[Translation of a lecture by an editor of GegenStandpunkt, Germany 23 April 2009]
The crisis is viewed in a biased way: everybody hopes that the economy will function again because they make their living from it. This desire clouds everybody’s consciousness, makes everybody blind to the outrageous things that come to light in a crisis and could attract anybody’s attention, but don’t because they take the view of: “what is necessary so that my livelihood functions again.” This lecture intends to turn the tables and draw attention to the question: what kind of a livelihood is that, if all the people – and there is no denying it – are dependent on it.
1st absurdity: cause and effect
Everybody can remember that it all started off when the securitized mortgages of poor American homeowners turned out to be papers which could no longer be sold. What happened? These papers were a speculative business through which investment bankers created profits by selling the debts they owned within the financial sector. Banks treated mortgages – i.e., loans they had granted, i.e., money they no longer had – as assets because of the interest payments they expected, selling them at a certain price, in most cases to their own conduits. The latter resold them at a profit within the financial sector. These businesses failed to a great extent, as is now known. The press then wrote that this was all the doing of irresponsible speculators, of just a few hundred investment bankers who rolled the dice and lost all the money. This was the cause: speculative businesses that before now were completely unknown to everybody, business deals somewhere in the financial world, failed. Effect: 50 million people are going to die of hunger, the newspapers write, because the speculation of some 100 investment bankers failed. In Germany, the same newspapers say, there will be 5 million more who will be unemployed this year, in the EU another 15 million. This year industrial production in Germany will shrink by 15%, exports by 25%, GNP by 5%; some states are going to fail, Iceland and Hungary have already done so, the Baltic States may follow suit.
How does this happen? How are the cause and the effect related? How do a hundred investment bankers become the world's undoing? Or to put it the other way around: what kind of a world is it, if the entire material life process is cut back because investment bankers lost money through speculation, if their failure in speculating brings about the breakdown of the material reproduction of entire continents? Material reproduction is an economic term which means: the material life process in which work is done so that products are made which can be consumed, consisting of houses, cars, or trains which can then be used – all that is brought to a halt now, even given up, only because a hundred or so investment bankers failed. What kind of business activities are these? They have, at any rate, nothing to do with the production of wheat or rice, but millions more will have to starve only because these bankers, who never produced any wheat or rice, now retreat from business. So what kind of business activities are they engaged in? Indeed, nobody understands what they do, not even the bankers themselves, as the newspapers write. And that’s taken as completely normal. What they do is generate the capitalistic miracle itself: they make more money out of money. As Marx wrote: M-M’ – out of a given amount of money, they make money plus an increment; a mathematical formula for the same thing: they lend money and get more money back for it. They own the debts of others and turn them into capital: by promising others profits on the debts they own, and on which they can expect earnings. Others buy these securities, or in other words: these promises that the money they pay will be increased. The promise is 5% on $100 for getting the $100 paid by somebody else; somebody pays these $100 for getting $5 more at the end of the year. They get $100 paid, and then they do exactly the same thing with the same $100: lend them at 5 or even 6%. What they do is – and this is the speculative element in it – turn future earnings into existing capital. This is what speculation means: making an asset out of an expectation. This is what they do, and it works. When the financial men are in the mood, i.e., when they trust in the owners of securities, they indeed compete for these papers, forcing up their prices, as is done with shares on the stock markets. They simply trust that the one who issued the securities will be able to pay back the promised sum. They don’t pose the question as to the source of this ability; they do not ask whether the issuer of this paper is able to pay. What they ask about is the financial power of the issuer of the securities; but they don’t care about the source of these surpluses. If somebody can promise a plus, he has the power to generate capital by promising: give me $100 and you’ll get $5 at the end of each year. The one who buys the paper for $100 has a security afterwards. (And this is something other than what occurs between normal people: if you need money, and I lend you $100, I don’t have it any more, but have to wait until you give me back this $100. This money only exists one time.) The money in the financial sector exists twice: the issuer of the security promises 5% and gets $100; the investor, i.e., the one who buys this paper, gives away this $100 and thus turns money into financial capital, i.e., turns his money into increasing money. And what he now has is a security, i.e., an asset that will be turned into $105 at the end of each year, and this can be used for all sorts of business operations: you can use it for getting a loan, you can sell it, you can even make purchases with it.
This miracle – they promise a plus, thus creating the capital out of which this plus will be paid – is a super business, given the investors’ trust. Together with the issuers of these papers, they then continuously accumulate capitalistic assets, on and on. And, by the way, the last 15 years consisted of a continuous gigantic expansion of capitalistic assets. If, however, mistrust arises in evaluating these papers, the trend is reversed; and this daily judgment is the business of the financial sector – and nobody needs to tell these guys that their business is risky, they themselves know this very well. Day in and day out, they assess whether they can still put their trust in the promise of an issuer of paper that it will increase in value. If they do, they buy another one, and if doubts arise, they sell their securities. Every investor, even small investors, but especially big investors, buy and sell investment bonds, day in and day out. Purchases and sales are always meant to increase the investor’s property: buying papers whose value will hopefully increase, selling those whose price will decrease in the foreseeable future. These assumptions take into account every possible indicator about the issuer, for instance, the future of the firm that issued the paper he holds, say, corporate bonds: how is its business running, can it pay a dividend next year, does it have good business expectations in the future? Then its bonds are bought; if not, they are sold. Are the balance sheets of a bank in order or not? If they’re positive, its papers are bought; if doubts arise, they are sold. And just as they permanently increase the amount of capitalistic assets in this sector into gigantic sums, they diminish them if doubts arise regarding the continuation of this sort of enrichment. Then everybody tries to rescue his property by parting with the dubious paper. As long as there are others whose bets go in the opposite direction, who buy the papers that are sold at a discount, all goes well. But if more or all try to get rid of these papers, the latter devalue just as quickly and easily as they had once gone up in value. Everybody knows this phenomenon from the stock market: if all investors try to sell the same shares, these papers are valueless. The same holds for securities: they increase in value – not so much in comparison – if there is enough confidence in future earnings; then the investors compete to buy them, pushing up the prices; in the reverse case, everybody sells them off, in which case they are no longer worth anything.
If all this comes to a halt, as is now the case, the public – in hindsight – laments that this kind of business is a sort of a “snowball system.” This is an image for the fact that this sphere of business really does business by promising with its papers an increase in value today that is supposed to be paid out of the accumulation of capital in the meantime. If capital grows, if more and more is invested in this sphere of business, and prices go up, then it’s a piece of cake to pay out the promised sum to the holders of these papers. This business is indeed a speculation on the growth of capital over the course of time. If, however, it doesn’t function anymore, everybody realizes that it couldn’t work – unless capital had gone on growing. Then people are surprised that such dodgy speculators and gamblers were at work this whole time in such noble bank towers. It is one thing to criticize the failure at this point – and this is what the whole world does, namely, it reproaches the investment bankers for taking too many risks, for involving themselves in business activities which were too dodgy, for constructing fraudulent papers, papers which they themselves didn’t actually understand any more. This sort of criticism does not look at the kind of business that is at work there; rather, it accuses the bankers of having done something that didn’t work out. What is interesting is that they wouldn’t have been criticized at all if things had functioned, and they indeed weren’t accused as long as it functioned. So it is much better to take a look at the sort of business that is going on out there instead of reserving criticism for the accusation that they had incorrectly dealt with “our” money. They didn’t deal incorrectly with money: they dealt with it precisely as is right and proper in their line of business. They traded with capital. In their hands – and this is the riddle mentioned above – money per se is capital: this miracle is that somebody who has money also has the right to have more of it tomorrow. Enrichment without further ado, enrichment as the quality of the dollar in your pocket. They simply administer this capitalistic miracle. What is the basis for making it possible? Does this work at all, that money simply becomes more money?
This idea, how does it work that money becomes more money, was once old Marx’s lead-in to his analysis of the capitalistic process of production. He said that it simply can’t be that money just becomes more money. That doesn’t happen so easily. You can’t put a hundred bucks on your table and then wait a year: these hundred won’t become more. So how does it work that $100 become $110 within a year? That can only be explained, he said, if we look at what is done with this $100 in the course of the year. This only works, he said, if you invest the money into a capitalistic process of production, buying means of production and labor that is for sale, people who work for money. These people have to be employed, made to work. And these people, who create new value while working, have to be made to work for themselves, but they have to be made to work longer than for what is necessary to acquire the wages they get. These people have to be made to produce more in value, surplus value, than what it costs an entrepreneur to pay them in wages; only then is there a surplus produced that a capitalist is able to credit as the increase of his capital to his account at the end of a year. This is the only way in which it can be explained that money increases on the whole within a society – this being the other message in the first chapters of Marx’s book Capital. It is of course easy to cheat others by selling at a higher price: the seller then has made $10 more on his hundred, but only at the price that the other has purchased a product that was only worth ninety. This is not how an increase of wealth comes about on the whole, this is not how an accumulation of money happens, that someone takes something away from someone else. Growth in society can only be made by employing money for a capitalistic process of production – so runs the analysis of Marx in Capital I.
What is important now is that – once the capitalistic mode of production is fully developed, i.e., labor is available for sale to anyone who has the money to buy and employ it – the making of profits for those who have money is contingent only on having a sufficient amount of money. Then, in the practical life of society – and this is absurd – money really is its own source. If you have money, you can make a surplus. If money is this power – and in fact money is nothing other than the power of property – if the power of property consists in the power to make the sources of its increase available to oneself, then everybody who has money has the instrument for making more out of it, and anybody who can make this money available possesses the source of more money, quite apart from whether he engages in the process of capitalistic production. He can make money available for those who use it, and because he makes it available he turns this money into capital for himself: he lends it, drawing interest on it. Once the capitalistic relations are complete, money quite practically is its own source. Of course, the sole basis for all this is that workers are exploitable; but this is of no concern to a banker, who doesn't need to ever come into contact with any workers: only because he has money and can make money available is money capital in his hands. So much so, that it doesn't really concern him what the person who gets a loan actually does with it. It doesn’t matter to him what is done with the loan by the borrower, who of course has to promise to pay back the sum plus interest, whether he turns it into the real source of making more money in a capitalistic process of production, or whether he is a poor consumer who buys a new washing machine on installment payments. It doesn’t matter to the bank. In one case, money is capitalistically employed and really becomes the source of a plus; in the other case, a consumer who can’t afford his own consumption buys by taking out a loan, and he too pays back $110 to the bank for the hundred he received. For the bank, this money is capital, regardless of whether it was really used as capital. In the hands of a bank, it is capital. In the next moment, the banks lend money to the state, buying treasury bonds. This money isn’t used as capital at all, but for financing state consumption. For the bank, it’s just the same: it now has capital, and in its hands, all money is capital. This is how the miracle can come about: the banks administer the power of money in capitalism, the power of making more money out of money, quite apart from the use of money as an advance of capital for a capitalistic process of production. And in the hands of banks, money is in and of itself the source of more money. This miracle can only exist on the basis of capitalistic production, but it exists alongside and apart from the capitalistic process of production. This miracle need not be the concern of the capitalistic process of production. That is why the bankers, the brokers, the investment funds, the hedge funds, and so on and so forth, then manage the right of money to become more money. And in their hands, each sum of money is capital and becomes more – except for the times when this doesn’t work out.
Thesis 1: cause and effect. It’s better not to get all worried and excited about the fact that business failed; rather, one should become upset about the kind of business that is practiced all the time: the capitalistic miracle itself, namely that money always becomes more money – without any intermediary step – simply by a legal act: I give you money and you give me back more, so that the growth of money appears as the quality and accomplishment of money itself and is managed in this way by the banks, for their customers and for themselves. This is the first point: what kind of business activity is this, which is nothing but a fraud when it doesn’t work out; the riddle is that it functions – and not that it doesn’t function.
2. The real economy becomes a “victim” of the collapse in the financial sector
We’re still dealing with the question of cause and effect: what has happened when a few hundred investment bankers fail and the consequence is 50 million more die of hunger and 15 million more are unemployed in Europe alone. How does the cause effect all this? Here, too, the whole world has a quick answer and understands immediately: if the banks don’t function, then the service that the banks provide for the real economy is cut and the economy can no longer “breathe.” “The bloodstream of the economy has come to a halt” is how the chancellor, Mrs. Merkel, has put it, and when this stream stops, nothing works anymore. An image settles every question. This is what this lecture will deal with now: what kind of a service this is. And the notion that banks are a kind of service will be refuted; banks are not a service, especially not for the real economy. If anything, it is the other way around.
At the very least, everybody could notice that this is a peculiar kind of service. If a hairdresser is absent because he is on holiday, or if a train doesn’t run, everything doesn’t break down; the specific service is probably just dropped. And this is indeed no problem: then one walks around with uncut hair or takes the car instead of the train. The service of banks seems to be so essential that nothing works without it. And another idea: when a service is dropped, maybe a hairdresser shuts down, then there is immediately a competitor who takes over the customers. Just look at Opel: when the company is going to be shut down, there are others, like VW or Fiat, which are immediately prepared to take over the money that can be earned there. When banks fail, there is nobody to step up and take things over. What banks do seems to be something different, something more fundamental, than just a service.
So let’s have a look at the real economy, the capital engaged in industry and trade. They always use and need credit. For each capitalist, the capital he possesses is too small. Each of them prefers to employ more capital than he owns. Each of them wants to grow without having yet produced the means that could be reinvested for further growth. Of course, capital that has been previously earned is always reinvested; of course, not all of it, but most or parts of it; but that is never sufficient. They always want to grow quicker, quicker than they are able to grow by their own means. This shows that industrialists and traders just have the same aim as investment bankers: they always want to earn more than they can, they always want to move more capital than they themselves own. They deal with all the perils of their business by using credit. From the standpoint of an entrepreneur, the time that capital needs for its turnover is always too long: first, it needs to be invested; once the means of production and work are bought, the workers have to be made to work, and then they are busy doing the necessary work; once the product exists, it needs to be stored for a while; then it is delivered to traders, where it lies around on shelves for a while; and some time or other, it reaches the consumer, and then money is earned – and all this time, which is needed for capital to pass through its circuit before it returns to its investor so that he can reinvest it again, is too long for every capitalist. Capitalists suffer because of the turnover: they say, shit, now capital is circulating instead of being returned. If it were back again, one could invest it again immediately, making a lot more profit with one and the same capital. So what are they going to do? They draw credit from their bank to overcome the limits of the turnover: hardly is the product in production, and they are drawing credit on their not yet completed product and restarting the circuit of their capital, even though their product is not even half-way finished. And in addition: for selling the product – and each capitalist has to get rid of his product – he uses the purchasing power that exists one way or another in society. The existing purchasing power, however, is nothing other than the money that business – i.e., the entrepreneurs as a whole – have put in the hands of all the others as an opportunity to earn money. The purchasing power in a capitalistic society is nothing other than what the entrepreneurs have brought into circulation as money. And this purchasing power is always too small for them, i.e., for the desire to sell that they have. They always want to sell more than what they provide with their own business. What are they going to do? They sell by giving loans. They offer their customers a lease on a car instead of buying it, offering to let their customers not buy the car they want immediately but step by step. They foster and accelerate their own turnover by skipping and ignoring the limits of the existing purchasing power that they themselves provide. Instead of selling at the amount that has been provided by the existing purchasing power, they sell at the amount of their own need to sell and not at the amount that would exist in demand for their products as purchasing power without credit. What do capitalists say in this way? They say: all the perils of my business, all the perils of my profit-making can be overcome. How? With capital. I only need to have access to capital. So they themselves say, in their practice: capital is the source of a plus. Once again, to repeat it, so this absurd reversal is understood: that money can be its own source only exists on the basis of the capitalistic process of production. But within it, nobody says: oh yes, it is the worker who produces surplus value. Within it, within the daily practice of making profit, money is dealt with as the source of profit-making. And the capitalist says: I can overcome the limits of my turnover with additional capital, I can ignore the limits of demand – the customers don’t have enough money. How? With capital. My business succeeds once I have enough capital. People who talk like this profess that capital is the source of their plus.
Because it is so, the “real economy” is nothing other than part of capital as a whole. Now, in the crisis, “real” capital all of a sudden gets a bonus: there, real products are produced, useful things, products that people live on. This would be, so to speak, the reasonable part of the economy – in contrast to the financial guys, who now get a minus: they are the speculative and unreliable guys, but only since the crisis, whereas before they had been the financial wonder boys who had been making such fabulous business deals, while the real economy simply existed, too. Now, the “real economy” gets a bonus, but what is this production in actual fact? It is nothing other than this plus-making. They invest, they produce for nothing other than the purpose of making more money out of money. They pursue the same purpose as the one that prevails in the banking sector. And for this same purpose, access to capital is the means. And because this is so, it is only one step for the capitalists to produce by drawing credit, and “real” capital itself becomes a credit construction. For quite some time now, it’s no longer so that companies are owned by a family, and if they are, these are exceptions that more often than not are going to go under at the moment, but the so-called real capital itself is a financial construct. Each of the better companies nowadays are joint-stock companies. They are firms that offer themselves for speculation, as an object to speculate on. The first owner says: I will get much richer if I turn my factory into a joint-stock company, selling shares on my firm. My firm is worth $1 million, but if I issue bonds, then it is worth $800 million, and when I sell the shares, I will at least have $800 million. But this is not yet the point in question. The point is that capital itself then is a financial construct: its resources are the product of the speculation on its course of business. A firm has financial power when its shares run well, i.e., when its shares have a price that allows the company to easily achieve an expansion of capital when it needs one. All the recent talk about “shareholder value” – just remember the erstwhile rumours that a company’s strategy would be too subservient to the shareholders – is nothing but the confession that the real competitive power of a company is dependent on how easy it is for it to get access to the capital markets. Then everything is turned around: then the means of success of a firm is its value on the capital markets. Then the purpose of a company is upholding the shareholder-value. Then the the ultimate purpose of a company is no longer the industrial profit they achieve by throwing their products on the market, selling them at a competitive price and ousting competitors; instead, the industrial profit is an instrument to prove the creditworthiness of a company. So by no means does there exist, on the one side, an actually solid “real economy”; rather, it is on the whole a sub-department of finance.
And if capital is the means to succeed in business, if the success of every company consists in having access to capital, then, of course, as soon as the financial power of the banks breaks down on the whole, when the banks crash because of their failed speculation, causing a chain reaction, so does the financial power of each firm. (This is why Lehman was so “important to the system”: there it became apparent that all the assets around the world consisted in the debts others had. If one party can’t pay its debts back, the assets of the other party are eliminated, which had been the basis of a variety of other parties. The fact that the breakdown of Lehman was a disaster for banks all over the world proves that the assets of all of them consisted to a great extent of Lehman's debts.) And as soon as this financial power also decreases, it becomes apparent – and this is absurd – that, in the face of what can be sold without that credit, a general overproduction has been taking place. If each business is based on credit, if each business is financed by anticipation of future successful business deals, and if these finances break down, it becomes apparent that, for the amount of cars that can be sold without credit, way too many cars have been produced. For the amount of cars that can be sold without credit, way too many auto factories exist; all of a sudden, when credit crumbles – and by the way, it doesn’t crumble because auto factories have become unable to sell their cars anymore; no, there is a breakdown in the financial sector for its own reasons, because their speculation failed – when the financial power in this sector diminishes, it all of a sudden becomes apparent that the entire economy has financed today’s businesses in anticipation of future successes. And then it becomes apparent that everything that exists in real capital is too much in every respect for what can be earned without credit. There is overproduction not because an overproduction in the real economy has become apparent; overproduction is revealed because credit breaks down. For that which can be earned, too much capital has been invested, too many commodities have been produced, too many people are prepared to work. The latter realize, at the same time, that their entire existence as workers who live by selling their labor in echange for wages – just remember the riddle mentioned at the beginning: some 100 investment bankers fail, millions become unemployed as a result – these people in actual fact realize that their entire existence is dependent on successful speculation, as an appendage of the flourishing of financial capital. There is a breakdown in the real economy, production is reduced and stopped because it is no longer worthwhile. And it becomes apparent – and this is important to notice – that all the production that was taking place was only for profitability. If the entire reproduction of society is cut back, and in many countries it is even deeply cut back, it becomes apparent that, once business calculations no longer work out, the entire material life process of this society, i.e., the production of all the means of living, had been good for nothing but the purpose of making more money out of money. If it is no longer useful for this purpose, it is turned off; it gets what it deserves, so to speak, it consisted in nothing else after all. That others would like it to consist of something else is their problem. If they seriously mean that it should be useful for something else, then they have to overthrow the existing mode of calculating. But pretending that it should be useful for the life of society, and then wondering why production is stopped when it is no longer profitable, that doesn’t fit together.
“Service”: the whole world says, and so does the chancellor and, by the way, all the left-wingers, the financial sector had a service to perform for the real economy, and now the good service is dropped because they somehow failed. A service – no way: in the financial sector, the actual power of capital to make more money out of money is administered as the quality of money, and for that – the real economy is one opportunity, but only one opportunity, to invest money. So everything is turned around in this world: the real economy is an instrument of finance, and not the other way around: that the financial sector would be something like a service, helping the real economy produce things. Even left-wingers say the financial sector had to finance industry and trade. As if this would be a matter of course. What does “financing” mean? Providing financial power – for what? For money to be turned into more money. That is the real meaning of financing – and the whole world comes up with the idea that finance somehow had to provide the colors so that others have something to paint with.
3. The state rescues the banks
What has been noticed, and even scares everybody, are the vast sums with which the banks are being rescued: numbers like $100 billion are now nothing at all; now we’re in the scope of trillions. Before talking about what the governments do there, just one conclusion. The governments thereby leave behind everything that for decades they’ve thought of as a solid monetary or solid national budget policy. All of a sudden, there are several billions spent that would never have been provided for other purposes in the last decades, except perhaps for a really large war. This fact alone, namely that the governments throw overboard any considerations for what they had previously given themselves as solid budget policy, reveals something: how fundamentally important the power of finance is for a state. All the important states admit that the power of their banks is their kingpin, so to speak. If they are unable to rescue the power of their banks, they may as well pack it all in. They risk everything to rescue this section of capital. We’re taught new phrases like “too big to fail,” including the distinctions that are made: the means of existence of those living on welfare and pensioners is of course not too big to fail. That’s self-evident, and nobody even has the idea that they would be important in any way. But even Opel is not too big to fail: there are of course discussions going on about the conditions for rescuing it and the sums that could be provided; but the car-maker is not relevant to the system in the way the banks are. The banks, however, are “too big to fail,” or at least the financial system is. All the might of a capitalistic nation, all that exists within it as economic power, all that exists within a nation as the potential to finance things, also in a political respect, up to the national and international usability of the money issued by the state, all that is contingent on the functioning of that sector of the economy that makes more money out of money without any intermediary stage. All this depends on this crazy point of the society: M-M’, without further ado. And the success of this ability to make more money out of money, thus maintaining the capitalistic assets that were generated in this way, is the most crucial thing of all for all the states, at least on the same level as maintaining their military might.
The states want to rescue the banks, and one thing is clear to them: rescuing the banks only works under their conditions. Maintaining their service for the entire nation only works out by maintaining their power. Rescuing the banks is something peculiar: there’s a lot of bitching about them going around, but in actual fact no consequences follow. Instead, there are offers made to the banks: would you be willing to take the state’s money. And strangely enough, the state more often than not notices that the answer is: no, not really. Just consider the absurdity as far as the case of Hypo Real Estate is concerned at the moment. This bank is bankrupt: it has debts that it can no longer vouch for. If the state had not given millions to it, it would have been insolvent long ago; the assets of its shareholders are of course no longer worth a cent. Now the state steps in, saying that it must not allow the bank to become insolvent because the assets of other banks are dependent on it, and a chain reaction has to be avoided. Now the shareholders, whose shares are no longer worth a cent, respond, saying that if the state needs to rescue the bank, there’s the opportunity to speculate on this need: we don’t sell, rescue the bank and our assets. And there’s something peculiar going on in Germany. Now the state is in a fix; it doesn’t say, so if you don’t want to sell, we simply won’t rescue you and your assets will be annulled, and this will happen in a certain time. In fact, if the state says it won’t provide another cent, then the assets of JC Flowers [the US private equity firm that is the largest shareholder in Hypo Real Estate – ed.] and other investors will be gone. But the state says it must rescue the bank, and Flowers says: then just go ahead, which means rescue our assets. And now the state indeed is looking for a compromise. And there is a reason for that. The state doesn’t want to eliminate the speculative financial power by replacing it with a sort of a state-controlled money-economy. The state in a way bets on the speculators’ getting back in the mood to speculate on money-promises being traded again like money so that each advance in money will be mobilized again as capital. The state doesn’t want to replace private money creation by a sovereign act of authority. Instead – and this is absurd – the state intends to tempt the private credit economy, which at the moment is about to collapse, into speculating again. It wants to guarantee security for the banks so that the banks and investors conclude: well now, we will dare to speculate again. The state doesn’t want a solid economy instead of speculation; it wants a functioning speculation. The state is indeed worried that if it nationalized the banks, investors might be horrified and shift their assets into foreign countries, out of Germany, and speculate more in foreign markets than in German ones. The dispute about nationalizing Hypo Real Estate is admittedly more of a joke, but it shows something. The state wants to rescue these fictitious assets, whatever the cost, so that they will speculate again and accumulate. But it can’t achieve this by an act of sovereignty; it has to do it under the banks’ conditions: they have to be willing to speculate again. This has a consequence: what the state does and what it seeks to achieve are not the same things. What the state, which seeks to rescue the banks, wants to achieve is that the investors buy these securities again, maintaining by their purchases that these papers are worth something. In paying a price for them, they would maintain that they are worth something; at the moment, the problem is that nobody wants to buy them, so they are valueless. The state would like these papers to be bought and traded again, then they would be worth something so that the banks would be enabled by the money coming in to service the interest payments to which they have obligated themselves. This is the wish, but what can the state do? It can only provide liquidity to illiquid banks, and that is what it has been doing for more than half a year. Providing liquidity means giving money to banks whose created money capital, i.e. created securities, are no longer sought after, thus have lost the quality of money capital and thus have turned into bad debts, i.e. debts whose ability to be sold again is doubted. The problem at the moment is that money owners all over the world, and in particular in Germany, no longer have the standpoint that their money needs to be turned into financial capital, they no longer want to invest – instead they have the standpoint, it would be nice if my financial capital could become money again and doubt if this is feasible at all. They want to withdraw money, which doesn’t function because the banks are no longer able to pay. Now the state says, ok, if the banks are no longer able to pay, I can do something by giving them the money. This works, of course, the banks are saved from bankruptcy, as long as the state is always handing enough money over to them. But the transformation of bad debts into attractive financial capital, which everybody would like to purchase, this transformation that the papers issued by the banks are no longer bad debts for which everybody would prefer to have money, this transformation is nothing that the state can bring about by its subsidies. What the state is doing is giving money-presents to banks, but what the banks are doing is servicing the payment obligations they actually are unable to fulfill. They pay off their creditors who want to see money instead of holding securities. But the transformation that debts are financial capital, that holding debts is a source of wealth again, that everyone no longer wants to own money but would like to give loans, i.e. have financial capital again, this transformation cannot be brought about by these measures. The state is financing the contraction of financial capital. But its measures can’t achieve the opposite, namely that instead of contracting, there is a new growth of speculative financial values again.
That’s why the rescue of the banks has an unambiguous tendency: from quarter to quarter, the money isn’t sufficient. From $100 billion to $600 billion, up to “bad banks” – every rescue measure is followed by another one, because each one fails to achieve what it is supposed to achieve. What is a bad bank? In short, leaving out all the complications that can be read in the newspapers: the state purchases the banks’ valueless securities as if they were still worth something. Whatever all the tinkering might exactly consist of – leaving things lying around for a decade or so, giving guarantees which are then something other than being liable for them, let’s just forget about all this nonsense – the simple truth is that the state gives money to banks for securities that are no longer worth any money.
By doing so, the state does something: in a situation in which it turned out that much too much credit had been created, in which it turned out that too many assets had been created for them to still be sustainable – they are after all annulled at the moment – in a situation in which it turned out that much too much credit had been created, the state helps out by creating much more credit – yet ultimately not credit generated out of an economic perspective that surpluses would come about, out of an expectation that growth would come about, on which loans are given. Instead, it is politically generated out of a situation in which precisely zero anticipation of future growth exists. This is, of course, delicate; an overabundance of credit – which has already collapsed, turned into thin air – is supposed to be cured by generating a lot more of the same. It’s ultimately no longer credit generated in the expectation of future profits, but credit circulated by the state as kind of a last resort, because none of these perspectives are on the horizon.
Everyone knows that this is dangerous for money. The newspapers write that inflation, even currency reform – where money is deleted after all – is imminent. To rescue the banks, money is in the end deleted. What does this once again reveal? Everyone knows that this is the craziest money printing action that has ever been brought into being – and they all say at the same time that this is necessary. They say at the same time that an alternative would just be impossible. So they profess that finance is the true wealth of society: this stronghold of the equation that every piece of money is more money, which the banks administer, this power to draw an advance of capital out of a sleeve, to create it wherever there is an opportunity to make business, this power is the true wealth of capitalistic nations. This is what these nations depend on, or to say it in other words: with this radicalism, by which they now rescue their banks, the governments profess the reason of state that prevails here: they risk their own financial power in order to rescue the private one.
4. Imperialistic competition in a crisis
First, again a public version to the fourth chapter; the public version runs like this: “When there is a global crisis, the states have to cooperate on a worldwide scale. Because – and this is what 1929 reminds us of – if states resort to economic nationalism, if every state seeks to rescue itself at the cost of others, then things are going to become worse and worse, and we all know from 1929 that it all ended up in World War II.” Foreign policy, i.e. monetary policy, takes place under the big headline that no state should be allowed to fail, and we all have to cooperate, cooperation is what we all need – but what is the content of it all? The content first of all has a material, a material that is not the deed of politics but an effect of the course of business.
Without the actions of states, the financial crisis first of all has an effect on the currencies and international business relations. Financial capitalists are seriously affected; their property depreciates; many of them get into financial difficulties and have to pay, withdrawing their funds from some places and putting them elsewhere, for reasons that no longer have to do with the quality of the good business deals they go there for; they are withdrawing money, shifting it to places where they’ve run into financial difficulties. This has a peculiar effect: over half a year, all this results in extremely erratic currency movements. Some currencies are devalued, others increase in value, but with an interesting content: precisely those states, of all states, where the financial crisis started off and is raging the most, are those whose currencies gain the most – relatively seen. And those states, mostly the so-called emerging markets, which the newspapers know had been least engaged in these wild speculations, these states have to realize that their national financial power, namely the currency and its value, are diminishing. Countries like the Czech Republic, Hungary, and Greece have not exactly been the great investors in ABS papers. But everything is turned around there: the big financial houses who had invested in foreign countries now withdraw their money, putting it there where they have obligations to pay, and this is in the center. All of a sudden, the center makes gains, while other countries that had nothing at all to do with these financial constructions are failing. It’s as unjust as always: countries that haven’t been the culprits suffer from being nothing but investment sites of the centers. When there’s a catastrophe, investors withdraw their funds, putting it back into their home countries, where they all of a sudden need it, while those countries where good business deals had been taking place over the last decade are all of a sudden without any means. This was the riddle last fall, when the emerging markets, which first were supposed to withstand the crisis quite well, all of a sudden were affected much more than the others, because their national currencies were immediately affected.
What does this mean for the main countries – for the main countries, which are not only rescuing their banks but attempting to maintain as much industrial production, as many opportunities to earn money and pay taxes, as possible? In the middle of a situation when nothing is clear yet, when it is not even clear how things can be managed, and how things will stand after the crisis, in such a situation, the main countries are once again treating all this as an opportunity to increase their power. Mr. Steinbrück, Germany’s foreign minister, came out with the cheeky remark: “After the crisis, nothing will be as before, and the American domination of the financial markets will be over.” Merkel, his chancellor, uses every opportunity to confirm this. “We’re going to come out of the crisis in a strengthened way, at least better than in the way we went into the crisis. We have the best opportunities for that.” They are already in an imperialistic competition to shape what the world will look like after the crisis. On the one hand, this is a sort of madness because they don’t know yet how they will be positioned after the crisis; on the other hand, that’s quite realistic because in times of a crisis really big shifts take place in the financial power of nations, and therefore their political power. And here, the common observer can really see what kind of nation he lives in: the success of a nation’s own imperialistic financial power, of the power of its banks and its monetary power, is indeed the true livelihood of a capitalistic nation. The politicians do their job, they do the right thing for their power, for their reason of state when they say: now is the time to take up the fight for our position after the crisis.
In the European Union, it becomes apparent how this fight is fought: it is fought in such a way that the most powerful financial states, with Germany on top, France of course coming next, reject a common management of the crisis by the European Union. The first statement of the German government is: simply no solidarity when paying for the burdens of the crisis; no European fund for rescuing the banks and no European fund for paying for the financing of industrial programs. The second statement is: let’s see how each state can cope with the crisis burdens that will appear. They already reckon with states that will have a hard time and run into difficulties, will be in need or are long since in need: Greece, Hungary, the Baltic States, Iceland, and so forth. They take it for granted that states will run into trouble, and they don’t say: we’ll prevent that. But they say, when states are near bankruptcy, we’ll see how to make use of the situation. Not in the sense – this being the other extreme – that the Euro zone will fall apart, that must not happen because the European financial power is to be preserved, but the member states in need are to be made to bend to German claims, to be instrumentalized in a new way. There will be loans available when the situation arises whether Hungary will have to announce insolvency or not – but not for helping Hungary but a) for giving proof to the European Union’s financial power and b) for making Hungary more obedient towards the claims of the dominant European powers. There’s an extortion taking place with the imminent insolvency and a struggle for the advance of the decades-long unsettled struggle over subordination versus dominance between completely unequal states. And in this point, the Germans are of the opinion that the hardships of others can be an instrument for asserting Germany’s claims in Europe. I only mention Germany, first because we’re living there, second because it is the biggest European financial power, but this isn’t to say that France would calculate any differently from its standpoint.
And the really big question is the one which can now be read constantly in the newspapers, which the Chinese dare to discuss quite openly: can the dollar at last be replaced as world money? Can’t the crisis bring the United States into such troubles that it becomes prepared for a reform of the world currency system, which would settle once and for all that America won’t once again be the only beneficiary of all growth on the globe – a system that would make it clear that it won’t again be America that enjoys limitless credit with which to inflate its money, whereas others always have the problem of not being able to inflate their money without consideration for the attractiveness of their respective national economic basis. The ultimate question of world power is raised: dethroning the dollar. And the Chinese make clear, in repeating this incessantly, without being penalized, that in owning $1.5 trillion or more they have the means for this. If they were in the mood to get rid of them, the dollar will be done with. They immediately afterwards say that they of course wouldn’t think of that. But not without making it known first of all, thus claiming to change the entire global imperialist financial balance of power. We needn’t pursue this thought but can talk about this in a year or two, having a look at what kind of money will then no longer exist, perhaps the euro, or another one, and where the world will have landed then. But what kind of questions of power are raised, when in the crisis – because it is the opportunity to change the global balance of power – the big questions of national financial power are brought up, can be read from this stuff, making a last summary: this global financial power, i.e. the potential of a nation to issue a money, creating it by fiat, one that is value for the entire world, binding for all of them, one which can be created by oneself but needs to be earned by others – this is the true financial power of a nation. Small wonder that the nations risk everything for that.
To say – in the face of all this – that things hopefully will go on, is really absurd, but this is ultimately the standpoint of the whole republic.