I get physically ill watching liberals complain about Donald Trump, instead of what made people desperate enough to vote for him – Reverend Chris Hedges
Trump represents greater continuity of foreign policy than either his detractors or admirers recognise – steel city scribe
The dream is over – John Lennon
There are decades, said Lenin, when little happens – and weeks when decades happen. Who’d dispute that the last ten days showcase the latter truth? On April 11, nine days after “Liberation Day”, Trump blinked in the face of US Treasury bonds, normally a safe haven at times of market turbulence, plunging as Japan and China, respectively the largest and second largest holders of US debt, went on a selling spree to send yields soaring. 1 Now we have a 90 day suspension – China excepted – of the slash and burn mayhem …
… with uncertainty as to what will happen on Day 91 doing little to calm the markets; rather, creating its own mayhem.
Over the coming week I’ll be featuring a number of third party commentators – non corporate economists and geopolitical analysts – on the tariffs and what they signify, but let me first set out what I see as essential to any understanding of what is now playing out:
- America has lost its manufacturing edge not, as Trump ridiculously asserts, due to unfair competition but because its ruling elites, led by rentiers, found it far more profitable to offshore industry and turn (in a process echoed across the
imperialist nationscollective West) its domestic economy into one dominated by FIRE sectors which produce little or no real value in the sense identified by classical economists like Smith, Ricardo, Mill and, in fullest form, Marx in the first volume of Capital. Capture of ‘democracy’ by a creditor oligarchy is both cause and effect of a hyper-financialisation no one has more thoroughly analysed than Michael Hudson in his two most recent books, The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism (basis of my posts on Why read Michael Hudson?) and The Collapse of Antiquity (on the way the ancient civilisation of Sumer periodically cancelled debt to forestall the rise of powerful but self destructively parasitic creditor elites, 2 as would later happen in ancient Greece and Rome and is now seeing Western capitalism morph into a fragile system of global rent extraction some call neo-feudalism). Writing yesterday in Defend Democracy Press, Sri Lanka based Indrajit Samarajiva captures the essence of Professor Hudson’s case, and of what France’s Valery Giscard d’Estaing was getting at when, apropos the Nixon Shock of 1971, he complained of “America’s exorbitant privilege”:
The biggest trade-off is between printing a reserve currency and running a trade surplus. You can’t do both. The US dollar is America’s main export. They make up liquidity as a service on computers and get real stuff in return. This is not a problem but the greatest opportunity in human history, which they just squandered. If America wanted to take care of its people and do manufacturing it could have done. How they spent their infinite money was a policy choice and they just chose wrong. Now they’re blaming everyone else, holding a gun to their heads and blubbering.
- Samarjiva, in a part amusing/part irritating mix of ripe language with algebraic formulae and reductio ad absurdum, shows the stated aim of the tariffs for the Alice-in nonsense it is. I doubt though that Trump – and a US ruling class united, for all its real differences, on the need both to make wage labour at home and abroad pay for a crisis of profitability to which its every response soon worsens matters, and deal with the threat to profits posed by China Rising – gives a damn. (I say this regardless of whether he, his kin or inner circle made a killing on the back of insider knowledge.) Here, writing days before the April 11 “pause”, is Brian Berletic; most astute and consistent of those who say that in economic policy no less than in the wars in Ukraine and Middle East, Trump shows more continuity than either his detractors or supporters recognise:
With the rollout of sweeping US tariffs aimed at nations worldwide, economists and geopolitical analysts alike are astounded by what at face value looks like irrational self-sabotage attributed to incompetence within the White House. In reality, the tariffs are a central pillar of bipartisan foreign, trade, and economic policy implemented first during the previous Trump administration, continued and even expanded during the Biden administration, before being expanded further still under the current Trump administration.
The US is preparing to subject its own population as well as those of its supposed “allies” to immense long-term economic, social, and political pain.
Rather than a random idea within the mind of Trump himself, or among those within his cabinet, sweeping tariffs are the stated policy of unelected corporate-financier interests, articulated in-depth within the pages of special interest-funded think tank documents including Heritage Foundation’s “Project 2025” paper under Chapter 26: Trade Policy. That policy, far from a sound plan to re-industrialize America or genuinely balance America’s trade deficit, is instead meant to maintain America as “the world’s dominant superpower.”
- Since the Nixon Shock has been mentioned (and will be again next week when, still in the context of tariff mayhem, I turn to Yanis Varoufakis) here’s a third essential to grasp. Nixon decoupled dollar from gold with no dilution of its Bretton Woods status as global reserve currency. Though this was not initially apparent even to its architects, the Nixon Shock was about to make America the first nation ever to make debt profitable. That we now see the curtain falling on that unique episode of history is less surprising than the fact it lasted as long as it did. The rational irrationality of Trump’s tariffs is a scorched earth response by the US ruling class to the fact the jig is up; the free lunch over.
I’d like to end there, leaving this post a simple intro to those to come, featuring amongst others Richard Wolff and Chris Hedges, Brian Berletic and Yanis Varoufakis. But Trump’s tariff dance is not the only one in town. It side-steps with an Iran ultimatum Tehran could never accept. I don’t doubt that the erratic and thin-skinned Donald is in need of a quick PR win right now, but we’d be foolishly reductive to believe that’s all there is to the “peace president’s” war talk.
Heightened aggression toward Iran cannot be separated from the terrifyingly escalatory path taken towards China. As Clausewitz told us, war is policy carried out by other means. And as I will keep saying, half of China’s oil imports pass through the Strait of Hormuz:
With this in mind, and given that China is the prime target of the tariffs, I’ll finish with former UK diplomat Alastair Crooke – the most erudite of Western commentators on the Middle East – on the path to a war with Iran it’s hard to see either China or the other nuclear powers in the Axis of Resistance, namely Russia and DPRK, being able to stay out of. The road to Armageddon – sure to be paved, as Caitlin Johnstone notes in her post today, with demonising of all things China – is opening up with renewed allure for the stewards of a dying empire.
* * *
- There’s an inverse relationship between bond prices, which fluctuate with supply and demand, and bond yields which rise by simple arithmetic as prices fall. Another inverse relationship, between bond prices and interest rates – with bond prices obliged to drop to increase yields when rising interest rates would otherwise make bonds uncompetitive – is focusing minds at the Federal Reserve and on Wall Street. Not for nothing have market reactions to Trump’s “Liberation Day” been likened – by observers as diverse as Nigel Farage, the British Communist Party and a Jeff Bezos-owned Washington Post – to those in response to the budget, in October 2022, of the UK’s shortest lasting PM and the chancellor, Kwasi Kwarteng, she promptly threw under a bus.
- In Sumer a new king would cancel debt since interest on it rises exponentially but wealth creation, through which debt is repaid, at best rises logarithmically. The inexorable logic is for power to accrue to a creditor oligarchy. Debt forgiveness derailed that logic but the incoming king had to have the chops to impose it. To put this in today’s terms, he had to be the thing liberals, labouring under the delusion ours is a democracy, condemn in a Xi or Putin. He had to be an Authoritarian. How else break the destructive – and ultimately self destructive – power of the creditocracy? Failure to do this, argues Professor Hudson, collapsed the civilisations of Greece and Rome under the weight of debt which could not be repaid but would not be forgiven.
A twenty odd minute Janet and John analysis of the thinking which suggests that the US wants to have its cake and eat it (keeping the US dollar as the reserve currency by making vassal states under the MAGA umbrella pay to keep the dollar value low by appreciating their own currency against the dollar to be able to trade with the US to give the US a competitive trade advantage) can be found here:
There are all sorts of very obvious problem with this which are not adequately covered. One example being that keeping the dollar as the reserve currency but getting vassal states to keep the value low (which I am led to understand from a lot of commentary will also reduce the US debt levels) by increasing the value of their own currencies would seem to produce a result in which those vassal states make their own export industries uncompetitive. Effectively undermining their own economies and sealing them into a permanent debt dependency for the benefit of the USA.
This is the three card Monte carried out at a global level.
As with Varoufakis’s arguments, there are a number of gaping holes in many of the assumptions underpinning the arguments put. Not least of which is the assumption that the rest of the world has no choice because no one can do without the US market.
An assumption which ignores the fact that the “customer” in this case – the USA – is maxed out on its credit card and cannot afford to buy the products of the rest of the world for much longer as the recycling of dollars back into the US system (Giscard’s exorbitant privilege) reduces as the dollar use as a reserve currency continues its current shrinking trajectory.
Which is why the Americans need a reset in the first place.
It also ignores the business 80/20 rule. In a capitalist neoliberal world where economic wealth is stratified in the way it is, the rule of thumb in profit making enterprises is that 80% of your revenue (which determine your profit levels) comes from 20% of your customer base. The top 20% of society with the most spending power.
The top 20% of Indian society alone, with a population of one billion plus, is over four times larger than 20% of the US market. Granted, they are likely not to be as wealthy as the US, YET. However, they are (a) on a trajectory not dissimilar to where the Chinese were a generation ago; (b) have growth potential; and (c) are not maxed out in debt on their credit card like the US economy with its crumbling infrastructure and broken social model.
They are also not, from the point of view of China, Russia, Iran and the core of the BRICS, that far away as a market in geographic terms. Reducing transport and logistics costs not just in terms of distance but also via the new more efficient and robust infrastructure going up throughout the New Silk Road, the North South Corridor and the soon to emerge Arctic routes.
Ditto for Indonesia, the Philippines, Vietnam, Myanmar, and Cambodia. Whose combined populations and potential for growth economies under the BRICS non-zero sum approach offers a larger future market than the US.
Then there is Japan, the two Korea’s, Russia, all the Stans along the New Silk Road to the Caucuses. Not forgetting all the Chinese/BRICS infrastructure investments throughout an African continent kept undeveloped by neocolonialism.
It really is a no brainer.
Which is why a betting man would start shorting the British economy, which is odds on favourite to jump straight into the Green Bin to vassal tutelage, effectively tying its currency to supporting a low value dollar as reserve currency against the interests of the UK economy making those of us who live here literal serfs and slaves of, and tied to, the collapsing US economy.
Sadly, and speaking as a fellow Brit, I agree with the conclusion of your final paragraph – though we shouldn’t entirely rule out a shake-out of Europe’s US-groomed Atlanticist leaders from von der Leyen and Macron to Merz and Starmer. (Though what would take their immediate place is not to be contemplated without a stiff shot of the fortifying.)
To the various absurdities you list in thinking – or to be precise, spinning the cover story – that “US jobs can be brought back home” – we can add that America, like Europe and for the same reason of a half century of neoliberal greed and folly, trails technologically behind China, has decrepit transport and other vital infrastructure, and its workforce has forgotten how to make things.
This piece also provides some relevant insights into the way matters are developing:
I’m ultra wary of Shahid Bolsen but there’s no denying his articulacy and force, nor the fact he is often right at the level of factual detail. I’ll check out this latest of his offerings.
Meanwhile the link in paragraph one of your first comment – to a podcast well worth a viewing – links in turn to a piece in The Economist; one I’ll be interrogating in a post either later today or tomorrow.