Update April 13
After five weeks of bombing Iran with Iran retaliating against the oil monarchies, which were collaborating with the U.S. and Israel, it became clear even to the Donald Trump administration that from their point of view, the war wasn’t going anywhere. There was talk that the U.S. might seize one or more Iranian islands. But even if successful, this would have achieved little. A full-scale invasion of Iran, meaning a march on Tehran, is out of the question at the current time.
Iran is a country of around 93 million people. This is larger than the German population of 80 million at the time of the U.S. invasion of Western Europe and Germany in 1944-1945. In geographical size, Iran is about the size of Western Europe. And of course, there is no equivalent to the armed forces of the Soviet Union attacking from the other side. This means that a “March to Tehran” like the march on Baghdad in 2003 is ruled out. If attempted, this would be the largest foreign military operation by the U.S. since 1945 and possibly even larger. This would require, at the very least, a full-scale mobilization and a renewed military draft.
Unlike in 1944-1945, when the U.S. enjoyed the support of most of the non-German Western European population who did not want to be ruled by Nazi Germany, this certainly would not be the case in any attempted “march on Tehran”. There are other important differences as well, and these are not in the U.S.’s favor. In 1944-45, U.S. industry was, relative to the industry of other countries, at its historic peak. Today, U.S. industrial production lags far behind China. The effects of the long-term decline of the U.S. are being felt as the U.S. and its extension, the Zionist entity, are running low on munitions. Unlike in 1944-1945, when the U.S. dollar was rock solid, the U.S. dollar had been plunging against gold, with the dollar price of gold above $5,000 per troy ounce when the war began on Feb. 28. Therefore, the Trump administration was forced to accept a two-week ceasefire on April 8. Talks to find a permanent end to the war opened in Pakistan on April 11 and collapsed on April 12 when the U.S. insisted that Iran give up its entire nuclear power industry.
The U.S. then announced it was blockading all trade through the Strait of Hormuz, effective April 13. This is an Act of War by the United States against the Islamic Republic of Iran. Whether this will lead to a resumption of large-scale military action and what form this military action may take is unknown as of the time of this writing on April 13, 8:36 A.M. Pacific time. It appears that the Trump administration is hoping that if it can prevent Iran from selling its oil on the world market, Iran will be forced to surrender to U.S. demand.
Events are moving very fast, and we will examine them in next month’s post.
Economy and War
April 6, 2026 — When you read these lines, the U.S.-Israeli war against Iran may have changed a lot. Perhaps there will be a ceasefire, or perhaps it will have escalated into a full-scale world war. Perhaps it will remain about the same, primarily a local war between the U.S. and its West Asian colony, the Zionist entity a.k.a. the so-called State of Israel. In the worst case, it will have escalated into a nuclear war — in that case, you will likely not be reading this post. I have to assume this will be avoided, at least for now.
Donald Trump as a wartime leader
On April 1 (April Fool’s Day), Trump addressed the American people. Generally, I avoid listening to such things, including the State of the Union, as they are too full of lies. But because I had to write this post, I felt I had no alternative but to suffer through it. One thing that stood out was Trump’s racism and Islamophobia. He referred to a former president as Barack Hussein Obama, though he is generally referred to without his middle name. By stressing Obama’s Muslim and Arabic middle name, Hussein, Trump succeeded only in emphasizing his own racism against the only non-white, African-American person to ever hold the office of U.S. president. For the record, Obama is a Christian.
I refer to this not because I am in any way an Obama supporter. Like all the other presidents since the slavocracy was destroyed as a separate ruling class due to the defeat of the slaveholders’ rebellion — the Civil War — Obama represented the ruling capitalist class, especially its most powerful section, the owners of finance capital. But this doesn’t change the repulsive use of Obama’s middle name by the racist, Islamophobic Donald Trump.
In his address, Trump also stated that if Iran fails to yield to all his demands, he would bomb the country back into the Stone Ages. What would the American people think if a foreign ruler threatened the United States the same way? This term is associated with the notorious U.S. Air Force General Curtis LeMay, who was instrumental in designing the brutal bombing of Japan during the final stage of World War II, including the only use of nuclear weapons in warfare up to the present. Whether we will be able to say the same after the current war remains to be seen. At the time of the October 1962 Cuban Missile Crisis, LeMay did all he could to convert the crisis into a nuclear one. During the 1965 Vietnam War, a few years later, LeMay threatened to bomb (North)Vietnam into the Stone Age.
Iran’s war aims
What are the war aims of the Islamic Republic of Iran? Though not an empire today, Iran is heir to the ancient Persian empire, and it has never been fully colonized. In today’s war, the aim is to first survive as a modern bourgeois nation-state. It is not a socialist country and has never claimed to be; it simply wants to develop its own capitalist economy. Though the U.S. empire is the world’s top champion of capitalist free enterprise, it is intolerant of any other nation that dares to develop a capitalist economy that might compete with itself. The U.S. maintains a massive war machine to enforce this.
In 1953, the Iranian prime minister nationalized Iran’s oil industry, which up to then was owned by British imperialism. In the words of Iranian President Masoud Pezeshkian in his April 1 letter to the American people, he wrote: “Relations between Iran and the United States were not originally hostile, and early interactions between the Iranian people and people of the U.S. were not marred with hostility or tension. The turning point was the 1953 coup d’état — an illegal U.S. intervention aimed at preventing the nationalization of Iran’s own resources. That coup disrupted Iran’s democratic process, reinstated dictatorship and sowed deep distrust among Iranians toward U.S. policies. This distrust deepened further with the U.S.’s support for the Shah’s regime, its backing of Saddam Hussein during the imposed war of the 1980s, the imposition of the longest and most comprehensive sanctions in modern history, and ultimately, unprovoked military aggression — twice, in the midst of negotiations — against Iran.”
Iran aims to maintain control of its own natural resources, the right to develop its own capitalist economy, and trade freely on the world market without interference from U.S. sanctions. If it achieves this, Iran will have won the war, whether or not it achieves its justified demand for reparations from the United States.
What are the aims of the aggressor countries, the United States and Israel? They are to crush Iran as a nation, destroy its economy, and dismember it into a “failed state” along the lines of present-day Libya, Syria, and Lebanon. If they get their way, Iran will be doomed to endless civil war among its nationalities and religious sects, preventing it from ever again consolidating into a modern nation-state.
Are there any divergences between the war ends of Israel and the U.S? Some insist that while Israel wants to destroy Iran and reduce it to the status of a failed state, the U.S. wants to limit Iran’s power. I don’t see this divergence. It goes without saying that Israel wants to see Iran crushed economically, politically dismembered, and thrown into endless civil war, and the U.S. agrees. Once Iran is crushed, the U.S. will be in a position to take control of the oil and other natural resources and use them against China and any other nation representing a commercial threat to U.S. domination of the world economy.
U.S. war aims fit Israel’s like a hand fits a glove. Israel is a settler-colonial state aimed against all the peoples of West Asia and North Africa. The Zionist entity is completely dependent on its “mother country,” the United States. In any divergence between the two — in the event of a victory in the war against Iran, Israeli interests will have to give way to those of the United States. The only empire that Israel can build is not its own: Given the fact that its Jewish population is less than seven million and the wretched relationship Jewish Israelis have with the peoples of West Asia and North Africa, Israel can only be an extension of the U.S. world empire and nothing else.
Israel, liberals, and the real causes of the Iranian war
Historians distinguish between the immediate and fundamental causes of wars. For example, the immediate cause of World War I was the assassination of Archduke Franz Ferdinand, heir to the Austrian throne, on June 28, 1914, by Serbian nationalist student Gavrilo Princip. This set off a diplomatic chain reaction that plunged Europe into war in August 1914. The root cause was the partition of the globe into colonies and semi-colonies, the economic rise of Germany that transformed relations between the great powers of Europe, the economic rise of Japan, and, above all, the economic rise of the United States. The U.S. emerged as the most powerful industrial country in the world by the end of the 19th century, the position previously held by Great Britain. The entire world was now controlled by a handful of capitalist powers. This reflected the transformation of capitalism based on free competition to monopoly capitalism — imperialism.
I don’t think enough information is available, as this is written, to be sure of the immediate cause of the current war. At the time, many said the ceasefire that ended the U.S.-Israel 12-day attack meant that a new war was inevitable within the next year. Events proved them correct. At some point, perhaps during the winter of 2025 or earlier, Trump gave the order to attack on February 28, 2026. There is speculation that Netanyahu blackmailed Trump into starting the war using information about Jeffrey Epstein’s sex slavery operation and Trump’s role in it. This is possible. Netanyahu has agitated for war with Iran for thirty years. Or perhaps Trump, misled by anti-government forces in Iran stirred up in part by the CIA and Mossad, fell for his own propaganda and believed the Iranian government would collapse as soon as bombs started to fall. Perhaps Trump, fresh from his success in kidnapping Venezuelan President Maduro and his wife, thought that Iran would collapse immediately, and this victory would boost the Republican Party’s rather bleak chances in the next round of elections.
Or perhaps it was partially due to Trump’s limited skills as a politician, and because it’s more difficult to make a democratic justification for a war against Iran than in other recent wars. In 2003, George W. Bush invaded Iraq less than two years after the 9/11 terrorist destruction of the World Trade Center. It is absolutely certain that Saddam Hussein’s government had nothing to do with that attack. His regime was completely intolerant of the terrorist tendencies that had earlier worked with U.S. imperialism to overthrow Afghanistan’s left-wing government — tendencies rooted in Saudi Arabia’s oil monarchy, not Iraq.
The majority of the U.S. population was unaware of these facts. The Bush administration not only falsely claimed that Saddam was developing a nuclear weapon but also hinted that he was somehow behind the events of 9/11/2001. The American people falsely believed that Saddam attacked the U.S. These excuses are not available to Trump. Trump and Netanyahu’s war began without even a fake casus belli, not even a Gulf of Tonkin. The majority of the population now opposes the war, the first time in U.S. history at the beginning of a war. Even without the war, Trump was already unpopular and hated by many. If this war is prolonged, the conditions it will create are ideal for building what could become the largest antiwar movement in U.S. history.
Isn’t the Zionist lobby the biggest factor working for war? Actually, no, imperialism, monopoly capitalism, is the culprit. U.S. monopoly capitalism does not abide competition from other capitalist countries for reasons we’ve explained throughout this blog. In reality, Zionism does not drive the imperialist world order dominated by U.S. monopoly capitalism; in fact, Zionism was the creation of and remains completely dependent on imperialism.
First, imperialism persecuted European Jews, peaking in the 1940s Nazi holocaust. Some survivors were then transferred to Palestine via the Zionist movement to join the increasingly genocidal war against the native Palestinian Arab population. This paved the way for the Jews of the Arab and the broader Muslim world to be driven into Palestine to join the imperialist war on Arab-Palestinian people, and so the Zionist entity was born. The U.S. Zionist movement, now allied with the most reactionary trends in Christianity, called Christian Zionists, organizes the Jewish community around support for the apartheid Zionist entity. This has set up the Jewish people, especially as the 1940s retreat into history, to again become the scapegoats, a role Jews have played many times in the last 2,000 years. As opposition to Zionist crimes grows in reaction to the Gaza genocide, a section of the supporters of U.S. imperialism blame Zionists (and sometimes simply Jews), but not imperialism. (1)
Liberals and progressives despise this genocide — and properly so! They paint Israel in the most terrible terms — and they are absolutely correct. It is difficult to exaggerate how awful Israel is. So far so good. But they wrongly claim that the U.S. is basically a “good” society, and the problem is that the Israeli lobby is somehow dominant and even oppresses the U.S. It’s not the American people being exploited by the U.S. capitalist class, but by Israel! Israel, essentially a U.S. colony, is treated as though Israel is an independent foreign country that is oppressing the U.S. If we are to believe these liberals and progressives, if the power of the “Zionist Lobby” and the Jewish supremacist billionaires and Israelis in the U.S. were broken, the U.S. would be a natural ally of Palestinians, Iranians and other oppressed peoples. In addition to echoing classical antisemitic ideology, it prettifies U.S. monopoly capitalism, painting it as some type of benign force.
One factor fueling this regressive tendency among our liberals and progressives is that more than 50 years have passed since the liberation of Saigon on April 30, 1975. The more recent wars on Iraq — like the current one — can be palmed off as the result of Zionist control of a basically healthy democratic political and military system. But about the Vietnam War? Was that caused by the “Zionist lobby”? What about the Korean War? (2) As was the case more than half a century ago, it will be necessary to struggle against liberal attempts to whitewash U.S. imperialism.
Trump as a wartime leader
The war continues because Donald Trump, partly due to his personal characteristics, is about the worst leader the U.S. could have to fight a war. This is shown by his performance during the COVID pandemic of 2020. Though not personally responsible for the pandemic himself, he certainly made things worse through the policies he represents — particularly his opposition to government-supported medical care.
A normal and reasonably politically capable leader would have appealed to people’s natural willingness and desire to sacrifice in a period of crisis. Trump failed to do this. He did everything possible to deny that a crisis was even occurring. He described COVID with a note of racism as the “Chinese flu.”
Early on, he urged people who were suffering symptoms to report to work. In March 2020, as soon as the extent of the crisis became obvious, he claimed that COVID would go away as soon as the weather warmed up in April. This was all in the absence of any scientific evidence. As soon as the dangers of the pandemic became obvious, he claimed it was practically over. He has done the same since he started the war against Iran on February 28, 2026.
His failure to appeal to people’s desire to sacrifice in a crisis and his constant claims that the COVID crisis was almost over, along with attempts “to repeal and replace” Obamacare, are what cost him reelection in 2020. While attempting to analyze Trump’s personality is well beyond the scope of this post, as well as my knowledge, and is ultimately a secondary factor, I will say this much: Trump, as is well known, was born into a rich New York City real estate family. Like most such people, his father, Fred Trump, held far-right views (Fred was arrested at a violent KKK march he helped lead through Queens, New York, in 1927). Such people have no desire to pull together in a crisis. Instead, the economic laws that rule the capitalist system I’ve been exploring throughout this blog encourage capitalists to see any crisis as an opportunity to enrich themselves.
Trump is simply incapable of appealing to people’s desire to sacrifice in any crisis, whether a pandemic like in 2020 or a war that he himself started. Instead, he boasts that things have never been better thanks to his brilliant leadership. Since starting the war on Iran on February 28, he’s dealt with this just as he dealt with the COVID crisis. First, he failed to provide any explanation for why the war was necessary. There is no claim, however phony, that the U.S. or even Israel, which is now widely hated worldwide due to its genocide in Gaza, was attacked by Iran. The closest thing Trump can come up with is that Iran was allegedly building a nuclear weapon. Why shouldn’t Iran have the right to have a nuclear weapon when the U.S. has thousands of them? That’s the way Marxists should look at it.
In reality, Iran has said that it does not want nuclear weapons and believes it’s against its religious principles. Iran says it is only enriching uranium short of the level that would support the chain reaction causing a nuclear explosion, to develop civilian nuclear power. During the Obama administration, Iran reached an agreement allowing it to enrich uranium only to a level to be used for generating electric power, not to make a nuclear weapon. The agreement included international inspections that violated its sovereignty, but the Iranian government agreed to the condition to avoid war with the U.S. and Israel.
In the few weeks before the war, the Trump administration and the Iranian government were engaged in negotiations in which Iran made further concessions. These are certainly not beyond criticism from the viewpoint of defending Iran’s sovereignty. Ultimately, the Iranian government alone has the responsibility and right to decide what concessions it does or does not make. On February 27, the talks seemed to be making progress. On the eve of the 12-day war last year, 2025, a similar situation existed, and the U.S.-Israel attacked anyway. (3) U.S. forces were massing for an attack, raising the question: would things turn out any differently than in June 2025? The answer was not long in coming. The next day, the U.S. and Israel attacked Iran.
There is no doubt who fired the first shot. It was the U.S. and its colony in Palestine— Israel. Frankly, from the viewpoint of U.S. imperialism, this is a stupid way of starting a war, since you are exposed in front of the world as the aggressors. More intelligent attackers go to great lengths to make it appear that the victims fired the first shot. Here are some examples from history:
In 1939, after he had crushed Czechoslovakia, Adolf Hitler decided to attack his eastern neighbor, Poland. But Hitler wanted to make it appear to the German people that Poland started the war. During the summer of 1939, the strictly Nazi-controlled German press launched a campaign claiming that in Poland, Poles were attacking ethnic Germans. Thinking this wasn’t enough, Hitler took some concentration camp prisoners, had them shot dead, dressed them in Polish uniforms, and dumped the bodies on the German-Polish border, then had a German radio station claim that Poland was attacking. So, according to Hitler’s government, Poland had attacked a far more powerful Germany!
Here is another example. It was August 1964, and Democrat Lyndon Johnson was running for president as a peace candidate against the ultra-right Republican war-mongering racist senator from Arizona, Barry Goldwater. The administration had quietly concluded that the only way to save the puppet Saigon regime was to openly introduce U.S. troops into the war, not as mere “advisers” as had been the case up to that time. The Johnson administration claimed that the Vietnamese PT boats making up what passed as the Vietnamese Navy had attacked the mighty U.S. Navy, the most powerful the world had ever seen, in the Gulf of Tonkin on Vietnam’s border. U.S. bombers, for the first time, but certainly not the last, bombed what was then the Democratic Republic of Vietnam (North Vietnam) in retaliation. Then, Johnson had Congress pass the so-called Gulf of Tonkin resolution that yielded Congress’s constitutional duty to declare war, instead giving the power to the president to fight its dirty war against Vietnam and other Indo-Chinese countries.
In addition to Trump’s failure to prepare for this war politically, he’s failed to prepare financially. Let’s look at the financial consequences of the first three weeks of war and its relationship with the economic laws we’ve been examining throughout this blog. One law is that whenever any type of crisis breaks out that threatens the smooth flow of payments, there is a rush into the currency of the nation whose currency serves as the main means of payment on the world market. This happens when an overproduction crisis erupts, and there is fear that debts coming due will not be paid. This leads to a rush to convert debts into cash to be used to settle the debt. By cash, I mean whatever serves as the chief means of payment on the world market. Despite the decline of the dollar system at this point, far more debts are still denominated in U.S. currency than in any other currency or gold. The decline of the dollar system is not the same thing as its fall. Something to be kept in mind is that the fall of the dollar system, the point where the dollar loses its role as the denominator of world debts and the means to settle them, is still ahead of us.
War, as well as overproduction crises, especially at the start when the outcome is unknown, can also increase the demand for the currency serving as the chief means of payment, both relative to other currencies and gold. When war or an overproduction crisis breaks out, the immediate effect is to increase demand for the currency of the nation that holds the reserve currency role.
In the case of war, the danger depends on the character and extent of the war and its chances of spreading. In August 1914, when war broke out among the main European powers, more of the world’s debts were denominated in British pounds than in any other currency. Between 1821 and 1914, the British pound represented a fixed quantity of gold in practice as well as in theory, due to Britain’s status as “workhouse of the world” since the late 1700s. Most manufactured commodities were produced in and purchased from Britain, its capitalists accepting payment in their own currency.
At the start of the war, there was fear that gold-laden ships would be sunk as a result of military action. Panic-stricken capitalists were determined to get hold of British pounds even if it meant taking larger foreign exchange losses than they would accept under normal circumstances. As a result, the British pound soared against other currencies and gold. The long-term effect of the war was the opposite. In the decades following 1914, the British pound was devalued against gold and other currencies, and by the late 20th century, it ceased to function as a major reserve currency. The end of Britain’s role as the “workshop of the world” after some time had passed led to the end of its currency’s role as the world’s chief means of payment.
This phenomenon shows that the country with the currency functioning as the reserve currency can more easily finance military adventures because the rush into its currency with military adventures allows that country to issue more currency without immediate depreciation. The U.S. can take advantage of this to help finance its military operations (wars of aggression) — unless the dollar loses its status as the world’s chief means of payment. The U.S.’s loss of the role as the world’s chief industrial country, one that the People’s Republic of China now occupies, prepares the way for the end of the dollar’s role as the chief means of payment.
This loss has not yet occurred. When it does, the U.S. empire will fall as the British empire fell. For now, the empire has become financially unstable, as shown by the rise in the dollar price of gold above $5,000 before the war broke out. Despite its erosion, for now the dollar’s role remains intact and so does the U.S. empire. The British Empire reached its peak just after World War I, when the territories of the former Ottoman Empire and Germany were divided between Britain and France. Among the new territories added to the British Empire in the form of a “mandate” by the League of Nations was Palestine, with disastrous consequences for both the Palestinian people and ultimately the world, which are so obvious today. (4)
Unlike other recent wars, such as those against Iraq, Afghanistan, etc., this war, during its first weeks, already had major economic effects. Iran has largely succeeded in deciding which ships can and cannot pass through the Strait of Hormuz. Under normal circumstances, about 20% of the world’s oil passes through. In addition, Iran has been successful, through missile bombardment and drones, in damaging oil and natural gas facilities in the Gulf oil monarchies. The U.S. and Israel, for their part, hit Iranian oil and gas facilities, including the Pars gas facility in Iran. All of this led to a considerable rise in the price of oil and natural gas.
I noted in a previous post that the dollar price of oil remained low in the face of the depreciation of the dollar against gold that we saw in the months leading up to the war. Even if the war stops soon, it will take years to repair all the damage that’s been done to production and refining capacity. Oil and natural gas are key raw materials in producing energy, fertilizer (and thereby food), and plastics. With commodity buyers having to spend more money on basics such as energy, food, and plastics, they have less money to spend on other commodities.
All of this has led to a classic reaction in the money and gold markets. As prices of many commodities begin to rise, more currency is needed to circulate commodities, or the currency must circulate faster, or a combination of the two. This affects interest rates. During the opening weeks of war, one would expect money to flow into the dollar, lowering interest rates on U.S. government bonds — with rates rising only if the war is prolonged. But not this time.
With the war driving a rise in energy prices, also pushing up prices of food, plastic, and many other commodities, even if the war ends soon, interest rates on U.S. government bonds have risen. The interest on the ten-year bond, the rate of interest on money borrowed for ten years, rose from 4.0860% on Feb 21, the last Friday closed before the outbreak of war, to 4.3918% by March 21, as the money market tightens and talk of a liquidity squeeze begins circulating in markets. With dollars suddenly in short supply, the sky-high dollar price of gold that rose above $5,000 an ounce before the war dropped to $4,575.90 on March 21. Tightening of the money market brought by higher commodity prices is the chief factor here, though the prospect of more government borrowing to finance the war works in the same direction. Remember, everything remaining equal, dollar gold prices rise when interest rates fall, as they did before the war broke out, but fall when the money market tightens, and interest rates rise.
I have dealt with the problems of war and economy before, but the current war makes this an urgent question. Even if it doesn’t escalate beyond its current dimensions, it’s already had a bigger economic impact than any war since at least the 1973 Israeli-Arab war. This is thanks to Iran’s move to cut off shipping through the Strait of Hormuz and the disruptions in oil shipping and production due to Iran’s defensive counterattacks against U.S.-dominated Gulf oil monarchies, forcing the surge in oil prices. As of the time of this writing, this has sent oil prices skyrocketing, and if my local gasoline station is any guide, has already led to a large jump in U.S. gasoline prices “at the pump,” effectively reducing the purchasing power of U.S. consumers. If people have to pay more for gasoline — in the automobile-dominated culture in the U.S., and a necessity for most people — they have less money to buy other commodities. Rising gasoline prices have a strong effect on the economy, all things remaining equal.
As the current war evolves — and nobody really knows how it will — this is a good opportunity to examine the effects of war on the capitalist economy. This is particularly important because a lot of mythology exists around this question. It’s often claimed that the U.S. economy pulled out of the Great Depression of the 1930s only because of a deficit-financed surge of government spending as a result of World War II.
Did World War II really end the Depression?
According to this basically Keynesian argument, the Depression was caused by a dearth of spending (by consumers, business, the government) in the economy. The surge in government spending on World War II ended the spending dearth that marked the Depression years. This appears to be true because in 1940, eleven years after the 1929 stock market crash that symbolically marks the beginning of the Depression (or as many believe, its cause), the number of unemployed was still officially estimated at more than 10 million.
Shortly thereafter, the U.S. became involved in World War II and a war economy with its commodity shortages and as close to full employment as you can have under the capitalist mode of production. The still huge number of unemployed that existed as late as 1940 was absorbed directly into the military or war industries. Did World War II have anything to do with this change in the economy? Of course it did. But we can’t stop our analysis at this point. If you look at the actual history of the Depression — that occurred when the U.S. was already the dominant industrial capitalist nation in the world — we see that the U.S. economy during that time was marked not by stagnation but by violent fluctuations.
Between the summer of 1929, just before the market crash, and the summer of 1932, the U.S. economy plunged like never before or since. This dragged the rest of the capitalist world into crisis. This is what I have in this blog called the “super crisis” of 1929-33 to distinguish it from the many others that have marked the concrete history of the capitalist system.
According to Encyclopedia Britannica, “The Great Depression began in the United States as an ordinary recession in the summer of 1929. The downturn became markedly worse, however, in late 1929 and continued until early 1933. Real output and prices fell precipitously. Between the peak and trough of the downturn, industrial [production] in the United States declined 47 percent and real gross domestic product (GDP) fell 30 percent. The wholesale price index declined 33 percent. … Although there is some debate about the reliability of the statistics, it is widely agreed that unemployment rate exceeded 20 percent at its high point.”
The quasi-official unemployment peak in March 1933 was almost 25%. Many historians believe that if you take underemployment into account, the figure reaches around 50%. A close examination of the economic data from that period reveals the natural low point of the crisis was in June or July 1932. After a modest recovery that lasted through the rest of the year, the economy declined again, finally bottoming out when Franklin Roosevelt was inaugurated as president on March 4, 1933. This was a secondary trough.
During the 1932 election campaign, Republican incumbent Herbert Hoover insisted that the dollar would not be devalued against gold as long as he was president. At this time, the Republican Party stood for a strong gold standard that meant that the Treasury, and from 1914, when it began operations, the Federal Reserve would buy and sell gold at a price of $20.67. Britain, still a major industrial country, had devalued the British pound in 1931.
Democrats were less committed to the gold standard in part because their coalition included silver-mining interests that wanted the dollar to be tied to silver, not gold, as well as farmers who wanted to see higher agricultural prices. In contrast, Republicans were associated with “hard” or gold money. During the 1932 campaign, Roosevelt refused to promise the dollar would not be devalued against gold. This was interpreted — correctly as it turned out — that Roosevelt would indeed devalue the dollar.
Devaluing the dollar meant raising the dollar price of gold. Under the classic gold standard of the time, a person could go to the bank and ask for their money in gold coins. After Roosevelt was elected, a number of deposit owners thought they had an easy way to make money (calculated in dollar terms, not gold). Their idea was to withdraw money from their accounts in gold coins whose bullion content was priced at the official dollar gold price of $20.67 per ounce and then sell the coins back at the higher market price of the bullion contained in the coins after the expected devaluation of the dollar. After all, the coins are made of gold and can easily be melted into bullion. As a result, the dollar, or other paper currency, price of gold coins cannot fall significantly below their bullion value.
In those days, commercial bank reserves consisted of deposits in the Federal Reserve banks, dollar bills, and small-denominated coins made of base metals, like today, plus, unlike today, gold coins. Earlier in the crisis, people took their money from the banks because they were afraid that if they didn’t, they would never see it again. At the beginning of 1933, the motive initially was that easy dollar profits could be made by withdrawing money in the form of gold and then selling it back to the banks at a higher price after Roosevelt’s expected devaluation. This was a sure, risk-free way to make money in dollar terms — or so it seemed.
But as more and more bank depositors withdrew their money in gold coins expecting to profit from the rise in gold’s dollar price, more began to withdraw their deposits in the form of paper dollars because they feared, (as they had earlier in the crisis) that they would be paid back after a long delay, or only partially — or not at all! The devastating bank runs that had tapered off by the time of Roosevelt’s election, with the recovery after June-July 1932, now resumed. Hoover, after he lost the November 1932 election, knew full well that, according to the Constitution, he would have to surrender the presidency to Roosevelt on March 4, 1933. Until then, under the same constitution, he retained all his presidential powers. Hoover made clear that as long as he remained president, there would be no departure from the gold standard. (4)
During these months, the U.S. effectively had two presidents with two different monetary policies. One president, Hoover, was determined not to devalue the dollar (raise the official dollar price of gold) while the other, Roosevelt, was expected to devalue the dollar as soon as he assumed office on March 4. It can be debated whether or not there was any need to devalue the dollar at that time.
Any of the three options — prompt dollar devaluation, suspension of gold payments to let the dollar float, or maintaining the existing gold standard — would have been better than two contradictory policies virtually guaranteeing a new wave of bank runs. And it did: the runs that followed were worse than ever. The U.S. banking system was brought to its knees. By the beginning of 1933, tentative signs of recovery had vanished, and the economy entered a renewed downward spiral from what was already a very depressed level.
As soon as he assumed office on March 4, Roosevelt shut down all commercial banks, allowing only solvent banks to reopen after the “bank holiday,” while suspending the convertibility of the dollar into gold. Roosevelt then ordered the Treasury to purchase gold on the open market at higher and higher dollar gold prices. This continued into 1934. Whenever Roosevelt ordered Treasury purchases of gold at a new, higher dollar price level, dollar commodity prices would surge — causing private businesses to build up inventories before dollar prices rose even further. This caused industrial production to surge, causing unemployment to fall, though it still remained high.
When Roosevelt paused Treasury gold purchases, dollar commodity prices fell back, causing industrial production and employment to slump again, though not to the previous lows. Finally, in 1934, Roosevelt announced that the Treasury would purchase and sell gold at a dollar price of $35 an ounce to foreigners on world gold markets. Commodity dollar prices stabilized while the rise in industrial production increased at a rapid, steady pace. In addition, the Roosevelt administration took other measures, including declaring ownership of gold coins by private individuals, commercial banks, and even the twelve Federal Reserve banks illegal.
The Treasury used gold certificates that, up to that point, functioned as ordinary currency to buy the gold owned by the Federal Reserve banks at the old official price of $20.67 per ounce. Today, all gold certificates are locked up in the vaults of the twelve Federal Reserve banks. Looking at them, they look like the old-fashioned dollar bills they once were. They differed in only one way from other dollar bills of the era. They were created when private individuals or entities sold gold to the Treasury and clearly stated the obligation to pay the gold back at the demand of the bearer, as compared to the more vague “payable in legal tender money” on other types of bills. The administration feared that the courts might support gold certificate owners’ demands to be paid back in gold at the old official rate of $20.67 per ounce, since legally the certificates were contracts entered into by the Treasury to pay gold in exchange for the certificates. However, the courts did not do this. (6)
As for the private individual who owned gold bullion, coins, or certificates, they had to be sold back to the Treasury at the old price of $20.67 per ounce. This prevented people who expected to earn dollar profits once the official price rose to realize any profits. In terms of gold, they lost like everybody who owned any form of dollar unless they had illegally melted down coins and held on to it or shipped it out of the country. But at that point, the horse was out of the barn, as the expression goes. The right to own gold was restored to private individuals and entities only under Gerald Ford in 1974.
Roosevelt’s gold policies were described as the nationalization of gold. Instead of nationalizing the means of production, a historic necessity, the administration nationalized the money material. They thought that by making private ownership of money material illegal, the danger of soaring demand would be staved off. No such soaring demand existed in the United States because, despite the Depression, its capitalist class was still more firmly in power than anywhere else in the world, while the 1929-33 overproduction super-crisis had more firmly liquidated overproduction than any previous crisis had done before or since. Only at the end of the 1960s into the 1970s did the desire of individuals and private entities to directly own money material begin to revive. The government eventually responded by legalizing private ownership of the money material (gold) again and even resumed limited minting of gold bullion into coins. (7)
By 1936, the U.S. economy was recovering rapidly, more due to the normal mechanisms of the industrial cycle than any of the Roosevelt administration’s particular policies, though it was still not in a boom. If anything, Roosevelt’s tampering with the monetary and currency system slowed the recovery. Unemployment, though still high, was declining. This encouraged a growing wave of strikes, like the rise in strikes we saw when the economy began to reopen after the COVID shutdowns, but on a larger scale. The Roosevelt administration began to fear that a runaway boom like that of 1928-29 could develop. They also feared that the industrial unions of the Congress of Industrial Organization (CIO), fueled by the economic recovery, were getting too strong. The leader of the New Deal decided the economic rebound had to be slowed down.
But there was a problem: The 1936 congressional and presidential elections were approaching. Any recession before this would hurt Roosevelt’s Democrats and perhaps endanger his election to a second term. During 1936, the administration carried on a series of deflationary measures to slow the economy, but they wouldn’t take full effect until after the elections were over. In 1936-37, Social Security was passed, and taxes were being collected, but so far, no payments had been made. The administration ended the Works Project Administration (WPA), the public works program, on the grounds that the Depression was over as industrial production finally surpassed the old record set in 1929. The Federal Reserve increased reserve requirements — meaning the quantity of cash a commercial bank had to keep on hand or on deposit with a Federal Reserve bank. The Treasury, not the Federal Reserve, instituted its own deflationary moves when, in June 1936, it instituted a policy of sterilizing gold. What was the essence of this policy?
Many European capitalists, fearing their gold would be seized by Nazi Germany (a realistic fear), were selling their gold to the Treasury. They then deposited the Treasury-issued checks into commercial banks, and the banks’ reserves were increased. For every dollar in gold sold to the Treasury, the Treasury borrowed a dollar and effectively locked it into a Federal Reserve vault, removing it from circulation. Gold continued to flow into the U.S. under the policy of “sterilizing” it, but the currency in circulation suddenly stopped increasing. This represented a deflationary shock to the economy. At the end of 1937, these massive government-induced deflationary measures caused a brief but violent recession. Unemployment, though still high, had been declining since March 1933, but suddenly spiked again.
From 1938 onward, unemployment drifted lower after the artificial recession of 1937-38 ended. There wasn’t enough time between the recession’s end and the start of World War II for unemployment to return to levels associated with normal capitalist prosperity. Liberal and progressive historians who supported Roosevelt’s policies, both at the time and later, claimed that a strike by capital against the New Deal caused the 1937-38 recession, while playing down the role of Roosevelt’s deflationary policies.
By the end of the 1930s, the world economy was glutted with idle money, mostly in the form of bank reserves in the United States. Never before or since in the history of capitalism had a situation been more favorable for financing a major war. And war there was, though it wasn’t actually necessary for a transition to a new era of prosperity. The normal mechanism of the capitalist industrial cycle would have brought about a boom with what the capitalist economists call “full employment” if the war had not been fought. What the industrial cycle could not do was accommodate the interests of Nazi Germany, driving for domination of Europe, and the United States, striving for the domination of the entire planet. There was no way the interests of the top two imperialist powers could be peacefully reconciled. Thanks to the Great Depression, there was in the United States, though not in Germany, plenty of unemployed and underemployed young men and plenty of idle money sleeping in the banking system to finance it. Never had a situation been more ripe for a world war.
Reviewing the causes of the Depression
What actually caused the Great Depression? This is a question we have been exploring throughout this blog since it began in 2009. It’s actually two questions, neither of which has been solved in any convincing way by present-day capitalist political economists. One question is why cyclical economic crises occur in a capitalist economy. The other is why the cyclical crisis that began in 1929 developed into the Great Depression?
From the Great Depression of the 19th century to the Great Depression of the 20th century
Let’s review the answer to the second question: We can trace the answer back to the Klondike gold discoveries in the middle of the 1890s that ended what used to be called the Great Depression before the 1930s usurped the name. Today, some call it the Long Depression. It wasn’t one single cyclical depression but represented a long period of falling prices with depressions, punctuated by short periods of rising prices and capitalist prosperity, that unfolded between 1873 and 1896. The combination of the discovery of gold deposits and the invention of the cyanide process making possible the extraction of a greater amount of gold from poor ores, sharply reduced gold’s value compared to that of most other commodities in the mid-1890s.
This meant that in terms of the use value of gold, prices that directly expressed the commodities’ value, as well as production prices that equalize the profit rate in all branches of production, including the gold industry, rose sharply. A change in values and production of commodities is not instantly, automatically reflected in commodity market prices. When the value of gold falls relative to the value of commodities, market prices can only be brought into line with the new, reduced value of gold through a period of accelerated economic growth that raises demand for commodities at existing prices over a period of years.
As explained in last month’s post, as prices rise, a period of extra profits occurs that has to be calculated in terms of the use value of the money commodity, gold. During the transition period of rising prices, the profit rate will be in higher market price terms than they are in values and production prices. The inflated profit rate, as calculated in terms of the use value of the money material, accelerates the accumulation of capital. The effect is temporary, assuming the fall in gold’s value relative to most other commodities is basically a one-off and not a continuing process. A continuing fall in gold’s value relative to non-money commodities would undermine gold’s ability to continue serving as the money commodity.
Eventually, the new gold mines developed from the Klondike discoveries were depleted, much as the California gold mines of 1848 had been. The temporary boost to profits caused by the fall in gold’s value was replaced by its reverse, the opposite process. When the direct and production prices of commodities fall, market prices don’t also fall automatically. They fall because demand can be equalized with supply only through lower market prices. While this unfolds, the profit rate will be lower in the use value of the money commodity than it will be in values and production prices. The result will be a period of weak investment and a strong tendency toward depressed economic conditions with higher than average unemployment.
Capitalists don’t know the value of commodities nor the profit rate in value terms, only market prices and profit rates calculated in market price terms. The exhaustion of the Klondike mines meant that the rise in commodity prices and profit rates that occurred in the late 19th and early 20th centuries gave way to a period of falling prices and falling profit rates.
This leads to a slowdown in capital accumulation caused by a drop in capital investment. In the concrete history of the 20th century, this process didn’t unfold as smoothly as it had before. By the beginning of the second decade of the 20th century, the rise in prices was leveling off as the Klondike mines were depleted. During 1913, the global economy sank into a world recession that deepened as 1914 began. It seemed that the Great Depression of the late 19th century, which had been ended by the 1890s gold discoveries, was coming back as the mines were depleted. Karl Kautsky, leading theoretician of the Second International, noted this at that time and predicted the coming of a new period of revolutions. The fact that Kautsky proved personally unequal to the challenges of this revolutionary epoch does not change the accuracy of his predictions.
War economy
War broke out among the European powers in August 1914. War economy replaced the global recession. World War I was a total war, not a limited one, as those fought between the world wars following the French Revolution and August 1914. Combined with the progress of destructive military technology, this made World War I far more devastating than anything before. Civilian commodity production was sharply restricted. The state told individual capitalists what and what not to produce.
This disrupted the process of expanded capitalist reproduction. Governments resorted to financing the war through massive deficit spending. The demand for commodities, including those used to produce other commodities, greatly exceeded their supply at prevailing prices. Prices calculated in gold terms, not just nominal prices in terms of depreciating currencies, about doubled in Europe and across the globe, including the United States.
When the war ended in November 1918, government orders for weapons suddenly fell. It was necessary to move production back to normal peacetime production to reestablish production proportions necessary for the resumption of expanded reproduction. The process took about six months, and by 1919, it had succeeded. It turned out that its return was only the beginning of the economic problems that faced the capitalist world in the post-war era.
Central banks continued issuing currency at a rapid rate because they feared the political consequences of mass unemployment, especially in light of the Russian October socialist revolution. In addition, only the United States was able to maintain the gold standard among the imperialist countries. By 1920, high prices in gold terms as well as dollars were causing the U.S. to lose gold. The newly created Federal Reserve was obliged to raise its (re)discount rate, the main tool through which the central banks carried out monetary policy. The result was a drop in prices accompanied by slumping industrial production and rising unemployment. Gold flowed back to the Federal Reserve, allowing it to again lower its (re)discount rate.
More or less the same process occurred in the other victorious capitalist countries. In the defeated countries, prices in gold terms were lowered through massive currency devaluations that led to hyperinflation. The biggest problem was invisible to most contemporary observers because it lay below the surface of economic life. The war had suppressed overproduction of means of consumption and means of production — including the commodities that make possible the expansion of the scale of production — while producing overproduction of the means of destruction alone. Indeed, so many means of destruction were produced that it stifled expanded reproduction. Instead of overproduction, the war brought underproduction of commodities involved with the (expanded) reproduction of commodities.
This limited the deflationary recession that hit the U.S., Britain, and Japan in 1920-21 as they moved to stabilize their currencies. The result was a big fall in prices calculated in terms of these currencies and, more importantly, in terms of the use value of gold. In the defeated capitalist countries, especially Germany, the fall in prices in gold terms, not currency units, was achieved through the radical devaluation of their currencies against gold and runaway inflation, and in Germany, full-blown hyper-inflation. Astronomical prices in terms of German paper marks were associated with dirt cheap prices relative to world prices in gold terms as well as in dollars fixed in gold terms. Across the globe, prices were plunging.
The problem was that the lack of overproduction during the war years meant that the fall in prices in gold terms ceased before they fell all the way back to 1914 levels. Market prices 1913-1914 in gold terms were already too high relative to underlying values and production prices. We know this because, though global gold production rose from its lows at the beginning of the 1920s, world gold production only partially recovered.
Thanks to the war, the 1920s global gold production remained below already inadequate peak levels of 1914, though the quantity of commodities that had to be circulated in internal trade within countries and world trade between them was higher than before, thanks to higher prices and production levels. Before a healthy relationship between the quantity of gold and non-money commodities could be reestablished, a further fall in prices in gold’s use value terms was necessary. This was the hidden time bomb that World War I planted beneath the world capitalist economy of the 1920s. It wasn’t only the war, it was the fact that it had broken out when market prices were already too high relative to commodity values and their production prices.
This manifested itself as a global gold shortage as well as all kinds of financial strains centered on German reparations. The shortage of money was most obvious in Germany in the wake of the 1923 hyperinflation. Money flowed out of the United States, where interest rates were relatively low, into cash-strapped Germany, where they were high. Between 1924, when the new German mark was stabilized, and 1928, the German mark was kept afloat by loans made by U.S. banks to German municipalities and enterprises. As a result, those municipalities and enterprises became highly indebted to U.S. banks. Viewed the other way, the U.S. banking system carried as assets on its balance sheets loans that depended on the continued ability of Germany to service its debts to the banks.
The boom of 1928-1929
During 1928, a strong boom developed in the U.S. economy, not just in the stock market, but in industrial production, and wholesale and retail trade. This greatly increased competition between expanding demand for loan money by industrial and commercial enterprises, as well as the stock market in the U.S. and credit-dependent enterprises and municipalities in Germany, which limited the credit available to it. This put the German economy into a vicious credit squeeze, which intensified further in 1929, dragging both the German and U.S. economies into a recession that led to the stock market crash of October 1929. There simply wasn’t money (gold) available in the world to support the 1928-29 boom any longer. Only the extreme inflation of credit built on top of a small golden monetary base made the boom possible at all. That ended in mid-1929.
After the October-November stock market crash and recession conditions took hold, credit eased. During the stock market panic, the Federal Reserve was able to prevent the crash from leading to a run on the banks as had occurred in 1907 and repeatedly during the 1800s. The Federal Reserve was put in place to prevent bank runs. When banks faced panicky withdrawals, they were forced to call in their loans and hold back on any new loans and discounts. They did everything possible to hold onto cash to repay depositors and avoid bankruptcy. These classic bank runs led to massive credit contractions, which forced commercial and industrial businesses to liquidate inventories by slashing prices and laying off workers. European nations with central banks were largely able to avoid bank runs by providing emergency loans and discounts to the commercial banks.
Things were different in the United States for reasons I don’t have time or space to examine here. There was no central bank in the U.S. Bank runs occurred in 1873, 1893 and 1907. Before World War I, a stock market collapse of this magnitude would have been accompanied by a bank run, but this didn’t happen at that point. In late 1929 and 1930, as the market crashed and recession deepened, the massive pressure on credit caused by the boom eased. The flow of loans from U.S. banks to Germany resumed. It seems likely that recession would run its course by the end of 1930. But in June that year, Hoover signed the highly protective Smoot-Hawley tariff. This raised the question of how Germany would pay its debts that, in the normal course, would have been expected to be paid with dollars that Germany would earn through exports to an expanding U.S. market. As a result, the renewed flow of loan money to Germany dried up.
Suddenly, loan portfolios of the banks began to look dubious. At the beginning of 1931, there was a brief upswing, and it looked as though the recession was bottoming out. Then a massive wave of bank runs occurred, and the massive credit collapse that was staved off in 1929 now broke out with full force. The crisis spread to Germany and Poland. The Bank of England was forced off the gold standard, and the British pound was devalued. The U.S. economy fell into a crisis of unprecedented depth, which I call in this blog a super crisis. The Great Depression was on.
How the Depression transformed the economic and political situation in the 1930s
The Depression had the same economic effects as other depressions, but on steroids. Prices dropped in dollar and pound terms and even more so in gold terms. The depression in gold production that developed as a result of the inflation of prices in gold terms was decisively ended, and a new upswing in its production began. The combination of global depression in industrial production and world trade, combined with an upswing of gold production, meant that the banks (especially those in the U.S. once the crisis proper ended in March 1933) were flooded with idle money to an extent unmatched in capitalist economic history. This made it possible for Germany to finance its rearmament with the help of strong mercantilist measures that we examined in earlier posts.
The United States gained even more. It had a population, an industrial machine, and a gold hoard far beyond anything that Germany had. With so much idle loan money in the banks backed by the huge gold hoard in Fort Knox, the U.S. was in a position to build up a huge military machine based on its industry without mercantilist measures. The economic upswing that had begun in March 1933, briefly but sharply interrupted by Roosevelt’s deflationary measures in 1936-1937, turned into a war economy after 1941, ending the Depression.
The wartime draft and vast expansion of the war industry quickly absorbed the mass unemployment left over from the Depression. In the war economy of World War II, the production of civilian vehicles stopped as civilian auto factories produced tanks, airplanes, and other military vehicles, solving the problem of automobile overproduction. There is a kernel of truth that war is the solution to capitalist economic crisis of overproduction. It did so this time only because normal capitalist expanded reproduction — the essence of capitalism — was temporarily suppressed.
As in World War I, rising prices in paper currencies as well as gold terms depressed gold production. But unlike World War I (and this is crucial), the world in 1941 was not short of gold. Higher commodity prices induced by the war reduced gold production, but it didn’t return to the depressed levels of the post-World War I period. After the war, it took decades before the world again faced a major gold shortage. Despite the unprecedented scale of the war, the U.S., swimming in a mass of idle money, had no problem financing it at Depression level interest rates!
War spending weakens — and in ‘total wars’ like World Wars I and II suppresses altogether — capitalist expanded reproduction. War economy is not a cure for overproduction crises. Expanded reproduction is the essence of capitalist production. In a world war that suppresses capitalist expanded reproduction, if it lasts too long, it leads to economic collapse far worse than any conceivable overproduction crisis. And this was already true in a world without nuclear weapons. The more unlimited a war is in terms of its scope, the more limited it must be in terms of time. Compare, for example, the U.S. war against Afghanistan between 2001 and 2021 with World Wars I and II. The war against Afghanistan was a hindrance to capitalist expanded reproduction, but it was far from halting it, allowing this “low intensity” battle to drag on for 20 years. This would not be possible with the world wars, not to speak of one involving nuclear weapons!
Among other things, fluctuations of the industrial cycle regulate the production of the money commodity in proportion to non-money commodities. This prevents the waste of total social labor on producing money material in quantities beyond what commodity circulation requires. In the long run — though not the short — this keeps commodity market prices reckoned in terms of the use value of the money commodity in line with the underlying values and production prices of non-money commodities.
War throws a monkey wrench into this mechanism. The classic case we examined above is WWI. On the eve of the war, world commodity prices had risen above the value of commodities as well as their production prices. As a result, the increase in world gold production needed to maintain global capitalist expanded reproduction tapered off. In 1913 and the first part of 1914, a global recession broke out that was beginning to lower inflated commodity market prices. Before this process could go far, war broke out. The result was that the already inflated commodity market prices measured in terms of the use value of gold about doubled. In the end, the law of the value of commodities drove prices back to and for a while below the value and production prices of commodities. As long as capitalism lasts, the law of the value of commodities prevails. In this case, the law of value could only prevail through the Great Depression, the greatest global economic disaster so far in the history of the world economy.
We saw the same phenomena during the Vietnam War, though to a lesser degree. World War II, though far larger than the Vietnam War, did not have anything like the same effect because it broke out when the world was awash with idle money thanks to the Great Depression. In contrast, World War I and Vietnam occurred when money was already getting tight, thanks to years of capitalist prosperity and the overproduction of this prosperity. The financing of the worst war in human history up to now, World War II, was made possible by the preceding Great Depression.
These facts must be kept in mind when considering the likely consequences of the current war. Unlike other recent wars, the current war is already disrupting the production of some not unimportant commodities and raising their prices in terms of gold, not simply paper money. A renewed upswing in global gold production in the near future, which seemed likely before the war, now seems less likely.
We should keep this in mind as the war and the world economic situation continue to evolve.
NOTES
(1) The first Zionists were actually Christian Zionists. Christian Zionism can be traced back to the struggle between the European Christian states and the then-growing power of the Muslim Ottoman Empire. Religion was mobilized by claiming that if the Jewish Temple was rebuilt in Jerusalem, Jesus Christ would return and the Christian utopia would be realized. Jewish Zionism only became a significant movement when modern antisemitism swept through Europe, especially Eastern Europe, following the crisis of 1873. The Jewish Zionists worked hand-in-glove with European antisemitic governments, including in 1930s Nazi Germany, to build the Jewish colony in Palestine that became today’s Zionist entity. (back)
(2) World War II, the so-called good war, was in reality a war of conquest on the part of the imperialist U.S. This is obscured by the fact that the U.S.’s imperialist opponents, Nazi Germany and Imperial Japan, were awful and obviously engaged in wars of conquest as well. The U.S. was allied with the Soviet Union and China, who were waging just wars against German and Japanese imperialism, just as today Iran is waging a just war against U.S. imperialism. In addition, the U.S. Communist Party, by far the largest group on the left in the U.S. that was directly linked to the Soviet Union and the Russian Revolution, supported the war. (back)
(3) Iran’s willingness to negotiate made it far harder for “pro-Western” Iranian liberals to argue that Iran had provoked the attack by refusing concessions to U.S.-Israel. This helped unite Iranian society behind the war for national survival. (back)
(4) This enabled Britain in 1917 to bring into effect the Balfour Declaration that laid the foundations of what became the so-called State of Israel. Without the support of a major imperialist power, the Zionist movement to colonize Palestine would not have gone far. (back)
(5) Hoover could have simply suspended the convertibility of the dollar into gold at the fixed rate of $20.67 and blamed Roosevelt. But “hard money” Hoover refused to do so. (back)
(6) Roosevelt’s move to outlaw private ownership of the actual money material, gold, outraged many of the biggest and richest capitalists. Some of them devised a scheme inspired by Mussolini’s “March on Rome” in 1922 to support a similar coup in the United States, called the “Business Plot” on Wikipedia. They hoped it would be led by General Smedley Butler and would either oust Roosevelt or strip him of any power. Butler refused to support the putsch, and many details remain obscure to this day. (back)
(7) The rich can always find ways of owning gold one way or another when they want to. (back)
A Critique of Crisis Theory 