Monday, 30 November 2009

Mystery of The Woods

What was the real cause? Tiger appears to have had the worst drive-off of his life. Not only did he hit a fire hydrant, but also a tree. Reports, however, say that he did manage to avoid a bunker and still landed on the green.

It appears his wife may have helped out by coming to his aid with a rescue Wood.

Thursday, 26 November 2009


Yesterday, Gold hit a new high of more than $1190 an ounce. It is only $10 away from all-time high prices in sterling and euro terms too. In the last year it has risen by 50% in dollar terms. Some people are referring to a “Gold Bubble” similar to the bubbles we have seen in the dotcom bubble, or in house prices. But, the rise in the price of Gold is not a bubble. Far from it, the rise in Gold prices has much, much further to go. One definition of a Bubble is where everyone jumps on a bandwagon to buy some particular asset, without really understanding why they are buying it. Some of the “smart money” investors, for example, said that when they were getting technology share tips from taxi drivers, in 2000, they knew it was time to sell! But, so far it is not Taxi drivers or other members of the General Public who are buying Gold. The buyers of Gold are the “smart money” investors, and increasingly Central Banks like China, India, and Russia. In fact, a look at the TV shows that the adverts, of the last few years, encouraging people to take on increasing amounts of debt, at high rates of interest, over prolonged periods, in order to buy things they don’t really need, have been replaced with adverts exhorting people to exchange their Gold Jewellery for cash. So long as Joe Public is exchanging Gold for a rapidly depreciating paper currency, Gold still has a long way to run. When all those people, who have sold their Gold jewellery off cheap, for that depreciating currency, begin instead to buy Gold its price will go parabolic.

The Value And Price of Gold

In the 1970’s the price of Gold rose 30 fold to reach its peak of $800 an ounce in 1980. If, it did the same thing this time it would rise from its 1999 low of $250 an ounce to $7,500 an ounce, or about a six-fold increase from where it is now. Its necessary to understand the difference between the value of gold, or more accurately what Marxists call its Price of Production (Cost of production plus average profit) and its price. The prices of commodities vary around this price of production, which can be viewed in orthodox economics terms as the equilibrium price. However, in the short run shifts in supply and demand will move prices up or down from this equilibrium. A change in tastes, which increases demand, which cannot immediately be met by increased supply will cause prices to move up and vice versa. Where supply is relatively fixed, prices will move up, and this may cause a vicious circle to develop. Buyers, fearful of not being able to buy, will not only scramble to buy at higher prices, but may also attempt to buy more than they need, in order to hoard. Speculators seeing the opportunity to buy now, and sell later, at even higher prices, may become buyers, even though they have no need of the commodity themselves. At the same time, suppliers, seeing rapidly rising prices, may decide to hold back supply in order to be able to sell later at even higher prices. All of these factors contribute to pushing prices in an upward spiral far removed from the actual value or price of production of the commodity – i.e. a bubble.

The latter can already be seen in relation to oil. There are dozens of tankers sitting off the coast of Britain and other countries, full of oil, whose owners are keeping them there, simply watching the oil price rise, so that they can sell at a higher price later. The Price of Production for oil is probably between $80-100 a barrel. Below $80, although many established, low cost oil fields are profitable, it is not profitable to open up new expensive oil fields, for example in deep sea locations. Because the world has reached Peak Oil production, the amount of oil, produced in the low cost fields, is insufficient to meet normal world demand, certainly not capable of meeting the rapid increase in demand of the next few years, as China, India and other developing economies swallow up huge amounts for their own consumption. Above $100 a barrel demand begins to get choked off, both as a result of the effect on world economic growth, and because of substitution by consumers of other alternatives to oil. Last year, as the price of oil rose above $100 as booming economic growth around the world sent demand up, consumers began to hoard. China, in particular, was using its vast dollar reserves to buy oil in order to diversify away from a depreciating dollar into appreciating hard assets. But, as oil appeared a one way bet, because Peak Oil meant that oil producers could not ramp up production to meet this new demand – in fact Russian oil production was falling – speculators saw the chance to make a quick buck. They bought oil futures, thereby withdrawing even more supply from the market. The price bubbled up to $147 a barrel. Like all bubbles it burst, because eventually there was no bigger fool to buy at a higher price, and in particular, as I said at the time, Severe Financial Warning , the first warning tremors of the Credit Crunch were seen by the fact that Banks, Hedge Funds and other financial institutions, who had made large profits by such speculation, became forced sellers, in order to raise cash they increasingly could not raise from within the interbank markets.

Peak Gold

We appear to have reached a similar situation of “Peak Gold”. As an indication, the deepest mine in the world is a Gold Mine in South Africa. The mine is so deep that the temperatures inside it rise so high that it requires the electricity consumption of a small town just to cool it enough for it to be worked! That gives some idea of the costs of production of the Gold from it. Up until the turn of the century many Gold producers sold Gold short on the Futures markets, because its price had been continually falling. This provided them with a hedge against their rising costs and falling prices. For the last few years, pretty much all of the Gold producers are themselves buying Gold Futures in the expectation of continual rising prices. Some new Gold production is being established in Central Asia, particularly in Kazakhstan, but, not only will it take some years before this production is fully on stream, but also, compared to the existing level of production – let alone the existing reserves of Gold – the effects of this new production, on Supply, will be marginal.

In fact, Gold appears to be facing a perfect storm. To understand it, it is necessary to properly understand the role that Gold plays. In previous blogs Gold – Why Its price is Soaring I’ve tried to explain that role. Every commodity has an Exchange Value, which is expressed as a certain quantity of some other Use Value. 1 Yard of linen equals 10 lbs of cotton, 1 Yard of Linen equals 2lbs of potatoes, and so on. These equivalences, which are okay in relation to barter trade, are a restriction on market exchange, and so it becomes necessary to have some commodity which acts as a universal equivalent, a commodity everyone is prepared to accept as standing in the place of varying quantities of all these other commodities i.e. a Money Commodity. Although, many commodities, including salt, have fulfilled that role, the money commodity par excellence is Gold, because of its high value, its ability to be divided into precise aliquot amounts, its consistency of quality and so on.

Gold As Real Money

A certain weight of Gold, having a given Exchange Value, expressed as varying quantities of other Use Values, implies the reverse, the Exchange Value of every commodity can be expressed as a certain quantity of the Use Value Gold. These quantities then become the names of different amounts of money e.g. a Sovereign. However, it became apparent that, insofar as these coins like Sovereigns circulated, they became debased. Not only was their weight diminished by simple wear and tear, but it was also deliberately diminished by “clipping”, that is people would nibble pieces of gold from the coin. Yet, although the coins now did not contain the required amount of Gold (or silver in the case of silver coins), they still tended to be circulated at their full value! In effect, what was being circulated, was a token, which represented, in its name, a certain quantity of precious metal.

What gave these tokens their value was the fact that they were redeemable at any time against an equivalent amount of Gold or silver. Provided the tokens were only issued in line with the amount of gold or silver required for circulation then they could fulfil that function. However, in line with the laws of supply and demand, if the number of tokens was increased above that level then the value of each token had to be diminished in terms of how much Gold it actually represented. In terms of paper currencies, indeed, they had no intrinsic value of their own. They only had value because they were accepted in circulation. As Marx, put it,

“How many reams of paper cut into fragments can circulate as money? In this form the question is absurd. Worthless tokens become tokens of value only when they represent gold within the process of circulation, and they can represent it only to the amount of gold which would circulate as coin, an amount which depends on the value of gold if the exchange-value of the commodities and the velocity of their metamorphoses are given…

“The number of pieces of paper is thus determined by the quantity of gold currency which they represent in circulation, and as they are tokens of value only in so far as they take the place of gold currency, their value is simply determined by their quantity. Whereas, therefore, the quantity of gold in circulation depends on the prices of commodities, the value of the paper in circulation, on the other hand, depends solely on its own quantity….

“The intervention of the State which issues paper money with a legal rate of exchange – and we speak only of this type of paper money – seems to invalidate the economic law. The State, whose mint price merely provided a definite weight of gold with a name and whose mint merely imprinted its stamp on gold, seems now to transform paper into gold by the magic of its imprint. Because the pieces of paper have a legal rate of exchange, it is impossible to prevent the State from thrusting any arbitrarily chosen number of them into circulation and to imprint them at will with any monetary denomination such as £1, £5, or £20. Once the notes are in circulation it is impossible to drive them out, for the frontiers of the country limit their movement, on the one hand, and on the other hand they lose all value, both use-value and exchange-value, outside the sphere of circulation. Apart from their function they are useless scraps of paper. But this power of the State is mere illusion. It may throw any number of paper notes of any denomination into circulation but its control ceases with this mechanical act. As soon as the token of value or paper money enters the sphere of circulation it is subject to the inherent laws of this sphere….

“The rise or fall of commodity-prices corresponding to an increase or decrease in the volume of paper notes – the latter where paper notes are the sole medium of circulation – is accordingly merely a forcible assertion by the process of circulation of a law which was mechanically infringed by extraneous action; i.e., the law that the quantity of gold in circulation is determined by the prices of commodities and the volume of tokens of value in circulation is determined by the amount of gold currency which they replace in circulation. The circulation process will, on the other hand, absorb or as it were digest any number of paper notes, since, irrespective of the gold title borne by the token of value when entering circulation, it is compressed to a token of the quantity of gold which could circulate instead. …

“In the circulation of tokens of value all the laws governing the circulation of real money seem to be reversed and turned upside down. Gold circulates because it has value, whereas paper has value because it circulates. If the exchange-value of commodities is given, the quantity of gold in circulation depends on its value, whereas the value of paper tokens depends on the number of tokens in circulation. The amount of gold in circulation increases or decreases with the rise or fall of commodity-prices, whereas commodity-prices seem to rise or fall with the changing amount of paper in circulation. The circulation of commodities can absorb only a certain quantity of gold currency, the alternating contraction and expansion of the volume of money in circulation manifesting itself accordingly as an inevitable law, whereas any amount of paper money seems to be absorbed by circulation.”

A Contribution To A Critique of Political Economy.

Gold And World Money

Marx’s message is clear. If States – and fiat currencies had to eventually be the preserve of States to issue – printed more money tokens (notes and coins) than was necessary to meet the needs of circulation, then, because, unlike precious metal, these notes and coins would not be removed from circulation – hoarded, melted down for their intrinsic value – they would continue to circulate, but at a reduced actual value. More of them would be required than previously, as an equivalent of all commodities against which they were exchanged. In other words, there would be inflation. In a world, in which international payments were settled in Gold, this would be a problem inside the particular country, but not between countries, because this inflation would raise the price of Gold itself in relation to that currency. However, once international payments begin to be made not just in Gold, but in so called reserve currencies, first the pound, and later the dollar, obvious difficulties can arise.

A country like the US, whose currency acts as a reserve currency – that is a currency accepted as a means of payment in international trade – obtains a significant advantage. The very fact that its currency is used to make such payments means that it automatically is confronted with demand by other countries, who need it to make such payments. Such demand raises its value against other currencies. In turn, such a country can pay for its own foreign transactions by simply printing more of its own currency. The consequence of that was demonstrated in 1971, and is being demonstrated again today. In 1971, faced with massive printing of dollars, by the US, to pay for the Vietnam War, and repeated does of Keynesian stimulus, to counter act economic decline, President DeGaulle demanded payment for French exports to the US in Gold rather than dollars. He was entitled to do so, because each dollar was supposed to represent a given quantity of Gold. The US, under President Nixon, responded by ending the dollars convertibility into Gold. But, as Marx says, Governments can undertake the mechanical act of printing more currency with a given face value, but their control ends there. Once that currency enters circulation the laws of economics govern its actual value. It was this massive printing of dollars – and other currencies, during the 1970’s, to try to offset the effects of the onset of the new Long Wave decline – which resulted in their mutual devaluation, and the thirty fold increase in the price of real money – Gold – referred to earlier.

In fact, Gold in terms of its Value – its real terms exchange ratio against other commodities – hit its peak not in 1980, but in 1960, around 11 years after the beginning of the Post War Long Wave boom. This tends to be the pattern during the Long Wave cycle. In the Spring Phase of the cycle, primary products, like Gold, rise in price rapidly, because the spurt of economic growth raises demand for these products, whose supply cannot be quickly increased. In contrast, the majority of other commodities increase in supply rapidly and with falling marginal costs. That is because labour, for their production, tends to be in plentiful supply, and new inventions and techniques bring about big rises in productivity. But, by the time that the Summer Phase of the cycle begins around 12 years in, high primary product prices have driven frantic exploration and development of new supply, which begins to meet demand, and stabilise prices. At the same time, the first flush of productivity gains tends to slow down, and the reserves of labour used up, leading to the price of labour power being bid up, and workers, finding a new confidence, begin to take action to raise wages and conditions further. In new labour markets, workers quickly begin to create new labour movements etc. Consequently, the prices of primary products begin to fall relative to other commodities.

Perfect Storm

Its for this reason that I say Gold faces a perfect storm. On the one hand it is perfectly natural for its Value to have risen during this phase of the Long Wave. If it followed the pattern of the last wave then taking the beginning of that wave as 1999, I would expect to see it reach its real terms peak against other commodities in 2010, just as it reached its peak in 1960 11 years after the commencement of the boom in 1949. Of course, there is no mechanical relationship between the two, and there is scope for leeway by a year or so. But, as said earlier, the price of Gold reached its nominal peak in 1980, reflecting the destruction of paper currencies during the 1970’s, and the consequent hoarding of Gold, and speculation. Yet, during the 1950’s and 1960’s there had been no huge increases in money supply over and above what was required for circulation – which is why inflation was muted during that period, in fact there was some deflation – despite repeated bouts of Keynesian stimulus, during that period, to cut short the recessions that recurred every few years.

Compare that with now. Although, the early 80’s were marked by the utilisation of Austrian economic theories, which led to severe constrictions of money supply – under Paul Volcker in the US, and under the tutelage of Hayek in Great Britain – when those policies had had their effect in both driving inflation out of the system, and defeating the Labour Movements by direct confrontation, mass unemployment, and forcing employers to take on the workers because they could not raise prices, both Governments changed course. They dropped the Austrians, and adopted Chicago School Monetarism, which argued that in order to get the economy out of its doldrums it was necessary to increase money supply. They did, and on the back of it created large numbers of low paid, low status jobs, whilst at the same time scrapping financial regulation and creating the kind of climate of “shop till you drop”, and “retail therapy” mentality that was necessary to get people to take on increasing amounts of debt, and to spend it in the various new shopping malls, and retail parks where many of these low-paid, low status jobs had been created – often on the sites of former collieries or steel works – and which increasingly sold very low priced goods, now being bought from China.

It also created a sizeable number of very well-paid jobs symbolised by Harry Enfield’s “Loadsamoney” character, as deregulation turned the City of London into the world’s leading financial hub, through which trillions of pounds in transactions were funnelled as a new world economy was forged in which China, and other emerging Asian economies recirculated their increasing pools of dollars and sterling into Treasury Bills. Even in the 1980’s this infusion of liquidity led to Stock market and housing bubbles with the attendant bursting of those bubbles, the Stock Market crash of 1987, and the UK housing crash of 1989. And that policy of increasing liquidity, particularly in the US, and to a similar extent in the UK, continued throughout the 1990’s, each time some Stock Market or other asset correction appeared, let alone any serious economic decline.

The idea that neo-Liberalism meant that during the period from 1980 onwards, the State gave up economic intervention is not just a myth, it’s a downright fabrication. The State during that period became bigger than it has ever been, and intervened in economic activity more than it has ever done before in history. Only its mode of intervention changed, and even that was to do with what it saw as the best means by which to guarantee and increase the rate of profit, rather than any ideological shift, as the massive interventions to nationalise the banks and other institutions over the last year or so have demonstrated.

Gold Out Of Favour

After 1980, the price of Gold fell. Partly, that was due to the introduction of the Austrian economic policies referred to above. As paper currency was removed from circulation, so the value of that currency rose against Gold. But, part of the price of Gold, in 1980, was the kind of speculation referred to earlier, hoarding as people shun devaluing currencies, and actual speculation by the “smart money” who saw the possibility of capital gain. The curbing of money supply pricked the bubble. Even when money supply did begin to be increased rapidly again, Gold prices continued to fall. Part of that is explained by the factors relating to the relative prices of primary products and other commodities at that stage of the Long Wave, as described above. But, also by the late 80’s increased money supply was not leading to inflation, precisely because the money was flowing into the purchase of vast amounts of new commodities being imported from China and other Asian economies. And, that which did not, was being diverted into other forms of speculation such as on the Stock Market and in the housing market. There was no demand for Gold as Money, because there was no inflation of commodity prices, and China and other suppliers were happy to accept dollars rather than Gold, because they could recirculate those dollars into US Treasury Bills, thereby providing the US Government, and US consumers, with the necessary funds to be able to continue to consume all of the goods that China wanted to sell to them! Under such conditions it is the nature of Gold as a commodity in its own right with an intrinsic value, which determines its price, not its role as the money commodity. If anything, during such a period its price may be lower than its Value, precisely because the Gold in existence, especially that sitting in Central Bank vaults, acts as a huge overhang of supply on the market.

During this period Central Banks sitting on an asset that earned no interest, and which was depreciating in value, looked to dispose of it in return for foreign exchange, particularly dollars, which could be placed on deposit, and at least earn interest. Each sale brought a huge new quantity of supply on to the market thereby depressing its price. Its no wonder that the Gold producers themselves began to short gold, thereby introducing an element of speculation into its price in the opposite direction to that of a bubble. In short, Gold is only demanded as Money when faith has been lost in the prevailing money tokens. During such periods its price is determined by its Use Value as a commodity, its use for jewellery, and in industrial production, and so by its price of production. Its typical that Central Banks like the Bank of England began to dispose of large amounts of Gold just at the moment when its price actually began to rise, thereby losing billions of pounds in the process!

But, not only has the relative value of Gold been rising compared to other commodities during the last decade, but we have also an increasing loss of faith in money tokens, in particular in the dollar, whose role as world reserve currency is itself now being brought into question. Within economies, people do not demand Gold as Money for the purpose of conducting transactions. But, as Marx demonstrates the function of Money is not just to act as currency, as means of payment. Money also acts as a unit of account, and as a store of value. It is this last function of Money that leads to Gold being demanded, because as paper money becomes increasingly devalued people seek to store their wealth in something that will retain its value. They can as I suggested some time ago Buy Gold & Baked Beans buy other commodities like baked beans, which are storable and needed for consumption. That was one aspect of the hyper-inflation of Weimar Germany. But, the reason that Gold, and not Baked Beans assumed the role of Money Commodity was precisely that you would need a very big storehouse indeed, to hold the same value in baked beans that can be stored in a small quantity of Gold! In fact, I’d recommend reading that blog from just over two years ago, which accurately predicted what, in fact transpired.

Ripped Off

All of the people who are hurriedly sending in their gold jewellery in return for cash are getting doubly ripped off. Only a fraction of the value of jewellery actually consists of the gold or other precious metal content. The majority of the value consists of the labour-time of the jewellery workers who turn it into articles of consumption. Yet, the companies buying up the jewellery are only interested in the gold, which they are melting down, to turn into bullion, to meet the growing demand from smart money investors, and its only the gold content, therefore, they are paying for, less their costs and profit margin. But, those selling are getting ripped off from another angle. Even in the last couple of months gold has risen in price by 20%, by the time Joe Public jumps on the bandwagon the price will be much higher.

When I first decided it would be a good idea to start buying gold, in 2002, I had no idea how to go about it. I went to a couple of banks to enquire about buying gold coins or bullion, and was met by blank looks. I went to a local jeweller who confidently told me that it was a bad idea, because there was so much Gold about that the price would never rise, which is why he’d stopped buying Gold Bullion and coins several years before. The same jeweller, I noticed last week, is now running large adverts in the local paper asking people to sell him their gold jewellery and coins!!! In fact, buying physical Gold is fraught with problems. You can, I discovered, buy Gold Bullion from a number of dealers, but you need several thousand pounds to buy each ingot. You can buy Gold Sovereigns, for around £150 each, and Krugerrands for around £600 each. But, not only do you need to take into consideration the costs of storage, and insurance, but you also get screwed on buying and selling by between 5% and 7%, in the difference with the spot price of gold. There are alternatives; you can buy Gold Certificates from the Perth Mint in Australia amongst others. They hold the gold, and you just get a certificate for the amount you have bought. Alternatively, you can buy Gold through an Exchange Traded Fund (ETF), such as the Lyxor Gold Bullion Securities ETF. It is like owning a share, in this case each share is equivalent to a tenth of an ounce of Gold. The price of the shares goes up as the price of gold rises, and because its an ETF the price spread is very small. As more shares are demanded, so more Gold is bought to cover the increased number of shares.

Gold, Inflation and A New World Currency

The fact that such instruments have been developed, which enable ordinary savers to buy Gold, in itself will play an important role in the future rise in the price of Gold. Already 20%, of physical Gold purchases are by such ETF’s, and up to yet, there has been no real demand from retail investors. As I have written previously, the way that Governments will overcome their debt problems will be through a large dose of inflation. The oceans of paper money tokens, already printed, provide the means for accomplishing that, and once economic activity picks up more strongly in the coming months, the velocity of circulation of those money tokens will increase rapidly, fuelling rapid inflation – which will fuel increased demand in itself. Already, Mervyn King has warned that inflation will rise sharply in the coming months. Anyone with cash in the Bank will lose out, as paper money gets devalued rapidly. In the last week the dollar has again begun to fall rapidly, which has partly been the cause of Gold hitting new all-time highs.

The Chinese RMB cannot yet act as a new reserve currency, and the main prospect, the Euro, is itself suspect due to the liquidity pumped out by the ECB, and the fact that European Capital will squeal loudly, if it believes that its competitiveness is being threatened by a rapidly rising Euro relative to the dollar and the RMB, and Yen. The Euro is likely to become the new reserve currency, but only painfully, and over a number of years. The other alternative, the use of IMF Special Drawing Rights, is almost certainly a non-starter, because they could have fulfilled that function any time since the inception of the Bretton Woods Agreement. They could not, because any fiat currency, including a world reserve currency, requires a State standing behind it, and no world state exists. Its in that light that the developments in relation to the EU, and the need for a European State standing behind a European currency have to be viewed. The only money that can fill the vacuum is real money, Gold.

The price of Gold will rise because its value relative to other commodities is rising, but as demand for it as Money, as store of Value, and even increasingly as a means of international payments resumes its price will rise over and above that. As demand rises, whilst supply remains relatively fixed, especially as paper currencies are rapidly devalued, it will not just be smart money investors who pile into Gold, but ordinary savers looking to protect their savings, and increasingly speculators, driving its price parabolic. The real peak price of Gold achieved in 1960, will then be combined with the nominal peak price of Gold in 1980, into a single event in this cycle. The $7,500 per ounce figure, then might be a considerable underestimate of the price Gold might rise to this time round.

Sunday, 22 November 2009

All To Play For

Harold Wilson said a week is a long time in politics. With more than six months still to run before the General Election, there is still all to play for. Not too much can be read into the Glasgow By-Election result, but it does have a number of lessons. The turnout was low, but it always is in this seat, and by-election turnout is always lower than in a General Election. But, Labour’s vote was so large that even had their been a 100% turnout, the Labour vote would have still been around 19% of the total! Given the number of parties standing, that could have been enough to win, even if not one single extra voter had voted Labour. That is the measure of the extent to which Labour remains the Workers Party.

In fact, given the nature of the Constituency, and given the conditions under which the election took place, the result for Labour has to give some encouragement. It is amongst ordinary working class voters that the greatest resentment of all the palaver about the expenses scandal is most strongly felt, because it is with them that the greatest contrast exists. Many middle class people employed in white collar jobs, let alone those who run their own businesses, or occupy Management posts know only too well the number of expenses and other fiddles that exist to boost incomes. Its also the lower ranks of the working class who have suffered most over the last year of recession. If there were going to be a rebellion against Labour for all these things then Glasgow should have seen it. There were, after all plenty of other parties standing who could have attracted their votes, some like the SNP, even having the potential of winning. Yet, even the SNP was literally swamped by the Labour vote, whilst the Tories only saved their deposit by coming in third, and the busted flush of the BNP once again did lose their deposit, failing to increase their vote from the last election. As for the sectarian Left in all its stripes, once again it demonstrated its complete irrelevance to the working class, its only function here being to make the 1,000 votes of the BNP look more respectable than it was!

In recent weeks, it has appeared that Labour has been making a steady recovery. I wrote more than a year ago, that Labour should not be written off, because ultimately its how people feel in their pockets, which determines how they vote. We have increasingly moved towards a Commoditisation of Politics, along US lines, where what is important is marketing a message, and the superficiality of image. Under those conditions, Brown was unlikely to do well. The media focus on him as an image, as though he were some “celebrity” on Big Brother, rather than on politics. We continually have comments from supposedly knowledgeable reporters like John Sopel, on today “Politics Show”, who talk about him not being elected, as though the Prime Minister were a President! Now, it would be a good idea to actually have an elected Head of State, but the Head of State in Britain, is not the Prime Minister, who is elected by Parliament, but is the Monarch who is elected by no one. But, this superficiality can only run so far.

The fact, is that the economy is turning around. It is certainly a far cry from the predictions of a Great Depression that sections of the Far Right and Far Left were making – and hoping for in the belief it would improve their own political fortunes – only a few months ago. Many economists think that the last set of ONS statistics showing that the UK economy was still in recession in the third quarter are questionable. That certainly seems to contradict much of the other economic data that has come out. Either way, economic activity is increasing, and the latest surveys show increasing confidence on the economy from consumers. Its likely that as the effects of an end to restocking in the US, and Europe lead to a slow down in those economies, but I expect not a double dip, Britain will actually be showing stronger growth, partly based on the advantage gained from a lower pound assisting manufacturing, and partly as Britain’s large Financial Services Sector, once again begins to drive growth on the back of a recovering world economy, and massive growth in Asia, in particular, which fuels a phenomenal amount of financial transactions, most of which are funnelled through London, one reason why Brown could probably get away with introducing a Tobin Tax on such transactions whether or not other financial centres followed suit.

Labour’s tactics in Glasgow also demonstrate how they can run the election in the rest of the country as insurgents rather than incumbents. In Glasgow they were able to do that by attacking the SNP, and its record in Government in Scotland. But, in the rest of the UK, it is Tories, Liberals, and Greens who have occupied that role now for the last few years in control of Metropolitan Councils, County Councils and Districts. And, that record has not been a good one. It is a record of swingeing cuts in spending even during a time when Central Government has been massively increasing Public Spending. It is a record like that in Leeds of Tory-Liberal Local Government making outright attacks on Public Sector workers. The record in London under Boris Johnson, also shows what workers could expect were the Tories and Liberals to form the Government. Already, Cameron is talking about freezing all Public Sector pay, and as I have suggested previously that is likely to be at a time when inflation is let rip in order to shrink the Government’s debt in real terms.

Of course, a Labour Election campaign that focuses on such facts is itself hypocritical even were it electorally successful. Labour Councils have cut spending and attacked workers conditions too. The economic facts of life that mean that so long as Capitalism exists whoever is in Government will be forced to act in ways which place the burden on workers, will push down on a Labour Government as much as a Tory Government. Indeed, under the current conditions, they would push down as much on a “Workers Government”, because outside the kind of fundamental change of material conditions that place the working class in a strong economic and social position, that enable it to base any political advancement upon such real economic and social power, any simply radical Left Government would be one built on sand.

That is why for a Marxist the coming election cannot be about who wins the most votes, but is about how to intervene in such a way as to enhance that economic and social power of the working class. That has to be about formulating a programme, such as that I set out in Why We Need A Socialist Campaign For A Labour Victory, which seeks to mobilise the working class to engage in collective self-activity to resolve its problems rather than looking to Parliament or the Capitalist State as the means for doing that. Of course, as part of that it is necessary to raise demands that facilitate the working class in doing that. We do not place any faith in the Capitalist State’s commitment to basic bourgeois freedoms like “Free Speech”, but we recognise the importance for workers of such freedoms, and we fight to defend them using proletarian means of struggle. Similarly, we do not place any faith in the bosses state intervening in a neutral let alone pro-worker fashion in industrial relations, but we do demand that the bosses state get its foot off the workers’ neck, and allow us to organise freely without the hindrance of anti-union laws.

At the moment the sectarian Left have all the hallmarks of crew moving around deckchairs on the Titanic, and in the process even then squabbling about where to place them. The Stalinists of the CPB look likely to simply back Labour uncritically. Son of No2EU looks mercifully stillborn. The LRC looks set to simply accept the Labour Election Manifesto, whilst relying on support at an individual level for Left MP’s like Corbyn and McDonell. Others are likely to engage in individual acts of adventurism standing candidates with no base in the working class, purely in order to salve their own consciences and in the hope of recruiting a few more sectarians into their ranks, whilst others still like the CPGB will support “Left” candidates where they stand, and Labour where they don’t. It’s a bit like an equivalent of those poor souls who suffering from some terrible illness seek out a solution at Lourdes, or some other such unlikely solution to their problems. The truth is that the illness here is the low and falling level of class consciousness within the working class, an illness that has been largely caused by the sectarianism of the Left itself over the last century, which has contented itself with trying to build its own pure, and consequently ever smaller, ever more fragmented vanguard, rather than selflessly building the mass organisations of the class – its Trade Unions, Party and Co-operatives. Unfortunately, the Left look set to keep trying to administer such solutions to the working class.

What we need is a Socialist Campaign for a Labour Victory fought for by a Left inside and out of the Labour Party, a campaign that seeks to establish a minimum programme based around building collective working class self-activity, and rebuilding the basic structures and organisations of the class on that basis.

Saturday, 21 November 2009

Universal Inflation or How Long Is A Piece of String?

A few weeks ago, I was watching a documentary about problems relating to the size of the Universe and current theories of physics. The argument basically goes like this. Imagine you see a number of people, all of whom are splattered with the same orange paint. It is reasonable to assume that at some point all of these people were in the same place where they all got covered with this paint, for example by a paint ball exploding. If you take the location of the people, and the direction in which they are travelling, it should then be possible to plot their course backwards, so that you can discover where this event happened. The same argument is true, of the Universe; if the galaxies are the equivalent of the paint splattered people, then because they all originated in the Big Bang, then tracing back their location and trajectory they should all end up back at the same point. The problem is that they don’t!

The programme then continued the analogy to offer a solution to this problem. If we think about the people, and assume that they too are varying distances from the origin, we can easily think why this might be. Some or all of the people may have run away from the initial event. In other words we only have to consider that they were travelling at different speeds. The problem is that in analysing the Universe, astronomers use the speed of light, and according to Einstein the speed of light is constant. Now, of course, Marxists have no fetish for constants and absolutes. The whole basis of dialectics is that nothing is absolute. Yet, we have good reason to believe that for all intents and purposes the speed of light IS constant. So, we need a good reason to accept the premise of the programme, which was that in the early moments of the Big Bang, the speed of light was greater than it is today.

I was thinking about that when I first saw the programme, and thought of what seemed to me an obvious alternative. I’d intended writing about it at the time, but I’ve had way to many other things to do to be able to get round to it. But, the other night, there was an Horizon programme on BBC with Alan Davies entitled, “How Long Is A Piece of String?”, which reinforced the ideas I’d had earlier, and so, with a few minutes to spare, I thought I’d set them down, for what they are worth, especially today as the Large Hadron Collider starts operation again.

One of the first problems that struck me with the comparison of the people all being at different locations on a map with the galaxies exploding away from a central Big Bang was one of dimension. The people on a map all head of two-dimensionally from a given point, whereas matter and energy exploding away from the Big Bang went out in three dimensions. The importance of that is obvious if you think about the geometry of two dimensional or three dimensional objects. The importance is even greater when you take into consideration the other things we know about the fabric of space – in particular that it is not flat, but is curved by gravity. Think about a balloon. If you mark two dots on its surface on opposite sides, then these two dots can begin in the same place. But, as you inflate the balloon the distance between them expands not just because they are moving away from each other, but also because the surface of the balloon is curved. The actual distance travelled is only a fraction – the radius of the sphere – compared to the distance between the two measured on the surface. And, because we can only measure distances in the Universe based upon the distance travelled by light from them, and because this light does not travel in a straight line, but has to follow all of the contours of space this is a more appropriate analogy it seems to me, than simply distances measured between objects on a flat piece of paper.

This is where the question of how long is a piece of string comes in. The programme demonstrated that if you cut a piece of string it is impossible to get a definitive measurement of its length. Marxists have long been familiar with this argument, because as stated above, the basis of dialectics is that there are no absolutes. If you go to a more accurate degree of measurement, you will always get a different result. In fact, I can remember, my old man as an engineer being a bit disparaging about woodworkers, because, as he said, for a woodworker being accurate up to a 16th of an inch was adequate, whereas for an engineer it was necessary to be accurate in thousandths of an inch. Today, with the development of even greater precision in measurement, and the ability to slice and dice with laser accuracy, let alone the development of nano-technology, even accuracy to within thousandths looks crude.

The concept is tied up with that of fractals. Fractals are shapes, which are themselves made up of smaller versions of themselves, which can be endlessly repeated. Snowflakes are an example, but in fact there are many such objects found in nature which share this property, which seem possibly also to be linked to the mathematical phenomenon of Fibanacci numbers. Now, if you take the piece of string its length will depend upon how accurately you measure it! Use a wooden ruler and you will get one length; use a laser measure, and you will get another. But, its weirder than that. Consider the coastline. If you want to know the distance between A and B then you can measure it roughly on a map, and using the map scale arrive at a distance. But, a more accurate map, will show that in fact, there were more kinks and curves than previously shown, and following these in and out, makes the actual distance travelled greater. The more accurately you measure the greater the distance, because if you get down to measuring each grain of sand on the beach that has to be gone round, already you are extending the distance considerably, measure each atom of each grain of sand, and so on. The whole point about fractals is that none of these surfaces are flat, and so it is always possible to go down another level and find a kink that has to be gone round.

Now if we apply this to the fabric of space then not only do we know from Einstein that it is curved, but we also know that it is dimpled. Each massive object like a galaxy or a black hole causes the fabric of space to be pulled down like placing a heavy object on a stretched out piece of rubber. So, it could be thought of more like a golf ball, except that in each dimple there would be other dimples caused by more localised gravity from stars, planets etc. So, when we measure the distances between ourselves and these other objects the light has not travelled in a straight line. If you consider a circle with two points on its circumference the shortest distance between them will always be a straight line drawn between them through the circle. But, if we consider the fabric of space as being like the rubber of the balloon then it is not possible to draw such a line through the balloon. At best it is possible to draw a line only through the tiny thickness of the rubber. Inside that is not the fabric of space, but sub-space.

Consequently, the distances measured between ourselves and these other objects in the universe must reflect this shape of the Universe, must reflect the fact that light travels a much greater distance, as a direct consequence of the expansion of the Universe and of its shape than is the actual distance travelled by these objects from their original source in the Big Bang.

Anyway, that’s my thoughts on the matter. I’m sure that far greater minds than mine have considered this, and it would be interesting to hear other thoughts on the matter.

Friday, 6 November 2009

A Reply To "Dave" On The Politics of The SWP & Fighting Fascism

This post is a reply to "Dave" following on from a discussion we have been having here

”For those of honest mind please read the following article (Daly Mail vs the Nazi’s) in the current edition of socialist worker, I think it makes my point:”

What point exactly is it making??? For one thing its confused. I think there actually has to be a debate about the nature of the BNP, as the Weekly Worker suggest. On the one hand, I have myself pointed to the fact that the BNP has within it many thugs, and you do not have to look far to find thuggish behaviour from BNP members. Until recently, I too stood by the classical view of the BNP as a fascist party. However, having read some of the articles in the WW recently, I am prepared to take a more open view. I think to be saying to people that this is a classic “Nazi” party, when it has NOT been going out in an organised way to smash up Left meetings or Trade Unions as the Nazis did, when it is speaking out vehemently, against groups like the EDL, who are engaged in such activity, could simply undermine the left, in the eyes of workers, who look at those statements and compare it with the reality and find a mismatch. Certainly, we can make the point that it is doing this in order to win electoral support, but does not the fact of how such a process changed the Front National – and in a different context Provisional Sinn Fein, or in yet another the way in which electoralism changed “Socialist” parties, and changes individual “socialist” politicians – cause us to engage in a more in depth analysis of what the BNP is?

At the same time the SWP’s position is thoroughly confused. At the same time as running such stories attacking the bourgeois press and bourgeois parties, it then puts the leading representatives, like David Cameron, of that same bourgeoisie, on its platforms, or attaches their names to its campaigns. It even advises people on demonstrations, it has called, not to attack the racists of UKIP! Trotsky referred to such bankrupt politics when he said that once you start down this road you always end up giving your support to, or going into alliance with, ever more reactionary politicians, because there is always some “greater evil”, measured against which these politicians are themselves the “lesser evil”.

What is more such politics reflect the fact that the SWP does not operate on the basis of class politics, but works on the basis of a world in which politics is compartmentalised. Over here there is “industrial politics”, over here there is “Anti-racism”, over there there is “Women’s Work” or “LGBT Work”, over here there is “Anti-Imperialism”. And what it does is to say different things in each area. When its working in the “Women’s Work” area, for example, it will promote itself as the champion of women’s rights. The same when it is working in the LGBT area it will be the greatest proponent of Gay and Lesbian rights and so on. But, when it is working on anti-racism it will refuse to pursue these issues, for example as it did in Bradford a few years ago over the question of grooming, and will even accuse others of Islamophobia, for doing so themselves. When it is working in the area of anti-imperialism, for example supporting the murdering mullahs in Iran or Iraq, it will refuse to challenge the fact that these same people are murdering socialists, trade unionists, women and gays and so on. The reason it does this is quite clear. Rather than locating its politics on the basis of class politics, it bases itself on “building the party”, and in each area of work simply says whatever it thinks that particular milieu wants to hear. It acts in accordance with your policy of “diplomacy”, subordinating its politics to the need to not upset possible recruits. But, what this “diplomacy” actually amounts to is nothing more than the kind of Opportunism that the adherents of the Second International were guilty.
The piece also is politically inadequate for another reason. It attacks – quite correctly – the racism of the gutter press (which for reasons I set out in my blog I don’t think necessarily DOES reflect the interests of the Capitalist class, which requires social stability, and cheap imported labour). But, it is arrant nonsense to suggest that the support for the BNP is based solely on the ravings of the Daily Mail, or the reactionary politics of mainstream parties. The BNP have been picking up workers votes, because many of the least well-off sections of the working class feel that they have been shat upon from a great height. They believe they don’t have jobs, decent houses, school places and so on, because of immigration. They are, of course, wrong, but simply telling them they are wrong is not enough. They need someone to provide them with a solution to those problems – a political solution.

But, and this was one of the main points I have previously made, it is quite clear that neither the UAF, nor the other anti-fascist organisations that base themselves on trying to build Popular Frontist opposition to the BNP can possibly provide such a solution. The SW article certainly offers none does it? The UAF etc. cannot offer such solutions precisely because doing so means advocating CLASS politics, and if the UAF did that then the David Cameron’s, the Teddy Taylor’s, and all the Bishops, all the bourgeois Nationalists who want to oppose the BNP by pretending to be better Nationalists would disappear in an instant.

“Imagine how they feel when you present your immigration ideas! Imagine what that does to the image of socialism in their eyes but you are correct not to pander to ignorance and the SWP are correct also.”

What on Earth are you talking about? How can my position of holding to a clear class politics and arguing against Immigration Controls cause any confusion? My position is clear. I see workers as the revolutionary class. It is the job of a Marxist to stick with the workers even where they hold reactionary ideas, precisely because the task is to divest them of those ideas. I do not make acceptance of my ideas a precondition for sticking with the workers, but I do insist on the need for Marxists not to abandon their ideas. Compare that with the sectarianism of the SWP over the LOR strikes, where they recognised that those who argue for “Import Controls”, and “British Jobs 4 British Workers” are “proponents of racism”, and on that basis refused to support workers in struggle against the bosses!!!!! In fact, one reason they did that – along with many of the other sects whose natural recruiting ground is amongst the petit-bourgeois, student and intellectualist milieu where having “right-on” politics in respect of racism is paramount – was precisely fear that they would lose support and potential recruits.

“I am not sure they do anymore actually. They have evolved into banter, that is my impression. Just like the jokes against the Germans.”

I think you are deluding yourself if you do not believe that these jokes were only possible because they took as their starting point entrenched stereotypes. Its rather like the bloke who said to me down the gym the other week that he was not a racist, and then went on to tell me that he’d been reading Obama’s book, and related that “his father was like all these blacks and couldn’t keep his dick in his trousers.” I suppose that’s just banter too!

“As I said shame some do not see through this sham!!!”

I think it’s a shame you are not prepared to consider whether more analysis is required.

“Your response to my Bakunin jibe was thoroughly confused. I will try to summarise as best I can my take on this immense topic.”

I’m not confused at all, its your politics that are confused, because you start from some principal, and then completely abandon it when it comes to its application!

”I do not agree with the pro imperialist position of the AWL for a variety of reason, but I think Marxists should have opinions on international matters.”

Who would disagree with that?

“Of course those opinions must be based absolutely on the interests of the class struggle. We should also distinguish a conflict between imperialists and those wars of domination by imperialists against weaker states.”

But, the SWP does not do that. On Ireland back in the 60’s it started from a thoroughly workerist position refusing to take on the National Question and British involvement, because it was unpopular amongst British workers at a time when bombs were going off. Then it completely changed course and became cheerleaders for the Provos. Its statements about “We are all Hezbollah Now”, i.e. we are all a bunch of clerical-fascists, have nothing to do with basing yourself on the class struggle and everything to do with basing yourself on trying to win recruits in its currently chosen milieu!

Moreover, what does imperialism against weaker states mean? Was Germany a weaker state when it had been occupied and placed under domination by Britain and the US, for example? Moreover, even having made this distinction what are the political conclusions that flow from it. I’ve given the quote from Trotsky about a war between Brazil and Britain. But, his more detailed position is illustrated by his position in relation to Japanese Imperialism and China. The SWP’s position on these issues is effectively that of Stalin. That is they subordinate their own politics in order to enter a Popular Front with bourgeois nationalist forces – “we are all Hezbollah”. Compare that with Trotsky who opposed submersion of the Communist forces in the KMT, whilst at the same time arguing for support for the KMT and Chiang Kai Shek against Japan. But, what did that “support” consist of. It consisted of offering to forge a military alliance against Japanese Imperialism, whilst maintaining the clearest political and organisational demarcation from the KMT, in fact, sharpening the criticisms of the KMT, pointing out that it could not be relied upon to fight a battle to the death with Japan, that it would turn on the workers and so on.

He was, of course, absolutely correct, because having used the Communists, just as the Stalinists and Communalists used the SWP in Respect, Chiang turned round and massacred the Communists, just as the Stalinists and Communalists turned on the SWP. Those who fail to learn from history are doomed to repeat it.

”Marx allowed himself to have an opinion on the war between Germany and France that led to the Paris Commune and at the same time he tasked the international to “put the conflict between England and Ireland in the foreground, and everywhere to side openly with Ireland”.”

But, Marx’s solution was not to submerge class politics in bourgeois Nationalism. Marx was a Centralist. He was only reluctantly in favour of the separation of the Irish and British workers in order to resolve this problem. Even then he favoured a federal Ireland and Britain in order to try to maintain the unity of the class. And start to finish, even though he was writing before the much fuller discussion of the National Question by later revolutionaries like Lenin, his solution was based on the working class providing the answer. Compare that with the SWP’s kowtowing to the reactionary politics of all kinds of clerical-fascists and bourgeois Nationalists at the expense of class politics.

”On the Second World War I agree with many of your factual observations but looking back after the event we should see the differences in the warring states and recognise that for many people this was seen as a ‘just’ war against the evils of fascism. Here I am not talking about the people who fought in the war but subsequent generations who look back with hindsight. So bringing this back to the debate in question I regard the word Nazi as synonymous with ‘evil’ Fascists and not ‘evil’ Germans.”

And I have said I disagree, but apart from that disagreement, I would suggest to you that the concomitant of that is to give credibility to the very idea that this WAS such a War. It is to give credence to the idea that there WAS a common cause between British Workers and British bosses against this evil Nazism. In going along with all the crap about trying to deny the BNP Nationalist symbols like the Spitfire and Churchill, the SWP does lend credence to the idea that there was something to be proud of in such an imperialist War, and does suggest that the Spitfire and Churchill were “ours”. But, of course, the job of a Marxist is to do the exact opposite, to shatter that myth. The SWP, cannot do it, because today in its Popular Frontist organisations it IS in bed with those very same bourgeois forces!!!

“I do not think Marx would have looked at this conflict and concluded that they were all as bad as each other so it didn’t matter what the outcome was. He often voiced his preference of sides in such conflicts.”

Firstly, Marx was writing prior to the world being divided into competing imperialist powers. Secondly, he was writing prior to the fuller discussion of the National Question by socialists at the beginning of the twentieth century. And yes, in any particular conflict Marxists have to take a view based on what furthers the interests of the working class. Lenin gives the classic example of that when he speaks about subordinating the bourgeois democratic freedoms that might be fought for in a small state to the interests of the workers in two larger states who might be dragged into a war, as a consequence of a struggle for those freedoms.

”To quote Marx verbatim “You see what a caricature he [Bakunin] has made of my doctrines! As the transformation of the existing States into Associations is our last end, we must allow the governments, those great Trade-Unions of the ruling classes, to do as they like, because to occupy ourselves with them is to acknowledge them.””

This has nothing to do with the argument you are trying to make. Of course, Marxists do not simply throw up their hands, and say what Governments do in International Affairs is none of our business! Who is suggesting that??? Of course, Marxists oppose Wars and so on, but Trotsky was, of course, correct, and Marx I’m sure would not have contradicted him, when he said that such wars may not be OUR wars, but we will have them unless we are strong enough to overthrow the bourgeoisie and establish our own state, because at the end of the day control over the military flows from control of that state!

”Your interpretation of my position I think shows you do not look at these events with the class struggle in mind, as your absurd implication that I would support the USA against Vietnam shows. Actually the opposite would be true.”

But, given what you said in your previous post about not being neutral between “fascist” and “democratic” regimes, and what you have repeated above there is nothing absurd in that conclusion at all. It flows logically from your position. Was not the US a bourgeois democracy of the kind you see as a lesser evil compared to fascism. Was not North Vietnam a Stalinist dictatorship, and didn’t Trotsky describe Stalinism as differing from Fascism only in its greater brutality? As you approve of the “diplomatic” alliances between workers and bourgeois to fight fascism then why should that not include an alliance with democratic bourgeois from other countries prepared to help in fighting the good fight? That is the logic of your position even if you are reluctant to accept it.

”For example, I wouldn’t support an attack on Iran but I would welcome an end to the clerical dictators by an uprising within Iran, even if the outcome was a more liberal ruling class. This would allow us to establish better links with the advanced workers in Iran. An attack by the West would set back that possibility for generations.”

That is exactly what the Stalinists proposed in their stages theory, and upon which they advocated the Popular Front. But, as I said, if this liberal bourgeoisie can be allied with in this way, then why not the liberal bourgeoisie of Britain and the US. Those who have taken your argument to its logical conclusion such as the Labour Friends of Iraq, argued precisely that, and like you pointed to the fact that we should not have been neutral between a victory for “democratic” Britain as against “Fascist” Germany in WWII. The AWL, whilst not completely taking the argument to its logical conclusion like LFIQ, at the same time, argue that this democratic imperialism was trying to establish some form of bourgeois democracy, in Iraq, as it had done in Germany and Japan. They too argue that this will allow “better links with the advanced workers in Iraq”. It is, of course, all nonsense, but it is far more consistent nonsense than the argument you are trying to make.