Monday Night — 08.10.09 — World Capitalist Crash Course — Loren Goldner & Howie Seligman

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Monday Night — 08.10.09 — World Capitalist Crash Course — Loren Goldner & Howie Seligman
1. About this Monday
2. About our guests
3. About Marx Crisis Crash Course
4. Superimperialism and the Iraq War
5. Useful Readings & Links
1. About this Monday
What: Lecture / Discussion
When: Monday 08.10.09
Where: 16 Beaver Street, 4th floor
When: 7:15 pm
Who: Free and open to all
This summer Loren Goldner and Howie Seligman have been running a weekly reading seminar on the origins of the financial crisis, its relations to Marx’s critique of political economy as well as some of the frequently blackboxed aspects of contemporary global finance. Some of you may recall our event in the spring with Loren and we are happy to have him back with Howie.
For this upcoming Monday, we transfer their self-organized seminar into our space and ask them each to give short presentations on the causes of the economic crisis. Howie will deal with the financial meltdown from a ‘wall street/investment’ point of view and develop some of what was contained in a recent talk he gave at Bluestockings. Loren will speak on the classical Marxist theory of the causes of the crisis.
We will use the discussion period to open to questions that are raised by their presentations and to consider the current “status” of the crisis in light of all recent attempts to convince the public that the worst has been averted.
2. About our guests
Loren Goldner is a long-term independent writer and political activist. He has spent much of the past four years in South Korea, involved in the workers’ movement there.
His work is available on the Break Their Haughty Power web site at
Howard Seligman was born in Brooklyn, New York in the mid nineteen fifties. He studied performing arts at Sarah Lawrence College and received an MBA in Finance from New York University in 1979.
Since 1985, Howard has had his own financial consulting practice working with individuals in the arts and entertainment fields and with not for profit cultural institutions. He was a founder of the New Writing Foundation and has served as the treasurer of numerous other arts organizations including New Art Publications, Autonomedia and ABC No Rio. He is also the President of a small umbrella organization,
The Solo Foundation based in the East Village. He has taught finance, economics and accounting (for non accountants) at The Pratt Institute and The Taylor Business Institute.
Howard’s lectures on the current state of the economy can be seen at www.blip.tv/howiesolo. He is still working on a book on the history of the Jewish gangster tentatively titled, “What Me Worry?!”
3. About Loren and Howie’s Summer Course
Summer Study Group on Marx’s Capital and the Current Crisis
Loren Goldner and Howie Seligman have been organizing a weekly study group in July and August for New York City-area people on Marx’s Capital (and other writings), linking Marx’s critique of political economy to the current crisis of the world capitalist system.
The group has been meeting every Tuesday beginning July 7 through September 1, 7-10 PM, in an East Village location. The participants have been committed to regular weekly attendance and keeping up with 50-100 pages per week of reading. The meetings have been free of charge, except for occasional contributions for photocopy expenses, refreshments, etc.
Readings have mainly consisted of selections from Marx’s Capital, and articles on contemporary developments.
This is from the introduction to their course:
“The events of the past two years in particular have re-awakened a serious interest in both Marx’s critique of political economy and in “current events” in the world economy. Goldner and Seligman will cooperate in putting the crisis into a Marxian theoretical perspective (Goldner), as well as providing insight into the more technical side of world market meltdown (CDO’s, hedge funds, Ponzi schemes, etc.) (Seligman). The approach will not be merely “economic” (the Marxian CRITIQUE of political economy is not another variant of “economics”) but will elucidate the impact of the crisis on ordinary working people, on developing actions against capitalist austerity in the US and around the world, and on the solution: abolition of the capitalist mode of production.
If successful, the study group will continue in some form in the fall, to be decided.
In order to put together a viable group, we would like interested people to write something brief (1-2 pages) about their background, the level of their knowledge of Marx and of the world economy, where they are coming from politically, and anything else they might consider relevant.
We are oriented above all to educating present and future activists, and will give such people priority in participation. We also hope to have a predominance of young people who are new, or relatively new, to Capital and Marxist theory generally, but that will of course be determined by the response.”
4. How America will get Europe to finance its Oil War with Iraq
by Michael Hudson
Last time around, in the 1991 Gulf War, America got its allies to bear most
of the costs voluntarily. After all, U.S. diplomats claimed, wasn’t the war
fought to protect Kuwait and the next petro-domino, Saudi Arabia, from Iraqi
attack – and in the process to protect Europe’s oil and gas supplies from an
aggressive grabber? Wasn’t it therefore fair to ask the Saudis and Kuwaitis,
along with the Germans, British and other countries to bear the lion’s share
of the cost of the oil war fought for their own benefit? Europe and the Near
East agreed to pay, and their central banks turned over some of the excess
U.S. Treasury bonds they had accumulated by running year after year of trade
and payments surpluses with America. And almost immediately, these central
banks’ dollar holdings filled up again with dollars that were unspendable
and had little value, except to give back to the United States or let
accumulate for no real purpose.
This Treasury-bond standard of international finance has enabled the United
States to obtain the largest free lunch ever achieved in history. America
has turned the international financial system upside down. Whereas formerly
it rested on gold, central bank reserves are now held in the form of U.S.
Government IOUs that can be run up without limit. In effect, America has
been buying up Europe, Asia and other regions with paper credit – U.S.
Treasury IOUs that it has informed the world it has little intention of ever
paying off.
And there is little Europe or Asia can do about it, except to abandon the
dollar and create their own financial system. Michael Hudson’s Super
Imperialism: The Origins and Fundamentals of U.S. World Dominance explains
how the dollar’s being forced off gold in 1971 led to a new international
financial system in which the world’s central banks are obliged to finance
the U.S. balance of payments deficit by using their surplus dollars in the
only way that central banks are allowed to use them: to buy U.S. Treasury
bonds. In the process, they finance the U.S. Government’s domestic budget
deficit as well. The larger America’s balance-of-payments deficit becomes,
the more dollars end up in the hands of European, Asian and Near Eastern
central banks, and the more money they must recycle back to the United
States by buying U.S. Treasury bonds. Over the past decade American savers
have been net sellers of government bonds, putting their own money into the
stock market, corporate bonds and real estate. Foreign governments have been
obliged to hold U.S. bonds whose interest rates have fallen steadily, while
their volume now exceeds America’s ability or willingness to pay.
What makes today’s Super Imperialism different from past “private
enterprise” imperialism Past studies of imperialism have focused on how
corporations invest in other countries, extracting profits and interest.
This phenomenon occurs largely via private- sector investors and exporters.
But today’s novel form of international financial 4 imperialism occurs among
governments themselves, and specifically between the U.S. Government and the
central banks of nations running balance-of-payments surpluses. The larger
their surpluses grow, the more dollars they are obliged to put into U.S.
Treasury securities. Hence, the book’s title, Super Imperialism.
How the United States makes other countries pay for its wars Since Europe’s
Middle Ages and Renaissance, going to war has left nations with heavy public
debts, which in turn have needed to be financed by raising taxes. Two
centuries ago Adam Smith gave a list of how each new war borrowing in
Britain led to a new tax being imposed to pay its interest charges.
Militarily ambitious nations thus became indebted, high-tax and high-cost
economies. When foreign funds could not be borrowed, belligerent countries
had to pay out gold to defray the costs of their military spending or see
their currencies depreciate against gold. After the Napoleonic Wars ended in
1815 and again after World War I, Britain and other countries imposed
deflationary financial policies whose unemployment and trade depression
imposed economic austerity until prices fell to a point where the currency
achieved its prewar gold price. Domestic economies thus were sacrificed to
pay creditors, saving them from having to suffer a loss as measured in gold.
America’s war in Vietnam and Southeast Asia in the 1960s seemed to follow
this time-honored scenario. U.S. overseas military spending ended up in the
hands of foreign central banks, especially France, whose banks were the
dominant financial institutions in Indo-China. Central banks cashed in these
for gold nearly on a monthly basis from the 1965 troop buildup onward.
Germany did on a quiet scale what General de Gaulle did with great fanfare
in cashing in the dollars sent from France’s former colonies. By 1971 the
U.S. dollar’s gold cover – legally 25 percent for Federal Reserve currency –
was nearly depleted, and America withdrew from the London Gold Pool. The
dollar no longer could be redeemed for gold at $35 an ounce. It seemed at
the time that the Vietnam War had cost America its world financial position,
just as World War I had stripped Britain and the rest of Europe of their
financial leadership as a result of their Inter-Ally arms debts to the
United States. But in going off gold the United States created a new kind of
international financial system. It was a double standard, that is, the
dollar-debt standard. The consequences can be seen today. This time around
the Near East and Moslem world have announced their opposition to a new U.S.
oil war, as have France and Germany. Popular opinion throughout Europe has
turned against American adventurism, and at first glance it appears that
America will have to finance its war alone. And indeed it would, if today’s
global financial system were still what it was before 1971. America could
not fight a conventional war and pay for its troop support costs without
seeing the dollar plunge. In fact, it seemed that in 1971 no country ever
again could go to war without seeing its international reserves depleted and
its currency collapse, forcing its interest rates to rise and its economy to
fall into depression. Yet in all the argument over the coming U.S.-Islamic
war, Europeans have not seen that it is they themselves that will have to
bear the U.S. military costs, and to do so without limit. 5 What has changed
is the fact that U.S. Treasury bonds – American IOUs of increasingly dubious
real value – have replaced gold as the form of reserves held by the world’s
central banks. Almost without anyone noticing it, these central banks have
been left with only one asset to hold: U.S. Government bonds. Central banks
do not buy stocks, real estate or other tangible assets. When Saudi Arabia
and Iran proposed to use their oil dollars to begin buying out American
companies after 1972, U.S. officials let it be known that this would be
viewed as an act of war. OPEC was told that it could raise oil prices all it
wanted, as long as it used the proceeds to buy U.S. Government bonds. That
way, Americans could pay for oil in their own currency, not in gold or other
“money of the world.” Oil exports to the United States, as well as German
and Japanese autos and sales by other countries, were bought with paper
dollars that could be created ad infinitim.
America’s free lunch as Europe’s and Asia’s expense After World Wars I and
during World War II, U.S. diplomats forced Britain and other countries to
pay their arms debts and other military expenditures in the form of real
output and by selling off their companies. But this is not what American
officials are willing to do today. The world economy now operates on a
double standard that enables America to spend internationally without limit,
following whatever economic and military policies it wishes to, without any
gold constraint or other international constraint. U.S. officials claim that
the world’s dollar glut has become the “engine” driving the international
economy. Where would Europe and Asia be, they ask, without the U.S. import
demand? Do not dollar purchases help other countries employ labor that
otherwise would stand idle? This kind of rhetorical question fails to
acknowledge the degree to which America is importing foreign goods and
pumping dollars into the world economy without providing any quid pro quo.
The important question to be asked is why European and Asian central banks
don’t simply create their own domestic credit to expand their markets? Why
can’t they increase their consumption and investment levels rather than
relying on the U.S. economy to buy their consumer goods and capital goods
for surplus dollars that have no better use than to accumulate in the
world’s central banking system? The answer is that Europe and Asia suffer
from a set of economic blinders known as the Washington Consensus. It is a
cover story to perpetuate America’s free ride at global expense, by
pretending that the Treasury bill standard is something other than an
exploitative free ride. Toward debtor countries, American diplomats impose
the Washington Consensus via the World Bank and IMF, demanding that debtors
raise their interest rates to raise the money to pay foreign investors.
These hapless countries dutifully impose austerity programs to keep their
wages low, sell off their public domain to pay their foreign debts,
deregulate their economy so as to enable foreign investors to privatize
local electricity, telephone services and other national infrastructure
formerly provided at subsidized rates to help these economies grow. Toward
creditor nations America relates as the world’s most Highly Indebted
Developed Country by refusing to raise its own interest rates or permit key
U.S. industries to be sold off. Super-Imperialism explains how this
dollar-debt standard came about. Hudson’s narrative begins with World War I,
showing how unforgiving America was of Europe’s arms debts. Its stance was
in sharp contrast to France’s forgiveness of America’s own Revolutionary War
debt, and also to America’s insistence today that Europe and Asia agree to
finance present and future American wars with unlimited lines of credit. In
particular, Super Imperialism focuses on how the United States used Britain
as its Trojan Horse within Europe. After reaching highly unfavorable
agreements with Britain as to how to finance its debts stemming from World
Wars I and II, America and Britain together than confronted the rest of
Europe with a fait accompli on harsh U.S. terms. Britain acquiesced in
relinquishing its world economic power to the United States instead of
trying to go it alone. It looks as if little has changed today. First
published in 1972, this new and revised second edition of Super Imperialism,
published by Pluto Press, reviews how the British and Germans, the Japanese
and Chinese, and even the central banks of France and Russia are about to
finance the war in Iraq indirectly, by absorb the dollars that will be
thrown off by America’s military adventurism. Prof. Hudson began writing
this book while serving as the balance-of-payments economist for the Chase
Manhattan Bank and Arthur Anderson during 1964-69, and completed it while
teaching international finance at The New School in New York. (He is now
Distinguished Professor of Economics at the University of Missouri at Kansas
City.) His book was quickly translated into Spanish, Japanese, Russian and
Arabic, and a new and revised edition was republished in Japan earlier this
year before being published in Britain by Pluto. This book was the first to
explain how America has obliged other countries to finance its payments
deficit, including its foreign military spending and its corporate buyouts
of European and Asian companies. In effect, America has devised a new means
to tax Europe and Asia via their central banks’ obligation to accept
unlimited sums of dollars. The burden on Europe and Asia is not felt
directly as a tax, however, but indirectly through their payments surpluses
with the United States. The Treasury-bill standard has enabled the USA to
import goods far beyond its ability to export. The upshot is to provide
America with a unique form of affluence, achieved by getting a free ride
from Europe, Asia and other regions. When British exporters (or the owners
of companies or real estate being sold for dollars) receive more dollar, the
recipients of these payments turn them over to the Bank of England for
sterling. The Bank of England in turn invests these dollars in U.S. Treasury
bonds, receiving a relatively small interest rate. Now that the gold option
has been closed there is no alternative for how to spend these dollars.
America has found a way to make the rest of the world pay for its imports,
and indeed pay for its takeover of foreign companies, and most imminently to
pay for its new war in the Middle East. This is why the new form of
America’s inter-governmental super imperialism differs from the familiar old
private-enterprise analysis that applied prior to 1971.
5. Useful Readings & Links
The most useful readings for the group this summer have been:
Karl Marx’s Capital
Michael Hudson’s Superimperialism book.