Predictions for 2023 - Prediction 4 – There Is A Ceasefire in The Ukraine-Russia War

Prediction 4 – There Is A Ceasefire in The Ukraine-Russia War

Over the coming Winter months, the potential for ground fighting in Eastern Ukraine is very limited, meaning that Russia is able to consolidate and fortify its position. The idea that Russia intended to occupy the whole of Ukraine, was always absurd. It was never capable of doing that, which Putin and his military clearly knew, and nor did they have any reason to want to do that. They can, however, consolidate control over those majority Russian areas, as they did in 2008 in Abkhazia and South Ossetia, and that provides the template for Russia in other ethnic Russian majority regions. In the meantime, Russia can continue applying considerable pressure to Ukraine and NATO, by its air campaign against Ukrainian infrastructure, and military command and control. The costs of that to Russia are fairly minimal, but they are substantial to a bankrupt Ukraine, and increasingly costly to NATO/EU that not only is sending billions of Dollars of military equipment that has had little effect, but is having to continually pour billions of Dollars into the black hole that is the Ukrainian economy.

At the same time, the economic sanctions applied by NATO/EU/G7 have been counter-productive. Just about the only currency that rose against the US Dollar, over the last year, was the Russian Rouble! At the start of February, the Dollar stood at 140 Roubles, and today stands at just over 70 Roubles, a rise in the Rouble of 100% against the Dollar, or a fall of 50% in the Dollar against the Rouble, whereas the Dollar has risen by around 20% against all other countries.

The reason for that is that those sanctions resulted in the global price of oil and gas, and of food, rising sharply, and Russia was able to continue to sell its oil and gas, but, now, at these much higher prices, bringing a bonanza to Russian foreign earnings. The same is now happening with the attempts of the EU to impose a price cap on Russian energy sales, especially at time when China has lifted its lockdowns, and its economy is likely to surge by around 20%, causing it to suck in all of the energy, food and primary products it can get its hands on. Primary product prices are expected to rise by as much as 40% in the coming year.

Meanwhile, the EU, which paid astronomical prices for gas to build up its stocks in previous months, is seeing them run down, at a time when prices have fallen. With colder weather, as with the so called weather bomb that hit North America, still to hit Europe, over the coming Winter months – Europe has only just entered Winter (21st December) – it has imposed a huge burden on itself, as a result of its boycott of Russian oil and gas. Workers across Europe are already on the march against the consequences of that, as manifest in soaring inflation, whilst governments attempt to hold back wages, resulting in a fall in real wages. Millions of workers are on strike to prevent that, and if states attempt to impose closures, due to energy shortages, they will face the same kind of rebellion that the Chinese Stalinists faced in trying to impose further lockdowns with the idiotic zero-Covid pretence. Europe will be led to turn to cheap Russian oil and gas to prevent that.

The US/NATO clearly understood that risk of the EU being led into a rapprochement with Russia, which is why it blew up the Nordstream pipelines to try to physically prevent that supply being re-established. The EU has other widening divisions with the US, as illustrated by Macron's railing at the economic war also being waged by US imperialism against the EU, via the economic nationalism of Biden's Inflation Reduction Act. Meanwhile, that US economic nationalism also impacts the US economy adversely, with lower growth and higher costs, adding to its inflationary problems. For months prior to the midterm elections, Biden drained the US Strategic Petroleum Reserve to dangerously low levels, to try to reduce petrol prices, but now it faces high diesel prices for home heating, and it faces having to rebuild the SPR at global oil prices that look set to rise to around $120.

The conditions are set for Russia to simply consolidate its position in Eastern Ukraine, as that becomes increasingly easy to defend, whilst Ukraine has no chance of winning it back, and is simply sucked into a meat grinder that drains its human, financial and material resources, as well as those of NATO/EU. Ultimately, capitalism/imperialism is concerned with those material facts, not with moral crusades. US/NATO imperialism clearly thought that Russia could be sucked into a war in Ukraine – as described in Blairite, former NATO Secretary General, George Robertson's comment that they “goaded Russia into attacking Ukraine” - that they would quickly be forced to withdraw from, thereby, seriously weakening it. They clearly believed that the kind of impact that US sanctions had on Iran, Iraq and elsewhere, would be replicated in respect of Russia, but that proved false, and backfired on them, in fact, driving Russia and China closer together, as well as a wider group of economies increasingly separating itself from dependence on US imperialism, if not actively hostile to it.

With no quick win for US/NATO imperialism, and with workers in Europe and North America striking in their millions, and set to take to the streets to oppose cuts in their living standards from rising inflation, and proposals for fiscal austerity, it is western social-democracy that could be wrecked by its war aims in Ukraine, not Russia. So, it is likely that the EU will be first to seek to pull away from continued support for Zelensky's war in Ukraine, and to press him to sue for peace. In those conditions, US/NATO imperialism will also be led to cut its losses, and regroup. Ukraine has already said it is seeking peace negotiations in February at the UN. The conditions they have set out are clearly absurd, because it would leave nothing to negotiate, and so are obviously opening positions, but it indicates the direction of travel, as they recognise the reality of the situation they are in.

A peace deal, and restoration of cheap Russian energy to Europe, together with the opening up of China, and the economic boom resulting from it, will create wholly different conditions in Europe, in the year ahead.

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Forward To Part 5

Northern Soul Classics - Share A Little Love With Me - The Monitors

 

Friday Night Disco - I owe You One - Shalamar

 

Predictions For 2023 - Prediction 3 – China Opens, Booms and Busts

Prediction 3 – China Opens, Booms and Busts

For the last year, I have been saying that, eventually, the Chinese Stalinists would be forced to drop their ridiculous zero-Covid façade, and end the lockdowns. There was no scientific, epidemiological basis for lockdowns, from the start, other than to specifically isolate and protect the elderly 20% of the population who were the only ones at serious risk, a task which the Stalinists, in China, as much as the bureaucrats in the West, failed to do, resulting in millions of elderly people dying unnecessarily, at the same time as destroying economic activity and wealth, destroying the livelihoods of million of workers, and denying millions of young workers of their liberty and education.

When vaccines were produced at the end of 2020, the justification for lockdowns was even more demolished, because it was now possible to focus their roll-out on the elderly, removing the need even for them to be isolated from general society. Western societies did roll-out the vaccines to the elderly, but seeing the surge in economic activity, demand for labour, rising wages and interest rates that followed, which caused asset prices to start falling sharply, they soon returned to the scare stories about new variants of COVID, and rising infections, even though the number of infections was a meaningless metric, and the new variants were all even less virulent than the initial strains. Eventually, however, western societies could no longer keep up the pretence that COVID represented any kind of serious threat to the vast majority of society, as the data continued to show increasingly minimal number of hospitalisations let alone deaths, the majority of which had always, in any case, been of people with COVID, rather than of deaths from COVID.

Western societies opened and boomed, labour shortages intensified, wages surged, as firms could not find workers, interest rates rose, and first bonds then shares dropped sharply. Only continued restrictions on activity and movement, alongside sharp rises in energy and food prices, resulting from NATO's sanctions against Russian oil, gas and food exports, restricted a more rapid rise in consumption, as workers' had to spend more of their budget on these basic items, before they had chance to negotiate wage rises to match them, a process still underway, as hundreds of millions, across the globe, take industrial action to that end.

China, though, had a particular set of problems. As an authoritarian state, its methods of social control are always far less subtle, heavy handed, and bureaucratic than those in bourgeois-democracies, and as a result more brittle. Bonapartism in bourgeois-democracies grew hugely during lockdowns too, in order to justify a clearly irrational and illiberal set of measures, and to suppress any criticism or protest against them. That most of the so called Left, rather than standing against that creeping Bonapartism, actually goaded it on, helped the state, in that endeavour, hugely, especially as the actual opposition to it came from a collection of cranks, right-wing populists and fascists, which enabled any critics to be associated with them, via the old Stalinist tactic of the amalgam. Even so, the irrationality of lockdowns became such that, within bourgeois-democracies, they could no longer be sustained.

That was not a consideration in the totalitarian regime of China. Justifying actions by an appeal to reason is never one the Chinese Stalinists have to contend with, until such time as the irrationality becomes so palpable that the mass of society cannot avoid seeing it, and so responds convulsively to it, and to those seeking to impose it upon them. That was always the way that one Chinese Dynasty was replaced by another, and much the same applies with the Stalinist Dynasties today. The Stalinists had vaccines at the same time they were developed in the West, and they could have simply bought western vaccines to supplement their own, using some of the vast amounts of foreign currency reserves they possess, let alone their huge trade surpluses. They chose, however, not to roll out vaccines to the elderly 20% or so of their population, actually at serious risk. Its reported that China has only vaccinated around 40% of its elderly population, as against more than 90% in most western countries. It has suffered around 1.7 million deaths of the elderly, though its official data does not admit it.

As an authoritarian state, clearly it could have done so by decree, and by mobilising its vast resources to roll-out mass vaccination. There was clearly a purpose in not doing so, and it fitted in with the continuation of lockdowns that the Chinese state could impose at will, en masse, or alternatively selectively, in one area of the country or another. If a part of the economy was overheating, or if a part of the country was seeing protests for one reason or another, the state was able to simply close it down, issuing instructions by text message to citizens to stay indoors. It was an even larger scale, and more authoritarian version of the period during which the British state locked down millions by NHS app, on the spurious basis that they may or may not have been in contact with someone with the virus. Reports showed that, in China, the state used this method to send out messages to protesters, demanding they remained confined, and so leaving them open to arrest if they disobeyed.

China is not only the workshop of the world, and so sees its economy grow whenever the global economy, and, particularly, developed economies grow, but it is also the world's largest market for vast numbers of commodities, such as cars, phones, computers and other electronic equipment. Its vast population, once unleashed, has vast capacity for consumption, much of which is satisfied from its own domestic production, meaning that when consumption rises, Chinese production rises along with it, and so Chinese employment rises, causing wages to rise, especially as China, too, now faces labour shortages. That is particularly true with service industry, which, now, occupies the majority of the economy, in China, as it does in western economies. The last time China opened up, it saw GDP surge by 18%.

China needed to restrain the rapid expansion of its economy, for the same reason that western economies did, which is that the conditions had been created by lockdowns in which a surge of liquidity hit the market causing demand to spike, leading firms to scramble for workers and inputs to meet demand, and not lose market share, which led to them being prepared to pay much higher prices for those inputs, confident that the level of monetary demand, fuelled by huge amounts of liquidity provided by central banks, enabled them to raise prices to cover those costs. That rapid expansion caused the demand for capital to rise relative its supply, leading to rising interest rates, which, in turn, leads to asset prices crashing.

In fact, the lockdowns exacerbated that condition, because, to limit opposition to the lockdowns, states were led to have to replace the incomes of households, and did so by printing yet more money tokens, and spreading them like confetti amongst the population, whilst pretending they represented money. For the duration of lockdowns, that caused asset prices to spike further, but, as soon as lockdowns were lifted it simply acted as though a dam had been breached, multiplying the force of the torrent. In western economies the process is proceeding, as it always does, in a series of waves and surges.

The first led to a surge in employment and inflation, rises in interest rates, and the biggest ever fall in bond prices, which carried into stock market falls of 20-40%. Wages for workers in specific sectors, where there are chronic shortages of labour, spiked, and workers found they could change jobs and obtain an average 15% rise in pay. Despite the Tory propaganda, private sector workers have been able to obtain significant pay rises, often without industrial action, or with just a couple of days action, as with the 17.6% pay rise won by Rolls Royce workers. It is in the state sector, and those closely tied to it, as with the railways, where the government has used its power to try to hold back wages, that workers have been forced to have to engage in larger scale strike action.

Consequently, although the total amount going to wages has been rising significantly, due to increased employment and so on, hourly wages continue to lag behind the headline rates of inflation. To compensate, households use some of their accumulated savings from the period of lockdowns. Demand continues to rise, frustrating the orthodox pundits seeking a recession, but has started to rise at a slower pace. Once the current strikes and other factors pushing wages higher flow through, however, there will be another wave of liquidity and demand spurring economies forward, which is why there will be no global recession, and that wave will also push interest rates higher, causing a further, and more significant crash in asset prices, with liquidity then also flowing from assets into the real economy..

China has the same asset price bubbles that the West has, and for the same reasons. Its ruling class owns its wealth in the form of fictitious capital, and has sought to protect that paper wealth by the same means of printing money tokens to buy up and inflate the prices of assets, and by holding back the development of the real economy, capital and wealth, so as to hold down interest rates and prevent asset prices crashing. Indeed, the Chinese ruling class is part of the global ruling class that owns its wealth and derives its power from this ownership of fictitious capital. The fact that the interests of real Chinese capital, come into conflict with the interests of real US capital, as with the interests of real European capital, is simply an indication of the contradictions existing between these different forms of capitalist property themselves, and their reflection in the world of ideas and politics.

Indeed, given the rigidities of Chinese society, these contradictions are heightened. A large part of the asset price bubble in China can be seen in its huge property bubble, and the state has repeatedly had to pump additional liquidity into it to prevent it busting. Even so the huge Evergrande property empire has collapsed, surviving on state life support, and threatens to be a Chinese Lehman's. The increase in global interest rates, crash in bond prices, and surge in bond yields, brings this to a head. After 20 years of surrealism, even Japan's central bank has now had to rejoin the real world, as Japanese inflation rises, and the Yen was cratering, and to begin the process of ending its policy of yield curve control, which saw the yield on its 10 Year JGB more than double in a single day. No one in financial markets believes the BOJ's Governor's claim that this is not the start of some continued shift, and markets are already preparing to test him on it. It puts even greater pressure on Chinese financial markets.

The Chinese authorities may have to accept reality too, whilst gearing their response to it accordingly. They have been forced to drop the lockdowns as a consequence of popular uprisings. Propaganda is coming out about large numbers of infections, but infections are meaningless, especially in relation to the later strains of COVID. Further propaganda is coming out in relation to deaths, some of it western propaganda trying to justify their own irrational behaviour during lockdowns. But, its unlikely that, now, lockdowns are returning. For one thing, the opening up and large numbers of infections will quickly create herd immunity. It also creates an incentive for the elderly to get vaccinated quickly.

So, a rapid opening is again likely to bring a surge in economic activity. As a result of China's lockdowns in the last year, a lot of primary product prices fell, as its the biggest consumer of them, and global surpluses were formed. That is now likely to reverse, but, with NATO sanctions on Russian oil and gas, and food exports, China will be able to take advantage of that to suck in imports from Russia, also further intensifying the growing symbiotic relation between Russia and China and formation of a Eurasian economic bloc. It will also make meaningless the attempts of NATO to impose a price cap on Russian oil and gas sales. China has an incentive in seeing those sanctions fail, because they are part of a wider economic war being waged by NATO against not only Russia, but also against China, as with the restrictions on sales of technology and so on. That is part of a growing inter-imperialist rivalry that is heading inexorably towards WWIII, unless the international working-class prevents it.

As part of that, China needing to finance its expansion, and seeing asset prices crashing, and yields rising, will look at what may be happening in Japan. As it ends its policy of yield curve control, lots of Japanese savers and speculators, who had been facing negative yields on their bonds, and who had, therefore, bought US Treasuries, will now start to repatriate that liquidity, which will feed into the Japanese economy. China has vast amounts of money tied up in US Treasury Bonds. As it seeks to finance capital accumulation at home, it will also have an incentive to repatriate some of those funds from the US, especially as it looks at the way Russian assets were simply seized by western governments. That liquidity flooding back into China will cushion the crash of its asset prices, shifting that burden on to its increasingly obvious imperialist rivals in the West, and the US, in particular.

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Forward To Prediction 4

Covid Protectionism

The US is imposing further protectionist restrictions on China, by demanding that, as China ends its idiotic lockdowns, Chinese visitors to the US provide negative COVID tests.  Why?  Chinese people, including those infected with COVID pose no greater threat to the US and its citizens than do Europeans, Africans, or anyone else.  As with the sanctions placed on trade in technology products, it is just part of the growing Mercantilism and economic protectionism of a reactionary, populist US government, as it sets about trying to carve up the globe into monopolised and protected spheres of influence.

For 60 years after WWII, the world was characterised by an imperialism based upon the dominance of industrial capitalism, which needed free trade, and the dismantling of old monopolies and colonial empires, so that the vanguard of that industrial capital, the multinational company could settle anywhere, and exploit labour where it could best employ it.  It was a period in which the theory of ultra imperialism, put forward by Kautsky, best explained the world, as against Lenin's "Imperialism", which was based on the period of colonialism that preceded it.  But, a declining and challenged US imperialism, now increasingly resembles its predecessors amongst those old colonial powers, as it tries to mobilise its military alongside its economic power, via sanctions and other measures to carve up the world into spheres of economic as well as political/military influence, though on a grander scale than the pre-WWI, colonial empires.

The period after WWII, was marked by a general rise in bourgeois-democracy and liberal freedoms, consistent with a breakdown of remaining monopolistic and protectionist behaviour.  Its most obvious manifestation was probably the flowering of youth culture in the 1950's and 60's, the break down of old sexual taboos, as well as the wiping away of all of the state imposed censorship and control.  More recently, many of those things have begun to re-establish themselves, and there has been a general rise in authoritarianism and Bonapartism, of a general resort to protectionism, censorship and so on, as an alternative to open debate and competition.

Imperialism always shaped the stage on which such events played out.  It was a rules based system, but one in which the dominant states determined the rules.  The framework within each economy, and also, thereby, globally, naturally favoured the largest industrial capitals, and so the largest industrial states.  But, just as changing material conditions see once dominant capitals eclipsed by new ones that rise from small beginnings, so too former dominant states get eclipsed by new ones, as happened to Britain in the 19th century, and as is happening to the US, today.  To try to hold on to their position, such states, always revert to the attempt to use whatever power they have to impose restrictions on the newcomers, becoming themselves, therefore, the fetters on further development, and the antithesis of what they started out as.

As China, India and other developing economies have risen, at the same time that the US and UK, in particular, have declined, but also as have many of the older economies of the EU, so the latter have used many methods familiar from the past.  Britain, France, Germany and the US developed industrially by exploiting labour brutally, whether in terms of almost limitless working-days, lack of any safety or health protection for workers, and of course, the use of child labour.  Only after these economies had industrialised were they able to dismantle the worst of these practices that became unnecessary and even counterproductive - though, for example, firms continued to knowingly expose workers to asbestos, until quite recently, where they had no economic alternatives.  

Yet, under cover of being civilised exploiters of labour, these same states insist that today's industrialising economies must live up to all of the same standards that those of the already developed economies are able to meet!  This is just an application on a global scale of the idea set out by Engels.

"And in proportion as this increase took place, in the same proportion did manufacturing industry become apparently moralised. The competition of manufacturer against manufacturer by means of petty thefts upon the workpeople did no longer pay. Trade had outgrown such low means of making money; they were not worth while practising for the manufacturing millionaire, and served merely to keep alive the competition of smaller traders, thankful to pick up a penny wherever they could. Thus the truck system was suppressed, the Ten Hours’ Bill was enacted, and a number of other secondary reforms introduced — much against the spirit of Free Trade and unbridled competition, but quite as much in favour of the giant-capitalist in his competition with his less favoured brother... The largest manufacturers, formerly the leaders of the war against the working-class, were now the foremost to preach peace and harmony. And for a very good reason. The fact is that all these concessions to justice and philanthropy were nothing else but means to accelerate the concentration of capital in the hands of the few, for whom the niggardly extra extortions of former years had lost all importance and had become actual nuisances; and to crush all the quicker and all the safer their smaller competitors, who could not make both ends meet without such perquisites."

(Preface to the English Edition of The Condition of The Working Class)

developing economies are required, despite their much smaller capitals, and difficulties to pay wages, and have working and environmental laws equal to those of already developed economies, and that necessarily discriminates against them, and in favour of the existing imperialist states.  The imposition of these tests is just another example of the way US imperialism is seeking to use the old monopolistic, protectionist and bureaucratic means to protect its position in the world, as is its general economic war against China, and use of its power to force other subordinate imperialist states to comply.  Another example, is the use by the US of the Inflation Reduction Act, which is another protectionist measure that also affects the EU.

It is still industrial capital that dominates, and we will yet see whether it is that which means that the period ahead is characterised by ultra-imperialism, and yet the contradictions that exist within imperialism itself, with existing states continuing to protect their own interests, with sizeable petty-bourgeois forces controlling governmental parties, with the long-term interest of large-scale socialised capital conflicting with the short-term interests of fictitious-capital, leads to the behaviour currently seen.  The existing dominant imperialist powers, particularly the US, in order to hold on to their dominance, resort to the old practices of colonialism and mercantilism, which they once abhorred and helped to sweep away.

Predictions For 2023 - Prediction 2 – There Will Be No Global Recession

Prediction 2 – There Will Be No Global Recession

For months, now, we have had financial pundits, who represent the ideas and interests of the ruling class, and speculators in general, as well as the general media, claiming that a recession was imminent, if not already upon us. The reason for such claims, even though the economic data continues to show economic growth, and particularly strong employment growth, is that speculators need central banks to provide liquidity in the form of QE, or, at least, not to be restricting it via QT, and they also require them to be reducing their policy rates not raising them. Because they associate higher interest rates with higher inflation, rather than the excess of demand for money-capital over its supply, they think that the road to lower interest rates runs through lower inflation, and because they see inflation only in terms of higher wages, they see the need to reduce wages, for which they see the need for higher unemployment, which means the need for slower growth and even recession.

Some of them are quite open about that. Larry Summers, for example, has said that US unemployment needs to rise by around 50% to more than 5%, for at least a year, so as to reduce inflation, by which he means reduce wage increases. When they see millions of workers on strike for higher pay to catch up with inflation, and see workers like those at Rolls Royce winning a 17.6% pay rise, and when they see firms scrabbling for labour to such an extent that the average pay increase for workers shifting employers is around 15%, you can imagine their fears. Of course, its not wages that cause inflation, and its not inflation that causes real interest rates to rise, but that does not matter to the speculators and their representatives for whom the only issue is easy money to support a continued inflation of asset prices.

Claims of impending recession not only justify the demands for that easy money, but they act to try to depress workers' pay claims, and firms plans to invest. After 2010, such claims were made, and QE has been justified as being necessary to prevent a 1930's style slump. But, virtually none of the QE after 2010 went into the real economy. Instead, it was pumped directly into asset prices. That is what QE does. Central banks directly buy bonds with the liquidity they create, inflating those bond prices, and reducing their yields. They also gave commercial banks liquidity to buy up bonds, and to lend out to other speculators nearly all of which (more than 90%) went into property speculation, inflating property prices. As bond prices were artificially raised, and yields lowered, so that made shares look cheaper, so encouraging speculation in shares, with firms themselves using profits to buy back shares, rather than invest in additional capital.

Indeed, far from QE preventing a 1930's style slump, by encouraging increased economic activity, it was, everywhere – except China, Africa, and other parts of Asia – accompanied by fiscal austerity designed to reduce economic activity! The two things, together, were a powerful inducement for liquidity to move out of the real economy and into speculation, so that, although, for example, the Dow rose by 1300% between 1980-2000, and by a further 40% between 2000 and 2007, before the bubble burst in 2008, between 2009 and 2019 it rose from 7,500 to 28,000. In 2020, when lockdowns were first mooted, stock markets sold off sharply, but the lockdowns simply gave central banks the excuse to return to the policy of printing money tokens and throwing them into circulation to inflate asset prices. Stock and bond markets again soared, with 20% of the economy closed down. The Dow Jones went from a low of 18,000 to close 2020 at 30,000, up 7.5% on the year, and in 2021, as the flow of liquidity continued, with economies still in lockdown, it soared further to 36,000, more than two and a half times the level it was at at the time of the 2008 bubble!

Its in 2022, as economies open up again, economic activity soared, employment continued its upward trajectory, and firms were forced to invest in additional capital, causing interest rates to rise, that first bond markets fell by the biggest amount in history, and then stock markets followed suit, with property markets in tow. Its no wonder the speculators are frantic to want a serious recession that will cause unemployment to rise, and workers to forego pay rises, and firms be able to get back to using profits to buy up useless bits of paper rather than investing in additional factories, machines and workers.

The most blatant example has, of course, been China, where lockdowns have continued in place until its population demanded they be lifted, and those protests began to spill into demands for greater political freedom, in general, and even for the overthrow of the Stalinist regime itself. There was no scientific, epidemiological basis for the lockdowns. We know that 80% of the population, i.e. those under 60, are at no serious risk from COVID, and, even more so, in relation to its later variants like Omicron. A rapid spread of the virus amongst that 80% would have quickly produced herd immunity, leaving the state only needing to isolate, and vaccinate the 20% of the population actually at risk, and primarily those over 70, which, given the authoritarian nature of the Chinese regime, should have been easy for it to do. But, it didn't, and has had even lower levels of vaccination than in the West. But, what that meant was that it could more easily justify lengthy, extensive, and repeated lockdowns, used both to restrain economic growth, and to control protests.

As western economies could no longer justify lockdowns with high levels of vaccination, and the number of seriously ill or hospitalised, let alone dying, from COVID, dropping to near zero, it had to look to alternative means of restraining surging growth, especially as populist governments were seeking electoral support on the basis of an end to the previous ten years of austerity, and even of fiscal largesse to “level up” populations. Various other viral infections such as Monkey Pox were hyped, but without success. The most successful alternative to suppress economic activity, and spread fear was war in Ukraine. But, within a matter of weeks public opinion tired of that as a look at internet searches on the subject shows. What did continue to be effective, however, was that, when NATO imposed sanctions on Russian oil and gas, it led to a sharp spike in energy prices. That spike proved useful, because it meant that many household's now saw a large part of their money going on fuel, eating into the savings and disposable income they had been using to expand their consumption, and which had fed into a surge in demand for wage goods, in turn causing firms to need to invest heavily in additional capacity.

Part of the problem with that was that these price hikes came just as Europe was entering the Spring and Summer period, when households use much less energy. It was mainly businesses that then bore the brunt of those price increases, whilst the other effect of NATO sanctions, restriction of Russian grain, fertiliser and food exports, caused global food prices to rise sharply, which mostly hit industrialising economies in Africa, rather than developed economies in Europe and North America. Higher oil prices resulting from the sanctions rebounded on Biden, as US oil companies shipped expensive oil to Europe to replace the cheaper Russian oil, and as they did so that caused petrol prices in the US to spike, endangering Biden's poll ratings, which, in turn, led to him draining the US Strategic Oil Reserve to dangerously low levels, and which now they will have to refill at much higher prices going into 2023.

The reason those prices will be much higher is that the Chinese protests that led to its lockdowns being lifted will now see the Chinese economy rebound mightily. The last time it lifted lockdowns, its economy surged by around 18%. It is set for another similar period, and that will mean that it will also suck in large quantities of primary products including Russian oil and gas, along with iron ore, bauxite, copper and so on, all of which will give a boost to the primary producers of those commodities in Africa, Latin America and so on. Chinese consumers will also be out in force again, buying western consumer goods such as German cars, and so on. So, although, the NATO sanctions will have acted to depress the Eurozone economy, which even so is not in recession, the opening of China will give a boost to global demand and trade that will prevent any recession, unless further direct measures are pursued to deliberately create one. The current rises in central bank rates are nowhere near enough to fulfil that function, and will crash asset prices long before they cause a recession.

As the US is engaged in an increasing economic war against China, it may also be the case that, in order to cushion any crash in its own asset prices, resulting from its lifting of lockdowns, China will withdraw large amounts of the liquidity it has tied up in US assets, and repatriate it to pump into Chinese assets. That will facilitate a further Chinese economic expansion whilst weakening the US both financially, as it suffers a serious asset price crash, and economically, as the Chinese economy again grows faster than the US, and secures a greater proportion of global trade and influence. Its no accident that Biden has been seeking to build additional ties with Africa, in the face of growing Chinese influence, but that seems to have gone badly, with the US having little to offer, and no real concrete proposals, at the same time that it also seems to be losing influence in the Middle East.

The predictions of financial pundits of recession are partly propaganda aimed at shifting expectations of workers, but also partly expectations themselves based on previous behaviour. The orthodox view is that employment is a lagging indicator, because its only after economies slow down that firms start laying off workers. However, as I have written before, in current conditions, of tight labour markets, employment is a leading indicator, because increasing employment leads to increased demand for wage goods, which leads to firms having to invest in additional capital, and so causing economic activity to rise. Its not just that, in the US, the last year has seen around 10 million new jobs created, which means 10 million additional wage packets creating additional demand in the economy, its also that, tightening labour markets mean that all existing 160 million workers see their wages rising. Those rises are higher than the figures for hourly wages suggest, because of additional hours worked, overtime rates, bonuses and so on, as well as the fact that larger numbers of workers are changing jobs, with an average pay increase of around 15% for having done so.

So, when we continue to see US non-farm payrolls continue to grow by between 200,000 to 300,000 per month, and we see weekly jobless claims down at around 210,000, as against a figure of around 500,000 in recessionary conditions, this is a leading indicator of huge amounts of additional wages coming in to form additional monetary demand for wage goods, meaning that competition forces firms to expand to grab their share of this growing market, which, in turn, creates additional demand for labour and capital. That is why just as with the predictions that inflation was merely transitory, the pundits have been repeatedly proved wrong in relation to predictions that job growth would slow, and so on.

But, the tsunami of strikes hitting global labour markets shows that conditions have fundamentally changed from those the mainstream analysts have in their models. Those models assume that, just as with the last 40 years, workers would not be able to raise wages, and so rising inflation would simply eat into disposable income, leading to a slow down in consumption, followed by a slow down in economic activity, and fall in wages and employment. Those conditions no longer exist, and have been falling apart ever since 1999, only interrupted by the period of austerity after 2010. Workers are demanding pay rises to match inflation, and getting them, as the Rolls Royce settlement and many more illustrate. Indeed, the fact that workers can get an average 15% pay rise just from shifting employers is indication of the underlying dynamic created by the demand and supply for labour-power.

Sharp rises in inflation, particularly fuel and food, in recent months, have bitten into household savings built up during lockdowns, and the current wave of strikes has not yet put the additional wages into workers pockets to compensate for that. But, it will, and when it does, workers will again have the funds to resume their increased consumption, meaning that firms will have to expand further, and so no recession. Given that 80% of the economy is service industry, which is labour intensive, as households now shift their spending away from the purchase of goods, undertaken during lockdowns, towards services, such as entertainment and so on, that will have an even bigger impact on increasing employment and economic activity. Although we are at much lower levels of unemployment, and higher levels of employment, we are still at levels of unemployment about 3-4 times what they were in the early 1960's, when such labour shortages led to a progressive shift, causing wage share to rise, relative to profit share, that continued through the 1960's, fuelling the consumer boom of that period, and into the 1970's.

Back To Prediction 1

Forward To Prediction 3

Predictions For 2023 - Prediction 1 Inflation Does Not Go Away

Prediction 1 – Inflation Does Not Go Away

Many central banks are predicting that inflation falls significantly in 2023, such that, by 2024, it will be back down to their target 2% levels, with some, even, predicting deflation at the end of that process. These are, of course, the same central banks that, in 2021, claimed that inflation was merely “transitory”, and repeatedly underestimated the level it was going to reach. Given all of my writing on inflation over the last couple of years, setting out the Marxist analysis of it as a monetary phenomenon, it should be obvious why I think these claims are going to be proved wrong.

There are three reasons why the prices of commodities might rise. Firstly, the value of the commodity itself rises, i.e. it requires more social labour-time for its production than before. Secondly, the value of the standard of prices falls, i.e. it represents less social labour-time than it did before – inflation. Thirdly, there may be fluctuations in the demand and supply for commodities, so that, at one point prices rise, and at others they fall. In the last two years, all of these have played into rising prices, but, it is only the second that causes inflation, and leads to a permanent rise in prices.

In general, social productivity rises, and so the social labour-time required for the production of every commodity, and all commodities, progressively falls, such that, if the standard of prices remained constant, the general price level, and the prices of every commodity would fall. But, at times, the level of productivity in certain areas of production, may fall. For example, a crop failure reduces productivity in agricultural production, and that feeds through into other areas of production where agricultural products constitute a sizeable element of constant capital – raw material. That tends not to be so significant in a global economy, because a crop failure in one part of the world can be compensated by importing products from another. But NATO's economic war against Russia, has prevented Russian grain and other exports from being shipped, as well as Russia's retaliation to that, by blocking Ukrainian grain exports has meant that large amounts of grain have been taken off the world market. Russia is the world's largest grain exporter by far, with Ukraine being the fifth.

In addition to global grain supply being drastically reduced, amounting to a massive drop in social productivity, the same NATO sanctions against Russia, reduced its exports of oil and gas, again amounting to a significant drop in social productivity, in relation to energy production. The use of gas in the production of fertiliser, along with similar sanctions on Russian exports of fertiliser, added to this huge drop in global social productivity for both energy and agricultural products, raisin the global value of energy and food, which has fed through into higher energy and food prices. But, other such measures have lowered global social productivity for all commodities. US trade sanctions against China, particularly in respect of technology, is just one part, but the US has also imposed trade restrictions on the EU too, leading to retaliatory actions.

Global lockdowns massively increased frictions and costs, undoing a lot of the rise in global social productivity that globalisation had brought, and those restrictions have still not been completely lifted, particularly in China, which is the workshop of the world. But, increasing protectionism, of which the US economic war against China and Russia is just part, forms part of a longer-term increase in such frictions and costs that reduce global social productivity and increases the value of commodities, reversing a trend that had been in place for 40 years. Brexit is just another manifestation of it.

This is a consequence of the unfolding of contradictions within imperialism as the stage of capitalism where it becomes a world economy, but has not created a single world market and state, and, consequently, where different competing large states seek to assert their dominance against others. It is also a consequence of the contradiction between the interests of large-scale socialised capital within each state, as against the interests of the petty-bourgeoisie, as manifest in Brexit, and assorted reactionary populist movements across the globe. It is a repetition, on a larger scale, of the same phenomenon that led to the creation of nation states, and then to the need to enlarge and centralise them, as with the US Civil War, and the European Wars of the late 19th and early 20th centuries.

At the same time, the petty-bourgeoisie, threatened by such developments, responds to it, within each state, and seeks to turn the clock backwards, as with Brexit. On the one hand, such restrictions are clearly not in the interests of global, large-scale socialised capital, whose vehicle is the multinational corporation, footloose and free to base itself wherever provides the greatest benefit, nor the global ruling class sharing the same characteristics, and which, now, owns all its wealth in the form of fictitious capital, equally footloose and able to be shifted from one country to another at the press of a computer key.

The driver of those frictions remains a state bureaucracy whose immediate interests are intimately tied to the preservation of existing state structures, as well as the political role of the petty-bourgeoisie, and the reactionary nationalist parties tied to it. Those contradictions can be seen to still play out inside the EU itself, delaying its rapid development into a centralised state. Even more so do they, thereby, play out on a global stage between large states such as the US, EU, and China. Overall, however, the long-term rise in global social productivity is going to assert itself, as The Law of Value.

As far as the second alternative is concerned, every standard of price has suffered continual and significant devaluation for the last 40 years. On the one hand, it counterbalanced a huge rise in global social productivity brought about in the 1980's and 90's, so that what would have appeared as a huge fall in the prices of manufactured commodities – and primary products using large amounts of fixed capital for their production – was largely disguised as a result of this inflation. A large amount of the liquidity also fed into the massive inflation of asset prices, such as the 1300% rise in the Dow Jones between 1980 and 2000.

After 2020, a further massive increase in liquidity occurred, and this time it was channelled, not solely into pushing asset prices higher (they rose again massively in 2020 and 2021), but directly into households, as income replacement, and so fed into consumption, and commodity prices, particularly having been welled up, during the lockdowns, and then suddenly released when those lockdowns ended. The increase in liquidity/devaluation of the standard of prices causes an inflation of prices that is permanent, and has not ended yet. But, in the given conditions, of restricted supply due to lockdowns, and then a sudden increase in monetary demand, it also fed into the third alternative of temporary imbalances of supply and demand, both at an individual and aggregate level.

That third alternative cause of rising prices, means that, as production gets underway again, as lockdowns end, supply will increase, so easing the imbalance of demand over supply. Increasing supply of microchips already seems to be feeding into car production, enabling it to rise, and so meet demand, which has also fed into a sharp fall in used car prices that had soared during lockdowns due to the unavailability of new cars. At the same time, however, this increase in production, means that more workers are employed, earning additional wages, and further tightening already tight labour markets, putting further upward pressure on wages. Rolls Royce in Goodwood have already handed a pay rise to their workers amounting to up to 17.6%. The risk of losing workers to competitors itself causes employers to cough up, with the average pay increase for workers shifting jobs being 15%.

But, those higher wages also feed into higher demand for consumption goods, which is yet to feed through into a new wave of demand. The demand for consumption goods means an increased demand also for raw materials, energy, and equipment. That is also coming at a time when the Chinese Stalinists have been forced to abandon their own attempts at locking down the Chinese economy, to prevent it growing rapidly, pushing Chinese wages higher, interest rates higher and its own asset price bubbles to burst. The next few months will see a surge of economic activity in China, and feeding through into neighbouring parts of Asia. So increased supply will also lead to another wave of increased demand. Increased Chinese demand for energy and raw materials is likely to cause a spike in primary product prices, with Goldman Sachs predicting a 40% rise in such prices, including energy in 2023.

Chinese demand for oil and gas will explode NATO and the EU's attempt to impose a price cap on Russian oil and gas. The first consequence of that will simply be for Russia to withhold supplies, and, then, to shift more of its exports to China and India, as Asian economies grow more rapidly, led by China in coming months. That also comes at a time when the US and other countries will be trying to restock strategic oil reserves run down to try to depress oil prices, as part of the economic war against Russia. Having sold those stocks at around $75-80, they will have to buy them back at between $100-120. Similarly, EU gas supplies will be rapidly being used up, as cold weather hits Northern Europe, and as it comes to restock, will face much higher global gas prices once more.

As I wrote a while ago, if central banks really did want to reduce inflation, they are using the wrong tools. Higher nominal policy rates will not reduce inflation, and they will not even slow economic activity, at current real rates after inflation. Even if they were raised enough to slow the economy, without reducing the liquidity in the system – notes and coins, credit and so on – and so stopping the devaluation of the standard of prices, the result would not be a drop in inflation, but simply stagflation. But, as wages rise, and feed back into consumer demand, the economy will not slow, and the global economy, particularly, will not slow, as China comes out of lockdowns, because that demand will feed into the European, Pacific, North and South American and African economies too. Indeed, that forms part of my second prediction for 2023, which is that there will be no global recession.

In reality, as the costs of primary products rise, and wages continue to rise, squeezing profits, central banks will be forced to continue to inject additional liquidity to enable firms to compensate for these higher costs in higher prices. The inflation that has occurred means a permanent rise in prices, but a further permanent rise in prices requires further injections of liquidity, which only become manifest after a two year lag. So far, the measures of QT introduced by the Federal Reserve, Bank of England and others have been tiny compared to the liquidity injected. Meanwhile, liquidity from other sources, such as commercial credit, and bank credit has increased. Central banks are already under pressure from speculators to “pivot”, i.e. to stop the policy of currency tightening and to again relax it, because what the rate rises have achieved is to cause asset prices to tumble by between 20-40%.

They should not expect, any pivot on those policy rates in the next year, but central banks will facilitate further inflation at current levels by injecting liquidity to enable firms to raise prices and defend profit margins.

Forward To Prediction 2

Chapter 2.2 – Medium of Exchange, C. Coins and Tokens of Value - Part 11 of 22

If the value of gold changes, then the quantity of paper notes representing it would change, so long as this relation to gold, and convertibility remains. In other words, if the value of gold halves, twice as much gold is required to represent the same amount of social labour-time, and so twice as many notes would be required in circulation.  But, that is only because gold retains this function as money commodity, and so measure of value/proxy for social labour-time.

“Supposing gold were superseded by silver as the standard of value and the relative value of silver to gold were 1:15, then 210 million pound notes would have to circulate henceforth instead of 14 million, if from now on each piece of paper was to represent the same amount of silver as it had previously represented of gold.” (p 119)

In other words, 14 million ¼ ounce gold coins is equal to the value of commodities to be circulated, say 14 million hours of labour. Each coin has the name £1. Now, silver replaces gold, but silver's value is only a fifteenth that of gold. So, each quarter ounce £1 silver coin represents only a fifteenth of the social labour-time that a £1 gold coin represented. Consequently, fifteen times as many of these silver £1 coins, 210 million, are required for circulation. Each coin retains the name £1, and the total price of commodities, therefore, rises to £210 million, even though their values and exchange-value have not changed.

If paper £1 notes circulate as representatives of these coins, this same law applies, so that, now, 210 million £1 notes would be required.

“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.” (p 119)

In other words, if 210 million £1 notes are in circulation, in place of 14 million £1 gold coins, this cannot change the underlying fundamental law by which they actually represent a given amount of social labour-time. The greater the quantity of these tokens put into circulation, the smaller the aliquot portion of that total value each token represents. So, although it seemed possible to infringe this law as had the Pereire Brothers and as MMT suggests, by simply printing more of these tokens, it is a delusion, because it cannot change the total value of commodities/social labour-time, for which they act as universal equivalent form of value. It simply reduces the value of each token proportionately, and that is manifest in higher prices.

“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.” (p 119)

Back To Part 10

Forward To Part 12

Review of Predictions For 2022

Prediction 1 - THE WORLD'S BIGGEST EVER FINANCIAL CRISIS OCCURS

Did that happen? No. However, in making the prediction, I set out, as always, that its impossible to be confident about any such prediction, in relation to financial markets. If it were possible, then Marxists would be multimillionaires. Marx did engage in some speculation on the stock exchange, but unlike Ricardo, was not very successful at it.

As Marx writes in a letter to his uncle Lion Philips in the summer of 1864:

“I have, which will surprise you not a little, been speculating … in English stocks, which are springing up like mushrooms this year … and are forced up to quite an unreasonable level and then, for the most part, collapse. In this way, I have made over £400."

Further on in his letter to his uncle, Marx says that he is going to do some more trading:

“… now that the complexity of the political situation affords greater scope, I shall begin all over again. It’s a type of operation that makes demands on one’s time, [but] it’s worthwhile running some risk in order to relieve the enemy of his money.”

Engels perhaps had more success, as a result of his business activities, and having a seat on a stock exchange, as well as hob-knobbing with capitalists in business forums, and as part of the Cheshire Hunt. He had shares in the London and Northern Railway Co., South Metropolitan Gas Co., Channel Tunnel Corp. and Foreign and Colonial Government Trust Co. As with Marx's comment above, he noted, that trading stocks “simply adjusts the distribution of the surplus value.”. It doesn’t expropriate it from the workers.

If they couldn't predict stock market movements, I have no pretension in that regard either. What I said in the original prediction, however, still holds. In fact, during the year, we did see the biggest ever crash in bond prices, and rise in bond yields, basically for the reasons described in the initial prediction, as global interest rates rise. On the back of it, we also saw stock markets drop by around 20-30%, and, in real, inflation adjusted terms, more like 30-40%, though they have also experienced two bear market rallies, including one still running.

One reason that the crash has not yet happened is that states have been able to continue to suppress economic activity. The war in Ukraine facilitated the spread of fear, and sharply rising energy prices resulting from NATO's boycott of Russian oil and gas, diverted household incomes into paying for these necessities, whilst states also acted to try to hold down the wages of public sector workers, resulting in a rash of strikes across the globe. The continued implementation of lockdowns in China, also held back global growth, but China has been forced to abandon them, as a result of widespread revolts against their continuance.

As China reopens, in the coming weeks, it is likely to see a significant boost to its economy, and spreading into the rest of the Pacific, and subsequently global economy. Attempts to proclaim imminent recession to persuade workers not to demand pay rises to cover inflation, are continually falling on deaf ears, as consumer demand continues to surpass predictions, and labour shortages become further extended, leading to rising wages. In short, all of the conditions for economic expansion, rising wages, and the need for capital accumulation leading to rising interest rates and a collapse in asset prices, remain in place.

Prediction 2 - POPULISM IS PUT IN RETREAT

Within that prediction, I pointed out that the prediction from the previous year had already been partly fulfilled, and so too with last year. Yet, the process is characterised by contradiction. The most obvious manifestation of populism being put in retreat was the failure of the Trumpists, in the US, to take control of the Senate, or to make major gains in the House, at the same time as failing to make significant gains in the gubernatorial, and other local elections. The victory in state ballots supporting abortion rights, and so on, was a further indication of that. In Britain, Brexit is now clearly a minority sport, with polls showing clear majorities in favour of re-joining the EU, and the even greater manifestation was that the populist fantasy of the Brexitories ran aground with the election of Liz Truss, as Tory Leader, and so Prime Minister, whose attempts to implement Reaganite populist policies led to a crash in the Pound, soaring bond yields, and the rapid removal of her government, as the international ruling class demonstrated, once again, really who did have control over Britain. Across Europe, the further advance of populist forces has been halted.

Yet, it has been halted, whilst simultaneously having been mainstreamed, much as the advance of the NF in Britain, in the 1980's, was halted only by Thatcher adopting their clothes.  Brexit is opposed by a clear majority of British voters, who now want to re-join the EU, and that sentiment is only likely to grow stronger, and yet, whilst, in practice, Brexit remains an illusion, Sunak and his government remain nominally committed to it, in order to retain the support of its petty-bourgeois base, and that position is also bizarrely held by Starmer's Brexitories too, as they abandon Labour's core working-class support (66% of which backs re-joining the EU as soon as possible), in the hope of winning the support of those same petty-bourgeois voters, and backward, lumpen areas concentrated in the decaying old industrial towns.

In the US, the Trumpists failed to advance, and Trump and his close allies are facing increasing court proceedings against them individually, which will further hamstring them, in the months to come, and yet, Biden and the Democrats have, like Starmer's Blue Labour, mainstreamed populism. Biden's economic nationalism and trade war against China is little differentiated from that of Trump before him, and the progressive social-democratic wing of the Democrats is little better. Its perhaps illustrated by their support for the measures passed in Congress to force a terrible deal on US rail workers, but the general protectionist measures being pursued, by Democrats, are ones that seek to subordinate workers interests to those of US capital.

The more obvious manifestation of that is, of course, the populist support for NATO's proxy war against Russia, being fought out in Ukraine, as well as similar moves in support of Taiwan to ramp up tension with China. That support, given also by large sections of the so called Left, is entirely populist in nature. It avoids any analysis and position based upon class, and proceeds purely on the basis of abstract, idealist conceptions of “nation” and “people”, the very definition of populism, as against class politics. The war, we are told, is all about defence of Ukraine, or the Ukrainian people, as though any such concept is more than just an abstraction that hides the fact that all nations are comprised of antagonistic classes. It belies the fact that, even setting aside the role of NATO imperialism, Ukraine is a reactionary capitalist state, run by a corrupt, kleptocratic regime, heavily reliant upon fascist forces of the Azov Battalion, and Right Sector, just as much as is the reactionary regime of Putin in Russia.

At the same time, we have other populists that have thrown their support behind Putin's reactionary regime, in a mirror image of those backing NATO imperialism, and the reactionary regime of Zelensky in Ukraine. All of this is a manifestation of the continued weakness of the working class and its leadership following more than 30 years of defeats, and an inability of the class to forge ahead with its own self-activity, and pursuit of its own distinct class interests, made worse by the debilitatung consequences of the welfarism and statism that strengthened during that time. But, as described, the change in global economic conditions is fundamentally altering that situation.

Labour shortages continue to grow, increasing the power of labour as against capital. Whatever Biden or Starmer might seek, workers will continue to push ahead on the basis of those changed conditions to demand higher wages, and firms competing for labour are forced to concede or even voluntarily offer such increases. The more conservative social-democrats are seen as an obstacle to that they will be ignored, rolled over, and new representatives of workers established in place of them. In Britain and the US, lockdowns had to be ended, and that has fed into the above process, and, although governments have sought to feed fear over a continuation of COVID, it has lost its sting, and other alternatives like Monkey Pox, Strep A and so on, cannot be hyped up in the same way. Even in China, as I had predicted, the Stalinists have been forced to abandon their ludicrous zero-Covid strategy whose real purpose was to keep workers and consumers pinned down, and so restrain economic growth, which threatens to cause Chinese wages to spike, with a consequent spike in interest rates, which will crash massively inflated Chinese asset prices.

Across Europe, workers are seeing through NATO imperialism's war against Russia in Ukraine, and the consequent effects of boycotting Russian oil and gas and food supplies. Not only has it caused European energy prices to soar unnecessarily, but it also threatens to cause unnecessary closures of European industry, affecting workers livelihoods, again driven not only by NATO's war aims, but also by a desire, again, to restrain economic growth, as in China, so as to avoid rising wages and interest rates, crashing asset prices once more, as they have become even more inflated than they were prior to the crash of 2008. Those protests, across Europe, are likely to intensify in the months ahead, particularly as Arctic blasts eat into gas storage.

The Left has been derelict in its duty, in that regard, as it collapsed into a populist, social chauvinism in support of NATO imperialism's war in Ukraine against Russia. It left the field open, in opposing the effects of those sanctions, to the red-browners, and other reactionaries supporting Putin. But opposing Putin's reactionary war in Ukraine, does not at all mean a need to support the reactionaries of the Ukrainian state and ruling class, nor its NATO puppet masters, nor the sanctions imposed by NATO/EU etc. Marxists do not determine their position on the basis of campism, of putting a minus where our opponents place a plus sign. Opposing Putin's war, does not require supporting Ukraine or NATO's war, and nor does it require us to support sanctions which threaten to damage the interest of both Russian and European workers, and even US workers, indirectly, as energy supplies shipped from the US cause US energy prices to rise.

As workers, across Europe, strengthen their position, in the months ahead, fighting and winning for higher wages to combat persistent inflation, they will also need to take up the issue of those energy prices, and more specifically shortages, caused by those sanctions, as they threaten their jobs. The vanguard in that struggle will quickly pass out of the hands of reactionary populists into the hands of a mobilised and organised labour movement.

Prediction 3 – Gold Heads To $3,000 an ounce

The Dollar Price of Gold has remained barely changed since the start of the year. However, at its highest point, the Dollar Index, against other currencies, was up by around 20%, meaning that, in other currencies, Gold too would be up, by around 20%, or around $400. That would still leave it well short of the $3,000 mark.

The underlying factors, set out last year, remain in place. The costs of gold production continue to rise, exacerbated by rising global inflation. But, inflation has not yet led to a rush from fiat currencies into gold as a safe haven, and, as other asset prices fell by around 20%, during the year, with crypto prices falling even more, gold, as a speculative asset, has been impacted by the same forces. That gold remained steady, despite the large falls in crypto-crap, and in stock and bond markets, is an indication of its continued power as a store of value.

It faces further contradictory pressures in the year ahead. On the one hand, inflation may rise, as workers continue to prise higher wages out of the hands of capital, as a result of labour shortages, and strikes, and as central banks respond by introducing yet more liquidity to enable firms to compensate their profits. The opening up of China, following the ending of the insane lockdowns, will boost the global economy, probably on a large scale, and as some bottlenecks, for example, in relation to microchips, are removed, that will facilitate even stronger global growth of manufacturing, and demand for labour. Higher global inflation may lead to speculators looking to gold for capital gains, as other assets continue to see declines.

Prediction 4 – Africa Outperforms

Sadly, this prediction also failed to materialise, as the continued effects of global lockdowns badly impacted global trade and African economies as a result of it. On top of that, NATO sanctions on Russian gas and oil, and other exports have badly impacted Africa. On the one hand, it is affected by sharply rising energy prices, but also prices of fertiliser rose sharply as a consequence of the rise in gas prices. Furthermore, Russia is the world's largest grain exporter, and the sanctions imposed on Russian grain exports not only created global food shortages, but also pushed up grain prices, significantly badly impacting all poorer countries, particularly in Africa.

Prediction 5 – Trump Indicted

Its still necessary to say “Watch this space”, as Trump still avoids indictment, whilst those around him are being indicted, sent down, or drawn into ever more legal entanglements. The noose continues to draw tighter, as courts issue orders for his tax and other dealings to be made open, and subject to scrutiny, and as the FBI has raided his home and uncovered masses of secret state documents he should not have had. The weight of material against him and his family and associates on a whole range of topics is mounting by the day, and that is before the question of his role in the attempted January 6th coup is added to it.

The Trumpists undoubtedly hoped that they would have taken the House by a large majority, and possibly the Senate, as well as taking control of several Governorships, which was central to their strategy in frustrating further legal action against Trump, and Congressional investigations, as well as preparing the ground for him running in 2024. Yet, despite Biden and the Democrats giving them every opportunity, in that regard, they failed. Democrats have control of the Senate, and its not clear Trump has a majority in the House. As he becomes a liability for Republicans, and given the contradictory nature of such populist formations, they are likely to form up around some alternative such as Florida's Desantis. Not that he's any better, but it opens the door to the Republicans clearing the decks by throwing Trump to the wolves, along with his supporters.

That process is now speeding up as the House of Representatives has voted to call on the Department of Justice to charge Trump on various criminal charges, including incitement to insurrection.

Martin Thomas On Inflation - Part 4 of 25

The only reason that anyone would demand redemption of paper notes in gold is because they thought that the notes themselves had been devalued, or that the issuing bank might collapse. Gold itself, as money, rather than as commodity (for use in jewellery etc.) only had significance as a store of value, and it only acted as a store of value, because it had value, i.e. was a use value/commodity representing a given quantity of social labour-time. It is why cryptocurrencies have no value, and only act as volatile stores of value in the same way that any other speculative asset does, i.e. on the basis of limited supply, and speculative demand. Unlike other assets, however, they have no other function, and so no value, acting as a minimum determinant of their price.

However, as Marx sets out, gold itself, precisely because it is a commodity, and has value, determined by the labour-time required for its production, is variable in value, and consequently its exchange-value relative to other commodities is also variable. Ricardo and his followers engaged in a wild goose chase for an absolute measure of exchange-value, and proponents of theories of subjective value, like Samuel Bailey, used that as a means to attack the labour-theory of value itself. Bailey correctly points out that if the value of gold, as measure of value, fluctuates, then there can be no absolute measure of value, and the value of commodities then becomes only a matter of what the participants in each exchange are prepared to pay.

But, as Marx sets out, in Theories of Surplus Value, Chapter 20, this fact that the value of the money commodity, like all other commodities, is variable, as a result of changes in social productivity, raising or reducing the labour-time required for its production, does not change the fact that the direct measure of value, by labour-time, as against its indirect measure by exchange-value, is absolute, at any one time. In other words, if it takes 10 hours of universal labour to produce a metre of linen, this is an absolute measurement of its value, irrespective of the exchange value of linen for wine, or gold or any other commodity. The only thing that can change the value of a metre of linen, as against changes in its exchange-value or price, is a change in social productivity that increases or reduces the amount of labour-time required for its production.

And, the same applies to the money commodity itself. The only thing that can change its value is changes in social productivity, increasing or reducing the labour-time required for its production. But, if the value of an ounce of gold falls from 100 hours to 50 hours, it still functions as a stable means of indirectly measuring the value of other commodities, because its exchange relation to all of them, whilst changing, does so in the same proportion. It is like changing from measuring distance in yards to measuring it in feet; all distances would be increased by the same proportion, i.e. a factor of 3.

Back To Part 3

Chapter 2.2 – Medium of Exchange, C. Coins and Tokens of Value - Part 10 of 22

As Marx pointed out, what enabled these tokens to do this had nothing to do with their own material value, but was solely determined by the quantity of them in circulation, as representatives of a given amount of money/social labour-time.

“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.” (p 118)

But, the gold itself, as money commodity, only evolves as proxy for universal labour/social labour-time, so, if the link to gold disappears, this could be written as,

“Worthless tokens become tokens of value only when they represent universal labour/social labour-time within the process of circulation.”

Berkeley also recognised this fact.

““Whether the denominations being retained, although the bullion were gone ... might not nevertheless ... a circulation of commerce (be) maintained?"” (Note **, p 118)

In fact, the references to gold, silver or other money commodities, in this respect, only arises as an ephemeral, historic proxy for it, during a specific period. Indeed, the fact that the money commodity has taken such disparate forms as cattle, silver and gold illustrates this point that there is nothing specific or magical about any of them, including gold, as the form of money. And, Marx further illustrates this point.

He first sets out that, where gold is the money commodity, and so money tokens first take the form of gold coins, then the quantity of these gold coins, in circulation, is determined by the laws previously set out. If the total of the coins amounts to, say, £14 million, then this is the total value of commodities to be circulated, divided by the velocity of circulation. Each £1 coin represents an aliquot portion of that total value/social labour-time. If we ask how many £1 notes should be put into circulation, then its clear that it is also this 14 million. However, if, instead, £5 notes are put into circulation, then, only 2.8 million are required, and if £10 notes are used, only 1.4 million. In the case of £5 notes, each represents five times as many gold coins/social labour-time as a £1 note, and for a £10 note, ten times as much.

“and if all payments were to be transacted in shilling notes, then twenty times more shilling notes than pound notes would have to circulate.” (p 118)

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Productivity - Part 2 of 6 - New Value Created and Congealed Value Preserved

New Value Created and Congealed Value Preserved

The labour process is one in which use values are transformed. That transformation takes the form of either a transformation of one use value into some other use value, or else takes the form of the movement of a use value from one location to another. Before Man could engage in the first form, and create products, it was necessary that Nature must do so, so that Man could consume, by engaging only in the second form. Nature produced plants that hunter-gatherers could simply pick and eat; it produced stones and sticks that could be picked up and used as the first tools and weapons with which to hunt other animals, and so engage in production themselves. The greater the productivity/fertility of Nature, the more of these use values existed for Man to consume and utilise. This is fundamental to understanding the Marxian theory of rent – and is also fundamental to Marx and Engels' materialist analysis of the role of The Law of Value, in the evolution of successive forms of social organism.

Value is a function of time, as Marx puts it in The Poverty of Philosophy,

“Time is everything, man is nothing; he is, at the most, time’s carcase.”

Of course, as Marx sets out, there, and in A Contribution To The Critique of Political Economy, and Capital, for commodity production, this time is a measure, not of concrete labour, the actual labour embodied in products/commodities, which all varies in quality, and may or may not be socially necessary, but of universal labour. It is purely the duration of this universal labour-time that determines the new value created, irrespective of the quantity of new use values created during that time. So, if we take a commodity such as yarn, the new value created, which resolves into the revenues wages and profit (v + s), is a function of this labour-time expended, irrespective of the productivity of the labour, measured in terms of the quantity of use values produced.

If 100 metres of yarn is produced by 10 hours of current universal labour, then the new value component of the yarn is equal to 0.10 hours per metre. If the labour doubles in productivity, so that it produces 200 metres in 10 hours, then the new value produced is still only equal to 10 hours, but the new value component of each metre, now falls to just 0.05 hours per metre.

Does this mean that the total value produced does not rise, even though the amount of new value created has not risen? No, because the value of the 200 metres of yarn does not consist solely of the new value created by labour, and resolved into revenues (v + s). It comprises also constant capital in the form of raw material (cotton), as well as the wear and tear of fixed capital (machines, buildings etc.) The value of this constant capital is merely preserved and transferred to the value of the output. It is not a function of time, but of the quantity of use values produced. This is also why GDP, which measures only the new value created by labour, is not the same as total output, and changes in GDP do not measure changes in total output.

For example, 100 metres of yarn, may require 100 kilos of cotton to produce it, but, then, 200 metres of yarn will require 200 kilos of cotton for its production, and the wear and tear of machinery would also increase as a result of the greater mass of production. If 100 kilos of cotton has a value of 10 hours labour, then, assuming no change in productivity, in cotton production, and ignoring the wear and tear of fixed capital, 200 kilos of cotton will have a value of 20 hours labour. Comparing the two situations, then, we have:

c 10 + (v + s) 10 = 20 = 100 metres = 0.20 per metre

c 20 + (v + s) 10 = 30 = 200 metres = 0.15 per metre

In other words, as a result of the doubling of productivity, in yarn production, the amount of new value does not rise, but the total value of yarn production does rise, because a greater value of constant capital (cotton value) is consumed in its production, and so a greater value of constant capital is preserved and transferred into the value of output. Despite productivity doubling, therefore, in yarn production, the value of yarn production does not double, but rises only by 50%, accounted for solely by the rise in the value of the consumed cotton, due to the quantity of cotton consumed being doubled. This is also the basis of Marx's Law of the Tendency for the Rate of Profit to Fall.

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