July 6, 2026
On June 17, a Memorandum of Understanding (MOU) was signed by Iranian President Masoud Pezeshkian and Donald Trump. It extends the April ceasefire for at least sixty days — with the possibility of extension — and provides a framework for negotiations to end the U.S.-Israel war on Iran. Though this is not a peace treaty, it represents a big retreat from Trump’s demand that Iran surrender unconditionally when he began the war on February 28. He started the war with the murder of Iran’s supreme leader, Seyyed Ali Khamenei, and other leaders. If Iran had knuckled under, it would have fallen under U.S. government control.
U.S. imperialist offensive that led to the Iran War
After years of war, Israeli attacks, economic pressure, and blockade, U.S. imperialism succeeded on December 8, 2024, in overthrowing Syrian Baathist President Bashar al-Assad. Assad was the last of a wave of relatively secular Arab nationalist leaders who were part of the pan-Arab wave that arose after World War II. This occurred while “Genocide Joe” Biden was still president, after Trump’s second election but before he assumed office the following January. Biden won the well-earned nickname “Genocide Joe” due to his support for the Gaza massacre carried out by the Zionist entity beginning in October 2023.
Obama had moved to establish normal diplomatic relations with Cuba, with the idea of encouraging capitalist tendencies within the country, hoping that they would eventually become strong enough to establish a capitalist government. Obama didn’t end the economic war, but he eased the pressure in the hope of encouraging the private sector of the economy in order to destroy the democratic and socialist gains of the revolution.
During Trump’s first term, he reversed Obama’s policies, claiming they were just giving socialist Cuba breathing space, and made the policies of blockade and economic war even harsher. Biden continued Trump’s policies. In Trump’s second term, Trump continued Biden’s policies and intensified them. His plan was to make it impossible for Cuba to buy or sell anything on the world market and to establish a full-scale military blockade against oil imports. This has created a desperate situation in Cuba.
Trump increased the pressure by kidnapping Venezuelan President Nicolás Maduro and Cilia Flores, both of whom now await trial in a New York jail. After that, acting on behalf of the U.S. oil industry — long at the center of U.S. imperialism — Trump took control of Venezuela’s oil industry, cutting off almost all of Cuba’s oil imports.
Venezuela’s election of Hugo Chávez and the subsequent Bolivarian Revolution, while not a substitute for the aid from the Soviet Union that made building socialism in Cuba possible, had enabled Cuba to import oil from Venezuela in exchange for Cuban doctors. This made it possible for Cuba to emerge from the Special Period, which occurred when the Soviet Union succumbed to the Gorbachev-Yeltsin capitalist counterrevolution of 1985-91.
Emboldened by these victories, Trump assumed that Iran would be easy pickings. Iran had lost its Syrian ally in a cruel blow to the “axis of resistance” against Zionist aggression in Gaza and Lebanon. In January 2026, pro-imperialist forces in Iran, aided by the U.S. CIA and Israel’s Mossad, staged a violent demonstration in Iran, attacking the country’s currency. Trump believed all he had to do was drop some bombs for a few days, or weeks at most, and Iran would fold. He had miscalculated.
Changes in military technology since the Iraq War
Since World War II, airpower has formed the basis of U.S. military might, as sea power was for the British a century earlier. The U.S. military didn’t do so well in the island warfare against Imperial Japan from 1941 to 1945, when airpower couldn’t easily be brought into play. During the “Battle of the Bulge” at the end of 1944, as U.S. forces were preparing to invade Germany proper, cloudy skies prevented their use of airpower. Without it, German forces proved to be superior.
When the weather changed and the skies cleared, U.S. forces moved quickly, resuming the march into Germany while Germany was fighting the Soviet army marching toward Berlin from the east. By late 1944 and early 1945, the once-feared German air force, headed by the number-two Nazi, Hermann Goering, was largely destroyed. Without airpower, U.S. forces were vulnerable, but with it, they were unbeatable. During the U.S. invasion of Iraq in 2003, Iraq’s air force was far too weak to offer any resistance. With a monopoly of airpower, the U.S. marched to Baghdad in three weeks with minimal casualties. Iraq was only able to resist using urban guerrilla warfare, where close fighting makes airpower less effective — one of the lessons of the Vietnam War. The guerrilla war began when the hopelessly outclassed Iraqi conventional army was disbanded, and the U.S. Army marched into Baghdad.
Times have changed, though when it comes to bombers, the U.S. still dominates, as it has since World War II. Since 2003, missile technology has made great strides. Not only can computer-controlled modern missiles hit targets with precision, but they are also becoming increasingly cheap to produce. Their disadvantage is that they can be used only once. Planes can be used many times until they are shot down, making bombing with planes cheaper than using missiles. Today, drones — essentially unmanned planes and helicopters — are cheap to produce and are increasingly replacing traditional bombers. And because they’re cheap, they’re being used by poor countries and even non-governmental resistance movements.
Another important change is the development of hypersonic missiles. Conventional missiles can often be shot down by “anti-missiles.” The new hypersonic missiles are so fast that, at this point, they cannot be shot down by anti-missiles. We should not, of course, underestimate U.S. military power. Its offensive capabilities are still the most powerful in the world, though it does not enjoy the same monopoly it had twenty years ago. The long-term relative decline of its capabilities is a reflection of changing technology as well as the decline of the U.S. industrial machine. A world in which the largest industrial military machine is located in the People’s Republic of China is not the same world that existed when the U.S. dominated. Ultimately, it was the industrial machine that made the U.S. the world’s greatest military power, and its relative, even absolute, decline is now reducing U.S. military power.
In addition to the changes in military technology since the Iraq War that have reduced U.S. military power, there are additional factors. Iran is a much larger country than Iraq in terms of geography and population: Iraq’s population is under fifty million, while Iran’s is over ninety million. Iran is also very mountainous, making it difficult to invade, especially if the capital city is the target. The mountains also make the country ideal for guerrilla war.
Taking into account the changes in military technology and the size and population of the two countries, in 2003, U.S. invading forces faced no attacks from the air, either from bombers or missiles, while the defending Iraqi forces were being decimated by air attacks. If the U.S. were to attempt a “march to Tehran,” it would face attacks by highly accurate Iranian missiles as well as drones. U.S. forces would be forced to fight in mountainous terrain that is highly advantageous for the defenders. Though many Iranians would fall victim to U.S. airpower and firepower, the war could well turn into a bloody quagmire for the invaders, worse than either Korea or Vietnam.
In addition, if U.S. forces attempted to fight their way to Tehran, they would not be aided by anything like the Soviet army in World War II, which did the lion’s share of the fighting against the Wehrmacht. Instead, if only to defend their own vital interests, Russia and the People’s Republic of China — now the world’s greatest industrial power and thus potentially the world’s strongest military power — would likely have to give military aid to Iran to prevent it from being crushed by U.S. imperialism.
Any attempted march to Tehran would be by far the largest single U.S. military operation since World War II. Indeed, it might turn out to be larger than the U.S. invasion of Europe between June 1944 and May 1945, or the operations carried out against Japan during the 1941-1945 Pacific campaign, unless the U.S. is prepared to use nuclear weapons. Nuclear weapons would take things to a whole new stage entirely. Remember, both Russia and China now have nuclear weapons, while in 1945 the U.S. had an absolute nuclear monopoly.
At the very least, a U.S. march to Tehran would require the mobilization of the reserves, the introduction of a full-fledged war economy, and a military draft. An army of perhaps a million men, and maybe women as well, would have to be raised to carry it out. The latest Republican tax cut contained in the “big beautiful bill” would have to give way to a massive wartime tax increase if there were any hope of preventing the collapse of the dollar.
From the start, the war on Iran was unpopular in the U.S., perhaps for the first time at the beginning of a war. People in the U.S. have no appetite to sacrifice for a war of naked aggression against Iran, which in no way threatened the United States. In addition, Donald Trump is one of the most hated U.S. presidents in history. He is the son of a very rich man, and when he was young, he dodged military service in Vietnam, though he did not participate in or support the massive movement against the war either. Trump has spent both his first and second terms trying to take medical benefits away from people in the U.S. and has cut government services and support for education on a broad front. He’s known to have been a playboy who had sex with many women who were not his wife, some of whom, it’s believed, were mere girls. He was the longtime friend of sex-slave dealer Jeffrey Epstein, and even if he didn’t actually have sex with underage girls, he was certainly involved in and profited from the exploitation of many women. Trump is not the kind of leader who inspires young men and women to take up arms against a country far from U.S. borders. No wonder he has been forced to retreat from his demand that Iran surrender unconditionally.
Taking all this into account, Trump had little choice but to pull back from a war that had the potential to lead to disastrous consequences for him personally, as well as for U.S. imperialism in general. This does not mean that the danger of a U.S. invasion of Iran is over.
First, we shouldn’t forget that the war against Iraq came in two phases. The original phase came in 1991, when the U.S. bombed Iraq and then invaded and restored the Kuwaiti oil monarchy that had been stolen from Iraq by the British. But Bush I — George H.W. Bush — did not attempt a march to Baghdad in 1991. He settled for invading Kuwait and restoring the monarchy that had been removed by Saddam Hussein’s government. Bush I probably assumed the Iraqi government would fall as the U.S. fought an economic war against Iraq, but it didn’t. Only in 2003, under the son, Bush II — George W. Bush — did the U.S. invade and march to Baghdad. In between came economic warfare and periodic bombings of Iraq.
Since the April 2026 “ceasefire,” the U.S. has carried out periodic small-scale military attacks on Iran. The war has shifted to a lower-intensity phase but has not stopped entirely. The April ceasefire and the current Memorandum of Understanding by no means rule out a bigger attack by U.S. imperialism in the future, perhaps under a more popular president and more favorable economic and financial position.
Oil supply
When the war broke out on February 28, Iran restricted access through the Strait of Hormuz, the waterway connecting the Persian Gulf with the Gulf of Oman, and from there to the Indian Ocean and the world economy. Once the war began, it became clear that there was no easy way to break Iran’s control of the Strait. Before the war, about 20% of the world’s oil supply passed through the Strait, so the Strait’s near-complete closure caused a buying panic in the global oil market. This was made all the more intense because, in the weeks leading up to it, the dollar price of gold had surged above $5,000. The world gold market had not seen anything like this since 1979-80. (1)
As mentioned above, whether through the urging of hawkish advisers, Israeli Prime Minister Netanyahu, or simply through his own stupidity — take your choice — Trump expected to crush Iran within days or weeks, much as he had bent Venezuela to his will in January. He was encouraged in early 2026 by a wave of anti-government demonstrations in Iran. These reflected the economic pressures caused by imperialist economic warfare against Iran’s economy, including, as mentioned, manipulation of the Iranian currency.
Agents of the CIA and Israel’s Mossad operating in Iran encouraged violent attacks against police stations and mosques, both seen as symbols of the clerical-dominated Iranian government. Someday, we’ll know more about the role that the CIA and Mossad played. But once the war broke out, the people rallied around the Iranian government, and the pro-imperialist demonstrations collapsed in the face of the much larger show of support for the government’s resistance to the U.S.-Israeli attack.
When Iran’s government didn’t surrender and instead launched effective military counterattacks using missiles and drones, Trump had a huge problem. For one thing, he couldn’t prevent the price of oil from rising. He tried to limit it by selling from the U.S. oil reserve, though this could last only so long, and it would soon be exhausted. If the war raged on, the price of oil would explode, with all the economic and financial consequences. The April ceasefire led to a decline in some of the panicked demand for oil. By June, according to the media, complete exhaustion of the oil reserves was a month away. Unable to break Iranian control militarily for months to come, Trump was forced to agree to the Memorandum of Understanding.
Financial and banking aspects of war
The U.S. national debt is now well over $39 trillion and rising. In addition, the Republican-Trump “big beautiful bill” means yet another tax cut that continues to accelerate the rise in the national debt. This was, of course, a financially risky move [link to posts about the real motivation of the tax cut] even in the absence of a large-scale war. The effects of a given national debt depend not only on its overall size but also on conditions in the global money market. The condition of the money market depends on the relationship between money — gold — and commodities. When money — gold — is abundant relative to commodities, governments can borrow considerably more than when money is scarce relative to non-money commodities.
The latter is, to some extent, counterintuitive. Certainly, countries with bigger GDPs can borrow more than those with smaller ones. As the GDPs of the leading capitalist nations grow while expanded production proceeds, doesn’t it become easier for governments to borrow money to finance their operations, including fighting wars? Actually, the opposite is true.
During the upward phase of the industrial cycle, when GDP and industrial production grow most rapidly, it paradoxically becomes more difficult for the government to borrow money, though how difficult it becomes depends on the specific conditions of the international money market. As a rule, during a period of rapid expansion, the government can’t borrow without driving up interest rates and making it harder for anyone else to borrow. The longer a boom continues, the more true this becomes. I have examined this throughout this blog, but will briefly review it here.
As a boom develops, commodity prices rise in terms of the use value of the money commodity, gold. This depresses the profit rate of the industry producing the money commodity relative to other branches. Capital moves from money-commodity production to other branches of industry. A growing gap develops between the expansion of non-money-commodity capitalist industry as a whole and the expansion of the industry producing additional money material. The money market tightens, increasing competition between the capitalists, the state and other borrowers for loan money. It becomes harder for the state to borrow money to finance a war without depriving the rest of the economy of the money and credit it needs to function.
The Depression-ridden 1930s created extremely favorable conditions for financing war. The greatest depression in the history of capitalism was followed, not by accident, by the bloodiest war in world history. Though the pre-World War I period was generally one of great capitalist prosperity, immediately before the war, in 1913-1914, there was a global recession. This created a pool of idle loan money that provided the initial financing for the war, which the European governments that unleashed it expected to last only a few months. Unlike the Second World War, financing World War I led to financial difficulties that ended in the Great Depression. Today’s surge in gold’s dollar price and tightening of the money market have created powerful pressure on the Trump administration to halt any further war escalation before things get completely out of control.
The Federal Reserve retreats
Just as Trump’s signing of the MOU represents a retreat from active war with Iran, the Federal Reserve is being forced to carry out a retreat of its own. Not long ago, Wall Street was talking about how quickly the Federal Reserve would lower its federal funds rate target. It was taken for granted that the government and the Federal Reserve would continue the policy begun in the wake of the disappointing recovery from the Great Recession: running the economy “hot.” But that was before gold’s dollar price skyrocketed to over $5,000 right before the start of the war against Iran.
Now the talk on Wall Street is that the Federal Reserve might raise, not cut, its federal funds rate target by year’s end. The website Kitco.com wrote on June 29, 2026: “Those fears [that the dollar price of gold might drop — SW] are quickly becoming reality after the Federal Reserve shifted from a loosening bias to a hawkish stance, signaling support for a potential rate hike [a reference to the federal funds rate — SW] by the end of the year.”
In plain English, this is a retreat from the Fed’s recent policy of running the economy hot, and it increases the chance of a near-term recession with soaring unemployment. Until that recession arrives, from the financial point of view, any new expensive military operations will be extremely dangerous.
The federal funds rate is the interest rate that commercial banks charge one another for overnight loans. At first glance, this appears to be a dry technicality, but under circumstances such as the present, it can have enormous political and even military significance. The federal funds rate is set by the market, not the Federal Reserve. What is it, and why is it so important? Here I’ll cover the essentials without going too deep into the technicalities.
Under the traditional reserve system, commercial banks were required by law to keep a certain reserve of cash behind their deposit liabilities. Deposit liabilities are what your bank owes you when you make a deposit. These cash reserves consisted of vault cash and the deposits that commercial banks held behind their deposit liabilities.
When you withdraw money from your personal account, the teller opens a drawer and pulls out some green cash to pay you. In these days of electronic payments through debit and credit cards and cellphones, this happens far less often than it used to. As a result, there is much less day-to-day use of cash defined as legal tender: Federal Reserve notes — green dollar bills with pictures of dead presidents on them — along with nickels, quarters, half dollars, and even a few dollar coins made out of base metals. As I write these lines, this also includes pennies, but the Treasury has stopped minting these now almost worthless coins, which accumulate in your pockets and are a constant nuisance. This is thanks to decades of dollar depreciation against gold, which have made currency tokens representing 1/100 of a dollar almost worthless. So in the coming years, pennies will disappear from circulation and will be of interest only to coin collectors.
When the teller runs low on hundred-dollar, fifty-dollar, twenty-dollar, ten-dollar, five-dollar, two-dollar, and one-dollar bills, or on half-dollar coins, quarters, dimes, nickels, and the soon-to-be-extinct pennies, the teller asks the back office to supply more currency. In the back office, there is a safe holding currency, which employees gradually draw down to replenish the teller’s cash drawer. Eventually, the cash in the safe will be gone.
The commercial bank must then withdraw cash from its own bank account at one of the twelve Federal Reserve banks, which are owned by member commercial banks that make up the Federal Reserve System. When the commercial bank finds its reserve of vault cash running low, it has to withdraw from its bank deposit held at its district Federal Reserve bank. Where does the bank’s account come from? It might come from other banks. Just like nations, commercial banks have a balance of payments. When their balance is favorable, they accumulate money from other commercial banks. When it is negative, they suffer a loss of monetary reserves. If we treat the commercial banks as a unit, how does the banking system as a whole grow its combined deposit with the Federal Reserve?
There are two main ways it’s done. Decades ago, before the huge military empire that the U.S. runs today existed, commercial banks would sell, or discount, some of the short-term debts they held against industrial and commercial capitalists as a result of their short-term loans and discounts. The Federal Reserve, or other central banks like Britain’s Bank of England, would then debit — that is, increase — the size of the deposit. For example, say a garment shop needs to pay its workers in cash. In those days, wages were paid mostly in coins that bought far more commodities than they do today. The garment shop would have to withdraw from its account with its commercial bank. It would then have to replenish its bank account by depositing the money it got when its garments were sold to wholesale merchants.
The garment workers, living from week to week, likely had no bank accounts of their own. This is the way things were, more or less, before the Great Depression of the 1930s. The middle class and skilled workers of the labor aristocracy might have had bank accounts in savings banks, savings and loans, and similar institutions, but most workers would rarely even own “paper” dollar bills. In those days, the Federal Reserve and other central banking systems manipulated the money market through their (re)discount rates. The commercial world would hold its breath whenever the Bank of England announced a change in its discount rate, much like today’s breath-holding whenever the Fed announces a new federal funds rate target.
The Federal Reserve, like other central banks, still carries out rediscounting operations, but today those operations play second fiddle to what are called “open market operations.” In addition to rediscounting operations, the Federal Reserve buys mostly short-term bills from the Treasury for its own account. Without getting bogged down in the technical details, the Federal Reserve goes to the open market — hence the expression “open market operations” — and purchases these bills. And here comes one of the greatest mystifications of the banking system. Where does the Fed get the money it uses to purchase the Treasury bills? Economic and financial textbooks explain that central banks “create new money” out of thin air.
Or so it seems. Basically, leaving aside all the middlemen involved, an owner of a short-term IOU from the Treasury, called a Treasury bill, sells it to the Federal Reserve. The Federal Reserve cuts a check to pay for the bill. When the seller deposits the check in their commercial bank account, the bank then deposits the check in its account with the Federal Reserve, which increases the commercial bank’s account with the Federal Reserve without reducing the account of any other commercial bank. The total reserves of the commercial banks as a whole increase.
This everyday operation conceals many of the mysteries surrounding money. In a capitalist society, almost everyone is obsessed with money. Everybody, including professional economists, wants money, and they all think they know what it is. But if you ask them to explain what it really is, they get tongue-tied. Most laypeople believe that money is something created by the government so people can be paid for their labor and then use the money to buy the commodities they need to live and meet their rent or mortgage payments. If they have taken a college-level economics course, perhaps they remember that money is supposed to be somehow created by the banking system itself.
Professional economists are not much better off in this regard. They believe money is a kind of synonym for the wealth of society. Wealth is money, and money is wealth, they proclaim. When we say Mr. Musk is worth more than a trillion U.S. dollars, we don’t literally mean that if you counted all the cash and bank accounts he owns, it would come close to a trillion dollars. What it means is that if he sold off all his wealth at current prices for one-dollar bills, he would have more than a trillion one-dollar bills. Of course, Mr. Musk wouldn’t dream of attempting to carry out such a pointless operation. What is true is that all his salable wealth, when measured in current dollar prices, comes to more than a trillion dollars. But don’t worry, Mr. Musk doesn’t lack dollar bills when he needs them; he simply doesn’t need a trillion one-dollar bills. This points to one of capitalism’s biggest contradictions: the relationship between commodities whose value is measured in money terms and the money commodity itself.
Laypeople are startled when told that the value of the bank accounts held at commercial banks far exceeds the quantity of actual dollars held by the banks. If all owners of commercial bank accounts tried to withdraw all their money in legal-tender cash at one time, the system would not have anywhere near the cash needed to pay them off. Is the banking system just one huge swindle? Maybe people wonder whether they should pull their money out of their accounts and stuff it in their mattresses after all. But that, of course, is dangerous as well, since money can be stolen and paper money can burn up in a fire.
The truth is that under normal circumstances, there is virtually no chance that people will withdraw all their money at one time. This is what makes the “fractional reserve” banking system possible. This is all the more true today because, unlike in the past, people can purchase their groceries, even their morning coffee, with debit or credit cards or smartphones, as long as they keep sufficient balances in their accounts and, if they use credit cards, stay within their credit limits. No one needs to handle paper dollar bills or struggle to pull almost worthless coins from their pockets nowadays. Today, it seems we live in an (almost) cashless society. Electronic bookkeeping and credit seem to have replaced money almost entirely. And yet, more than ever, money appears all-powerful. Something doesn’t quite compute here.
The possibility remains that, as a result of some type of crisis or mass hysteria, the banking public might panic and try to convert a large part of their bank accounts into actual cash. A bank account, after all, is a promise by the bank to pay a certain amount of legal-tender cash on demand by the depositor. And no bank has enough cash on hand to meet the legal obligations represented by all its deposit liabilities.
Like other types of capitalists, individual and collective, a commercial bank wants to make the maximum amount of profit possible. And banks don’t make money by letting their money collect dust as vault cash or by earning only minimal interest in their own accounts with the Federal Reserve. Instead, they want to lend all the money they can at the highest interest they can get, even if their loans create deposit liabilities that far exceed the cash they have on hand at any particular moment. They lend money and then borrow the money back in the form of deposits, then lend the same money out again and again, creating more and more liabilities with a fixed amount of ready cash. This is called fractional reserve banking. Welcome to the beauties of the capitalist credit system.
While these operations usually go smoothly, things can go wrong. Between 1931 and 1933, well-founded doubts about the ability of commercial banks to meet their liabilities led to huge waves of bank runs in the U.S., Germany, Austria, and Poland. Nor was this limited to 1931-1933; it happened in other, lesser crises as well. In the U.S., there were such panics in 1819, 1837, 1857, 1873, 1893, and 1907, as well as in 1931-1933. When this happened, banks would cease lending money altogether and call in their existing loans in a last-ditch attempt to survive. During these crises, the flow of credit would dry up, and money in circulation would contract sharply as panic-stricken depositors lined up, hoping to get to a teller before the bank completely ran out of cash. If they did get their cash out in time, they would hide it away somewhere, like under a mattress. Money dropped out of circulation and into hiding, bringing a sudden contraction in the circulation of commodities as well as in industrial production and employment.
If such a crisis occurred today, the consequences would be far worse than anything in the past because people now depend on electronic bookkeeping, instant bank loans in the form of credit cards, and debit-card and smartphone payments. Imagine if suddenly you couldn’t buy your morning coffee because the coffee shop demanded cash payment and you didn’t have any. You can’t go to your bank to withdraw the cash because it has gone bankrupt and closed its doors. The coffee shop won’t be able to sell any coffee because nobody has the means to buy it; the wholesaler who sells to your shop can’t sell any; the coffee growers in Brazil can’t sell anything to the wholesaler. If this goes on for any length of time, the shop’s employees will be laid off, the wholesaler’s workers will be laid off, the shipping workers bringing supplies to the United States from Brazil will be laid off, and the Brazilian plantation workers will also lose their jobs because the planters won’t be able to sell their product or make any profit.
This would affect most other commodities as well. To prevent such a disaster, the capitalist government has to regulate the commercial banking system, in effect saving the banking capitalists, who are slaves to profit, from themselves. Under such a system, government and central bank regulators, as representatives of the state, tell commercial banks that they must keep a certain cash reserve behind their deposits. Driven by the profit motive, the banks want to lend money until they are close to the legal limit, and often exceed it.
At the end of an ordinary business day, some banks find that their cash on hand is below the limit. What do they do? They borrow money overnight in what is called the federal funds market to meet the limit. Who lends them this money? Other banks that have a surplus of cash above the limit lend it to avoid the opportunity cost of idle money — money that should be appropriating surplus value in the form of interest instead of lying idle. So, to avoid this disaster, capitalists driven by competition must maximize profits, lending the money overnight at the prevailing market rate to banks with deficient reserves. The interest rate on these overnight loans is called the federal funds rate.
This is the interest rate that the Federal Reserve and other central banks manipulate when they engage in open market operations. For example, the Federal Open Market Committee decides that the target rate on these loans should be 3.5% on an annualized basis. It can’t just decree this figure. It might set a low end of 3.25 and a high end of 3.75%. If the rate at the end of a given business day falls toward 3.25%, the Federal Reserve Bank of New York, which carries out open market operations, sells some Treasury securities — IOUs issued by the Treasury to raise cash for the federal government — to the commercial banks. The banks pay for these IOUs with cash, and the transaction reduces the amount of cash held in the system. The federal funds rate then rises as bank reserves contract, and the money market tightens. If the rate rises to 3.75%, the Federal Reserve Bank of New York buys some more Treasury securities for its account to lower the rate again.
Let’s examine this transaction in more detail, as this is where the mystification of the entire operation is greatest. To understand it, let’s go back to California’s gold rush of the late 1840s. Back then in the U.S., there were commercial banks but no central banking system. Let’s assume I made a gold strike and had a bag full of gold. I could take it to a mint or assay office, where it could be turned into gold coins. I could then deposit those coins in a commercial bank. This would cause the cash reserves of that bank, and ultimately the global commercial banking system, to increase. When we take into account all the new bank reserves that were created this way in the wake of the discovery of gold in California’s Sierra foothills, the entire global capitalist system entered a boom phase on a scale never experienced before. These reserves were not made out of “thin air”; they were made by the labor put into panning for gold in the streams of the California gold country. Today, whatever the textbooks on economics and finance claim, bank reserves are ultimately created the same way, except that gold is now produced by huge for-profit capitalist mining and refining enterprises.
Today, when the Federal Reserve Bank of New York purchases a Treasury security, the money it uses appears to come out of thin air. When the owner deposits the check into a commercial bank, the reserves of that bank, as well as those of the entire system, expand. If the supply of gold on the world market doesn’t expand enough to match the rise in dollar reserves, the increased dollar-denominated monetary reserves of the system will sooner or later raise the dollar price of gold. The monetary reserves the Federal Reserve is trying to create will then be burned up through inflation.
In terms of gold, there’s no real expansion of reserves in terms of money material. Instead, we will have inflation, where the quantity of money increases in dollar terms, but once inflation is taken into account, the purchasing power of the cash in the system fails to increase in real terms and, under panicky conditions, can contract as capitalists sell their dollars for gold. This is what we saw in the 1970s and what is threatening to occur once again today.
Gold is produced every day by the modern capitalist gold mining and refining industry. As long as the Federal Reserve doesn’t create dollars faster than gold is produced, the dollar won’t depreciate — that is, the dollar price of gold will not rise. But if the Federal Reserve does create dollars faster than gold is produced, the added dollar reserves will be burned away through inflation. The dollar will depreciate against gold. Real money is not created by bankers out of thin air after all but by workers who toil in the world’s gold mines and refineries.
In the long run, capitalist governments cannot finance wars with money created out of thin air. They must fight the war with weapons as well as with the money to buy those weapons — money created by workers’ labor in the mines and refineries. This is something that Mr. Trump and his associates must consider when they ponder their next moves in the war on Iran.
Historical materialism
Over the last several months, global politics have been unusually turbulent. In part, this reflects the rather bizarre, to say the least, personality of President Trump. For example, Trump and his supporters put his name on the Kennedy Center, named for the late John F. Kennedy, in Washington, D.C. In June 2026, a federal judge ordered Trump’s name removed from the building.
Another example is the proposal to put Trump’s picture on a proposed $250 bill. Historically, kings and emperors have had their portraits put on metal coins and paper currency. But never in the history of the U.S. have images of a living president been put on currency. This is one of the differences between a republic like the United States, where the head of state is elected — though not necessarily democratically — and a hereditary monarchy, where the head of state belongs to a ruling dynastic family based on the claim of being chosen by God for that role. In a republic, a dead president can be put on the currency, but not a living one. Trump seems to believe that there is nothing wrong with putting his image on currency. (2)
Capitalist politics, particularly in the last few months, seems chaotic, and there are many accidental elements, including a president’s personality. But underneath the political surface lurks economics. You can ignore the economy, but it won’t ignore you. As Marx and Engels pointed out, before people can participate in any cultural, artistic, scientific, or political activity, they must first obtain food, water, clothing, and shelter, one way or another. Indeed, labor — production — marked the beginning of the differentiation between the human world and the rest of the animal kingdom. And changes in the mode of production have been the underlying factor governing the general course of human prehistory and then history.
Changes in the mode of production have governed the transition from the original clan-tribal, communist organization of human society to the various forms of human society based on private property and the state, which goes with it. Within the history of class societies, changes in the mode of production have governed the transition from the earliest class societies, such as irrigation-based agricultural societies, to chattel slavery, feudal society, and modern capitalist society. Marx showed that the further development of our productive forces will sooner or later lead to a communist society without classes or private property in the means of production and the state that protects that private property. Today, capitalism dominates the world economy. Capitalism is a dynamic, contradictory, and unstable economic system in which production is socialized while appropriation remains private. The fluctuations of the capitalist economy profoundly affect the political evolution of capitalist society. War is thoroughly rooted in politics and is itself ruled by the evolution of the capitalist mode of production.
The politics of the last several months have been dominated by the U.S.-Israeli war against Iran. The war has directly involved three entities: the United States and the so-called State of Israel on one side, and the Islamic Republic of Iran on the other. These entities have very different histories. The United States today is the most powerful capitalist-imperialist state in the world. Until recently, it was the dominant industrial country. Now the People’s Republic of China has taken that role, though the United States remains by far the most powerful financial and military power in the world.
What is the history of the United States? I’ve always lived in the U.S., and it’s the country I know best. The events that eventually led to its origin as a country began with the so-called “Age of Discovery.” In the 1400s, long before the United States existed, Europe experienced a growing shortage of money. What existed at that time was a long-term monetary crisis, not to be confused with the cyclical monetary crises that occur periodically in the course of the industrial cycle that marks modern capitalism.
This overall shortage of money relative to the needs of commodity circulation meant that European governments were under great pressure to find additional supplies of the money material to support the existing level of circulation and make possible its further expansion. Most of the world’s supply of money — gold and silver — was in Asia, mainly in China. European governments, especially those of Spain and Portugal, believed the solution to their financial problems was to find a sea route to China rather than rely on land routes. Contrary to what is sometimes claimed, educated Europeans of the 15th century knew full well that the world was a sphere.
What they didn’t realize was that if you sailed west over the Atlantic Ocean, before you reached China, you would run into what we now call the Americas. But the European explorers in the pay of the Spanish government were in luck. The Americas were rich in what they were after: gold and silver, the monetary commodities. Columbus himself was absolutely obsessed with gold and, as far as we can tell, interested in little else. While he himself found only limited quantities, his successors found plenty of it. The monetarily effective demand for commodities in Europe exploded, and one result was that about 90% of the Indigenous population of what Europeans called the Americas died.
The “discovery” by bourgeois, gold-obsessed Europeans was itself made possible by the previous development of the productive forces in Europe. This made possible the building of sailing ships capable of reaching the Americas and returning to Europe. This led to the “commercial revolution,” as historians call the explosion of the market for commodities during the 16th century that launched the capitalist system.
From the commercial revolution to capitalism
When the first sugar cane plantations were established in the Caribbean islands to meet rising demand in Europe, the planters couldn’t put up “help wanted” signs and expect the Indigenous people to offer to sell their labor power. The Indigenous peoples had their own modes of production not based on wage labor, and they had no interest in selling their labor power. The Indigenous societies were largely destroyed, but this did not solve the problem of who would work on the plantations. The main solution was to bring Africans to the plantations as chattel slaves, and in time, this slavery system spread to South and North America.
In Europe itself, the demand for the labor power needed to produce commodities was met by wage labor. Under the system of wage labor, the boss who needs more workers to produce particular commodities has to buy more labor power. Tomorrow, the demand for those commodities might slump, perhaps due to seasonal factors, changes in fashion, or something else. Then the boss will lay off workers, and what happens to them is not the boss’s concern.
In contrast, under chattel slavery, the slaveowner does not buy the workers’ labor power but the workers themselves. If the slaveowner doesn’t need the labor power of all the slaves, the slaveowner might sell some of them. If no buyers could be found, all the investment in fixed capital that the slaves represented could be lost. The slaves would still have to be fed until a buyer could be found, because if the slave is not fed, the slave dies and the fixed capital the slave represents is lost, or until their labor power was needed again because of changing market demand. Under a market slave economy, the slave, not the slave’s labor power, is the commodity.
Under the slave system, the loss in fixed capital represented by the slave was greater than the cost of feeding temporarily idle slaves. Under the system of “free wage labor,” as soon as workers become superfluous, they can be laid off; to the capitalist boss, their labor power represents circulating, not fixed, capital. Eventually, the great expansion of the world market, fueled by an explosion in the amount of money material — called by historians the commercial revolution — led to the rise of two modes of production.
One was the rise of what was called “modern slavery” — commercial slavery, to distinguish it from ancient slavery. The other was the rise of the capitalist mode of production based on wage slavery. In the modern slavery system, the boss owns workers outright, not their labor power. The modern slavery system based on the enslavement of Africans reached its climax in the southern U.S. on the eve of the war of the slaveholders’ rebellion, the U.S. Civil War, fought between 1861 and 1865. (3) After that war, the modern slavery mode of production declined rapidly, while capitalist wage slavery spread throughout the world, destroying all non-capitalist modes of production it came into contact with. The rise of the capitalist mode of production, with all its contradictions and industrial cycles, transformed political and military affairs.
Unlike earlier modes of production, capitalist production continuously transforms the mode of production itself. Capitalism has evolved from manufacture — centralized and organized handcraft production in factories with an elaborate division of labor — to mechanized production beginning with steam as the chief motive power, and then to mechanized production with electricity as the main motive power. There are indications that we are on the brink of a new stage, where “intelligent” computers and machines that can “learn,” controlled by computers running AI programs, will increasingly take over factory and other forms of production. What the limits of AI or machine-learning technology are is not apparent now.
Each new stage in the evolution of the capitalist mode of production has one thing in common: it has led to a drop in the amount of human labor needed to produce commodities of given use values and quality. By organizing and centralizing production in factories during the first stage of capitalist production from the 16th century onward, it became possible to reduce the amount of labor necessary to produce commodities compared to the amount needed under guild production or a system of disorganized craft production organized, at best, only through the market.
Steam power reduced the labor necessary to produce commodities much further, and the replacement of steam by electricity as the motive force made possible the industrial production we knew during the 20th century. Machine learning could radically reduce still further the amount of labor needed for commodity production, as well as make possible the creation of commodities with new use values compared to what existed in the last century. Production activity that has resisted mechanization up to now will likely yield to machine learning. This whole movement was kicked off by the explosion of demand tied to the “discovery” of the Americas at the end of the 15th century by bourgeois Europeans hungry for money material — gold and silver.
The formula for specifically capitalist production is M-C … P … C’-M’. Where does the initial M come from? The movement begins and ends with money — M. Looking at an individual capitalist, it doesn’t matter where this initial M comes from. The capitalist might inherit the M, steal it, borrow it, sell illegal drugs, and so on. Looking at the total social capital, the initial M largely came from the “discovery” of gold and silver in the Americas. This was done at the price of the destruction of Indigenous societies and Indigenous peoples themselves. Once the monetary explosion — the commercial revolution — began, the guild and unorganized craft production that had met the demands of the narrow, limited markets of the European Middle Ages was no longer adequate to meet the expanded and growing monetarily effective demand for commodities.
The explosive development of capitalism transformed the class structure of society. At one pole, we’ve seen the concentration of wealth in the hands of the capitalist class, especially the richest capitalists, whose wealth would have been undreamed of in any earlier age. As I write these lines, Elon Musk has become the world’s first dollar trillionaire. We’ve gone from millionaires to billionaires, and now trillionaires. While some of this reflects the depreciation of the dollar, it also reflects the centralization of capital by the richest capitalists. At the other pole is the growing portion of the global population that owns no means of production, and that portion keeps expanding.
The global capitalist economy is very unstable because, in a sense, it has two souls. One soul is the unprecedented cooperation of more than 3.6 billion wage workers in the world, along with nature, producing the entire wealth of the world. The other soul is the means of production that make possible the world’s enormous wealth, which continues to be the private property of the individuals and families that make up the capitalist class. As a result, the products of the billions of workers engaged in socialized labor still consist of commodities split into use values and exchange values. This means that the world of commodities, on a scale not seen before, has split into the money commodity, gold, on one side, and all other commodities on the other. This contradiction was visible when Marx was writing “Capital,” but on a scale that was a mere tempest in a teapot compared to what exists today.
Since the 1980s, the world has passed through an era of political reaction resulting from the counterrevolutionary destruction of the Soviet Union, the first prolonged attempt to build a modern socialist society. This doesn’t mean that the clock of history has been turned all the way back to where it stood on November 6, 1917. On that date, most of what today is called the “Global South,” especially the African continent, was under colonial, not neocolonial, control by the British, French, and other European empires. The economic logic of the declining U.S. world empire points toward the reestablishment of full colonial control. As the competitive power of U.S. industry and agriculture declines relative to China and other newly industrialized countries, the U.S. can rely less and less on the overwhelming economic domination it exercised in the decades following 1945.
To defend its position on the world market, the U.S. needs to be able to dictate to the countries it dominates who they can trade with, the terms of that trade, and which countries they are not allowed to trade with at all. This is true of the countries of the Global South dominated by the U.S. empire, as well as the satellite imperialist countries of the Global North — Europe and Japan. For example, under both Biden and Trump, the U.S. told its Western European “allies” that they could not buy Russian pipeline gas.
The U.S. has used all the political-military power it possesses through the U.S.-controlled NATO “alliance” to force the Western European satellite imperialist powers to go directly against their own economic interests. Instead, they have been made to act in the national and commercial interests of U.S. imperialism by purchasing more expensive U.S. liquefied natural gas, or LNG, shipped across the Atlantic Ocean. This is expensive and puts European industry at a disadvantage relative to U.S. industry. These policies are good for the U.S. and bad for Europe.
To drive the point home, the second Trump administration threatened to go to war with Denmark if it didn’t hand over its Greenland colony and “suggested” that Canada end its limited political independence to become the fifty-first state — or part of it, along with Greenland. While there was undoubtedly a considerable amount of political grandstanding here, of the type that is so much a part of Trump’s personal style, it would be a mistake to reduce it to that.
Along the same lines, in Venezuela, Trump ordered U.S. armed forces to bomb Caracas, kidnap Venezuelan President Nicolás Maduro and Cilia Flores, and fly them to New York City to be tried in a U.S. court as common criminals. This is a move to take over Venezuela and turn it into a colony. On January 3, 2026, Trump announced similar plans for Cuba.
This parallels a similar evolution that occurred in the last quarter of the 19th century, as Britain lost the industrial monopoly it had enjoyed over the preceding century. Today, the U.S. is under pressure to do the same, increasingly unable to compete with Chinese industry, including high-tech production as well as traditional 20th-century industries like steel and textiles. The now eighty-year-old Donald Trump will be gone soon enough. But long after his obnoxious personality and personal corruption are unpleasant memories, the economic imperatives will remain.
In addition to long-term economic evolution, short-term economic fluctuations play a crucial role in the evolution of the political and military situation. Much of this reflects the fluctuations of the industrial cycle. During the boom phase of the industrial cycle, competition drives capitalists to expand as rapidly as possible. To expand industrial capital, the capitalist must obtain money capital. The basic formula for industrial capital is M-C … P … C’-M’. The industrial cycle begins with a sum of money capital — we don’t care where the M comes from.
The industrial capitalist begins as a mere money capitalist but doesn’t remain one. Some of the money is transformed into constant capital, including factory buildings, machinery, raw materials, and auxiliary materials such as electricity. This constant capital transfers its value to the products it helps to produce, nothing more. No new value, and most importantly, no surplus value, is produced. The capitalist cannot make a profit this way. In addition to transforming money capital into constant capital, some must also be transformed into variable capital. Unlike constant capital, variable capital — which in its real form is the purchased labor power of wage workers — replaces its value as it is productively consumed by industrial capital. It produces a value greater than itself: surplus value.
To produce surplus value, the capitalist must transform a portion of money capital into labor power. The capitalist transforms the money form of variable capital into its real form: the labor power of the working class, purchased on the labor market and engaged in production.
Unlike the slaveholder, the capitalist isn’t interested in purchasing the worker; they purchase only the worker’s ability to work. When capitalists can’t carry out production profitably, they simply decline to purchase labor power. From the capitalist’s viewpoint, they’re not stuck with ownership of idle, non-profitable slaves. The replacement of chattel slavery by “free” wage labor is not a mere concession made to the worker; it’s very much in the capitalist’s interest.
If demand for certain use values increases, the industrial capitalist can hire workers skilled in producing these commodities. If, for whatever reason, demand ebbs, the boss can decide not to purchase their labor power but instead use their money capital to purchase the labor power of workers skilled in producing commodities that are in demand. Or the capitalist can hold the money form of variable capital off the labor market until it is again profitable to employ it in its real form: the labor power of workers put to work producing still more surplus value.
The capitalists, who insist on owning the means of production other than the workers’ bodies, purchase the workers’ ability to work and then combine the means of production with the labor power they have purchased from the workers. The use value of the worker’s labor power for the capitalist is that it produces a value greater than itself — surplus value. Assuming that all commodities sell at their values — their direct prices — the capitalist purchases labor power at its value. The capitalist begins with a sum of money that purchases labor power. The workers work part of the working day to reproduce the value of their labor power. During the rest of the working day, the worker works free of charge, producing surplus value. This surplus value is embodied in commodity capital, the commodity product that must be sold on the market. Commodity capital consists of commodities that contain surplus value that has not yet been realized on the market.
The capitalist starts with a sum of money. Once production is completed, the capitalist possesses commodity capital with a value greater than the value they began with. As an owner of commodity capital, our capitalist, who started out as a money capitalist, is now a merchant capitalist. Assuming the capitalist can sell the commodities at their value, a profit has been made, which is the whole point of being a capitalist.
Profit, while it cannot exist without a surplus product, cannot be reduced to the surplus product. Profit is measured in money terms, not in the use values of the commodities that make up the surplus product, except for the small part of the surplus product that consists of the money commodity itself.
If there is not enough money material produced, even if all other use values are produced in perfect proportions, it will sooner or later cripple the process of expanded capitalist reproduction. First, if the initial M — the money the capitalist begins with — is not enough, it will be impossible to achieve the expanded scale of production needed to maintain expanded reproduction. The capitalist will complain about insufficient capital, but what they really mean is that there is insufficient money capital. If the scale of production is expanded, there remains the problem of transforming the commodities containing surplus value into money. To maintain expanded capitalist reproduction, it is necessary to match the expansion of non-money commodities with a comparable expansion of the total quantity of the money commodity that is accumulated throughout the history of capitalist production and even before.
We have to distinguish between the case involving a particular industrial capital and the case involving total social capital. A money famine will arise whenever the increase in the total quantity of the money commodity lags behind the level needed to initiate expanded capitalist reproduction and realize the value of the expanded mass of commodities that must be sold. This means more and more individual capitalists will have difficulty finding enough money to initiate expanded reproduction. They will be less and less able to expand production, complaining of insufficient money capital and slow returns on commodities containing surplus value they have already produced.
As expanded reproduction develops, the extra M needed to initiate expanded reproduction normally comes from the preceding sale of commodities. When the scale of production is expanded, the extra M often has to be raised on money-capital markets by floating new bonds. When the production of new money material lags behind the total needed to maintain the rate of expanded reproduction, capitalists find they can’t raise enough money. Interest rates rise, and they find it harder to sell commodities profitably, since many commodities are sold on credit.
The money famine that immediately precedes and accompanies the crisis is just the flip side of general overproduction, since money shortages are not absolute but relative to non-money commodities. Monetary shortages hit not only capitalists but also commodity buyers, such as home buyers and buyers of expensive durable commodities designed for personal consumption — or even buyers of morning coffee when credit cards are used. A monetary shortage makes it harder to raise the money needed to initiate expanded reproduction, as well as to realize the surplus value once it has been produced and embodied in commodities. That realized surplus value is needed to launch another cycle of expanded reproduction.
Local, state or provincial, and central governments also act as borrowers. This is where war comes in. In the long run, enough of the commodity serving as money must be produced to match the increase in the amount of non-money commodities being produced. In the short run, the money commodity is either overproduced, causing money to accumulate in idle hoards in the banks and driving interest rates toward zero, or underproduced, making money “tight” and raising interest rates.
There are times when great surpluses of money exist, the most extreme example in history up to the present— 2026 — being the 1930s. These surpluses can be caused by new geographical discoveries of gold, as described above in the “New World” during the 1500s, and, from the end of the first quarter of the 19th century onward, by the course of the modern industrial cycle itself. Discoveries of new mines continue to play a role in the expansion of the quantity of money needed for expanded capital reproduction. But the alternating periods of abundant idle money and money shortage primarily reflect the alternating phases of the industrial cycle, though gold discoveries, or the lack of them, feed back on the industrial cycle.
The process of expanded reproduction is elastic by nature. Capitalists don’t get rich by sitting on idle money but by expanding the scale of production and, through that, increasing the number of workers producing surplus value. With a given rate of surplus value, the more workers they exploit, the more surplus value is produced. Each turn of the cycle M-C … P … C’-M’ is carried out on a larger scale, with the aim of increasing the total mass of surplus value realized in the form of a mass of profit — leaving aside temporary cyclical crises. The total mass of surplus value can also be increased by increasing the ratio of unpaid to paid labor. But this process runs into the limit set by the resistance of the workers on one side and the capitalists’ attempts to increase exploitation on the other. It also runs into the limits set by the laws of mathematics, since the rate of surplus value is upwardly limited by the fact that necessary labor — the labor that is paid for — cannot fall to zero.
This process of expanded capitalist reproduction also runs into a historical limit. The most important thing is the need to find ever greater numbers of workers to exploit. To find new workers, sufficient means of subsistence must be produced to support them. This process cannot go on forever because, if it did, the physical mass of the workers and the means of subsistence needed to produce an ever greater amount of surplus value would eventually exceed the mass of the Earth, the solar system, and finally the total observable universe. In other words, the indefinite continuation of expanded capitalist reproduction violates the laws of physics and therefore is impossible. As Marx explained, no form of human production can violate natural law. Therefore, capitalism is an historically limited system.
In addition, since capitalist production is unplanned, shortages of certain inputs are bound to appear. These are not absolute limits, but they can present temporary obstacles to expanded capitalist reproduction and create crises and stoppages. For example, the disruption of oil production caused by the U.S.-Israel war against Iran caused an underproduction of key commodities involved in the production of energy, as well as other vital commodities involved in food production, threatening global capitalist expanded reproduction.
Even in the absence of war, drought, or epidemic — all of which we have seen in recent years — whenever the planless, profit-driven process of expanded reproduction proceeds with full vigor, more or less accidental disproportions are bound to occur, creating accidental disruptions of capitalist expanded reproduction. This is felt most strongly when production is near its physical potential. Operating the economy well below its physical potential, the normal condition under capitalism, cushions these disproportions and enables capitalist reproduction to proceed more or less smoothly. Periods of vigorous production associated with cyclical booms and war economies bring these disproportions to the surface.
The law of value, operating through the tendency of the profit rate to equalize, achieves over time a proportionate development of mutually dependent branches of production. But this proportionality can be achieved only through constant deviations in the short run, reflected in the continual divergence of the actual profit rates in various branches of industry from the average rate of profit.
In addition to all this, there is the inevitable disproportion between the production of the commodity that serves as money and the production of all other commodities. Inevitably, periods of underproduction of money material, reflected in a profit rate above the average, lead to a surge of money-material production. This causes monetarily effective demand for commodities to rise, leading to an economic boom and a rise in commodity prices measured in terms of the money commodity. This leads to a fall in the rate of profit in money-commodity production relative to the production of other commodities. There will then be an underproduction of money material relative to the needs of capitalist circulation, followed by a money famine resulting in a crisis of commodity circulation and generalized commodity overproduction. The crisis reduces non-money commodity production while stimulating money production. This leads back to the overproduction of money material, expressed in the accumulation of idle money capital and plunging interest rates — easy money. The cycle then repeats. Periodic overproduction crises aren’t accidents; they’re a necessary feature of capitalist expanded reproduction.
Faced with the dollar’s recent plunge, even if it has partially recovered since the war broke out, as well as pressure on the Treasury market and the disruption of energy markets caused directly by the war, the Trump administration has been forced to retreat from an all-out war against Iran at this time. The administration instead seems to have decided on a lower-intensity war combined with diplomacy, though this too could again get out of hand.
I will close this post with some thoughts about the possible future development of the Iran war. Trump is faced with a squeeze on oil supplies caused by the war, as well as a potential money famine caused by the normal mechanisms of the industrial cycle, forcing him to retreat from his demand for unconditional surrender. He, and more importantly U.S. imperialism, is playing for time. None of the conditions that have caused U.S. imperialism to bitterly oppose the Iranian Revolution since 1979 has disappeared, even if current negotiations lead to a treaty and the normalization of U.S.-Iran relations.
This could change over the next few years. If a significant recession develops, there will be more unemployed young workers who could be absorbed into the U.S. military. The widely hated Donald Trump will be gone, “Genocide Joe” Biden will be largely forgotten, and a new, more popular capitalist politician — quite possibly a Democrat — may be put into office on January 20, 2029. The dollar will likely be much stronger due to cyclical factors, even as long-term economic factors continue to undermine it. This will create an improved position for U.S. imperialism to launch wars against Iran and other countries. Though Trump will be gone, the economic imperatives to establish something like old-fashioned colonial control over the countries of the Global South, and even Europe, will be stronger than ever.
We will continue to analyze these possibilities as the situation evolves in future posts.
NOTES
(1) After the war broke out, oil and other commodity prices spiked, and the money market tightened, knocking down the dollar price of gold from above $5,000 to, at times, below $4,000. (back)
(2) This shows Trump’s Bonapartist politics. Despite claiming royal titles, the original French Bonaparte family was not considered legitimate by European royalty. They were called mere upstarts because, unlike “real” European crowned heads, they were not supposedly appointed by God Himself. Today, Trump is attempting to assume the rights of a king by putting his name on buildings and currency. He was not appointed by God Himself; according to the Constitution, he is only a president chosen by the Electoral College. (back)
(3) The U.S. founding fathers were strong supporters of the ideas of the bourgeois epoch in which they lived, including the idea of the equality of all commodity owners before the law. This made the U.S. different from old Europe, which was still saddled with all kinds of feudal privileges. But there was a problem: some of the founding fathers were slaveholders. How could chattel slavery be reconciled with the equality and freedom of all commodity owners before the law?
One way to solve the problem was to modify the principle of the equality of commodity owners before the law into the equality of all white commodity owners. Since Africans weren’t white, it was claimed they belonged to a lower order of beings somewhere between white people, who were considered fully human, and the animal kingdom. Animals didn’t own commodities, and some were themselves owned as commodities, so the principle of equality didn’t apply to them.
Supporters of modern slavery based on the enslavement of Africans argued that Africans were in the same position. Unlike free white workers, who sell their labor power to the bosses, enslaved Africans had nothing to sell but were themselves sold as commodities. Especially in the United States, the bourgeois principle of equality was applied only to white people. This racism was exported back to old Europe and evolved into other forms of racism, such as antisemitism and Zionism, that defaced the late 19th, 20th, and now the 21st centuries. (back)