Only Yesterdays

Only Yesterdays

I.  What a difference 200+ days don’t make.  It seems like it was only yesterday  when Greece was facing bankruptcy; when the European Central Bank was the lender of first, last, and only resort for major European banks; when the sovereign debts of Italy, Spain and Portugal were suspect, contaminated, shunned; when seats on the flight to safety were going, to use the language of the trade, at a premium; the fate of the euro was the latest speculation; when the future of the European Union was the latest, to use the language of the trade,  short; when Geithner was urging his counterparts across the Atlantic to do something dramatic, to pull out the “big bazooka;” when the EU was apoplectic, or anaphylactic, or both over the prospects of a referendum in Greece concerning the terms of so-called bailout.  Only yesterday.

These 200+ days later?  Well, Greece is facing bankruptcy; Greece had a referendum, disguised as a general election and the results were exactly the results expected only yesterday; the ECB is the only lender of any resort for European banks; the sovereign debts are again suspect; the flight to safety has driven certain short term interest rates below zero, which is also the latest line on the future prospects of the European Union.  And once again Geithner is urging, hoping, praying for that big bazooka to drop out of the sky, a miracle of another sort in government green.  Praise the lord and pass the ammunition. 

While we’re at it, remarking as it were on the amazing and the banal, the banality of the “amazing,”  the recurrence of the unusual, exceptional with such frequency that unusual becomes the tedious,  everyday functioning of this system based upon the aggrandizement and depreciation of human labor……..let’s ask a question.  Let’s ask a question that appears to be as tangential to the predicament of irrelevant to the predicament of capital accumulation as a question can be:  Is it possible to compare “amazing” “things,”— events, quantities, qualities, effects, non-effects?

Can one amazing event, quality, quantity, effect, non-effect, be more or less amazing than a different amazing…etc?  

As we ponder this, and count the number of pinheads dancing on angels too, let’s just slog on with the predicament of capital accumulation, to wit:

It’s really amazing how far a lot, a real lot, of money can’t go these days.  And it’s even more, or less, amazing how little time lots and lots of money buys these days.  The most amazing, or not, thing of all is that this exchange of money for time, this buying of time exposes, condenses, displays, distills, but most of all narrates the historical trajectory of value production; the once and future prospects of capitalism.  

Amazing, isn’t it?  Or not. 

After all, it was just a few short months ago that the ECB took to the stormy Mediterranean in its rescue vessel, the EUSS Long Term Refinancing Operation, LTRO, to the spread the oil of long-term-low-interest-any-collateral-will-suffice loans on trouble waters of Eurozone bank finances.

That was an undertaking of amazing, even epic, proportions—supplying over one trillion euros—that’s a thousand billion for those of you not hooked up with hedge funds or astronomical observatories—for a term of three years, at rates of 1% or less.  

This was not, to be sure, an original undertaking.  The ECB was borrowing a page, and a bit of liquidity from the US Federal Reserve, which had borrowed a page from Crazy Eddie of 1980s discount electronics, and TV commercial fame—“prices so low, they’re practically giving it away.”  Crazy Eddie, as we all, know, folded, having folded into his own pockets significant amounts of the readies provided through his bank credit lines,  and having turned his stores into sources of credit, into mini-banks,  financing purchases, and counting the debts as earnings, thus pyramiding downward,  reproducing  in infinite miniatures, fractals really, the bad assets as bad banks.  “I’ve looked in the mirror, and I’ve seen a million little mes.”  

While separate and apart from the sovereign “bail outs” engineered by through the EFSF cum ESM, the ECB’s LTRO has the same origin and object as the programs that produced the sovereign debt crises—that is relieving the distress of the European Union private banking system with the application of massive state sponsored liquidity.  

That might work, if the banking distress was in fact a liquidity issue.  It is not.  As the governor of the Bank of England put it, “The crisis in the euro area is one of solvency not liquidity.”  And who could possibly know more about chronic, extended, and attenuated insolvency than the guv of the bank of the bourgeoisie of that storied isle, Mervyn God Save the Ring-a-Ding-Ding ?  Only Crazy Eddie, for sure.

So anyway, the various “sovereign” governments had tried that, just that old liquidity shuffle [pay no attention to the left hand, watch the right hand], turning their public treasuries into lenders of penultimate resort, into bad banks.  The ECB determined it could do no less than repeat the process, since, after all, accumulation of capital, is by origin, definition, and destiny a repetition compulsion, pathology.

The ECB offered its balance sheet as the virgin to be sacrificed at the altar of the great god of non-performing assets.  The best laid plans, and hedges, of mice, men, and the recombinant DNA offspring of both called finance ministers, had come to less than zero.

II. Let’s catch up.  In September, 2011, the then finance minister of the Spanish government, Elena Salgado, stated, “The banking sector now is prepared to overcome any test it may face in the future.”   The fact that she was reading from a text originally written in 2008 by the former finance minister of Ireland in which he claimed that he had provided Irish banks with “the cheapest bailout in the world so far” didn’t do much to convince the international debt markets that the Spanish banking sector was prepared to overcome anything, least of all the e220 billion in non-performing debt on its books. 

In December 2011, Mario Draghi, the new chief of the European Central Bank announced that the bank will accept “a wider range of assets as collateral” as security for its lending programs to the eurozone banking center,  including corporate bonds, covered bonds and “previously encumbered assets”—i.e. non-performing debts.  Happy Christmas.

In the same month, Italian banks borrowed e200 billion from the ECB, equal to 25% of all ECB lending for that month. 

In 2012, the Spanish government acknowledged that it would not reach its target for reduction in the government deficit.

Italy’s Banco Monte dei Paschi di Siena suspended payment on bonds issued to the Italian government by the bank to secure the government’s bailout. 

Spain announced it was suspending its plan to privatize the airports of Barcelona and Madrid because of a precipitous decline in the valuation of the properties.

Greece too could not privatize assets at anywhere near the numbers, nor the schedule,  embodied in the bailout agreement.

The ECB’s balance sheet [loan’s outstanding] reached e3 trillion, an amount equivalent to one-third of the Eurozone’s GDP. 

In March 2012, the European Union announced that Spanish banks would not need a bailout.

German banks’ exposure to Spanish debt measured e148 billion including e53 billion in claims against Spanish banks. 

The largest EU private banks had deposited e 1.2 trillion with the various central banks in the union, an increase of 66% since 2010. 

In May, elections in Greece yielded no government.

Also in May, elections in France installed someone claiming to be “socialist” in the Élysée Palace, a result slightly, but only slightly less appalling to the bourgeoisie, than that of the Greek elections.

III. The news coming from Europe hasn’t been all bad.  After the British government revealed that it planned a state funeral, at the cost of sterling 2 million, for Margaret Thatcher upon her demise, the remaining Keynesians in the Labor Party argued that the funeral should be absorbed into an economic stimulus program.  Given the dire circumstances of the economy, the Labor Party’s shadow Exchequer proposed that the government not wait for Lady Thatcher’s illnesses to take their natural course, but rather put her to death, painlessly but immediately, as part of the emergency measures for restoring growth.  “Markets hate uncertainty,” said the shadow Exchequer, “We must act decisively and boldly.”  

If nothing else, the Labor Party Keynesians proved, at least and at last, that they had grasped the substance of Lenin’s tactic of “critical support”— “like the rope supports the hanged man.”

And……..the former head of the Vatican’s Instituto per le Opere di Religione (IOR), Ettore Gotti Tedeschi, under investigation for money-laundering, indicated that he is in fear for his life.  Pope Benedict laughed off suggestions that Tedeschi was responding to threats of possible retaliation from the bank if he cooperates with the investigating authorities.  Said the pope, “He has nothing to fear.  Everyone knows we never molest anyone over 14 years of age.”

IV. This is definitely not a liquidity crisis. This is not a fiscal crisis. This is not a monetary crisis.    It is, however, more than a crisis in the reproduction of capital, in the accumulation of capital, in the profitability of capital.  It is that moment when the mechanisms of crisis—bankruptcy, unemployment, declining wages—are not enough to restore the profitability of capitalist production.  For that reason, the programs, policies, agreements, and disagreements, within, between, among, the institutions, parties, and bourgeoisie of the nations of the EU; and the agreements and disagreements of the EU, or its members, with the United States about policy and program, about big bazookas, super-regulators, Basel 3 capital requirement, eurozone bonds, sovereign debt guarantees are irrelevant, immaterial, and meaningless.  

Money, being what it is to the bourgeoisie—church and state, love and lust, god, goddess and dominatrix, mirror and lens, wing and prayer—it’s to be expected that the bourgeoisie see every problem and every solution in terms of money, as problems of finance.  However, the problems condensed and expressed in money-capital, in money as capital, as credit, are not amenable by solutions focusing on  money as a medium of exchange; money as a means of circulation; money as a universal equivalent; money as a store of value; money as a hoard. 

If money is the “ultimate issue” of exchange value, its embodiment, distillation, and abstraction, then credit and credit instruments are the embodiment, distillation, and abstraction of money; they are money’s money.  The origin of credit instruments in capitalist production has everything to do with that need of capitalists to buy time—that the time of realization of value need not, does not, cannot correspond with the actual aggrandizement of value.  Return on investment cannot be coincident with investment.  If return were coincident, there would be no time to expropriate; there would be no distinction between private property and social need; there would be no rate of profit; capital in fact could not exist.

Credit originates in the lags in, between, among the various sectors of capitalist production; in the different rates of turnover of various capitalist enterprises; in the time differentials between investments and profits.  Credit bridges those differentials and in that process distributes accumulated values, accumulated profits, according to the same exact laws that govern all exchanges in capital.  

There is, in fact, nothing fictitious about the credit instruments of finance capital; or nothing more fictitious about credit instruments than there is about all capital—namely it’s not a thing, it’s a social relation of production and when capital cannot reproduce itself, that social relation, quickly and profitably enough, when capital cannot maintain a rate of self-expansion, it loses its aggrandized corporeality, its life stolen from labor. 

The inability to restore the expansion of profitability is what besets capital in the EU, and in the United States.  The differences in policies and programs between and among an Obama, a Merkel, a Hollande, a Tsipras (who has promised to keep Greece in the Eurozone; who proclaims only his party can restore stability to capitalism in Greece), even an idiot like Cameron are immaterial and irrelevant to the unity, the totality of capital’s antagonism to labor.  

It is sad then to see the comrades of Insurgent Notes giving voice to this notion that there is a substantive conflict among the bourgeoisie regarding policy and program.  In an article entitled “Chicken Game:  Eurocrisis, Again” (http://insurgentnotes.com/2012/06/chicken-game-eurocrisis-again/) by Raffaele Sciortino, we get the usual list of the usual suspects as working to take advantage of the predicament of the European Union and compel the Union to conform to a new Washington Consensus.  The author actually claims that a “financial war” has emerged pitting the dollar against the euro, and that the assault on European banking and sovereign debt is not only part of that war, but a strategic effort by the Washington-Wall Street-US Federal Reserve to reinforce dollar dominance over the euro.  Says the author:

In the middle of the year, as the effects of the Fed’s injections of liquidity were being exhausted, underscoring the risk of a double dip in the  Unites States, we saw a further surge of speculative funds betting against the European sovereign debts, a surge which pushed Italy and Spain into the highly dangerous grey area between liquidity crisis and insolvency…The crises of public debt issue and the devaluation of the assets of the European banks, left without liquidity from the a simultaneous withdraw of US monies, were circularly reinforce, while the euro itself entered the risk zone.

The double calculus here is to profit from the deterioration of public balance sheets and to give Europe a serious warning, specifically to the ECB and especially to the German government…

What bollocks.  What’s next from our comrades at Insurgent Notes? An article claiming that the real reason Bush invaded Iraq is because Hussein threatened to price Iraq’s oil in euros?

The author of this article makes the rookie mistake of confusing the New York Times, and George Soros, as the “voice of Wall Street.”   Anyone who has ever worked, or traded, on Wall Street knows that the opinions of Soros and the NYT reflect exactly nothing about the street. 

Now regarding the claims of our author—the closing of the US short-term debt markets, the commercial paper money markets to European Union banks did not begin in middle of 2011.  The declining market for bank paper, including US bank paper, in the commercial paper money markets has been going on since 2008.  It was the major reason that the US FRB and Treasury produced its Asset Backed Commercial Paper Money Market Funding Liquidity Facility,  its Money Market Funding Facility, ad almost infinitum.  While 2010 did bring some relief to the banks, allowing the Fed to close the ABCPMMFLF, the volume of open market paper issued by US financial institutions declined a cumulative $850 billion in the years from 2007 to 2011.  

Total credit market borrowing by US domestic financial corporations declined by more than $3 trillion in 2009, 2010, 2011, as US banks and institutions wrote off or sold assets, both performing and non-performing, raised capital through rights and equity issues, and simply shrank their businesses. 

Today, participation in the commercial paper money markets is centered on the purchase and sale of paper with the shortest maturities to the degree that 31% of the portfolios of US Prime money market funds are overnight loans. 

The action, and lack thereof, in the CPMMs hardly amounts to “targeting” the EU, or “sending a warning” regarding a policy disagreement.  It represents the poor condition of the US and EU banks, the mountains of non-performing assets, and the emptying of the public treasuries to support the insolvent banks.  

Moreover, the European Union banks are practicing the very same credit withdrawal against each other.   For the 4^th quarter 2011, The Bank of International Settlements (that executive committee formed by the Reichsbank in which it would meet with its friendly correspondent banks in belligerent countries during WW2?  In order to manage its international holdings and ensure the uninterrupted flow of profits from companies in Latin America, the US, the UK?  The very same) reported that interbank lending declined by $637 billion, 60% of which was the result of reduced cross-border lending by European Union banks. 

Flogging the dead horse of “fictitious capital,” the author claims:

Behind this confrontation, we see the outlines of an unavoidable next phase:  the devalorization of the enormous mass of fictitious capital (Marx) which has accumulated over the cycle of more than 30 years of growth based on debt.

First off, the 30 years of growth in the capitalist economy has not been based on debt.  It has been based on reducing wages, shrinking unit labor costs, liquidating pensions and benefits of the workers and taking that liquidation right to the bottom line as profits, and substantial gains in labor productivity.  The devaluation that is going on is not the devaluation of “fictitious capital” per se.  This process is not confined to credit instruments, debt obligations, but rather involves the very real and very deep devaluation of capital, of the living and accumulated components of capital.  Precisely because this is not a liquidity issue, but one of reproduction, the “crisis” is inadequate to that task and capitalism against must and will attempt to drive wages below the cost of the reproduction of labor and destroy the means of production.   

The presentation of the last 30 years as one that can be apprehended by the notion of “fictitious capital” has produced its complementary opposite, fictitious Marxism. 

The momentary divisions, disagreements of the capitalists are insignificant and irrelevant to the unity, the totality of capital’s opposition to human labor. 

S. Artesian,  17 June 2012

sartesian@earthlink.net 

"Beats Me"

"It's really difficult for me to understand why American imperialism would risk a sharp spike in oil prices given the state of the the global economy"

So says Louis Proyect, owner and operator of the Marxmail listserv, film critic ordinaire, and self proclaimed unrepentant Marxist.

Yep, it puzzles an inveterate Marxist[not to be confused with invertebrate Marxist].  It perplexes our aging Fidelista.  It beats the hell out of him.....

As if...

1. the US bourgeoisie gives a rat's ass about the state of the world economy when the only world and the only economy it knows is the economy of aggrandizement, exploitation, appropriation, accumulation-- even if, especially when that aggrandizement, that accumulation requires the liquidation of assets.
As if...
2. the bourgeoisie anywhere always act rationally.
As if...
3. that rationality should somehow conform to what an "inveterate Marxist" thinks should be the rationality of capitalism.
As if...
4. the violent fluctuations in the price of oil is not exactly how capital has channeled, allocated, distributed profit among its constituent enterprises.
As if...
5. those fluctuations aren't exactly the way capital has transferred, expanded, and liquidated wealth over the past 35 years.
As if...
6. the 1979-1980 spike in oil prices did not inaugurate the double-dip recession of the early 1980s, suspending for a bit the massive generalized overproduction of capital.
As if...
7. the double recession was not fundamental to capital's assault on the living standards of workers everywhere.
As if...
8. that price spike did not feed US finance capital as petro-dollars recycled through the US banking system.
As if...
9. this particular overproduction of petroleum as a commodity did not resurface as general overproduction through the recycling of petro-dollars.
As if...
9. the general overproduction did not lead to the price break of oil in the mid 1980s, with the subsequent devastation of Mexico, the Soviet Union, the US Savings and Loan industry, and housing markets.
As if...
10. the invasion of Iraq in 1991 was not undertaken to force Iraq's production off the world market, just as Iraq's invasion of Kuwait had been launched to force Kuwait's production off the markets.
As if...
11. the price boosts provided by the war and the coincident "instability" was not short-lived, soon overwhelmed and undermined by the technical advances in locating and recovering reserves.
As if...
12. the decline in global lifting and finding costs coupled with the increased capital expansion had not, once again as always, engendered overproduction, depressing once again as always the market price, the rate of return on investment; leading to the dramatic price break of 1998 when oil prices dropped below $10 per barrel.
As if...
13. the 1998 collapse did not, once again as always, lead to cries of outrage and pain by our oil bourgeoisie about Iraq's increased production.
As if...
14. OPEC had not, once again as always, heard the cries of its most unsilent partner and had not intervened once again as always with production cuts.
As if...
15. the intervention of OPEC did not once again signal an end, but not the end, to a period of capital expansion, to accumulation by increased capitalization, and the approach, once again, of economic contraction.
 As if...
16. the economic contraction, the subsequent re-invasion of Iraq, the oil price spikes did not, once again as always, redistribute profit so that the profit channeled to the oil companies was proportionate to the size of the capital invested in oil production. 
As if...
17. reestablishing the proportionality of profit to the size of the capital was not inherent in and a refraction of capital's tendency to equalize profit rates over time.
As if...
18. equalizing profit rates did not transform a particular overproduction into general social overproduction; did not signify the overproduction of oil as capital;  did not signify that the means of producing oil, regardless of the intensity of the exploitation of labor and because of the intensity of exploitation of labor in the production process, could NOT exploit labor intensely enough to maintain the value-ization process, enough to maintain accumulation.
As if...
19. overproduction is not once again as always behind capital's drive to force Iranian production from the market, and better yet for the bourgeoisie, destroy Iran's productive capacity.

As if...
20. the United States has not reduced its oil imports by approximately 18% in the last 5 years; expanded its domestic onshore production, and increased its total hydrocarbon fuel exports so that exports exceeded imports.
As if...
21. US crude oil production in 2010 had not increased 10% from its 2007 level; the US Energy Information Agency was not projecting an increase in domestic production to 6.7 million barrels per day by 2020 based on the exploitation of "tight oil" [shale formation] supplies.
As if...
22. excess capacity in the global oil industry was not 4 million barrels per day.
As if...
23. between 2007 and 2012 US daily consumption of oil had not declined by 1.5 million barrels per day.
As if...
24. the history of the world we've been living in for 40 years isn't the history of overproduction.


That Proyect is puzzled, confused,  is understandable since Proyect has been flogging  neo-Malthusian, apocalyptic, peak [snake] oil theories for at least a decade.

That Proyect doesn't understand a bit of what he claims to understand, "Marxism," that is to say Marx's critique of capitalist production, is one thing and a very small thing.  Personally, I have nothing against Mr. Proyect, and if he weren't such a sanctimonious, self-righteous jerk, I'd probably leave his name out of this completely.

That not a one of Proyect's "Marxmailers"-- not a single mother's son or daughter, not a single so-called Marxist, Trotskyist, Luxemburgist, anti-Leninist, anarchist, Fidelista, Chavezista, Moralesismo-er,  not a single one of the professed, professional, and professorial Marxists who occupy the chat room in Proyect's digital retirement home--challenged their host's confusion, sought to enlighten the chat-room moderator is another sad thing altogether.

The point isn't whether or not US production meets, exceeds, or falls short of the US EIA projections and estimates.  The point isn't whether global oil supplies are sufficient for 50 or 100 years.

The point is that the production of oil, the increases and declines in production, the increases and declines in prices, the actions and "rationality" of the oil capitalists will be determined by the economics of capitalism, by the social organization of labor that determines accumulation.   Oil production conforms to the needs of capitalist accumulation even when, especially when, those needs and that accumulation are difficult for Marxists to understand.

And you can take that to the bank.  Or the movies.

S.Artesian    February 23, 2012 

FACETS OF VALUE, 2

Facets of Value, 2

Marx provides a critical, historical exposition in his notes, draft, essay The Production Process of Capital, “Relative Surplus Value,” in volume 30 of the Collected Works [International Publishers, 1988] pages 294-299.

Marx begins:

“What is need first, therefore, is not an increase in population, but an increase in the purely industrial population, or a different distribution of the population. The first condition for this is that the population directly employed in the production of the means of subsistence, in agriculture, be diminished, that people be separated from the land, from mother earth, and that they be thereby set free [FREE HANDS, as Steuart says), mobilised. The separation from agriculture of the kinds of work bound up with it, and the—progressive—limitation of agriculture to fewer hands, is the main condition for the division of labour and for manufacture in general, if it is to emerge not in individual cases, at isolated points, but playing a predominant role. All this belongs to accumulation.”

So here we have it, and it being the beginning of the differentiation of capitalist manufacture from that of earlier, non-predominant forms of commodity production, of earlier deployments of wage-labor. “The first condition for this is...that people be SEPARATED from the land and thereby set FREE..”

That is to say, mobilized, as “free hands”-- hands not necessary for supplying the means of subsistence.

And there we have it, it being what constitutes “freedom” in the bourgeois order, that which defines “free labor”-- dispossessed, separated, detached, without use to the “free laborer” save its value as a means of exchange for the means of subsistence.

Marx goes on to describe the conditions that must accompany the adoption of the division of labor--

concentration of workers;

concentration of the instruments of labor;

increase in raw material.

And all of this is the formation of the social relation of production, of the opposition, the antagonism of labor to the conditions of labor, since this takes place under, within, through and by the extension of private property.

Marx continues:

“In absolute terms, therefore, nothing is required for manufacture, i.e. for the workshop based on the division of labour, but a change in the distribution of the different constituents of capital, concentration instead of dispersal. As long as they are dispersed, these conditions of labour do not yet exist as capital, although they do exist as material constituents of capital, in the same way as the working part of the population exists, although not yet in the quality of wage labourers or proletarians.”

This is pretty remarkable: “As long as they are dispersed these conditions of labour do not yet exist as capital, although they do exist as material constituents of capital, in the same way as the working part of the population exists, although not yet in the quality of wage labourers or proletarians.”

And what constitutes that quality? The social organization, the transformation of the isolated methods of labor into the basis for social production. That basis is, of course, the production of and for exchange value. The working population working for wages in dispersed, isolated, not predominant forms does not yet have the quality-- that social quality, that quality of, and as, a class.

I think it is very easy to, and that we often do, overlook the importance of the division of labor, and the importance of Marx's explorations of the division of labor, to both the development of modern capitalism as distinct from its predecessors and Marx's critique thereof.

Marx says:

“Once the commodity becomes the general form of production, or production takes place on the basis of exchange value...the production of each individual becomes one-sided, whereas his needs are many-sided....The whole range of the objective conditions which are required for the production of a single commodity, such as the raw materials, instruments, matieres instrumentales, enter into the production of that commodity as commodities are conditioned by the sale and purchase of these elementary constituents of the commodity which have been produced independently of each other....[]this takes place the more the commodity become the general elementary form of wealth, i.e. the more production ceases to be for the individual the direct creation of his own means of subsistence, and becomes TRADE, as Steuart says, with the commodity therefore ceasing to be the form of the part of the individual's needs, i.e. the part which is superfluous and therefore saleable for the individual. Here the production of commodities still rests on the foundation of a production the main product of which does not become a commodity. It is not yet a situation where subsistence itself depends on sale; where the producer, unless he produces a commodity, produces nothing at all;...”

That quality, that social, general form of the commodity is production for exchange value. It is value not just as a quantity, a measure, but as a quality, a need in and of itself, and upon which all other needs are dependent socially, contingent socially, dependent socially.

Further:

“...that what is decisive for the producer is no longer the use value of the product but its exchange value alone, the use value being only the vehicle of the exchange value for him; that he must in fact produce not merely a particular product, but money. This prerequisite, that the product is universally produced as a commodity, hence is mediated by the conditions of its own production as commodities, by circulation, into which they enter, implies and all embracing division of social labour [emphasis added], or in other words, the separation of the various mutually conditioning and complementary labours into independent branches of labour only brought into contact with each other through the circulation of commodities, or through sale and purchase. Or, it is identical with this situation, since for products to confront each other generally as commodities presupposes a mutual confronting of the activities producing them....This way of viewing things is therefore historically important....”

Indeed, historically important, for in fact we are no longer viewing things, we view relations. We are viewing objects of production as expressions of the social organization of labor, but a social organization that is “incomplete,” “stunted,” “circumscribed” by...the relation that the social labor in the branches of production are only brought into contact with each other through the circulation of commodities, through sale and purchase. Social labor thus is expressed only as a market relation, use for exchange, exchange for use, not as social labor for, by the needs of social labor; not as, for, and by the need of the individual. Social labor is thus, upon establishing its own universality, does so only it its alienation, in its expression as a market value. Value, meanwhile, having survived for so long without the social quality of value, without the all powerful power of the inter-mediation of human relations, now steps forward as the reason of existence.

"The use value is only the vehicle for the exchange value," and so it is, so it becomes, with the human labor process when circumscribed by the valuation process. The use value, the ability of human, social labor to provide for the needs of one and all becomes but the vehicle for the exchange value. Labor becomes a beast, and a burden. The laborer becomes his or her own donkey; his or her use value is only a vehicle for its value in exchange.

Marx's ability to trace the “genealogy” of value, to apprehend value as the abstract substance of exchange, is the product of his apprehension of the singular triumph of modern capitalism, of its division of labor in creating in quantity, and thus making manifest, the alienated quality which value expresses universally-- time.

“Time is everything; man is nothing, at most time's carcass,” Marx writes. He wasn't kidding. Capitalism, capitalism as the predominant mode of production is the disposition over time. It's wealth is the appropriation of the time of others.

Capitalism creates, demands, reproduces, expropriates, abstract labor; labor not in its essence, but in its alienated essence, as a loss of time. How often have we heard that the “value of the commodity is the socially necessary labor time for its reproduction”? Countless times? And countless times that definition has been incorrect, incomplete, lacking the quality that makes value a limit, an obstruction; that makes value obsolete, destructive, antithetical to human emancipation. The value of the commodity is the expropriated, alienated, dispossessed, aggrandized, useless, labor time necessary for its reproduction. 

S.Artesian

February 5, 2012

address all comments to:sartesian@earthlink.net 

Hair[cuts] of the Dog[s]

Part 2

4.   Two weeks before the summit, the European Union announced that it was setting a deadline for the development of, and agreement upon, a comprehensive program for saving its currency and itself from the insolvency of the sovereign and banking debts of its member nations. 

Publicizing the deadline date did not exactly instill confidence in the financial markets.  Actually, the deadline announcement elicited nothing more than a shrug of the shoulders and an uncomfortable feeling of déjà-vu among the bondholders, and those traders who had become holders against their will since the markets had frozen in the chill wind blowing from the south. 

“Haven’t we already done that?  Didn’t we say we had already done that?  And twice?  Didn’t we do that last year, in the summer of 2010?  Didn’t we that this summer, in July?”

What might be déjà-vu for the rest of us is, and is always a repetition compulsion for the bourgeoisie and their agents.  Yes, they had said that in June 2010.  Yes, they had said that again in July 2011.  Yes, they were saying it again in October.  And yes, they would be saying it again in December.

Déjà-vu and short-term memory loss are the two poles measuring the full range of the bourgeoisie’s neural processes, just as fear and greed measure the full range of their emotional processes.  This year’s model of déjà-vu and short-term memory loss was the vision of a more “robust” [robust meaning unrealistic] European Financial Stability Facility [EFSF]. 

The members of the EU had guaranteed this bailout fund to the tune of e440 billion, which was, of course, inadequate to the task.  The 440 had been reduced to 250 after the commitments to Greece in 2010, and then Ireland and then Portugal. The summiteers had to come up with a program to expand the protection afforded by the EFSF umbrella and they were ready to consider anything—anything that is except actually purchasing a bigger umbrella.  Germany, Finland, the Netherlands were convinced rain, even if it is acid, even black, is good for the spirit, especially the spirit of those watching others getting soaked.   France wanted a bigger umbrella but certainly couldn’t afford one.  Britain… well as Sarkozy said to Cameron “You’ve missed a fine opportunity to shut up.”

The EU summiteers proposed two methods for expanding the EFSF.  One proposed method was to turn the EFSF into an insurance fund—insuring the first 25% of losses on purchasers of sovereign debt, thus turning the EFSF into a “mono-line” insurer of the Ambac variety [Ambac filed for bankruptcy protection in November, 2010].

The second mechanism was that old favorite, the “public-private partnership” whereby EFSF funds would be used to guarantee the “value”— actually, the purchase price private institutions paid for sovereign debt.    

What do the bourgeoisie do when they are a bit short of their common currency, OPM, other peoples’ money? They borrow. They leverage. They structure. They take the debt-service payments of a debt instrument [mortgages, auto loans, credit card debts] and package those debt-service payments as an equity, a specialized, structured investment vehicle  The “as if” equity then becomes the basis, the collateral, for the sale of more and expanded debt instruments—of leverage. These collateralized debt obligations then can be combined again into super or synthetic CDOs ad infinitum and ad nauseum. 

All the compounded debt service payments depend upon the revenue stream attached to the original debt instruments.  When the reproduction of that revenue stream falters, we get….Bear Stearns, Northern Rock, Lehman Brothers, AIG,  RBS, Wachovia, Dexia; we get 2008.

Essentially, the EU proposed leveraging the EFSF, the fund that was supposed to manage an orderly deleveraging of non-performing EU sovereign debt.

The US Treasury, Federal Reserve, and FDIC attempted a PPIP in 2009 for the “legacy assets” [i.e. non-performing loans] that has so encumbered US banks.  In the US scheme, the bank had to offer the debt instruments for bid, accepting the highest bid.  The private bidder, of course, was certainly not going to bid the notional [face] value of the securities. The entire basis for the PPIP was the fact that there was no market for these legacy assets.  There was no effective process of valuation.    The FDIC would guarantee 85 percent of the bid amount, by guaranteeing the bonds the bidder would issue for that amount.   Of the remaining 15 percent, considered the “equity portion,” half would be funded by the US Treasury.   A private purchaser was responsible for the other half.   .

What recourse did the FDIC have if the private purchaser failed to dispose of the legacy assets and make the payments on the FDIC guaranteed bonds?  None.  The legacy assets were the collateral for the loan issued to buy the legacy assets. So if the partnership failed, the FDIC would seize the unmarketable, non-performing legacy assets. Now that’s what I call leverage.  And what the bourgeoisie call a public-private investment partnership.

The US Treasury was optimistic about the prospects for its PPIP program, anticipating the movement of hundreds of billions of dollars of non-performing loans into these partnerships for resale and liquidation.  However, when the program was closed, only $30 billion is such assets had moved into the program.

The US PPIP failed for essentially the reason it was deemed necessary—there was no market for the unmarketable securities.  The sellers, the banks, did not want to sell into the discounts, and thus realize the loss.  The buyers could not establish a price floor based, at the very least, on     the anticipated revenue, the interim payments, the debt service, until sale.

The US PPIP had the advantage, at least, of recognizing the need to discount the legacy loans, of the banks absorbing losses.  The US PPIP also had the advantage of having sufficient funding [at least in theory] from the getgo to actually sustain the program, and “cover” the private “partners.” 

The EU “plan” lacked both those elements, as the PPIP’s origin was in the fact that the EFSF was insufficiently funded.  At the same time, the EU summiteers were swearing that Greece was an exception, a “one-off,” a unique situation, and that all other EU sovereign debt would be redeemed by its issuer or an EU body at face value.  Hence no purchasing the debt at a deep discount and no basis for arbitrage.

Jens Weidmann of the Bundesbank took up the song:

 “[The proposal] embraces the same kind of financial instruments to boost effectiveness that many blame for causing the financial crisis in 2008.”

And

 “The envisaged leverage instruments are similar to those which were among the sources of the crisis because they temporarily masked the risk.”

When the sovereign debt markets opened the next day, they were speaking German.

“Risk” which not so long ago had been the badge of courage for our brave bondholders was now scorned.   “No risk, no reward” had been transformed into “risk, no reward.”  The “workout” mantra, a meaningless phrase mumbled repeatedly, numbing the mumbler to reality, of “no pain, no gain,” was replaced by the European Commission’s workout mantra, “no gain, all pain.” 

The entrepreneurs’ ode to joy had become fear and trembling, a sickness unto death.

5.   The bond markets regarded the summit statement as boilerplate, that standard language applying the usual conditions to the ordinary transactions, when the markets themselves were hardly in the usual condition, incapable of conducting ordinary transactions.  What the text on the boilerplate really said was, “days late, and dollars short.”  

 The European Central Bank held fast to its position, unsurprisingly the same position as its biggest shareholder, the Bundesbank, adamantly declaring that its resources could not and would not be utilized to bail out any EU government.  The ECB held fast to another position, also shared by its biggest shareholder, the Bundesbank, adamantly declaring that all of its resources would be mobilized to bail out the European Union banks holding the sovereign debt of the governments it would not bail out.

The private banks were permitted to post the sovereign debt as collateral for essentially unlimited loans.  The private banks then re-deposited the funds in overnight accounts with the ECB.  It was a public-private investment partnership that the EU governments could only dream of joining.

6.  Prior to the 2009 election that restored Papandreou’s socialists [PASOK] to power, the Amherst College, London School of Economics, Harvard University educated soon-to-be-Prime Minister, dismissed concerns over the country’s sovereign debt. ”The money’s there,“ said he.  “The markets can wait.”

Two years later the money that wasn’t there wasn’t waiting any longer.

During his period as prime minister, Papandreou had dedicated his energies to enforcing the austerity programs that the “troika” had mandated as restitution for the money that had never been there.  He had governed behind the ranks of helmeted police protecting the buildings, the offices, and the very parliament of his government from the resistance and fury of the governed. 

He had exercised his dismal wizardry, which by the way, had reduced the average income of a family in Greece by the equivalent of some seven thousand dollars, safely obscured by the curtain of tear gas that hung over Athens for days on end.

Yet on October 31, 2011, a bizarre hallucinatory fusion of the memories of his Halloween days spent in the US around Cambridge with the recognition that he was in fact Greek and it was, after all, Greece that he was governing, produced a sort of epiphany in Papandreou. 

All dressed up, goody-bag in hand, he rang the Eurozone’s doorbell and announced, “Trick-or-Treat, motherfuckers.  We’re going to have a referendum.” 

Actually he said, “The people are wise and capable of making the right decision for the benefit of our country.”  He received the following immediate responses:

“While Greece is threatening a vote, nobody will ever give Europe the resources for the enhanced [bailout fund],” Jan Poser [sic!], chief economist Bank Sarasin.

“[The vote] is a very unfortunate development…we have to do everything to prevent it,” Mark Rutte, prime minister the Netherlands.”

“Be in Cannes no later than 1100 hours.” Or else,” Angela and Nick.

At the same time, the EU suspended release of the next tranche in the loans scheduled for distribution to Greece.  

“No democracy for the birthplace of democracy.”

“The bondholders, united, will never be defeated.  The bondholders, united, will never be defeated.”

“We own 99%.  We own 99%. We own 99%.

These were the chants coming from Brussels, The Hague, Cannes, Frankfurt. 

On November 2, Papandreou, knowing to whom he owed allegiance, left Greece, preferring Cannes and its La Croisette to Athens and its parliament where his government was facing a debate on its “program” and a no-confidence vote.

Nick and Angela, having refined their good-cop, bad-cop routine picked a conference room with an unobstructed view of Ile Sainte-Marguerite, prison home of The Man in the Iron Mask, for their meeting with George.

While Angela toyed idly with the set of handcuffs she always carried, Nick put it to George, straight simple and no chaser.

“In or Out, George? Before you answer, look out there,” said Sarkozy gesturing to the pink, gray, and green island resting comfortably in the Mediterranean.  “Beautiful isn’t it?  Never guess from here that there is a completely restored and functioning prison, avec dungeon there, would you George?  Used it for Carlos the Jackal.  Plan to have him spend the rest of his life there as soon as the trial is completed.  He might like some company.  What do think George?  In or out?”

That was the good-cop.  The bad-cop just played with her handcuffs.

On November 4, Papandreou announced his withdrawal of the proposal for a referendum.

It was too little and too late.  EFSF cancelled its planned issue of euro 3 billion in 10 year debt instruments due to lack of interest, which means of course that the EFSF would have been required to pay too much interest, as the markets were discounting the face or notional value of the debt, thereby increasing the total return, and the yield to maturity of the EFSF bonds. 

“If the vehicle that is supposed to borrow on behalf of the countries that can’t borrow can’t borrow, then that may push the crisis into an even more dangerous phase,” Alan Wilde, Barings Asset Management.

See, it’s like this:  if a woodchuck won’t chuck wood, who would chuck the wood the woodchuck wouldn’t chuck? 

Papandreou returned to Athens, where upon being informed that he had triumphed against the no-confidence vote in Parliament, promptly resigned as prime minister. George made way for Lucas Papademos, the former governor of the Bank of Greece, recent vice-president of the European Central Bank, and, most importantly, the man with the Frankfurt connection.  He was a “Senior Fellow” at the Center for Financial Studies at the University of Frankfurt.  Maybe Germany wasn’t about to put its tanks in the streets of Athens, but it sure would send its bankers.

7.   The outgoing ECB president, Trichet, had been steadfast in his refusal to “rescue” any country by committing the resources of the bank to securing the trading, and refinancing, of sovereign debt instruments.  He had been that steadfast even as he utilized the bank’s resources to purchase sovereign debt in the secondary markets, even as he accepted sovereign debt as collateral for loans to private banks.  There was no country he was more steadfastly committed to not rescuing as he was steadfastly committed to not rescuing Italy…. as long as Berlusconi was premier.

Was Trichet lodging a monetary protest over Berlusconi’s dalliance with 17 year olds?  Was Trichet enforcing an embargo on governments where the prime minister installs girlfriends and former girlfriends in official positions?  Of course not, Trichet is French.  He knows why men enter politics.

Berlusconi had wavered in his commitment to the ECB to take Italy down the path already taken by Ireland, Portugal, and Greece.  He could not be trusted to attack wages, and even more importantly, to attack past wages, deferred wages, pensions.  There is no future for capital without wasting, and wrecking, the past.

Italy, with its euro 1.9 trillion in sovereign debt wasn’t too big to fail, it was too big to save.  No bailout fund could absorb the burden of supporting that amount of non-performing debt if Italy were frozen out of the bond markets, so it had to adopt the measures the “troika” had imposed on Greece, willingly, autonomously, without recourse to loans from the EFSF.

No meetings in Cannes, Berlusconi simply had to go.  It had to appear that the bond markets were the forces behind Berlusconi’s defenestration.  After all, neither France nor Germany was willing to put its tanks on the streets of Rome. Besides, if Merkel and Sarkozy had summoned Berlusconi to Cannes, he just would have shown up topless…and with a date.

So when the bond traders started another round of crack the whip, driving up interest rates on Italy’s ten year notes in the secondary markets, Trichet decided to intervene by not doing what he had done so often before; utilizing ECB funds to enter the markets, purchasing the debt, and blunting the rise in interest rates.  Nero had fiddled while Rome burned.  Trichet wouldn’t fiddle, thus allowing the Roman to burn.

Journalists, economist, financial advisors, traders all did their jobs when the interest rates broke through the 7 percent level.  “Interest rates that high are simply unsupportable,” said one, said all.  The EU bourgeoisie had found their marker, their indicator, their summum bonum and maximum malum, for all things economic.  Below 7%, good, 7% bad, above 7%, unsustainably bad. 

Of course, the 7% rate in the secondary markets didn’t cost Italy an extra penny, as it applied to debt that had been issued previously, underwritten previously, and sold previously.  It did cost the banks which held the 10 year instruments a bit, as the value of their holdings declined. It could mean that more collateral would have to be posted to get the low interest loans from the ECB.  It would mean that the EU banks, already pressed to increase capital levels to offset accrued risk, that is to say the accumulated devaluation [another marvel of capitalism’s oxymoronic being], would require more capital.

It would cost Italy a bundle in the future, on its future debt issues, provided such issues escaped the fate that had recently befallen the EFSF and there was even a market for future issues.  Finance, to repeat what all traders know, is nothing.  Refinancing is everything

“Lay waste to the past.  Destroy their pensions.  Preserve our future.  Protect the rollovers,” demand the bondholders, traders, bankers, central bankers. “If not, we’ve seen the future and you can’t afford the vig.”

Seven was the lucky number, with luckiness being next to godliness in the bourgeoisie’s order of battle.  Seven percent however was the unluckiest number of them all. 

Emerging from World War 2, the bourgeoisie of Europe thought that they had found a fix to the competition that periodically led to destruction of the continent.  That solution was supposed to be in a customs, trading, currency and capital union.  The markets however were telling the bourgeoisie that the currency and capital unions were the problem, and they, the markets were ready to drown the EU in their own fix… which was the 7 percent dissolution

Berlusconi had survived more than 50 no-confidence votes during his tenure as Italy’s Il Primo Ministro.  It was, however, the approval of his austerity budget that signaled his downfall as the budget was passed due to, and only due to, the abstention of members of the opposition parties, allied parties, and even his own party. 

Once Berlusconi agreed to vacate the premiership for Mr. Monti, the ECB intervened in the sovereign debt markets in the attempt to push the interest rate on Italian government debt below the 7 percent dissolution mark, thus bailing out the government it had sworn never to bail out.  This leads us to an important question: When is a bailout not a bailout?  

“Wenn wir sagen es ist nicht,” replied the Frenchman Trichet.

“Dies ist kein Rettunspaket,” answered the Italian Draghi.

8. Berlusconi or no Berlusconi, Papandreou or no Papandreou, the October Summit did nothing to calm the November markets.  On November 16, panic swept the European bond markets.  Germany was unable to find buyers for 40 percent of a euro six billion bond issue.  Individuals and corporations moved deposits out of EU banks, and out of EU currencies, including the euro.

Finance is nothing.  Refinancing is everything.  European Union banks had been frozen out of the short-term commercial paper money markets, utilized for day-to-day operating costs. For months, US mutual funds have refused to rollover the short term debt as it came due. 

European Union banks have also been frozen out of the long-term capital funding markets, unable and unwilling to risk the response to senior bond issuance.  Market refinancing to the banks had been pretty much restricted to “coco” instruments--  “contingent convertible” obligations, which are debt obligations that would convert to equity stakes if the amounts the banks held in their capital tiers [tier 1, 2,etc.] dropped below specified levels. 

The problem is that for the “cocos” to be approved by the European Banking Authority as instruments for replenishing capital, the conversion triggers are so “fragile” that the convertibility is practically automatic providing almost no security for the bondholder as the bond is converted into equity, ownership shares with no claims on assets.  This in turn requires the issuing banks to increase their coupon payments to levels well above the “unsustainable” 7% dissolution mark.

The “coco” is in essence, the flip side of the asset-backed-security, of the collateralized debt obligation, as the bond liquidates itself into an equity pool upon the failure of bank assets to produce sufficient earnings. The bourgeoisie not only peddle their hair-of-the dog-that-bit-you cure for what ails their machinations, they also flog their hair-of-the-inside-out-dog-that-will-bite- you-soon alternative.

Cocos to the contrary notwithstanding, the ECB has become the lender of only resort to European Union banks, providing overnight, one week, three month, one year, and three year loans to the European banking network   And what do the banks do with the “unlimited liquidity” provided by central bank?  They deposit the loans in overnight, one week, three month, one year, three year accounts with the European Central Bank, of course.  The more liquidity the ECB supplies to the banking network, the more cash the banks deposit in the ECB.

As a result of its generosity, the balance sheet of the ECB, the assets held on its books for loans extended, now measures some euro 2 trillion, with the capital ratio of the ECB, the paid in cash from its shareholder EU governments that it refuses to “bail out,” relative to those loans, is far below the levels the European Banking Authority requires for private banks.  What has not resulted from the “unlimited liquidity” offerings of the ECB is the refinancing of the assets the private banking network holds on its balance sheet.

The banks will require approximately euro 700 billion of refinancing in 2012.  Eurozone governments are estimated to require a total of euro 800 billion in additional and rollover financing in 2012. 

These amounts are trivial, however, in comparison to the corporate debt, in bank loans and bond issues that EU corporations must refund in the next four years.  That amount is a cool euro 4 trillion.  The EU banks hold three-quarters of that outstanding corporate debt.

9.   The central executive committee of the European Union called the European Commission demonstrated to the satisfaction or dissatisfaction of all that it had no economic program to remedy the sovereign debt crisis of its member countries. The ECB established emphatically through the inability of its “unlimited liquidity” programs to restore liquidity to the financial markets, that the predicament of the European Union banks was not a “liquidity crisis,” or a “credit crunch,” but rather a matter of solvency.  But failure can be its own reward, just ask any CEO picking up his or her paycheck on the way out of the door of a company in liquidation.

The reward for our merchants of failure isn’t in the resolution of the solvency crisis, but rather in the use of the solvency crisis to suborn the budgetary processes of the member countries of the EU to the social policy and program of central bank.  Where the European Central Bank pretends to an “independence” from government policy, it makes no such allowances for government independence from its policy. 

And so the October summit statement introduced inside the shell of “haircuts,” the leveraging of the EFSF, under the guise of greater coordination, couched in its own boiler plate language, the subjugation of it member countries to a single fiscal policy.   The summit statement proposes that each eurozone nation adopt constitutional requirements for the government to maintain a “balanced” budget; that each member state submits fiscal and/or economic policy reform plans to the European Commission for pre-view; that each member adhere to the recommendations of the Commission. 

Those are the proposals for governing the governments of the states without “excessive deficits,” i.e. requiring any special economic assistance.

For member states already encumbered in the “excessive deficit procedure,” the summit statement proposed that national budgets be submitted to the European Commission before submission to the “relevant national parliaments,” and that the Commission will maintain a monitor, review, and amendment capability over the course of the budget.  

Where before the universal warning had been “Beware of Greeks bearing gifts,” now the warning was “Beware of those bearing gifts to the Greeks.”

Finally, however, the European Union had its policy, its program, and its new intra-continental, inter-national anthem:  Bundesbank über Alles!

As the bond market turmoil continued through November, the European Commission pushed forward proposals to expand its authority over national budgets, including the ability to request revisions of draft budgets.

The structure of the EU, which would not and could not be changed to allow the Union to issue a single common Eurobond,  supposedly would and could be changed to allow the European Commission to, in essence, put a member state into receivership.

To be sure, there was some concern among the member states.  Even Sarkozy felt a bit of discomfort being so close to Merkel.  Sarkozy proposed that the individual member states exercise their sovereign powers in electing to submit to the super-sovereignty of the European Commission, while Merkel preferred the power to be concentrated in the Commission and the obligation in the members. Obviously it was time for another summit to once and for all resolve the sovereign debt crisis and propel the Union forward to its future of unencumbered prosperity.

For the proposals to be adopted by the European Union, as a union; to fund the bureaucracy inherent in authority, review, and enforcement, the member states would have to agree unanimously to the changes [and dispense, it was fervently hoped, with messy parliamentary votes, not to mention the nightmare of referenda].

The summit was set for December 9, 2011, and on December 9, 2011, the world was privileged to see the prime minister of Britain’s government of the posh and the twits, by the posh and the twits, for the posh and the twists, that runner from the floor of the London Stock Exchange, that messenger boy from the financial institutions located in “The City,” David Cameron, hold an entire continent for ransom.  Cameron, whose own policies of retrenchment, austerity, and deficit reduction, were expected to increase his government’s borrowing, declared that no economic reorganization would be allowed unless it guaranteed the right of his friends, his schoolmates, his rippers, his swindlers to rip, swindle and conduct business in their accustomed manner.   

“God Save The Queen,” he concluded.

Sarkozy, not missing a beat, channeling the Sex Pistols, responded:

“She’s made you a moron,

 A potential H-Bomb”           

Merkel, who had received her higher education in the then East Germany, and had satisfactorily completed her required coursework in Marxism-Leninism, simply stared at Cameron and muttered in German:

“Trotzkistischen Zerstörer!”

So...so this is the way the summits end, not with bangs or whimpers, but with old songs. 

New music, meanwhile, is out there, waiting to be composed, orchestrated, conducted.  There’s a new music army tuning up in the streets.

S. Artesian

January 8, 2012.