[Marxism] A worthless piece of paper

[Marvin Gandall]

David Walters writes:

> I'd like to see more discussion on this. My local news station did a 4
> minute segment on this. The analysists talking about it said that this
> could have a profound impact on just about anything and everything
> economic. I tend to agree. We're talking about Finance Capital here
> folks, this is big time.
>
>[...]

> One idea, very plausible, is that many countries will start to move,
> slowly, toward a "Petro-Euro", accepting both currencies as payment
> (Iran actually does this now).
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They have steadily been altering the mix of their foreign exchange holdings
as the dollar has declined, so this is a possibility.

But the US multinationals also receive an increasing share of their profits
from abroad and routinely hedge their exposure to the USD so they would also
be in a position to buy oil and other goods which are pegged to a basket of
currencies.

It's worth remembering also, amid all the crisis-mongering about a falling
dollar, that it has been the Bush administration - not its allies or rivals
or adversaries - which has engineered the decline in order to to boost US
exports and to reduce the current account deficit.

There is always the risk of an uncontrolled devaluation and a run on the
currency in such exercises, but that would be countered by massive
interventions to support the USD by the Federal Reserve acting in concert
with the European, Asian, and Middle Eastern central banks.  The latter not
only have an interest in preventing the collapse of their huge dollar
holdings; more important, they need to protect their own exporters faced by
more competitive US suppliers in the American market and abroad. At the
extreme, an American depression would spread quickly around the world. There
is as yet no domestic market which can serve as an alternative engine of
growth to rival the US, though the European and Asian economies are
narrowing the gap, which is being reflected in the increased relative
strength of their currencies.

Meanwhile, the euro has risen by 70% against the dollar since 2001, and
European exporters and politicians have been loudly clamouring for a halt.
Chinese and Japanese exports have been famously underpinned by open market
interventions in support of the US dollar, and it is the US, not the
People's Bank of China, which has been pushing for an upward revaluation of
the yuan - the flip side of dollar devaluation.

The likeliest outcome of the current financial chaos will be a US
recession - possibly a very deep one - and a surplus of depressed shares,
real estate, and other assets available for purchase by overseas sovereign
wealth funds and private investors flush with US dollars and their own
appreciating currencies. In such circumstances, US shareholders and
employees in corporations threatened with bankruptcy might well be forced to
swallow their customary xenophobia in favour of rescue by Mideast, Chinese,
and other foreign "white knights".

The US ruling class could also use a sharp US downturn and rise in the
budget deficit to build support for its long awaited assault on Social
Security under the pretext that funding needed to be diverted to foster a
recovery during the "national emergency".