more radical and even socialist measures.

Of course, so far sanctions have been generally employed against economies that are either moving toward socialism or are at least heterodox, like Iran. They have not been employed against a full-fledged capitalist economy. The Russian case is the first of its kind, where the imperialist countries are employing sanctions against a full-fledged and powerful capitalist country. There is no question of “capitalist normalization” here; but to what extent it gets pushed toward the adoption of heterodox measures, radical measures, and even socialist measures, remains to be seen. Its measures against the Western sanctions, however, will have to be in that general direction.

Of course, I am not suggesting that Russia’s capitalist development trajectory will necessarily come to an end. Socialism comes only through a revolutionary struggle of the working people, and not through the policy choices of the ruling establishment of a capitalist country. So when I am talking about possible socialist measures here, I am not at all suggesting that socialism would be coming back to Russia through the actions of a Putin who is facing some compulsions because of the sanctions; I am only talking about some measures reminiscent of its socialist past being introduced in Russia in the wake of the sanctions. What follows this introduction and how the situation evolves will depend on class struggle within Russia.

Image
A gas line in Caracas, January 2021. Lines at the pump are less prevalent now: the Iran-Venezuela agreement has stabilized fuel production in Venezuela. (El Universal)

The point here is simply this: the impact of imperialist sanctions on different countries is by no means uniform; it varies across countries depending on their sizes and histories.

CPM: Western sanctions may inadvertently push sanctioned nations outside of the loop. In Venezuela’s case, there is no doubt that the U.S. sanctions have pushed the Caribbean nation closer to Turkey, China, Russia, and Iran. Now, with sanctions being imposed on Russia, this may drive it closer to China, and it may end up taking sanctioned countries outside the domain of the dollar and help peripheral financial systems grow. Can you talk about this further?

PP: What you are saying is in my view absolutely correct. I mentioned above that, because of sanctions, regional, local, and bilateral arrangements are coming into vogue which undermine the “world order” imposed by imperialism. In addition, a recent move by Russia that I have not yet talked about poses an even greater threat to this “world order,” and that is Russia’s proposed insistence to be paid in roubles for its oil exports.

This is way beyond anything proposed till now and has profound significance. The rouble has collapsed by as much as 40 percent against the dollar because of the Western impounding of Russia’s foreign exchange reserves. In this context, Russia’s proposal acquires significance, because it would force buying countries to demand roubles to pay for what they buy, which would reverse the steep fall in the price of the rouble.

The normal response would have been to acquire dollars against oil exports and then use these dollars to shore up the rouble. However, given the removal of Russian banks from the SWIFT system and the impounding of Russia’s foreign exchange reserves, it is not clear if the dollars earned against oil exports even in the coming days can be used at all for stabilizing the rouble. The insistence on being paid in roubles for Russia’s oil exports puts the onus of increasing the demand for roubles in exchange for Western currencies–and hence of shoring up the rouble’s exchange rate on countries importing oil from Russia rather than on the Russian Central Bank.

But this move has a significance beyond the immediate issue of rouble depreciation. It amounts to providing a commodity backing for the rouble, in the form of oil. Because Russia is a major oil producer and exporter–and because the European Union simply cannot do without Russian oil in the foreseeable future, upon which it is heavily dependent at present–oil can play the same role for the rouble as gold used to do for the pound sterling under the Gold Standard. A currency’s convertibility to gold at a fixed price under that system is what instilled confidence in that currency in the minds of wealth-holders.

Under the Bretton Woods system, only the dollar was backed by gold, while other currencies’ exchange rate vis-à-vis gold or dollar could in principle be altered (though, in the case of metropolitan currencies, their exchange rates against the dollar were generally maintained through the appropriate management of their macroeconomies). Even under this system, the key to its successful functioning lay in the wealth-holders’ confidence in the stability of the value of the leading currencies, notably the dollar.

At present, of course, we have a flexible exchange rate regime. However, such a regime is viable only because of wealth-holders’ confidence that the value of the leading currency (and to a lesser extent the values of other Western currencies) in terms of commodities will remain relatively stable. Central to this confidence is the belief that the price of oil will remain relatively stable in terms of the dollar, in the sense that notwithstanding fluctuations there would be no rapid secular increase in the dollar price of oil; this is because oil, being a universal intermediary, is a major determinant of the overall price level.

Money wage rates are also kept relatively stable by having a suitably large reserve army of labour. And the insistence on “inflation targeting” ensures that in case there is an inflationary episode, it is suppressed very rapidly. In short, the idea is to maintain the dollar as a currency that is “as good as gold,” so that it remains a stable medium for holding wealth. And other advanced country currencies seek to maintain parity vis-à-vis the dollar through pursuing appropriate macroeconomic policies.

Russia’s insistence on rouble payments by oil importers amounts to a suggestion that the rouble can play this role even more convincingly; it poses a threat to the hegemony of the dollar. If the price of the rouble in terms of oil (and hence by implication in terms of other commodities) is fixed then the world’s wealth-holders, at least some of them, will be tempted to hold their wealth in roubles instead of dollars, which would be a setback for the dollar.

The Chief of the European Commission, Ursula von der Leyen, has simply announced that this insistence by Russia would not be allowed to prevail, but the European Commission is in no position to do anything about it. It can scarcely reduce Europe’s purchase of Russian oil, if Russia insists that such purchase is paid for by roubles.

In fact, ironically, since the imposition of sanctions, Europe’s import of Russian oil has actually increased. This is because the anticipation of an oil-shortage has pushed up spot prices of crude oil in the international market, making Russian crude much cheaper; Europe obviously wants to take advantage of this situation. Biden’s efforts to widen the sanctions to cover Russia’s crude exports to Europe (so far only Russian oil exports to the U.S. are prohibited) have come a cropper. European countries are neither going to do without oil nor pay through their noses for oil imports; hence they will be loath to boycott Russian oil. In fact Biden’s recent European trip, which was meant to achieve progress towards such a boycott, turned out to be an utter failure.

At the same time the U.S. is trying to persuade Venezuela and Iran, countries which it has been targeting through sanctions, to increase their oil production and exports (as it has been trying to pressure Saudi Arabia), so that the world can do without Russian oil and not experience any shortage. But, to achieve this, if at all, the U.S. has to pay a political price; in the case of Venezuela, for instance, it has been trying to prop up Juan Guiado as the president in place of the duly-elected president, Nicolás Maduro. It will have to forego all such machinations as a pre-condition for negotiating with Venezuela. Likewise, it will have to backtrack on its manoeuvres on the Iran Nuclear Deal as a condition for negotiating with Iran. The political price it will have to pay will amount therefore to its eating humble pie vis-à-vis those countries which it was attacking just yesterday.

At a deeper level, therefore, what we are witnessing today is the end of U.S. hegemony in world affairs. Its desperate attempts to preserve that hegemony underlies the Ukraine crisis (since it wants to drive a wedge between Western Europe and Russia and for that reason wants to keep “provoking the bear” so that Western Europe is forced to fall in line behind the U.S. in response to the resulting Russian aggression); but its measures in the wake of that crisis, namely the sanctions it has imposed on Russia, undermine that hegemony, both in terms of economics and also politics.

To say this does not mean that some other country is going to exercise this hegemony in lieu of the United States. Rather, it means a period during which hegemony as we have known it till now will not be exercised by anybody. We are soon going to witness a period of disarray in world imperialism, which will no doubt open up opportunities for revolutionary praxis that the grip of the neo-liberal order has hitherto foreclosed. The working people of the Third World must take advantage of these opportunities that are being opened up.

https://mronline.org/2022/04/04/sanctio ... mic-order/

Which brings to mind all of the empty talk about NWO, globalized capitalism and such nonsense. 'Globalization' has always been the method of US expansion and control. The fantasy of world capitalism having an existence independent of and superior to nation states has always been camouflage for the hegemon. Allowing your 'partners'(punks and suckfish) a little piece of the action preserves appearances and keeps them from getting too antsy. But the 'perception', greatly promoted by the finance media especially(and who owns that?) that inspires crazy paranoia on the Right and to my eye despair("resistance is futile!") on the Far Left is crumbling before our eyes as 'dissing the dollar' becomes an international fad.

The big 'tell' is that this 'globalized capital' has no military of it's own. Without that it does not have physical force and is dependent upon the will of the national capital of nation states. As hegemony dissolves this will become undeniably apparent.
"There is great chaos under heaven; the situation is excellent."

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Re: The crisis of bourgeois economics

Post by blindpig » Fri Apr 08, 2022 1:41 pm

A Once in a Century Opportunity

Alastair Crooke

April 4, 2022

“The era of liberal globalization is over. Before our eyes, a new world economic order is being formed”

Wow! How rapidly the wheel of fortune turns. It seems like only yesterday that a French Finance minister was touting the imminent the collapse of the Russian economy, and President Biden celebrated the Rouble being “reduced to rubble” – the collective West having seized foreign exchange reserves of the Central Bank of Russia; threatened to seize any Russian gold it could lay its hands on; as well as imposing unprecedented sanctions on Russian individuals, companies and institutions. Total fin-war!

Well, it didn’t work out that way. It scared the bejesus out of Central Bankers around the world that their reserves might be up for seizing too if they strayed from ‘the line’. Nonetheless, Team Biden’s hubristic decision to try again to collapse of the Russian economy (first ‘go’ was 2014) may yet come to be viewed as a major geo-political inflection point.

Its’ salience in geo-political terms may even ultimately equate to Nixon’s closing of the U.S. ‘gold window’ in 1971 – albeit, this time, with events pointing completely in the converse direction.

The consequences to Nixon’s abandonment of gold were nuclear. The petrodollar based trading system that was birthed from it allowed America to ‘nuke’ the world with sanctions and secondary sanctions – giving the U.S. its unipolar financial hegemony (after U.S. militarism alone, as the global order’s main support pillar, became discredited in the wake of the 2006 Gulf War).

Now, barely a month on, we see articles in the financial press that it is the Western financial system and world reserve currency that is in open decline, and not Russia’s economic system.

So what is going on?

The post-1971 system quickly evolved from being underpinned by a commodity – crude oil – to a fiat currency which is a “promise” to repay a debt obligation, and nothing more. A hard asset-backed currency is a guarantee that repayment will occur. By contrast, a one dollar of reserve capital is backed by nothing tangible – just the “full faith and credit” of the issuing entity.

What happened is that the fiat system began its demise when the Russo-phobic Washington ‘hawks’ stupidly picked a fight with the one country – Russia – that has the commodities needed to run the world, and to trigger the shift to a different monetary system – to a system that is anchored in something other than fiat money.

Well, the first ‘strike’ on the system – the sequellae to western financial war on Russia – simply was mayhem in commodity markets as prices soared astronomically. Russia is a global commodity super supplier, and it was being ring-fenced by sanctions.

Then early in March, Zoltan Pozsar, who formerly worked at the NY Fed, and was formerly an advisor at the U.S. Treasury and currently a strategist at Credit Suisse, published a research report in which he made the case that the world is heading to a monetary system in which currencies are backed by commodities, as opposed to being backed solely by a sovereign issuer’s “full faith and credit.”

As one of Wall Street’s most respected voices, Pozsar argued that this present monetary system worked so long as commodity prices oscillated predictably within a narrow band – i.e. not under extreme stress (precisely because commodities are collateral for other debt instruments). However, when the entire commodity complex is under stress – as it is now – the berserk commodity prices drive a wider ‘no-confidence’ vote in the system. And that is what we are witnessing now.

In short, the financial war on Russia gave the West an unmistakable lesson from Moscow that the hardest currencies are not USD or EUR, but rather oil, gas, wheat, and gold. Yes, energy, food and strategic resources are currencies.

Then arrived the second strike on the system: On 28 March, Russia announced that it was putting a floor under the price of gold. Its Central Bank would buy gold at a fixed price of 5,000 roubles per gramme – until at least 30 June (the 2nd quarter end).

A price of RUB 100: 1 dollar imputes a gold price of $1550 per ounce, and a RUB/USD rate of around 75, but today a rouble exchanges at approximately RUB 84:1 dollar – (i.e. more roubles than just 75 are required to buy one dollar). Tom Luongo has noted however, that with the Central Bank buying gold at a fixed rate, this commitment gives an arbitrage incentive to Russians to hold savings in roubles, because the rouble is being ‘fixed’ at an undervalued rate relative to an over-valued open gold price (at approximately $1,936 per ounce, at time of writing).

In short, Russia’s Central Bank commitment sets in motion a dynamic to bring the Rouble back into balance with the current dollar price of gold on the open market. And ‘hey presto’, contrary to the European-U.S. effort to crash the exchange value of the rouble and cause a crisis, the rouble is already back at its pre-war level – and it is the dollar which has crashed (vs. the rouble).

But note this: Should the value of the rouble rise further vs the dollar, (say from 100 to 96:1) – as a result of Russia’s commodity trade strength – then the imputed price of gold becomes $1610 per oz. Or, in other words the value of gold rises.

But there is another wrinkle to this: Europeans are loudly protesting that Putin has insisted that ‘unfriendly states’ pay for their gas imports in Roubles (rather than dollars or euros) from 31 March, but Putin added the rider that the Europeans alternatively could pay in gold. (And other states have a further option to pay in Bitcoin.)

And here is the point: If fewer than 75 roubles equate to one dollar, buyers are getting oil at a discount when paying in gold. Maybe the big European energy majors will not be interested, but Asian traders will be keen to arbitrage and profit from the implied price differentials. And that, in itself, is likely to force the physical gold markets into a supply shortage situation, which again will feed through into further increasing the price of physical gold.

One less evident component therefore to European cries of pain (‘We won’t pay in roubles’), is that Central Bankers try to keep gold trading in a tight pattern (through manipulating the paper gold market as so not to rock the foundation of the global financial system).

But what the Russian Central Bank has just done is to wrest the gold ‘price-maker’ role away from the West, and its price manipulation. Between them, Russia and China can therefore effectively control the gold and oil price. Luongo concludes: ‘They are about to change the denominator in the global foreign exchange markets from the USD to gold/oil (commodity currency)’.

“Putin let the world down easy with this announcement. He could have walked right in and said 8000 roubles to the gram or $2575/oz and that would have broken the markets Friday going into the weekend, by selling his oil and gas at a steep discount” – thus forcing a rise in the gold price.

Neat, hey?

Ok, ok: bring on the chorus with usual tropes: Oh no; not another ‘de-dollarisation narrative! TINA – “There is no alternative to the dollar as a reserve currency”.

Fine. We all know that all gold at current valuation is far too small in total value to underpin a fully gold-backed trading currency or global trade. And, by the way, this is not about ending the dollar as an instrument of trade. No, it is about signalling a new direction of travel.

Pozsar’s argument is more subtle: A crisis is unfolding. A crisis of commodities. Commodities are collateral, and collateral is money, and this crisis is about the rising allure of ‘commodity-linked currency’ over fiat money. In periods of banking crises, banks are reluctant to play the inside game because they don’t trust fiat currency as a real collateral. They then refuse to lend money to their banking peers. Every time this occurs, the Central Banks have to print more money to “lubricate” the system enough so that it functions. This in turn, further devalues the fiat money, on which the system is predicated.

But if currency issued by Governments and printed by Central Banks is backed by hard assets, this problem is avoided. In this system, the counter-party to trade or financing transactions would have the option of demanding payment in the hard asset or assets backing the currency – most likely gold or possibly a pre-agreed upon commodity asset. Recall, fiat currency is nothing more than an unsecured debt instrument of the issuing entity – one which we have seen can be ‘cancelled’ at whim by the issuer – the U.S. Treasury.

This makes the ‘pay in roubles’ scheme more understandable too: Any workable “pay in roubles” scheme will have gas buyers going to Russian banks to sell dollars or euros or sterling to the bank, to have it buy roubles to tender to Gazprom. This will have the effect both of increasing the value of the rouble as a means of trade but may mitigate exposure to further financial sanctions by making Russian institutions the locus for payment operations.

As for the ‘direction of travel’? “After the current history of confiscation of dollar reserves”, Sergei Glazyev – supervising Eurasian Economic Commission’s planning for the monetary future – has said bluntly: “I don’t think any country will want to use another country’s currency as a reserve currency. So, we need some new tool”. “We (the EEC) are currently working on a such a tool, which can first become a weighted average component of these national currencies”, he said. “Well, to this we must add, from my point of view, exchange-traded commodities: not only gold, but also oil, metal, grain, and water: A sort of commodity bundle – with a payment system based on modern digital blockchain technologies”.

“In other words, the era of liberal globalization is over. Before our eyes, a new world economic order is being formed — an integral one, in which some states and private banks lose their private monopoly on the issue of money”.

https://www.strategic-culture.org/news/ ... portunity/
"There is great chaos under heaven; the situation is excellent."

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Re: The crisis of bourgeois economics

Post by blindpig » Sat Apr 09, 2022 2:00 pm

The Dollar Devours the Euro
By Michael Thursday, April 7, 2022

It is now clear that today’s escalation of the New Cold War was planned over a year ago. America’s plan to block Nord Stream 2 was really part of its strategy to block Western Europe (“NATO”) from seeking prosperity by mutual trade and investment with China and Russia.

As President Biden and U.S. national-security reports announced, China was seen as the major enemy. This despite China’s helpful role in enabling corporate America to drive down labor’s wage rates by de-industrializing the U.S. economy in favor of Chinese industrialization, China’s growth was recognized as posing the Ultimate Terror: prosperity through socialism. Socialist industrialization always has been perceived to be the great enemy of the rentier economy that has taken over most nations in the century since World War I ended, and especially since the 1980s. The result today is a clash of economic systems – socialist industrialization vs. neoliberal finance capitalism.

That makes the New Cold War against China an implicit opening act of what threatens to be a long-drawn-out World War III. The U.S. strategy is to pry away China’s most likely economic allies, especially Russia, Central Asia, South Asia and East Asia. The question was, where to start the carve-up and isolation.

Russia was seen as presenting the greatest opportunity to begin isolating, both from China and from the NATO Eurozone. A sequence of increasingly severe – and hopefully fatal – sanctions against Russia was drawn up to block NATO from trading with it. All that was needed to ignite the geopolitical earthquake as a casus belli.

That was arranged easily enough. The escalating New Cold War could have been launched in the Near East – over resistance to America’s grabbing of Iraqi oil fields, or against Iran and countries helping it survive economically, or in East Africa. Plans for coups, color revolutions and regime change have been drawn up for all these areas, and America’s African army has been built up especially fast over the past year or two. But Ukraine has been subjected to a U.S.-backed civil war for eight years, since the 2014 Maidan coup, and offered the chance for the greatest first victory in this confrontation against China, Russia and their allies.

So the Russian-speaking Donetsk and Luhansk regions were shelled with increasing intensity, and when Russia still refrained from responding, plans reportedly were drawn up for a great showdown to commence in late February – beginning with a blitzkrieg Western Ukrainian attack organized by U.S. advisors and armed by NATO.

Russia’s preemptive defense of the two Eastern Ukrainian provinces and its subsequent military destruction of the Ukrainian army, navy and air force over the past two months has been used as the excuse to start imposing the U.S.-designed sanctions program that we are seeing unfolding today. Western Europe has dutifully gone along whole-hog. Instead of buying Russian gas, oil and food grains, it will buy these from the United States, along with sharply increased arms imports.

The prospective fall in the Euro/Dollar exchange rate
It therefore is appropriate to look at how this is likely to affect Western Europe’s balance of payments and hence the euro’s exchange rate against the dollar.

European trade and investment prior to the War to Impose Sanctions had promised a rising mutual prosperity between Germany, France and other NATO countries vis-à-vis Russia and China. Russia was providing abundant energy at a competitive price, and this energy was to make a quantum leap with Nord Stream 2. Europe was to earn the foreign exchange to pay for this rising import trade by a combination of exporting more industrial manufactures to Russia and capital investment in developing the Russian economy, e.g. by German auto companies and financial investment. This bilateral trade and investment is now stopped – and will remain stopped for many, many years, given NATO’s confiscation of Russia’s foreign reserves kept in euros and British sterling, and Europe’s Russophobia being fanned by U.S. propaganda media.

In its place, NATO countries will purchase U.S. LNG – but they will need to spend billions of dollars building sufficient port capacity, which may take until perhaps 2024. (Good luck until then.) The energy shortage will sharply raise the world price of gas and oil. NATO countries also will step up their purchases of arms from the U.S. military-industrial complex. The near-panic buying will also raise the price for arms. And food prices also will rise as a result of the desperate grain shortfalls resulting from a cessation of imports from Russia and Ukraine on the one hand, and the shortage of ammonia fertilizer made from gas.

All three of these trade dynamics will strengthen the dollar vis-à-vis the euro. The question is, how will Europe balance its international payments with the United States? What does it have to export that the U.S. economy will accept as its own protectionist interests gain influence, now that global free trade is dying quickly?

The answer is, not much. So what will Europe do?

I could make a modest proposal. Now that Europe has pretty much ceased to be a politically independent state, it is beginning to look more like Panama and Liberia – “flag of convenience” offshore banking centers that are not real “states” because they don’t issue their own currency, but use the U.S. dollar. Since the eurozone has been created with monetary handcuffs limiting its ability to create money to spend into the economy beyond the limit of 3 percent of GDP, why not simply throw in the financial towel and adopt the U.S. dollar, like Ecuador, Somalia and the Turks and Caicos Islands? That would give foreign investors security against currency depreciation in their rising trade with Europe and its export financing.

For Europe, the alternative is that the dollar-cost of its foreign debt taken on to finance its widening trade deficit with the United States for oil, arms and food will explode. The cost in euros will be even greater as the currency falls against the dollar. Interest rates will rise, slowing investment and making Europe even more dependent on imports. The eurozone will turn into an economic dead zone.

For the United States, this is Dollar Hegemony on steroids – at least vis-à-vis Europe. The continent would become a somewhat larger version of Puerto Rico.

The dollar vis-à-vis Global South currencies
The full-blown version is the New Cold War turning into the opening salvo of World War III triggered by the “Ukraine War”, that’s likely to last at least a decade, perhaps two, as the U.S. extends the fight between neoliberalism and socialism to encompass a worldwide conflict. Apart from the U.S. economic conquest of Europe, its strategists are seeking to lock in African, South American and Asian countries along similar lines to what has been planned for Europe.

The sharp rise in energy and food prices will hit food-deficit and oil-deficit economies hard – at the same time that their foreign dollar-denominated debts to bondholders and banks are falling due and the dollar’s exchange rate is rising against their own currency. Many African and Latin American countries – especially North Africa – face a choice between going hungry, cutting back their gasoline and electricity use, or borrowing the dollars to cover their dependency on U.S.-shaped trade.

There has been talk of IMF issues of new SDRs to finance the rising trade and payments deficits. But such credit always comes with strings attached. The IMF has its own policy of sanctioning countries that do not obey U.S. policy. The first U.S. demand will be that these countries boycott Russia, China and their emerging trade and currency self-help alliance. “Why should we give you SDRs or extend new dollar loans to you, if you are simply going to spend these in Russia, China and other countries that we have declared to be enemies,” the U.S. officials will ask.

At least, this is the plan. I would not be surprised to see some African country become the “next Ukraine,” with U.S. proxy troops (there are still plenty of Wahabi advocates and mercenaries) fighting against the armies and populations of countries seeking to feed themselves with grain from Russian farms, and power their economies with oil or gas from Russian wells – not to speak of participating in China’s Belt and Road Initiative that was, after all, the trigger to America’s launching of its new war for global neoliberal hegemony.

The world economy is being enflamed, and the United States has prepared for a military response and weaponization of its own oil and agricultural export trade, arms trade and demands for countries to choose which side of the New Iron Curtain they wish to join.

But what is in this for Europe? Greek labor unions already are demonstrating against the sanctions being imposed. And in Hungary, Prime Minister Viktor Orban has just won an election on what is basically an anti-EU and anti-U.S. worldview, starting with paying for Russian gas in roubles. How many other countries will break ranks – and how long will it take?

What is in this for the Global South countries being squeezed – not merely as “collateral damage” to the deep shortages and soaring prices for energy and food, but as the very objective of U.S. strategy as it inaugurates the great splitting of the world economy in two? India has already told U.S. diplomats that its economy is naturally connected with those of Russia and China.

From the U.S. vantage point, all that needs to be answered is, “What’s in it for the local politicians and client oligarchies that we reward for delivering their countries?”

That is what makes the looming World War III a veritable war of economic systems. What side will countries choose: their own economic interest and social cohesion, or the U.S. diplomacy put in the hands of their political leaders? When combined with U.S. meddling along the lines of the $5 billion that Assistant Secretary of State Victoria Nuland bragged of having invested in Ukraine’s neo-Nazi parties eight years ago to initiate the fighting erupting in today’s war, there is a lot to consider.

In the face of all this political meddling and media propaganda, how long will it take the rest of the world to realize that there’s a global war on as it expands into World War III? The real problem is that by the time it understands what is going on, the global fracture will already have enabled Russia, China and Eurasia to create a real non-neoliberal New World Order that does not need NATO countries, having lost trust and hope for mutual economic gains. The military battlefield will be littered with economic corpses.

https://michael-hudson.com/2022/04/the- ... -the-euro/
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Re: The crisis of bourgeois economics

Post by blindpig » Wed Apr 27, 2022 1:50 pm

US Fed's policies are main driver of inflation
By Zhang Yongjun | China Daily Global | Updated: 2022-04-27 09:16

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The Federal Reserve building is seen in Washington, US, Jan 26, 2022. [Photo/Agencies]

Data released recently by the US Bureau of Labor Statistics showed that the consumer price index in the United States jumped 8.5 percent in March over the same period last year, a record high in 40 years, while the producer price index also rose at a faster pace.

US President Joe Biden blamed the high inflation on the Russia-Ukraine conflict and even coined a new term-"Putin's price hike"-for it. However, that claim does not hold water. Even some US media outlets said that the Biden administration was attempting to pass the buck to Russia to divert attention from its own failure to tame inflation ahead of the midterm elections.

The inflation rate in the US was already high before the flare-up of the Ukraine crisis. In March, the country's consumer price index rose 1.2 percent from the previous month, of which 0.7 percentage point was caused by the rising price of gasoline. This seems to support Biden's claim, since prices of oil, gas and food saw dramatic growth after the Russia-Ukraine conflict broke out. But it should be noted that although the Ukraine crisis has aggravated inflation, prices in the US had started to rise long before the conflict. Since May last year, the CPI has been running above 5 percent for 11 months in a row, and had already shot up to 7.5 percent in January.

If the main driving force behind the acceleration of inflation was the increase in oil and gas prices caused by the Russia-Ukraine conflict, then European countries, which are more directly affected by the conflict, should have had more severe inflation than the US.But consumer prices in the US have grown faster than those in the eurozone.

According to Eurostat, the European Union's statistical office, the eurozone's consumer price index/harmonized index of consumer prices-an inflation and price stability indicator of the European Central Bank-jumped 7.54 percent year-on-year in March, nearly 1 percentage point lower than the US figure.

Germany is highly dependent on Russian oil and natural gas imports, with statistics published by the International Energy Agency showing that the country imported 46 percent of its gas and 37 percent of its oil from Russia. In comparison, US imports of gas and oil from Russia are negligible. However, Germany's consumer price index/harmonized index of consumer prices rose 7.6 percent in March, 0.9 percentage point lower than the US, which indicates that the US' inflation woes should not be attributed to the Ukraine crisis.

The main cause of the US inflation is its aggressive monetary and fiscal policies. In the first half of 2020, the Federal Reserve launched massive quantitative easing, which pumped hefty amounts of money into the market.

From May 2020 to March 2021, M1-a narrow measure of money supply that covers cash in circulation and current deposits-surged more than 300 percent on a monthly basis on average, and M2, which covers cash in circulation and all deposits, rose more than 20 percent, which has fueled the rise of prices in the US.

In terms of fiscal deficit, data from the US Treasury Department shows that the country's fiscal deficit was $3.13 trillion in fiscal 2020 and $2.77 trillion in fiscal 2021, the highest and second-highest in history. The deficit-to-GDP ratio was 15.2 percent in 2020 and 12.4 percent in 2021.

The large amount of money pumped into the market by the Fed has been used to buy government bonds to make up for the fiscal deficit, and the fiscal spending has gone into the pockets of residents and enterprises in the forms of subsidies and allowances, which has contributed to the rebound of market demand. However, supply capacity has not recovered at the same pace as demand, resulting in a gap between demand and supply, which has driven inflation higher.

The soaring inflation rates in the US and Europe can be put down to the aggressive monetary and fiscal policies adopted there. The US is the first developed nation to witness accelerated inflation. As the US dollar is an international currency and the increase in its supply far outpaces other global currencies such as the euro, the excessive liquidity of the dollar directly pushed up the prices in the US and also fueled rising inflation worldwide, which has been worsened by the Russia-Ukraine conflict.

Therefore, the US and European countries should tighten their macroeconomic policies and urge Russia and Ukraine to reach a cease-fire agreement through negotiations at an early date to minimize the impact of the conflict on the world economy.

https://www.chinadaily.com.cn/a/202204/ ... 59893.html

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If Wage Growth Is Driving Inflation, Why Is Workers’ Share of Income Falling?
Dean BakerBy DEAN BAKERApril 21, 2022

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A popular line on our recent surge of inflation is that an over-tight labor market has led to rapid wage growth, which in turn forces companies to raise prices. Higher prices in turn lead workers to demand higher wages, which will give us a wage-price spiral and soon lead to double-digit inflation.

While this was a story that plausibly fit the data in the 1970s, it is very hard to make the wage-price spiral fit the current situation for a simple reason: The wage share of income has fallen sharply since the pandemic. By wage share I mean total compensation to workers, including fringe benefits, not just cash wages and salaries.

Here’s the picture:

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Worker Share of Net Corporate Income Decline
Source: Federal Bureau of Economic Analysis

As can be seen, the wage share of corporate income had been recovering gradually from the troughs it hit in 2014 following the Great Recession. However, we see a sharp reversal in 2021, with the wage share falling from 76.1% to 73.7%, a decline of 2.4 percentage points.

Perhaps some economists can tell a story where rapid wage growth is driving inflation even as the wage share of income is falling, but I’m not that good an economist. [Editor’s Note: “Good” as in dishonest.]

This still looks to me like a case where supply-side disruptions, associated with the economy reopening from the pandemic together with the war in Ukraine are driving inflation.

This view is consistent with the fact that year-over-year inflation in the European Union was 7.5% as of March. The EU countries did not have as big a stimulus as the United States and by most measures the EU labor market is not as tight as in the United States.

https://www.dcreport.org/2022/04/21/if- ... e-falling/
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