On December 8, 2024, Syrian President Bashar Al-Assad’s government collapsed before an offensive of U.S.-backed HTS rebels. The rebels call themselves Hay’at Tahrir al-Sham [HTS, in English: Organization for the Liberation of the Levant].
Assad was forced to flee the country after the Syrian Arab army put up little resistance to the pro-U.S.-NATO rebel offensive, ultimately finding refuge in Russia. HTS’s central leader is Ahmed al Sharaa, also known as Abu Mohammad al Julani. HTS consider themselves Sunni Muslims strongly opposed to other Islamic sects, such as the Shia and Alawites, as well as to other religions, including Christians and Druze. According to the HTS, all these religions and sects worship the “one true God,” in the wrong way.
Previously, al Sharaa was a member of al-Qaeda, the group founded by Osama bin Laden — the same group credited with the attacks on the World Trade Center and the Pentagon building on 9/11/2001. The attacks killed thousands of people in the United States and were the declared target of George W. Bush’s “war on terror.” But times have changed, and today, HTS and al Sharaa are pictured by the imperialists and their media as moderates who can bring Western-style democracy and religious tolerance to the Syrian people.
When the media describes a group as moderate, it means they are doing what the U.S. imperialist world empire wants them to do. During the final days of the HTS advance to Damascus, the Israeli air force provided them with air support. U.S.-supplied Israeli forces bombed military bases and the headquarters of Syrian intelligence in the center of Damascus. The Israelis struck bases that housed Syrian troops and stockpiles of weapons that the Syrian army might have used to defend Damascus (this included the Mezzah Air Base).
Since HTS seized control of Damascus, Israel has taken complete control of the Golan Heights. This is without a world of protest by Ahmed al Sharaa (Abu Mohammad al Julani).
Ironically, al Julani means “the man from the Golan Heights” in Arabic. Though he was born in Saudi Arabia, his father comes from the Golan. Significantly, HTS has shown no solidarity with the Palestinian people but instead shows interest in establishing good relations with the apartheid-genocidal Zionist entity. Thus, the imperialist media calls them moderate.
The U.S.-NATO world empire has not been able to hide its delight with these events despite decades of bitterly denouncing “Islamic terrorism.” Failing to denounce the Israeli genocide or even protest the seizure of the Golan by Israel — what could be more moderate and democratic than that?
I am no expert on Syrian history or its people. The fall of Syria to HTS is a deadly threat to the Palestinians, especially in light of the continuation of the unchecked genocide in Gaza, despite reports that have circulated since the start in October 2023 that a ceasefire is imminent. This unfortunate development makes solidarity with Palestine even more important during this hour of increased danger to the survival of its people.
I want to concentrate on moves by the U.S.-NATO imperialist world empire to pump money out of Syria. I wrote an earlier post about a similar operation in Venezuela. But the current situation is more extreme than that aimed at the Venezuelan Chavista government.
The money drain played a decisive role in the fall of the al-Assad government and made it possible for HTS to seize control with little resistance. One aspect has been the sanctions directed at Syria since the 2011 “Arab Spring.” But these moves go beyond sanctions.
Since 2014, the U.S. has had troops in northwestern Syria to protect the Kurds supposedly. Former — and now current — President Trump — said the point of occupying northwest Syria was “only for oil.”
While Trump’s remark is closer to the truth than the official claim, there is more to it than oil. The U.S. has plenty of its own oil and dominates the oil monarchies — it doesn’t need Syrian oil. Northwestern Syria produces not only oil but grain as well. Again, the U.S. is a major grain producer in its own right and doesn’t need Syrian grain.
How did the U.S. seizing Syrian grain and oil affect the flow of money into and out of Syria? Even in the case of Venezuela, the U.S. has not — yet — seized military control of its oil-producing regions. As long as Syria had control of its oil and grain, they, as commodities, could circulate within its own economy. Syria could consume grain and oil without any money leaving the country. Or Syria could export grain and oil, causing money to flow into the country. This money made possible the circulation of commodities domestically or to be used to import commodities produced abroad.
When the balance of trade and payments turns against a currency, the currency declines on the foreign exchange markets against both other currencies and gold. To some extent, this can be countered by domestic gold production, but Syria doesn’t produce much gold. Even if it did, the amount of gold produced by even the largest gold-producing countries is a fraction of their annual commodity circulation. Imagine the effect on the dollar and the economy in general if a hostile foreign country occupied the main grain-growing and oil-producing regions of the U.S.?
The sharp decline of the Syrian currency led to huge inflation in the country, prompting its central banking system to print additional currency to make up for the missing money. The resulting accelerating currency depreciation generated currency depreciation inflation. It forced Syrian capitalists to calculate their profits not in terms of the local currency — though they are happy to pay their workers in this all but worthless currency — but in dollars. (1)
The results on all classes in Syria were disastrous, for the profits of the capitalists, the wages of the workers, the rent of the landowners, the monetary income of the peasantry, and, importantly, the wages of the soldiers in the army and the salaries of the officers. Once a government loses the support of the capitalists, the landowners, the workers, the peasantry, and the soldiers —it is pretty much finished. All classes conclude that imperialism is just too strong. (2) Surrender to the enemy seems the only way out. It is easy to fault such attitudes of capitulation if you live in the West, but not so easy if you live in Syria.
This is why the soldiers, reflecting all classes, were no longer willing to defend the al-Assad government. They hope that a government willing to capitulate to imperialism’s demands will allow at least some money to return to Syria and, of course, to their own pockets. This will allow commodities to circulate again and allow them and all to survive. We should demand that all restrictions on Syria – regardless of our opinions on the current Damascus authorities – that all restrictions on Syria’s ability to trade and make money on the world market be immediately ended.
The truth is that the U.S.-NATO World empire is unwilling to allow Syria to develop even along capitalist lines. Before 2011, under Assad and his Baath party, Syria was developing along capitalist lines. The U.S.-NATO world empire is determined to prevent any strong capitalist nation-state from emerging in West Asia that would compete with Western capitalists.
For this reason, HTS is an ideal tool for imperialism. Due to its sectarian religious nature, it seems unlikely to be able to establish a strong central government. With the religious sectarian- HTS in power, the country will likely break up along sectarian religious lines. Turkey will get much of the north, the Zionist entity will get the Golan Heights and any other territory it claims it needs for its security, while the U.S.-NATO world empire will be in overall charge.
No doubt, the Syrian and Arab people will eventually find a way to drive the empire out just as the Chinese and Vietnamese people did, but it will take years of hard struggle. There have already been reports of demonstrations in cities with large Alwaite and Christian populations. This is encouraging. But there is no other way forward. The people of Syria, Lebanon, and Palestine will need the support of their allies in the belly of the beast, the class-conscious workers, and their allies among students, progressive intellectuals, and non-proletarian working people.
But the unfortunate developments in Syria and the continued genocide in Palestine were not the only news that December 2024 brought.
The assassination of UnitedHealthcare CEO
On December 4, Brian Thompson, CEO of UnitedHealthcare — the largest private for-profit health insurance provider in the United States — was shot and killed in New York City. Twenty-six-year-old computer engineer Luigi Mangione was charged with the murder in a cocktail of New York state and federal charges. The federal charges include the possibility of the death penalty. With pro-death penalty Donald Trump sworn in as president on January 20, 2025, there is a possibility that the federal government will execute Mangione.
Usually, a person charged with murder and terrorism would enjoy little sympathy in the U.S. unless there was overwhelming evidence that it was a frame-up. This does not seem to be the case with Mangione, as polls and social media show that many people sympathize with him, raising alarm bells in the capitalist ruling class.
Corporate CEOs — active capitalists — undoubtedly fear that they, too, might be assassinated. But the real story does not lie there. Marxists oppose the assassination of individual politicians and capitalists. Such individuals can always be replaced, and the capitalist system, with all its evils, continues.
In 19th-century Russia, the assassinations of Czar Alexander II and Czar Alexander III did not end czarism. It took the 1917 revolutions involving millions of revolutionary workers, peasants, and soldiers to accomplish that. The revolution was so thorough that even the Russian counterrevolution of 1985-91, though it restored capitalism, has not been able to bring back czarism or the feudal economic relationship on which it rested.
The assassinations of Alexanders II and III showed the unbearable class tensions building up in Russia, which found an outlet in the Russian revolutions of 1905 and February and October 1917. The assassination of Thompson and the widespread sympathy it evoked for the alleged assassin also show that class tensions are building up, which will, in the coming historical period, lead to a revolution involving millions of people. It will be the revolution itself, not a lone assassin, that will sweep away U.S. imperialism.
Let’s look at the history of health care as a human right, not a privilege available only to those who can pay for it. As far back as the administration of Theodore Roosevelt, there was talk about some sort of government-guaranteed healthcare. During the New Deal in the 1930s, Franklin Roosevelt promised to create such a system but failed to deliver it. It remained part of the Democratic Party platform — though never that of the Republican Party. Then, under the reactionary Republican Ronald Reagan administration, Democrats dropped their promise to guarantee healthcare as a human right.
In the 1950s, the Republican Eisenhower administration rejected government-guaranteed health care in favor of employer-provided (capitalist) health insurance as part of the wage. Workers can access this only through their employer or sometimes through a labor union. When unemployed, workers either have to do without health care, pay for private insurance, or pay directly to the provider, both of which are prohibitively expensive. In addition, not all jobs provide health insurance, and in most cases, there is no union.
Bosses love this system because it increases the desperation of the unemployed to find work, increases competition for jobs, and holds down wages. The ratio of unpaid to paid part of the work day is thereby increased. In Marxist terms, the rate of exploitation — the rate of surplus value — rises, and so does the rate of profit. Progressives and liberals who support health care as a right emphasize the role of the so-called health care insurance companies as for-profit entities. This system resists any suggestion of health care as a human right. It is part and parcel of the capitalist system. The only time concessions on this are granted is when capitalists feel the danger of a workers’ socialist revolution.
How health care as a human right came to Europe
Germany was the first country to move toward a kind of health care as a human right under the reactionary Chancellor Otto von Bismark. The reason was that German workers organized a mass working-class party based on Marxism known as the Social Democratic Party of Germany or SPD. This party was different from the present-day bourgeois liberal party of that name based partly on trade unions. How the original SPD was transformed from a Marxist into the bourgeois liberal-labor-based party it is today is a long story we cannot examine here. The Bismarck regime banned the SPD under anti-socialist laws. However, repression was not enough to defeat it.
In addition to the anti-socialist laws stick, there was a carrot. By granting a state-guaranteed health insurance scheme, Bismark hoped to prevent workers from supporting the Social Democrats. Here, we see how state repression was combined with reforms to safeguard the rule of the landowners and capitalists in the late 19th century.
Only after World War II was government-supported health insurance established in most of the capitalist countries in Western Europe. The case in Britain is typical. Before the early 20th century, British trade unions supported the purely capitalist Liberal Party like the U.S. trade unions supported the Democratic Party. By the early 20th century, British domination of the world market had finally ended. At this point British trade unions took the step of establishing their own political party: the British Labor Party. Unlike the German SPD, this was not a Marxist party but it was based on the British working class. Landowners had the Conservative Party and the capitalists had the Liberal Party.
In the 1920s (after World War I), the first British Labor government under Ramsay McDonald was formed. It was a disappointment to the working class as not only did it fail to take steps to build a socialist society, it granted no significant reforms. As a result, Conservatives soon returned to office.
During World War II, warmongering Conservative Winston Churchill was in power. He was built up as a heroic war-time leader who during Britain’s hour of greatest danger saved Britain from being occupied and ruled by Nazi Germany. A Conservative victory under Churchill’s leadership in the first post-war election in 1945 was assumed to be a foregone conclusion.
However, to the capitalists’ shock and dismay, the Labor Party under Clement Attlee won a majority in parliament. The world had changed, and British workers and parts of the middle class were no longer willing to tolerate the capitalist rule that had prevailed before the war.
There was no guarantee that if the Labor government again failed to make meaningful reforms the result would not be a return of Tories to office as had happened in the 1920s. The Communist Party-led Soviet Union and the international communist movement, not Churchill or the Tories, played the decisive role in defeating the Nazis.
If the new Labor government failed to grant meaningful reform, there was a chance the British workers would turn to the left. To prevent this, the Labor government felt it had to initiate the National Health Service or NHS.
Under the NHS, doctors became employees of the state. Anybody who needs a doctor can find one of their choice nearby and the NHS pays the bill. This system goes beyond Senator Bernie Sander’s “Medicare for All” plan. It is so popular that no British government, Conservative (Tory) or Labor, has dared to take it away.
Various schemes were adopted in every Western European country, and health care as a human right was established in Eastern Europe under the new communist governments. In the 1960s, Canada established its own system of health care as a human right. Among the industrially developed countries, only the United States failed to establish a system of health care as a human right.
During the Depression-New Deal years of the 1930s, there was talk that the newly established industrial unions of the Congress of Industrial Organizations would establish some type of labor party modeled on the British Labor Party. But ultimately the CIO decided to support the Democratic Party of Franklin D. Roosevelt.
This was a terrible development in two ways. First, because the Democratic Party is a capitalist party. But the Democratic Party wasn’t only a capitalist party. In those days, the racist Democratic Party in the South maintained its fascist-like rule through an apartheid system of legal segregation known as Jim Crow. As a result, progressives in the U.S., who called themselves liberals and even the Communist Party during the popular front period, found themselves supporting the party that included racist and often antisemitic reactionaries of the Jim Crow South.
Frankly, this is a disgraceful episode in the history of the left. Recently Kyle Kulinski, a progressive, though not Marxist, vlogger looked back with enthusiasm to the 1930s and 1940s when he claimed the Democrats held 80% of all congressional seats. This may sound good to today’s progressives who hate the reactionary Republican Party of Donald Trump. But what Kulinski overlooked was that many of these Democrats were openly racist (not mere dog whistlers), segregationist Jim Crow Democrats who were to the right of the Republicans. Even the present-day Republican Party led by President Trump would find these racist Democrats too extreme.
After World War II, the question was whether the U.S. would follow the example of Britain and the rest of Europe and acknowledge health care as a human right or resist it as the capitalists desired. The U.S. Communist Party, weakened by its support for the Democrats during the New Deal era and World War II, did not have the kind of support in the working class that European communists won through the fight against Nazi Germany and their local fascists.
The closest thing to local fascists in the U.S. were the Southern Democrats, who were part of the national Democratic Party, which the U.S. Communist Party supported. As a result, the capitalists and their allies in the newly formed industrial unions were able to launch a witch hunt that drove the Communists, as well as Trotskyists, out of the unions.
Under the uncontested rule of pro-Cold War anti-communist officials, the unions continued to support the Democrats. In light of this, the U.S. ruling class saw no need to establish a government-supported universal healthcare system despite Democrats’ empty promises to do so.
In the 1960s, with the massive anti-Jim Crow Civil Rights Movement and a wave of student radicalism, Medicare, a government-guaranteed healthcare system for people over 65, was finally established. People over 65 were mainly retired from the active workforce, and capitalists saw them as less of a threat. Private insurance providers were always unwilling to sell insurance at an affordable price to those over 65. In addition, a separate system for the very poor, Medicaid, was also established.
Medicaid, however, came with strict means-checking, designed to push more of the very poor into the labor market, thus increasing competition among workers for jobs. In addition, Medicaid is run by the states (not federally by Washington), where reactionary Republican governments — often found in the post-Jim Crow Republican-dominated South — control the program. This keeps benefits exceptionally skimpy and difficult to obtain. Therefore, despite the 1960s-era reforms, most working-age people remain at the mercy of the employer-centered private insurance health care system.
In Western Europe, even after the Russian and East European counterrevolutions of 1985-1991 pushed politics to the right worldwide, it has been impossible to return to a private health care system. Right-wing political parties have found they can’t get more than a few percent of the vote if they run on an anti-healthcare for all platform. On this question, far-right political parties in Europe, and elsewhere, are to the left of the Democrat as well as the Republican parties. The million-plus deaths resulting from the COVID-19 pandemic illustrate the criminal scandal that is the employer-centered U.S. healthcare system today.
Naturally, this has led to a movement to establish Western European-Canadian health care as a human right system in the United States. To stave off this movement, the Republican Party developed a program to make purchasing private health insurance easier. The Democrats then duly adopted this program, and a version of it was passed under Democratic President Barack Obama, dubbed Obamacare.
It is an awful system. If a person cannot afford healthcare insurance and cannot find an employer who can provide it, the government will make up the difference, allowing them to purchase private insurance. One positive feature of Obamacare is that the insurance companies can no longer refuse coverage for people with preexisting conditions like they did before. The skimpy Medicaid insurance for the very poor was also expanded, but individual states were allowed to opt out of providing it. The states that chose to opt out are Republican-dominated, mainly in the Southeast with its heritage of slavery and Jim Crow. The modern Southern Republican Party is a modified version of the old Jim Crow Southern Democratic Party designed to operate in the post-Jim Crow South as a “white” party. (3)
The subsidies people get when purchasing private health insurance are strictly means-tested. If a person makes a slightly higher income than allowed, they’re forced to return the subsidy to the government. To make matters worse, insurance can only be purchased during certain times of the year, called enrollment periods, and must be repurchased yearly. What the various plans cover is confusing. They are divided into so-called minimal silver and more inclusive gold and platinum plans. (4)
Obamacare was initially unpopular, enabling the Republican Party to gain support in 2016 when it promised to repeal and replace it, though it did not explain what they would replace it with. In his successful 2016 presidential campaign, Trump promised the replacement would mean cheaper insurance for everybody. This sounded good for many voters who assumed Trump would come up with something better.
Trump and the Republicans proposed essentially returning to the worst system that existed before Obamacare. The voters eventually caught on, and just enough Republicans in Congress joined the Democrats in sinking the proposed replacement, saving Obamacare. In the 2018 mid-term elections, the Republicans lost many congressional seats, and the proposed replacement for Obamacare played no small role in Trump’s defeat in the 2020 elections.
In the 2024 elections, the Republicans were mostly silent about further healthcare reforms, implying they’ll leave it as is. Trump recently indicated he is dreaming up some kind of replacement but has refused to indicate his plan. The public reaction to the killing of UnitedHealthcare CEO Brian Thompson indicates that if Trump or the Republicans revive their attempt to replace Obamacare as they proposed in 2017-18, they could face massive opposition in the streets. But even if they leave Obamacare alone, the issue is a ticking time bomb that is likely to explode in the faces of both parties sooner rather than later.
In 2024, long-term interest rates drifted upward despite the Federal Reserve’s attempts to lower them by reducing its target for the Federal Funds Rate. Meanwhile, the dollar price of gold increased. As a rule, movement in long-term interest rates precedes movement in short-term rates.
Normally higher interest rates mean lower dollar gold prices while lower interest rates mean higher dollar gold prices. When both long-term rates and dollar gold prices rise simultaneously (as happened near the end of the year) this indicates the approach of an economic crisis of the general relative overproduction of commodities.
Will this prove to be the case this time over the next few years, despite the financial press and the Federal Reserve’s claims that they have achieved a soft landing just ensuring the continuation of the current prosperity such as it is for years to come? If history is any guide, this seems unlikely, especially in light of continuing high dollar gold prices and soaring long-term interest rates. Recently, the Federal Reserve has hinted that it might not cut the Federal Funds Rate as much as earlier indicated and perhaps not at all, pleading “stubborn inflation” and the continuing strength of the economy. We will examine the economic situation as it unfolds in upcoming posts.
The crash of 2008
To get an idea of what lies ahead, we’ll examine the 2008 crash. It was preceded by a rise in the dollar gold price (which tied the hands of the Federal Reserve) and a rise in interest rates.
In 2004, the dollar price of gold started the year at around $415–$417 per ounce. It then trended downward to a low of just above $370 in May. The dollar gold price then rose over the summer, reaching around $450–$455 per ounce in early December 2004.
Three years later, the dollar price of gold fluctuated between a low of around $600 at the beginning of the year to a high of around almost $850 in November 2007. The dollar gold price, which measures how much gold a dollar represents in circulation fell considerably, from 1/370 a troy ounce at its highest point in 2004 to 1/850 at its lowest point in 2007. The yield on government bonds started in 2004 at 4.00% but hit 5.00% at times in 2007. During the three years leading up to 2008, the dollar price of gold rose substantially even as interest rates drifted upward. Remember that under neutral conditions — for example, no overproduction — rising interest rates should have lowered the dollar price of gold. The continued rise price of gold in the face of rising interest rates was a sign of the storm to come.
Under the current system of a floating exchange between gold and the dollar, which has prevailed since August 1971, the dollar price of gold and the interest rate tend to move inversely. With an ordinary non-money commodity, everything remaining equal, a rise in its price will reduce the demand for that commodity, while a fall in its price will increase demand.
Gold, as the money commodity, has no true price. The reason is that the price of a commodity is measured in terms of the use value of the commodity that serves as money. It is meaningless to measure the value of a commodity in terms of its own use value.
Therefore, the usual price mechanism that balances supply and demand does not work the same way for the money commodity. Instead, changes in interest rates bring the supply and demand for the money commodity into equilibrium.
Let’s see how this works. An owner of the money commodity is not entitled to interest which is a portion of the surplus value of the working class’s unpaid labor. To enjoy the security that comes with owning the money commodity, the owner must forego any claim to a share of the surplus value. There is no incentive to loan money if the interest rate is zero. The higher the interest rate, the more likely the owner of the money commodity will choose to loan it out.
The economic law states that the higher the price (price is always measured in terms of the use value of the money commodity), the lower the demand for the commodity all other things remaining equal. In the case of the money commodity, this is replaced by the following: the higher the interest rate, the lower the demand for the money commodity all other things remaining equal. Therefore, as a general rule, a rise in interest rates will reduce the demand for gold, while a fall in interest rates will increase it.
When the supply of a non-money commodity falls for whatever reason—for example, a harvest failure—its price will rise because a higher price is needed to equate supply with demand. If demand exceeds supply, the market price will rise until demand is reduced to the supply. If, on the other hand, supply increases, supply will exceed demand for it at the old market price. To equalize supply with demand again, the price must fall, increasing demand until supply and demand are again equal.
As we saw above this law cannot operate with the money commodity because prices are measured in terms of its use value. Let’s assume that gold, the money commodity, is overproduced relative to non-money commodities. Considering what we explained above, the interest rate has to fall to equalize the now increased supply of gold with demand. If gold is underproduced relative to the production of non-money commodities, the demand for gold increases independent of the movement in interest rates. Equalizing the increased demand for gold with its supply is achieved through a rise in the interest rate. During the upward phase of the industrial cycle, for reasons we have explained throughout this blog, the supply of gold measured in its use value — a unit of weight — rises more slowly than the sum of the quantity of the price tags of non-money commodities also measured in terms of gold’s use value.
Let’s briefly review why the quantity of physical gold increases more slowly than that of imaginary gold represented by the sum of the price tags of non-money commodities. One reason is that during the upward phase of the industrial cycle, the demand for commodities tends to exceed the supply at existing prices, causing their market prices to rise. As the prices rise, market prices rise relative to their price of production measured in the use value of the money commodity.
If commodity market prices equal their production prices — meaning market prices across all capitals, regardless of a commodity’s use value or size (5) — then they will earn equal rates of profit over the same period of time. (6)
This is important — profit must always be measured in terms of some unit of weight of gold. Under our assumption that market price equals production price, profit is the difference between the price and the cost price of the commodity. Production and cost prices must be measured like all other prices, which must be measured in terms of the use value of the money commodity.
The difference between the production price and cost price are both reckoned in terms of the use value of gold, which is the profit. Therefore, profit must be measured in terms of the use value of the money commodity. This includes the capitalists who produce the money commodity. We can’t measure the price of the money commodity in terms of its own use value but we can measure the difference between the quantity of gold produced by the gold producer and the quantity of money (gold) that the gold miner must advance to produce additional gold.
Capital consists of commodities, including the money commodity. The quantity of commodities with different use values is measured in terms of the use value of the money commodity. While we can’t measure the price of the money commodity in terms of itself, we measure one quantity of the use value of the money commodity in terms of a different quantity of the use value of the same money commodity.
The greater the increase in market prices of non-money commodities in comparison to production costs, the lower the profit rate of gold mining will be, both in absolute terms and relatively, as the profit rate within that industry declines both absolutely and relatively.
Capital flows from industries with lower-than-average profit rates to those with higher rates. This means that the higher market prices of commodities rise relative to their prices of production, the slower the rise in the physical quantity of gold measured in terms of some unit of weight relative to the imaginary quantity of gold represented by the price tags of non-money commodities.
Everything else remaining equal, the stronger a boom and the faster commodity prices rise, the slower the increase in the quantity of gold will be and the greater the rise in interest rates. The rise in interest rates reflects the growing overproduction of non-money commodities relative to the production of the money commodity.
Political economists dream that capitalist production will escape the paradox of relative overproduction if only the monetary system could be detached from commodity money.
When the last relic of the gold exchange standard was abandoned in August 1971, U.S. policymakers imagined they could then create whatever quantity of dollars necessary to set interest rate(s) to any level they wished. Fearing that the Federal Reserve would grossly overissue the dollar to keep the boom going, the demand for gold on the part of the money capitalists then rose independently of the rising ratio of non-money commodities to the money commodity.
Interest rates had to rise sharply to equalize the demand and supply of gold. The irony is that the Federal Reserve’s policy of accelerating the creation of dollars in a vain attempt to prevent interest rates from rising actually drove interest rates upward to unprecedented heights.
This isn’t mere theory but is written all over the concrete history of interest rates. When Nixon closed the gold window in August 1971, the interest rate on 10-year government bonds was approximately 6.40%. In October 1981, the interest rate on those same bonds exceeded 15%. The fluctuations in short-term interest rates were even sharper. This was the opposite of what government policymakers wanted to happen.
When the central bank attempts to sustain a boom by creating an expanding mass of currency not backed by gold, that mass of currency swells in proportion to the gap between lagging gold production and commodity production. In addition, the demand for gold also rises to the extent that confidence in the currency is undermined. This happened in the 1970s and the beginning of the 1980s. Soaring demand for gold led to soaring interest rates.
This revealed the fatal flaw in Keynesian economics. Once the industrial cycle reaches the critical point the only way the central bank can lower interest rates is to allow — not cause — a recession to unfold. The recession lowers interest rates by increasing the quantity of gold relative to the supply of non-money commodities measured in terms of imaginary quantities of gold. If the central bank tries to prevent a recession — once overproduction has matured — the demand for gold soars, driving up both the rates of inflation as well as of interest.
As currency-depreciation inflation accelerates, the quantity of currency socially necessary to circulate commodities increases. If the central bank fails to provide the additional currency, a shortage develops, and interest rates spike. Rising interest rates reduce the demand for gold as the economy is thrown into recession.
This causes increased demand for currency as a means of payment, reducing the demand for gold. Indebted gold speculators are forced to sell to meet the debts they incurred from purchasing gold. The resulting money squeeze drives up interest rates to the point where money capitalists are satisfied.
Then, a rush out of gold into currency occurs. Fears of further currency depreciation evaporate as the dollar price of gold begins to fall. Then, the Federal Reserve (or other central bank) can flood the money market with newly created dollars. Interest rate cuts that weeks before would have provoked an accelerated rush into gold no longer do. The history of crises (the best example being 2008) shows that the central bank can create tremendous amounts of currency at this point without further currency depreciation.
Instead, the additional currency accumulates in the banks as the velocity of the currency turnover drops, driving down the interest rate as inflation fades away. The rush into currency that replaced the rush into gold caused industrial production, world trade, and employment to fall. The fall in production and employment liquidates overproduction. This is the magic of the marketplace in action.
As the real economy contracts, the production of additional money material accelerates. First, the contraction and then the stagnation of the real economy allows an accumulation of idle money capital in commercial banks. This allows the next economic expansion to rise to a level above that reached by the preceding expansion before a new crisis occurs.
As long as the central bank keeps preventing a sufficient slowdown in production by creating currency, the crisis of overproduction will grow worse. Short of the abolition of capitalist production, the crisis can be resolved only by cutting production, which the market through the mechanisms discussed above will force — destroying not only real wealth but human lives. This is the price of retaining the capitalist shell surrounding socialized production.
The basis of the antagonism between the capitalist class and the proletariat is that the proletariat, consciously or unconsciously, strives to get rid of the capitalist shell. The capitalist class instead clings to the shell because retaining it is the only way to continue its luxurious lifestyle without having to work.
If the central banks continue creating currency once overproduction is reached, the crisis can no longer be postponed. At this point, there’s the danger the currency will collapse into hyperinflation and lose its character as money — or rather to represent itself as money in the sphere of circulation. At that point, gold — or whatever commodity was used as the money material — could alone function as currency. As Marx put it, gold, the money commodity, is “the coin of last resort.”
In that event, the currency and credit system would have to be rebuilt from the ground up, sparking the worst capitalist crisis of relative general overproduction of commodities possible — surpassing even the 1929–33 super crisis. While we have seen instances of paper currency hyperinflation throughout history, these cases haven’t typically coincided with a widespread crisis of overproduction of non-money commodities. The economic crisis of 1979-82 came closest to exhibiting these combined characteristics.
Soft landings
In an attempt to blunt the force of the crisis, the central bank can slow the economy before gold demand soars forcing the crisis, giving rise to the appearance that the central bankers caused the crisis. What they are trying to do is slow down overproduction before the gold demand forces the crisis. Under the gold and gold exchange standards, it seems that legal laws (not economic laws) that mandate the central bank safeguard the convertibility of currency it creates into gold at a fixed exchange rate are the cause of economic crises.
In the absence of a gold or gold exchange system, it appears that crises occur due to central bank error. The central bankers are accused of overestimating the danger of inflation and underestimating the danger of recession. Certainly, a mistaken policy can create an unnecessary recession. However, the possibility of a general hyper-inflationary collapse caused by unchecked overproduction means there is a point beyond which overproduction cannot go, no matter the central bank policy.
If economists or central bankers themselves clearly explained this, they would have revealed capitalism’s contradictions in all their nakedness. To hide these contradictions from the working class and even themselves the economists have proposed various theories of inflation and crisis. The most popular theory for crises that the economists put forward is that a wage-price spiral causes inflation, which then can only be halted by increasing unemployment. Economists and capitalist politicians also sometimes blame the Arab oil sheiks (as they did in the 1970s), the Russians, or, at other times, Jewish bankers, and so forth.
Economists also use another method to hide the contradictions of capitalism (even from themselves). They use physical analogies that sound profound but actually explain nothing. They claim the economy is overheating and needs to be cooled down. The economy doesn’t overheat. We know that the release of too much carbon dioxide can cause global warming. We also know that the periodic crises of relative commodity overproduction are not the same thing as global warming, though global warming is, in the long term, a more serious threat to our and other species on the planet.
Capitalists have a class interest in preventing the real nature of the crisis of general commodity overproduction from being understood. How can the working class and its allies be asked to sacrifice to preserve the system in which a small part of society can continue to live off the unpaid labor of the working class and non-proletarian working people? This is why capitalist political economy must obscure the real nature of capitalist crises.
The U.S. Federal Reserve system, the world central banker
Under the dollar-dominated international monetary system, the Federal Reserve acts as the global central banker. In 2007-08, if the Federal Reserve had reacted to the developing recession as it had in the 1970s; interest rates would dip briefly but, before long, would rise to new heights. A new period of high rates would arrive.
This would also mean that interest rates would rise above the average profit rate again. This would lead to a new wave of financialization and de-industrialization, where some industrial and merchant capitalists would transform a portion of their capital into loan money. Money would have been withdrawn from circuits M-C…P…C’-M’ (the formula for industrial capital) and M-C-M’ (the formula for merchant capital) into into M-M’ (the formula for money loan capital).
Another wave of deindustrialization might have proven fatal for the U.S. world empire in the long and short run. To prevent this, in light of high gold demand, the Fed decided to allow global capitalism to crash in late 2008. Much to the surprise of many, the government allowed the giant Lehman Brothers investment bank to go bankrupt and liquidate in September 2008. By allowing this the Federal Reserve staved off a new period of accelerating inflation and soaring interest rates that would have ended in a new financialization and deindustrialization.
The 2008 crash was the type of crash that was not supposed to happen anymore. However, it was the price that had to be paid to prevent a new 1970s and early 1980s-style spike in interest rates.
The collapse of Lehman Brothers caused such a rip in the chain of payments that the demand for cash (dollars) as a means of payment caused the demand for gold to drop in the face of falling interest rates. Under normal, non-crisis, circumstances a fall in interest rates after the 2008 crash would have caused gold demand to increase. The rush out of gold into dollars caused by the panic allowed the Federal Reserve to flood the commercial banks with newly created dollars, something it could not have done weeks before without causing gold’s dollar price to spike. Let’s see what happened.
Three business days before the collapse of Lehman Brothers on September 9, the dollar price of gold closed at $802.90, while the yield on the 10-year Treasury bond was 3.66%. With the collapse of Lehman Brothers, the most acute phase of the crisis was underway and raged on during the following weeks.
On September 19, the interest rates on 10-year bonds rose to 3.7690% and the dollar price of gold hit $871.80. However, the rise in the dollar price of gold was muted as gold remained below $900. Before the crisis hit full force in July-August, the demand for the dollar as a means of payment was far lower and the dollar price of gold was above $900 a troy ounce. But as Lehman Brothers, collapsed the chain of payments was ripped apart. This process continued over the following months.
Right after Lehman Brothers filed for bankruptcy, the brokerage and investment bank Merill-Lynch was forcibly merged into Bank of America to save it from the same fate. The giant Washington Mutual Savings and Loan was forcibly merged into JP Morgan Chase Bank, and Wachovia Bank was forcibly merged into Wells Fargo.
The Federal Reserve reacted to the crisis by doubling the monetary base. Under any other circumstance, such a growth rate of the monetary base would have triggered a run out of the dollar into gold. But not this time, with the huge rifts in the chain as payments created a rush into dollars as a means of payment and of hoarding.
On September 26, the dollar price of gold closed at $877.80 per ounce with the yield on 10-year government bonds at 3.8270%. The crisis had reached its climax.
By December 5, 2008, the dollar price of gold was down to $750.50 and the interest rate on bonds dropped to 2.5%. At the same time, the monetary base (currency in circulation, vault cash, and deposits) of the commercial banks in the Federal Reserve Banks was growing at an explosive rate.
Industrial production, employment, and world trade were falling, so in this sense (what matters to the working class and its allies), the crisis deepened and continued for months.
However, since the crisis was one of the general overproduction of non-money commodities relative to the money commodity, it was now being resolved not despite the decline in production, employment, and world trade but because of it. As for the financial-monetary aspects, the acute phase of the crisis was now past reflecting that its essence — overproduction — was being overcome by underproduction as the global capitalist economy sunk into the depths of the Great Recession.
What the 2008 crisis shows about crises in general
Between 1979 and 1987, the Federal Reserve targeted the money supply in accordance with Milton Friedman’s teachings. However, in 1987, it announced it was returning to its traditional policy of targeting interest rates, specifically the Federal Funds Rate. This is the rate of interest paid on overnight loans that a commercial bank with a surplus of cash lends to another bank that is short of funds. The open market committee cannot set the Federal Funds Rate, because the Federal Reserve is not directly involved in these transactions.
When the Federal Funds Rate exceeds the Federal Reserve’s target, the Federal Reserve Bank of New York — considered the most influential of the twelve banks comprising the Federal Reserve System — will purchase short-term Treasury securities from a leading Wall Street bank.
The Federal Reserve Bank of New York makes these purchases by promising to pay legal tender dollars to the securities’ owners on demand. In turn, the Wall Street bank counts these promises as reserves, effectively raising the overall reserves of the commercial banking system. As a result, the additional reserves push the Federal Funds Rate — highly sensitive to money market conditions — back into the Federal Reserve’s targeted range.
If the Federal Funds Rate falls below the Federal Open Market Committee’s target range, the Federal Reserve will sell Treasury bonds to a major Wall Street bank. The bank pays by writing a check to the Federal Reserve Bank, reducing its own reserves and those of the wider commercial banking system. This will push the Federal Funds Rate back up.
Can the Federal Reserve and its Open Market Committee set the Federal Funds at any level it desires? The financial pages of newspapers, most economists, and most academic Marxists (even Anwar Shaikh) assume they can. Under the current system, unlike in the past, there are no legal barriers to the Fed setting any target it wants. However, there are economic laws limiting the Fed Funds Rate.
These economic laws say the demand for gold increases when interest rates fall and decreases when they rise. If the Federal Open Market Committee sets the Federal Funds Rate below the level the market wants, gold demand goes up, driving the dollar price of gold higher. As a result, each newly created dollar represents less gold, setting off currency depreciation inflation. Conversely, if the Fed sets its rate target above what the market wants, the dollar price of gold will fall.
If the price of gold in dollars continues to decline, each newly issued Federal Reserve dollar represents a larger share of gold, effectively triggering currency appreciation-deflation. This is undesirable because it encourages delaying purchases of commodities, slows business activity, makes debt repayment more difficult, and encourages businesses to accumulate substantial cash hoards. It also increases the amount of Fed-created dollars relative to the declining general price level — ultimately driving down interest rates.
For the Federal Reserve, the straightforward way to address currency appreciation-deflation is to lower its Federal Funds target. This is politically popular because there is no shortage of borrowers in our debt-heavy capitalist system. Consequently, politicians often criticize the Fed for setting rates too high but never for keeping them too low. The opposite — raising the Federal Funds Rate — is far more politically difficult. Nevertheless, a rising dollar price of gold signals the need for higher rates, affecting both short-term and longer-term borrowing costs.
In the face of rising dollar gold prices, the Fed has little choice but to increase the Federal Funds Rate. If it resists, it faces consequences, such as those that occurred between 1968 and 1982. Back then, repeated attempts by the Fed to drive interest rates down to “stimulate the economy” led to the highest interest rates in the history of capitalism.
To maintain lower interest rates in the long run, the Federal Reserve and its Open Market Committee must be ready to raise the Federal Funds target when faced with ongoing overproduction, effectively slowing the economy down. Alternatively, once overproduction has fully matured, the Fed has allowed a recession to force an end to overproduction before soaring demand for gold threatened the entire monetary and credit system with collapse. These periodic recessions liquidate overproduction and ultimately keep interest rates from rising above the profit rate over time.
Keeping these laws in mind we can see what happened as the prosperity that marked 2004-06 gave way to the crash of September 2008. In August 2006, the Fed announced it was pausing its pushing up of the federal funds rate.
At the time, the Fed Funds Rate was around 5.25% on an annualized basis. It had been pushing up the rate from around 1% it was in mid-2004. This was a quick rise over a short period, though far from the 18%+ peak it reached at the beginning of the 1980s.
The Fed hoped for a soft landing — as it does today. It was trying to slow down overproduction before it caused a major crisis. However, the decline in gold production since the turn of the 21st century has worsened overproduction. The relative overproduction is relative to the money commodity. If the production of the money commodity slows down, fewer non-money commodities have to be produced before overproduction develops.
The Fed hoped its move to raise the Fed Funds Rate over the preceding two years would slow the worldwide rise in the production of non-money commodities enough to prevent a crisis. Because gold production was slowing (a sure sign market prices had risen above the prices of production) it turned out it didn’t.
On May 14, 2006, the dollar price of gold closed at $710.50, the highest Friday close since 1979-82. The Fed was in no position to cut the Fed Funds Rate because if it did, the rise in gold would have accelerated with 1970s-style inflation ending in a rise in interest rates above the average rate of profit.
The U.S. world empire couldn’t afford this. The dollar price of gold fluctuated but remained below $700 on Friday’s closing. While the dollar was weak, a 1970s-style depreciation was being avoided. Remember, it’s not the absolute level of the dollar gold price that matters but its rate of change. A 5.25% Fed Funds Rate was high enough to keep further dollar depreciation from rising towards 1970s levels and, for the time being, was low enough to prevent the economy from crashing.
Things began to worsen in mid-2007 when cracks appeared in the debt chains making up the credit system. In June 2007, two hedge funds managed by the Bear Stearns investment bank collapsed (though not the bank itself). Market tensions rose but did not yet devolve into crisis — until August 2007, when the credit markets suddenly locked up.
The Federal Reserve took this as a signal that it was time to lower the Federal Funds Rate. If they waited any longer a deep recession would quickly develop. If they moved too soon before overproduction was adequately checked by recession, the dollar price of gold would rise, and 1970s-style inflation would return.
Fearful of setting off a stampede into gold, the Fed moved carefully. It cut the rediscount rate by 0.05% but left its more important target for the Federal Funds Rate unchanged. In September 2007, the Fed cut its target for Fed Funds by 0.5%, risking a new rush into gold. In light of the deteriorating credit situation, it had little choice.
In August 2007, the dollar price of gold rose again above $700 an ounce. The conventional wisdom on Wall Street held that the Fed would not allow a real crash but would move to rescue the economy and the banks before one could develop.
Wall Street bulls claimed the Fed had put a “put” on the stock market, meaning it would never allow a real crash again. (7)
After dropping in August, the market rallied and made a new high in September, but then it drifted lower. While the market rally was short-lived, the dollar price of gold continued to climb. As the year approached its end, the dollar gold price was above $800. The price was now flirting with levels it had only briefly touched at the height of the panicky rush into gold in January 1980, more than twenty-seven years earlier.
The Federal Reserve suddenly found itself walking a tightrope. Despite reassurances from the Fed and the financial press that the “sub-prime mortgage crisis” was contained — suggesting that rising defaults on sub-prime mortgages would not spread to prime loans or other segments of the credit system — the broader financial situation was visibly deteriorating. Complicating matters further, the high and rising dollar price of gold prevented the Fed from simply flooding banks with newly created dollars to stem the crisis. Any such move could spark a panicked rush into gold, unleashing massive inflation and driving interest rates sharply higher.
Limited though the Fed’s actions were to check the crisis (though the media claimed the Fed was taking bold action to stop the developing crisis so there was no need to panic), the rise in the dollar price of gold was accelerating. By the beginning of 2008 the dollar price of gold was above $900, higher than at the peak of the last major crisis in 1980, and showing no signs of slowing down.
If we examine changes in the monetary base we see that in this period despite the fall in the Federal Funds Rate and the creation of various facilities to extend credit to various groups of hard-pressed capitalists, there was no overall acceleration of the rate at which the Federal Reserve was creating new dollars. What the Fed was doing, with the assistance of the capitalist press, was to create the impression that it was taking bold action when, in reality, it, or rather the Treasury, lacked sufficient gold to prevent the crisis from getting worse.
In February 2008, the International Monetary Fund, not the Treasury, announced it was considering gold sales. Dollar gold prices dipped only momentarily and then resumed their climb. The bluff failed.
The following month, March 2008, things took another turn. This time Bear Stearns itself, not just some of its hedge funds, now faced collapse. It was forcibly merged into the gigantic universal bank J.P. Morgan Chase. As this forced merger occurred the dollar price of gold flirted and briefly rose above $1000.00 an ounce.
The dollar price of gold closed on Friday, March 14, just below that at $999.60. This proved to be the highest gold or the lowest the dollar got against gold during what would soon be called the 2007-09 Great Recession.
After mid-2008, the dollar price of gold backed off a bit, closing near or above $900 most weeks. This was like a tremor that precedes the main earthquake. The main earthquake hit September 15, 2008, when the investment bank Lehman Brothers went bankrupt and was forced into liquidation.
Even the super-crisis of 1929-33 hadn’t seen anything like this. With so many holes now ripped in the chains of debt that make up the credit system, the global capitalist economy plunged into a deep recession.
The only question that remained was whether a run on the banks would develop that would overwhelm the Federal Deposit Insurance Corporation causing the entire credit system to crumble like it had during 1931-1933. The resulting Depression would have dwarfed the Great Depression. At this point, the Federal Reserve was able to take advantage of an economic law that holds that if a sufficient demand for cash develops as a means of payment and hoarding, the central bank can create extra cash over the existing quantity of gold without the value of its banknotes depreciating like they would under non-crisis conditions.
Marx was aware of this, as shown by criticism of the Bank (of England) (re)Charter Act of 1844. We have written about the Bank Act before but it’s worth reviewing Marx’s criticism. Under the influence of the quantity theory of money the Bank Act divided the Bank of England into two departments, the issue department and the banking department. The banking department ran a standard 19th-century-style commercial banking operation. It took deposits and re-discounted commercial paper. But like a modern commercial bank, the banking department had no authority to issue banknotes — the strips of paper with pretty pictures that most people view as money.
The right to issue banknotes was reserved to the issue department. The issue department was not allowed to issue banknotes to the banking department at will. It had to back up its note issue with gold — and, to a certain extent silver, plus a fixed amount of government bonds.
When the banking department needed banknotes to make discounts or loans or redeem deposits it had to go to the issue department to obtain the banknotes — legal tender money. If the issue department lacked sufficient gold to meet these demands, the banking department would have to raise its discount rates and limit its discounts and loans in order to conserve its supply of banknotes.
This ingenious system caused the British banking system with a central bank to act like a banking system without a central bank. Thanks to this legislation, in a crisis the central bank was banned from flooding the commercial banking system with newly created pound banknotes.
This meant that when a crisis developed the owners of bank deposits — even those who owned deposits with the Bank of England itself — would panic fearing the bank would run out of banknotes before they could convert their deposits into Bank of England notes.
Under the 1844 Bank Act, it didn’t take much before a bank run developed. When runs developed, the commercial banks feared that long lines would form in front of their offices, and the withdrawals would cause the commercial banks to fail. The banks reacted by freezing new loans and discounts or charging high interest rates to build up their reserves.
Since banks then as now were the pivot of the entire credit system, credit would collapse. Then only hard cash — pound notes or gold coins — would be accepted. Under these conditions sales would dry up, industrial production would plunge and workers would be laid off in droves.
The Bank Act did contain an escape clause. In a crisis, the Bank Act could be temporarily suspended. On three occasions, the Act was suspended in the 1847, 1857, and 1866 crises. Before the Bank Act, during the crises of 1825 and 1837, the Bank of England was free to issue additional pound notes in excess of its gold (and silver) reserves to halt the crisis.
But after 1844, during the crises of 1847, 1857, and 1866, the Act threatened to cause disaster. To stave this off on all three occasions the Bank Act was suspended. In 1847 and 1866, after the Act was suspended, bank runs were halted without creating any additional banknotes beyond what was allowed by the Bank Act itself. The mere knowledge that extra banknotes could be issued was sufficient to end the crises. Only in the 1857 crisis were any additional notes beyond those allowed issued and then only briefly.
Notably, there was no depreciation of the extra banknotes issued in the crisis of 1857 (the most severe of the three crises), nor any run on the Bank of England gold reserves. To avoid a run on gold and an eventual devaluation of the pound, and contrary to the teaching of the quantity theory of money, all the Bank had to do was to keep the growth of the total quantity of banknotes in line with the growth of gold in the issue department’s vaults in the long run. It could within broad limits increase the quantity of banknotes beyond its gold reserves during a crisis when an extra demand for banknotes developed. This economic law was very much in evidence, as we will see next month, during the crisis of 2008 and its aftermath.
(1) What I call the money pump would be worth a closer examination in a future post. (back)
(2) Proletarians, who by definition own no income-producing property, have the least to lose and will be the last to surrender, while landowners and the capitalist class will be the first to surrender. People of oppressed countries, especially workers, but also the poor peasants, will show tremendous courage and even be willing to give their lives, but only if victory seems to be at least possible under the existing leadership. Even proletarians, when they have no confidence in the nation’s leadership or lose confidence in the ability to achieve victory, will eventually lose their willingness to fight. Splitting the people from their leaders is a key aim of imperialism in its policy of crushing peoples of oppressed nations. This is why imperialism demonizes the leadership of a targeted oppressed country.
Why didn’t the Syrian workers, allying with the poor peasants, overthrow the bourgeois al-Assad government and create a workers’ and peasants’ government to lead the Syrian people to victory? This is not only a theoretical possibility but also part of the socialist program. In a world with no powerful bloc of socialist countries—unlike before the 1985-91 Russian counterrevolution—it is easier to imagine a socialist Syria in the West than to achieve it concretely in Syria under the current circumstances.
Our job is to change these circumstances so the Syrian workers and their allies among the non-proletarian working people will see a concrete path to their liberation through a Syrian socialist revolution. The fact that large elements of the Western left have supported the pro-imperialist rebels in their fight against not a socialist Syria government but against the bourgeois nationalist al-Assad government means that Western revolutionists who want to see a liberated socialist Syria have our work cut out for us. (back)
(3) The modern Southern Republicans generally don’t use in-your-face racism — or open antisemitism, though they do use open Islamophobia — that the Jim Crow Southern Democrats used. Instead, they use racist “dog whistles” (coded language). Like the Jim Crow Democrats of old, they are viciously anti-union, opposing all concessions to the working class, and are, of course, extremely pro-business. Under the rule of the present-day Republicans, though in a somewhat modified way, the South remains a bastion of reaction. (back)
(4) It is interesting that these various plans are nicknamed after precious metals. Silver is the cheapest of the precious metals, meaning that, on average, less labor is needed to produce an ounce of silver than it takes to produce an ounce of gold. It takes even more labor to produce an ounce of platinum. This underlines the fact that under Obamacare, healthcare remains very much a commodity and not a human right. (back)
(5) The size of an individual capital is ultimately measured by the quantity of abstract human labor that makes up the commodities that the capital consists of. As far as the capitalist owner is concerned, the size of a given capital is measured in terms of the quantities of the price of the commodities that make up the capital. (back)
(6) When calculating the market price of a commodity relative to its price of production, we have to assume that the prices of the commodities that capitalists purchase to produce the commodity are themselves equal to their prices of production. In other words, the prices of production of all commodities must be calculated simultaneously. In the real world, market prices can only be expected to approximate the prices of production but never equal them. When market prices of a particular commodity or commodities deviate too far from the prices of production, competition among the capitalists will again pull them toward the prices of production. It is through competition among the capitalists that the law of the value of commodities asserts itself. Understanding what value and prices of production are and the relationship between the value and prices of production is vital to understanding how competition among the capitalists pulls market prices back toward their prices of production whenever they move away from them either in an up or down direction. (back)
(7) In stock market lingo a put is an agreement by a potential buyer to purchase the stock at a given price, even if the market price has fallen below the put’s agreed level. (back)
A Critique of Crisis Theory 