Historical
Parallels?
Germany’s
Push For War In the 1930’s and the Current War of the Cheney-Bush Administration
Loren
Goldner
March
2003
In
recent weeks there has been some allusion to the economic parallels between
Germany in 1938 and the U.S., today, on the eve of the second war against
Iraq. I think that in U.S. domestic politics, in spite
of the clear sharpening of the immigration laws, the shredding of constitutional
rights for alleged “terrorists”, the Homeland Security Act, etc. [...] it would be loose talk indeed to speak of “fascism”
in the U.S. Nonetheless I see clear parallels on the economic level, and
particularly the structural similarity between Hjalmar Schacht’s Mefo-bills
and the credit pyramid of the U.S. economy (Schacht was Hitler’s finance
minister and Mefo-bills were floated by the private Metallforschungsgesellschaft,
which was initially capitalized with 100,000 Reichsmark and which over the
1933-1938 period created 4 billion RM of credit, a ratio of 4000:1. This
money was used for German rearmament, as a prelude to the Europe-wide looting
of assets in World War II.
Despite
growing repression on the domestic front (Ashcroft, thousands of immigrants
expelled) the U.S. today, unlike Germany in the 1930’s, is not a fascist
regime. The current level mobilization against the coming war, with mass
demonstrations in October, December and in February, with city councils and
trade unions passing anti-war resolutions—and all this, before the shooting
begins—ist hardly what one would find under a fascist regime, and, for the
current stage, a much broader agitation than what happened in the early years
of the Vietnam War.
It
is true that arms production, prior to September 11, was less important for
the U.S. economy than it had been in the 1980’s, or it was for Germany in
the 1930’s. But Bush’s ten-year rearmament plans are comparable to Cold War
levels and mark a clear reversal of the recent trend.
Quite
apart from that, if the U.S. is not imperialist, with troops and ongoing
military operations in 100 countries, than I don’t know what the word means.
Some
orthodox Marxists object than the dollar is a currency like any other (i.e.
the euro or the yen) and that America’s 2+trillion net external indebtedness
and the reserve status of the dollar are unimportant.
But
when one approaches the question in this way, than one is ultimately viewing
money in a Ricardian fashion, i.e. as a mere “veil” over “real” exchange.
. But money as capital in the valorization process M-C-M’ is not merely a
veil, but acquires in the course of the business cycle an increasingly ficiticious
dimension, requiring valorization alongside “real” commodity production. Once again: the U.S., according to the best estimates,
has a net external indebtedness of over $2 trillion, or 20% of GDP, a level
comparable with an indebted Third World country (one arrives at this figure
by deducting $8 trillion of total U.S. holdings abroad from the $10 trillion
held by foreigners). This is a further important difference with Germany
in the 1930’s, since in the rigorous autarchy then in effect only the weakest
countries had to hold their trade surpluses with Germany in Reichsmarks and
barter was a widespread form of international trade. .Further, Germany had
unilaterally repudiated its international debts from the Versailles Treaty
and from war reparations.
Since 1945, the dollar has been the number one international
reserve currency. It began as “paper gold”, which creditors of the U.S. could
hold in their reserves; since 1971 the U.S. has no longer paid its creditors
in gold upon request, and the dollar has become “paper paper”. Perhaps the
yen and the euro will eventually compete with the dollar, but it will be
a long time before Japan or Europe can militarily or politically challenge
the U.S., and a reserve currency is not merely an “economic” phenomenon.
.
Since
the end of the 1950’s, there has been increasing turmoil in the international
currency and financial system, as the external debt of the U.S., and the
related trade and balance-of-payments deficits, have continued to grow. A
major thrust of U.S. foreign policy is aimed at forcing foreign holders of
dollars to continue the existing arrangement, and thus shows that money is
not merely a “veil” over real commodity exchange, but is a fiction, backed
up by the entire imperial (i.e. also political and military) position of
the U.S, Real goods flow to the U.S., and pieces of
green paper accumulate abroad; this is a rather more refined form of looting
the world’s wealth than Germany’s slave labor programs in eastern Europe
after 1938.
U.S. policy, particularly since the end of Bretton Woods
(1971-73), aims at increasing this capacity to loot. By loot I mean nothing
more (and nothing less) than access to wealth above and beyond “normal” commodity
exchange.
By
its unilateral dissolution of Bretton Woods the U.S. devalued foreign dollar
holdings by 10-20%; the 20% fall of the dollar in the last year has had a
similar result. Deflation and inflation alike do not
merely entail a change in the price tags of commodities, since all commodities
do not change equally. Deflation punishes debtors
(because they have to earn more, to pay back their debts) and rewards creditors
(because the money owed them becomes more valuable); inflation
punishes creditors (whose loans lose value) and rewards debtors (because
they can repay their debts more cheaply) In these case, money is clearly
more than a veil; monetary policy entails a redistribution of wealth. At
the end of the great inflation in Germany in 1923, industry’s debts had been
wiped out, and the working class had managed to keep up its wages through
struggle, but the German middle strata who had financed World War I with
their savings, and who had no real collective power to struggle, were completely
wiped out.
Greenspan
and the Federal Reserve Bank have almost shot their last bolt. They have
pushed interest rates down to near-zero, and the subsequent refinancing of
mortages has put hundreds of billions of additional purchasing power into
the hands of the middle class.
The
increased indebtedness of U.S. “consumers” has for years for the “locomotive”
of the world economy. When these emergency measures lose their momentum,
then a deflationary collapse will be avoidable only by unleashing the printing
presses, i.e. by “punishing the creditors”, particularly foreign creditors.
The commodities represented by these foreign-held dollars will have come
to the U.S. for “free”.
Since
the end of Bretton Woods and particularly since 1980, U.S. policy has consisted
in an ever-greater extension of American access to the looting of foreign
wealth (i.e. once again the increase of “free” wealth through currency fluctuations),
through the violent opening of mercantilist nations and blocs: Europe, Japan
and the “tigers” (through the Asia crisis), eastern Europe, Russia, and Latin
America.
The
IMF/World Bank recipies for “free trade” and “transparency” come down to
the dismantling of all statist obstacles to the valorization of U.S. capital.
Capital expands, and society regresses.
Germany
in 1938 was tightly encircled by other imperialisms (above all Britain, France
and the U.S.), whereas the U.S. since 1971 has enjoyed increasingly “global
access” for its looting mechanisms. In China and in India, where serious
wealth is still untapped, the local mercantile structures still constitute
an obstacle for looting, precisely as U.S. policy on the Eurasian land mass
aims precisely at ending the relative isolation of this region (above all
Central Asia). That is the core of the parallels with Germany in 1938, which
the U.S. is realizing on a larger, more global scale.
U.S.
Inflation First, Then Deflation
By
Loren Goldner
June
2003
With
Germany on the brink of deflation, Japan already in it, and increasing
discussion
of its imminence in the U.S., it is time to address the question of deflation
vs. inflation in the current conjuncture. I foresee a burst of inflation,
at least in the U.S., preceding final
world
deflation. This raises the specter of, ultimately, a "debt-deflation" crisis
as
a
world-wide fall of price levels leaves serious amounts of debt in place,
since
not all debts deflate, and as Japan has shown, institutional intervention
can
keep some of them from deflating for a long time. (This is the real
analytical
significance of of the concept of fictitious capital.) The U.S. Federal Reserve
Bank will
try--in
fact, has now already vigorously trying since January 2001--one more burst
of credit
creation
to head off collapse; it is the only trick they know, and has
seriously
improved liquidity since the scare of Fall 2002. Of course the Fed
hardly
controls the whole show; with $10 trillion estimated held abroad and a
net
$3 trillion in U.S. external debt, serious dumping of the dollar by
foreigners
will certainly accelerate the important exit from the dollar
underway
over the past year if inflation takes off in the U.S. If this exit from the
dollar becomes a fall off a cliff
the
Fed will either have to quickly raise interest rates and thus accelerate
domestic
deflation, or take drastic action to wipe out the value of dollar
holdings
abroad. (This was done in a mild way by Nixon's 1971 dissolution of
Bretton
Woods, but the stakes are far higher now.) It was estimated in 1980
when
the price of gold went to $900 an ounce (up from $168 an ounce in 1978)
that
a return to the gold standard (one highly hypothetical "thought
experiment)
would require a gold price of $2000 an ounce to anchor total
dollars
outstanding. The U.S. in 1980 was, it should be recalled, still a
creditor
country; it ceased to be one in 1984, and one can only imagine the gold price
necessary to underwrite
the
total dollars outstanding today. Such a drastic move is of course highly
unlikely,
because it would be tantamount to an exhorbitant export of deflation
to
the rest of the world, and would require virtual autarchy in the U.S., in
the
context of world deflationary collapse.
It is important to keep in mind that the deflationary
experiences of Japan and Germany are the experiences of creditor countries,
and countries which moreover undergo the consequences of U.S. credit profligacy.
Since 1945, through the Bretton Woods system,the world has essentially been
on a dollar standard ultimately backed by the debt of the U.S. government.
Until 1971, this system also had a backing in gold reserves; since 1971,
its only backing has been the creditworthiness of the American state. It
is noteworthy that in late May the White House acknowledged suppressing a
U.S. Treasury report that forecast the U.S. government debt reaching $42
trillion, just as the Bush administration is pushing through $800 in tax
cuts over the next 10 years. The key fact in the world financial system today
is the holding of dollars by foreigners, in the form of U.S. government debt,
U.S. stocks and bonds, and direct investment in the U.S. This recycling of
dollars from the U.S. balance of payments hemorrhage (heading for $500 billion
in 2003) makes possible the pyramiding of U.S. Federal, state, municipal,
corporate and personal debt; total domestic indebtedness (minus the Federal
government) is estimated at $20 trillion, or two times GDP. The two main
foreign creditors of the U.S. today are China and Japan, with roughly $1
trillion between them; if and when these and other creditors of the U.S.
sell their dollars, this whole pyramid of U.S. domestic loans will collapse.
In the meantime, however, the Fed is doing everything
in its power to inflate the U.S. domestic credit bubbles, above all through
such mechanisms as mortgage refinancing, which has put tens of billions of
credit into the hands of the middle classes in the past few years, creating
a housing bubble comparable to the earlier high tech bubble and the slowly
deflating dollar bubble.
A massive exit from the dollar by foreigners will be the
moment of world deflation into depression. The world has been laboring under
the bankruptcy of the dollar system since the 1960’s; in March 1968, in the
summer of 1974, and possibly in 1979 the world came close to a flight from
the dollar which would have begun the depression then and there. What prevented
the depression from occurring was a pyramiding of credit which even amazed
astute analysts of the time in its magnitude, combined with a successful
attack on U.S. living standards of the order of a 20% decline for 80% of
the population.
As we have seen in the Iraq wars (1991, 2003), both of
which significantly occurred in the trough of a U.S. recession, one must
never underestimate the political dimension of crisis management. This will
not be a purely economic phenomenon; the U.S. in the 1960’s and 1970’s exported
its inflation, and now it will export its deflation. The policy it has been
developing in Eurasia, with the military ringing of Russia and China (most
recently with announced bases in Poland and Rumania),has tremendous potential
for further crisis mongering. When England became bankrupt in the 1930’s,
U.S. capital was waiting in the wings; there is no force capable to supplanting
the U.S. today, which means that only a working-class response can offer
a successful exit from U.S. implosion.
(This text is from the Break
Their Haughty Power web site at http://home.earthlink.net~lrgoldner)