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Loren Goldner, "The 'Dollar' Crisis, and Us"The 'Dollar' Crisis, and Us Incredible as it may sound, ever since the late 1950’s, the world economy has been tossing around a “hot potato” of an ever-increasing mass of “nomad dollars” (dollars held outside the U.S.) whose actual conversion into tangible wealth would plunge the world into a deflationary crash. Even now, few people are aware of the extent to which this “technical” question of “economics” (and in reality a profoundly social question) has in fact cadenced 45 years of world history, erupting into view in key years such as 1968 (dollar convertibility crisis), 1973 (end of the Bretton Woods System), 1979 (runaway global inflation, gold at $850 an ounce) 1990 (Japanese deflation) or 1997-98 (Asia crisis, Russian default, “hedge fund” crisis).
The basic problem of every major crisis in capitalism’s history has been (as rapidly sketched here) that of destroying or deflating a “bubble” of fictitious or speculative claims on wealth (stocks, bonds, property titles) and bringing those claims back into rough correspondence with the “real” rate of profit available in production (speaking very schematically) and from “free inputs” available elsewhere (such as the looting of peasant labor and nature). Unfortunately, seeing this process at work today is greatly complicated by decades in which the U.S. has been fashioned into a rentier economy far beyond anything achieved by its predecessor, the British empire of 1815-1945. While the “story” of how that came about cannot meaningfully be sketched here (2), what has differentiated American world empire from the British since World War II has been America’s ability to force the rest of the world to hold its own debts as the major portion of international reserves in central banks (whereas the British, who could do this with their colonial empire, were globally constrained by serious rivals and the gold standard). Particularly after 1973, the U.S. succeeded in placing the rest of the world on a fiat dollar standard based on nothing but the financial credibility of the U.S. government.
With the Cold War over, nothing in this economic arrangement has changed, and things have only gotten far worse, like a small tumor turning into elephantiasis. As U.S. Treasury Secretary John Connally in 1971 told Europe and Japan “it’s our currency, but it’s your problem”. Without the recycling of dollars by foreigners with (to date) little alternative back into the U.S., the driving pillars of the U.S. domestic economy, the consumer financing of auto and housing sales, would collapse overnight. Worse still, the apparent (and very relative, compared to world population) booms in such places as China and Latin America (currently led by Brazil) are directly dependent on the global circulation of the “dollar bubble”. Without massive Chinese exports to the U.S., made possible by China’s (and Japan’s) willingness to hold hundreds of billions of dollar reserves, the Chinese boom would collapse, as would the current Latin American expansion made possible by the export of raw materials to China to produce consumer goods for the U.S.
But enough of this “technical” “economic” discussion, which causes most people’s eyes to glaze over. The truly interesting question behind all this is its meaning for a radical anti-capitalist left. The simple fact of the matter is that neither we, nor the vast majority of American working people, are prepared for the depths of the catastrophe now unfolding. The levels of austerity the capitalists will demand have been unknown since the 1930’s,(and in the 1930’s the U.S. was becoming the uncontested hegemon of world credit and industrial production, not the world’s biggest debtor nation and industrial has-been it is now). Obscure as the above economic dynamic is, both in the mainstream and in the radical left, it will be even more obscured by the clear capitalist determination to avoid a “purely economic crisis”, much as Adolf Hitler chose to go to war in 1938 when his Finance Minister, Schacht, told him that the German debt pyramid and war production was on the verge of complete bankruptcy. The post-1979 U.S. strategy on the perimeter of Russia and China, as illustrated in Afghanistan, Yugoslavia, Iraq, most recently in Ukraine (3), and tomorrow most probably in Iran and North Korea, aims at preventing any serious challenge (economic and military) from coalescing on the Eurasian land mass. Europe, Russia, China, Japan and India must all be kept at loggerheads and on the defensive, and hence incapable of challenging the increasingly obvious bankruptcy of the U.S. dominated system. This American offensive (there are as many U.S. armaments today in the Gulf state of Qatar as in Germany), not to mention further brewing crises (Sudan, Venezuela, Columbia) and “perennials” (e.g. Palestine) will never lack fires to put out, if and when the “war on terror” loses its mobilizing edge. The American capitalists understand that their decline requires keeping not only all potential rivals but American working people themselves, permanently off balance. Everything will be done to make the consequences of decades of American decline appear instead as the work of terrorists, or China, or (as in the unbelievable French-bashing in the run-up to the Iraq war) even of Europe. Remote as the prospect of political and social power for a radical anti-capitalist left might seem today, we must begin to popularize an understanding of the real forces at work in shaping today’s political agenda. It is imperative to cut through the weight of ideology that is fueling the current U.S. isolationism and might soon fuel a large protectionist backlash as another mass diversionary response to the crisis. No less a figure than Warren Buffett has been saying for years that America’s vast, highly paid army of “financial engineers”, media CEOs, lawyers, HMO bureaucrats and myriad others populating the “FIRE” economy is collectively “kicking society in the shins”. There is no lack of “disconnect” between ordinary working people and the spectacle of business-as-usual politics and the media promoting them; our problem is rather to relocate the populist (of the right or of the left) impulse articulated by Buffett, or Nader, or Buchanan, or Tom Frank away from the widely despised “elites” to a truly radical, Marxist analysis of the dynamic of a global system of social relations.
l) Who can seriously imagine a mainstream politician saying the “we must abolish the global dollar standard and accept a major devaluation of our currency, in light of new world economic realities; recognize our declining status as the world’s largest debtor nation; accept a further major fall in our living standards on top of the 20% fall since 1973; cut social services to the bone, and bring exports into surplus over exports to begin repaying our huge outstanding debts”?
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