We have reached the end of 2023 and – a few of us might have noticed – the world economy continues its freefall. The rise in global debt is unstoppable (currently standing at $307 trillion, without counting the derivative galaxy) and most government deficits are spiralling out of control. Credit cards are exploding; car and mortgage delinquencies are surging; bankruptcy filings are breaking new records; savings are evaporating; homelessness is skyrocketing.
Still, there is Gaza to remind us that the worst is yet to come. While in the West the genocide is being normalised through sickening hypocrisy, its inhuman brutality is reminiscent of the darkest years of the 20th century. For the racist West the lives of Palestinians are worth nothing. We are not supposed to care about the ethnic cleansing of the poor and the oppressed. The wealthy oppressors, on the other hand, are invited every day on our liberal media to illustrate the rationale behind their massacres. It is the same media who, while turning woke victimhood into a dogma, are now keen to interview criminals who justify carpet bombing thousands of Palestinian women and children. If the pulverising of Gaza is the worst massacre of civilians in recent times, in London an eight-year-old is suspended from school for wearing a Palestinian badge to commemorate relatives who died under Israeli bombs. Is this not enough evidence that we live in perverse times? That we are sleepwalking back into the worst nightmares of modern history?
Recently, Harey Zahav, a leading Israeli real estate company, has announced a new housing project to be built directly on Palestinian blood: ‘a beach villa on the Gaza strip is not a dream!’ – so the slogan has it; like launching a 5-star hotel in Auschwitz. The nauseating advert, whether or not meant as a joke (!), encapsulates the nexus between capital and violence. What most people struggle to come to terms with is that today’s capital flows keep orbiting over our heads only because more debt, mass slaughters, and manipulations are rolled out. For how is it that, amid socioeconomic decay and sadistic military violence, at the end of 2023 Western stock markets are enjoying a phenomenal Santa rally? The causal link between monetary policy, the debt hyper-bubble, the euphoric financial sector, and a continuous stream of wars & emergencies is right in front of us, hidden in plain sight. And yet, we prefer to ignore it.
IF WAR WORKS WONDERS
The Fed’s recently announced rate-hike pause, combined with the US military machine “owning” geopolitical conflicts in Ukraine, Gaza, and now in the Red Sea, has pushed Western financial markets to astonishing heights. The loosening of monetary policy is an obvious market tailwind. Chairman Powell’s pivot toward rate cuts is the predictable lifeline thrown at the credit-addicted financial markets riddled with myriad zombie enterprises facing frightening debt rollovers in 2024 and 2025. The pivot is therefore meant to prevent a market bloodbath as well as a sovereign bond trap. Without cheaper borrowing, current IOUs are going to crush not only companies, but also individuals and broke governments. It is crucial to reiterate that the illusion of ultra-financialised capitalism is kept alive by the artificial suppression of bond yields (the cost of servicing, or paying interest on, one’s debt). In this respect, war works wonders: even the threat of it makes cash flow into bond markets, which pushes yields down and opens the door for liquidity to inflate stock market bubbles.
The immediate effect of the current Santa rally is that it brings multi-million end-of-year “gifts” (bonuses) to corporate CEOs, while also boosting Team Biden’s expectations ahead of election year. Market euphoria may continue for a while, but the artificial over-valuation of financial assets (bubbles) is increasingly risky. It is worth noting that, currently, most investors are all in, especially on Tech and AI trade. For instance, asset managers and leveraged funds are emphatically long on the Nasdaq 100 (comprising the 100 largest tech companies): they are betting heavily on continued tech growth (the Nasdaq 100 basket is up 53% this year). But it is precisely when trades get so crowded that one should ask questions about the sustainability of the upward trend, and its potential reversal to the downside.
This is why cheap liquidity is the only option going forward: it buys time. If the Fed (and subordinate central banks) fails to cut rates and print more magic money, financial assets will risk tanking, bringing down the entire economy. However, the attempt to “save the system” by “pumping it silly” will further damage the purchasing power of fiat currencies, fuelling another inflationary wave whose brunt will be borne by the lower and middle classes. Conversely, letting inflation rip also means that the real value of the debt burden, especially for governments, could be reduced, or “inflated away”.
It should be easy to see how, in this context, global geopolitical conflicts play a crucial strategic role. Here we must acknowledge that our “leaders” have been very successful at setting up the ideal poly-crisis scenario. In other words, they can play on multiple tables, with several red buttons available on their touchscreens. The latest one is the “geopolitics of recession” linked to the escalation of the Gaza war which, as discussed, was always meant to be “a new 9/11”. In the Red Sea – a crucial hub for world trade, especially between Asia and Europe – Yemen’s Houthi rebels, in solidarity with the Palestinian cause, have been attacking cargo ships linked with Israel, which has prompted the United States to set up an international coalition to protect commercial shipping vessels headed towards the Suez Canal. But what if the aim of the (comically named) “Operation Prosperity Guardian” is the opposite of what it says on the tin: not to protect global trade, but to trigger a widespread recession through a controlled incident followed by more military interventions and a faster pivot to rate cuts & mouse-clicked liquidity? The disruption of one of the world’s key trade routes has already caused shipping and insurance costs to rise sharply as companies send their goods via longer sea routes.
Today’s debt-based financial casino desperately seeks scapegoats for its credit addiction. As with Covid, geopolitical crises and liquidity creation go hand in hand. We are now marching into a recession which is inherently dis-inflationary, if not downright deflationary. Only after such recession is officially pinned on an external “agent of chaos” will the money spigots be turned on. In other words, central bankers are desperate to announce the recession (which is already with us), but they are even more desperate to find a sacrificial lamb.
Moving into 2024, the gap between the economy and the stock market will continue to increase, which makes it legitimate to assume that we will move closer to the end game. But what does “end game” mean exactly? Firstly, that at some point the “everything bubble” will pop; and secondly, that by then a regime of physical control over the people must be in place, since the money-control infrastructure (driven by flip-flopping monetary policy) will no longer be working. The Covid operation was the first explicit step in this direction, among other things testing how chaos and instability can be brought under control. As expectations that fear shuts down critical thinking were emphatically confirmed, we can be sure that global panic will come in handy again. A short break is enough for most people to forget and take the same bait again.
But let us get to the heart of the matter. Monetary increase through financial transactions is a compensatory response to the secular crisis of accumulation in the real economy, which originates in the replacement of value-creating wage labour with technology. This insurmountable barrier within contemporary capitalism can only be counteracted, in the short term, with the supply of mouse-clicked liquidity, while its disastrous consequences are already with us. Money creation has far outstripped any real economic growth for many years – that capitalist dream of organic real growth is dead and buried, and we should not miss it either. Yet nobody seems interested in a serious reflection on the destructive nature of “crisis capitalism”. Instead, it is easier to either passively accept manipulation and propaganda or engage in simplistic moralising and name blaming. But there can be no turning back from this path to catastrophe. As in the build-up to the 2007-08 global financial crisis, things are much worse under the surface than our “leaders” are letting on – with the crucial difference that this time bailouts and monetary policy will just not cut it. As they say, steering does not work after you have driven off the cliff.
The powers that be are now pushing the narrative that inflation is under control, which, as anticipated, allows the Federal Reserve to stoke a bull market in Wall Street’s echo chamber (by hinting at rate cuts). In truth, over the last couple of years we have only experienced the initial symptoms of a structural inflationary disease that continues to spread under the veil of misinformation; and will necessarily explode in a second wave of calamitous monetary devaluation. We have only been served an appetizer compared to the currency-destroying diet that is in store for us.
The Fed seems to have opted to alternate between destroying the economy and destroying the currency. We have just lived through a year of the former (higher interest rates wiping out medium- and small-sized enterprises, as well as starting a banking crisis) and we are now about to embark on more of the latter. Between the two, all economic value will be squeezed beyond belief, and everyone will wonder how we got to the stage where fiat currencies cannot keep up with prices, while goods begin to disappear from the shelves.
1923-2023: A CURIOUS PARADOX
Among the many prophetic passages in Walter Benjamin’s Einbahnstraße (One-Way Street) – the anthology of aphoristic meditations penned by the German philosopher in the 1920s – the section ‘Imperial Panorama: A Tour of German Inflation’ stands out as perhaps the most compelling piece of social criticism in Benjamin’s entire oeuvre. Written immediately before the Weimer hyperinflation peak of late 1923, the “tour” is composed of 14 “theses” on the deterioration of sociality as observed in Berlin by the philosopher-flaneur. Reading this section attentively from today’s perspective can be an illuminating experience. It reminds us that the delusions of Homo Economicus repeat themselves with uncanny punctuality in modern history.
As an opening gambit, Benjamin situates the socioeconomic instability caused by hyperinflation within a wider historical context dominated by the stability of decline and immiseration. The latter, he argues, escapes the ‘stock of phraseology that lays bare the amalgam of stupidity and cowardice constituting the mode of life of the German bourgeois’. He then continues:
‘The helpless fixation on notions of security and property deriving from past decades keeps the average citizen from perceiving the quite remarkable stabilities of an entirely new kind that underlie the present situation. […] stable conditions need by no means be pleasant conditions, and even before the war [World War I] there were strata for whom stabilized conditions amounted to stabilized wretchedness. To decline is no less stable, no more surprising, than to rise’.[i]
If the immiserated masses languished in a steady condition of destitution both before and after World War I, the predicament of Berlin’s urban bourgeoisie under the heavy blows of hyperinflation should be pitched against the background of universal delusion characterizing capitalist modernity. Precisely because the declining middle classes are unable to see past individualism and economic self-interest, they stick with the fantasy that any loss of purchasing power is a temporary glitch awaiting systemic resolution – as if Capital were an eternal and inexhaustible mode of wealth creation. This inherent myopia of the bourgeois suggests that they will comply with any ideological demand that carries the promise of socioeconomic protection, fulfilling the conservative fantasy of eternal wealth stability – which is precisely why Benjamin, in 1923, senses that a new catastrophe (World War II and the Holocaust) is on its way.
A hundred years later, Benjamin’s critique rings true especially for a globally delusional middle class for whom the structural devaluation of fiat currencies has ushered in the chilling prospect of persistent immiseration. The same cry of frustration and incredulity against inflation that Benjamin recorded in 1923 can be heard all around us in 2023: ‘Things can’t go on like this!’
At a deep existential level, most of today’s middle classes still identify with the consumerist utopia of endless growth that characterised both the post-war Fordist accumulation cycle and the following neoliberal financialization of the economy. The moral majority are spontaneously short-sighted vis-à-vis the historical trajectory of capitalism as a social formation. This type of delusion requires the repression of any genuine intuition that, today, capitalist decline is both inevitable and catastrophic. At the same time, today’s middle classes can hardly avoid experiencing fits of panic at the prospect of losing purchasing power and, with it, status. And yet such panic does not translate into any meaningful awareness of systemic implosion. Rather, it tends to seek redemption in the acceptance of a “new normal” that requires ever increasing doses of “active ignorance” toward the unmitigated barbarism unleashed by transnational flows of capital.
If a new type of dogmatic conservatism exploded during the “pandemic”, affecting nearly all self-proclaimed free and progressive voices, it descends from the obdurate attachment to a socioeconomic “way of life” that is as ingrained in our minds and bodies as it is irreversibly collapsing. The sad lesson is that, collectively, we remain incapable of even imagining the possibility of “another world”. Ultimately, behind the ‘picture of imbecility’ that describes most people’s compliance one detects a desperate attachment to the “capitalist gift”: the stubborn echo of the original promise of socioeconomic privilege that, however, is now fast evaporating.
The voice of authority that promised salvation from Virus is the same voice that promises salvation from economic freefall. But any ideal of solidarity mobilized by capitalist power under “warlike” conditions (whether the “global health emergency”, “Putin’s war”, or “Hamas’s attacks”) should at least appear unnatural to the reflective mind.
As Benjamin put it in One-Way Street, because ‘money stands ruinously at the center of every vital interest’, the social bond is disintegrating. He reads monetary inflation as the cultural or psychological attitude that accompanies the socioeconomic logic of capital. The hard, objective violence of hyperinflation – here the printing of banknotes to finance Germany’s war reparations – is deployed as a trope to indict the inflation of human ‘stupidity and cowardice’ vis-à-vis the modern dogma of capital’s self-valorisation, which leads the masses to submit to totalitarian diktats in the hope of retaining a modicum of economic privilege. Ultimately, the object of Benjamin’s critique is the hyperinflation of herd-behaviour under economic duress, as expressed in a passage that could be read as a summation of today’s conflation of public virtues and private vices:
‘A curious paradox: people have only the narrowest private interest in mind when they act, yet they are at the same time more than ever determined in their behavior by the instincts of the mass. And more than ever mass instincts have become confused and estranged from life. […] Again and again it has been shown that society’s attachment to its familiar and long-since-forfeited life is so rigid as to nullify the genuinely human application of intellect, forethought, even dire peril. So that in this society the picture of imbecility is complete: uncertainty, indeed perversion of vital instincts, and impotence, indeed decay of the intellect.’[ii]
The ‘curious paradox’ of mass compliance in the name of narrow self-interest captures the folly of an entire civilization suspended between economic collapse and “totalitarian solutions”. There can be no doubt that our civilization is making steady progress toward self-destruction, dispensing the same terror and devastation it once used to assert itself.
It seems fitting to conclude with a brief reference to a brilliant North-American sage of the 17th century known as Kandiaronk. In his dialogues with French coloniser Baron de Lahontan, published in a travelogue that became very popular in the Enlightenment salons of 18th century Europe, the indigenous philosopher-statesman Kandiaronk resolutely rejected the argument that the European civilization was superior to that of his native Wendat people. In dissecting the central categories of what effectively was bourgeoning capitalism (including economics, politics, religion, and health) Kandiaronk argued that Europe would be better off dismantling its entire social system as based on money, the pursuit of material self-interest, laws of coercive nature, lack of mutual aid, and blind submission to authority. In this respect, his indictment of money (which the Wendat did not use, and referred to as “the French serpent”) is worth quoting:
‘I affirm that what you call money is the devil of devils; the tyrant of the French, the source of all evils; the bane of soul and slaughterhouse of the living. To imagine that one can live in the country of money and preserve one’s soul is like imagining one can preserve one’s life at the bottom of a lake. Money is the father of luxury, lasciviousness, intrigues, trickery, lies, betrayal, insincerity – all of the world’s worst behaviour.’[iii]
While the image of the “noble savage” popularised by Jean-Jacques Rousseau is no doubt a European fantasy, the Indigenous American’s critique of the settlers’ mores and social categories is particularly stimulating today, at a time when a system based on the compulsive pursuit of money’s self-expansion is heading blindly and remorselessly toward self-destruction.
[i] W. Benjamin, One-Way Street (Cambridge, MA and London: Harvard University Press, 2016), pp. 32-33.
[ii] Ibid, p. 34.
[iii] Quoted in David Graeber and David Wengrow, The Dawn of Everything. A New History of Humanity (London: Penguin Books, 2021), pp. 54-55.