Translated from Gegenstandpunkt: Politische Vierteljahreszeitschrift 4-1994, Gegenstandpunkt Verlag, Munich

Currency and its Value
The Competition of Nations for the Wealth of the World

No one has any doubt that the exchange rate of currencies is of great importance. To the everyday observer of the world of economics this statement seems more or less self-evident. Not only are the figures published daily — they are also regularly commented on in a way that proves their relevance for more or less all kinds of economic activities and interests. Such commentaries range in tone from cool observation to fierce debates on the advantages and disadvantages of recent changes. Strong opinions are put forth as to causes and effects, guilty persons and victims, promising tendencies and perils. What such commentaries have to say — and their competence on the subject — is determined purely by the specific interest they take as the criterion for their judgment on good or bad tendencies. The one who keeps an eye on the export of commodities judges a currency drop differently than do importers displaying consternation. For banks engaged in currency trade, a rate change matters in still a different way. Whether “the markets” are blamed, or else paid compliments for their beneficial “forces,” depends on whether a favored currency is hit or if another currency has been sold off in advance of its wisely predicted collapse. Those who bring forth their arguments in the name of the national interest, however, can certainly be called the most competent experts on the subject. For this they need not even be a cabinet head or chief of a currency-issuing bank — all they have to do is choose the national currency as the object of concern and observe its exchange rate with foreign moneys from the point of view of national accounts — and they have all their arguments laid out for them.

There are obvious advantages for assessing exchange rates from this point of view.; Their way of looking at currency movements doesn’t stoop to evaluate the state of the national currency as a mere condition for one or another private business interest. Rather, they consider and desire to maintain the utility of the exchange rate from the point of view of the institution that guards and guaranties the money of the nation — the state. This way of looking at and evaluating the condition of the exchange rate is all the more pertinent to the subject as governments themselves include the concerns of the business world in their calculations: they acknowledge success and failure in the fields of foreign trade and international credit as decisive factors of their own accounts, and consequently as relevant data for assessing the state of their currency. Conversely, they view their own budgetary conduct as a factor that affects the exchange rate as well as growth; whereas foreign exchange traders who on their part deal with the exchange rate as a factor in their calculations take the intimate association of finance ministers and central banks with money as grounds for holding them responsible for their difficulties.


The commentaries published in the business section of a newspaper are not interested in the explanation of the exchange rate, but solely in the — possible — consequences that these movements might have for the success of this or that economic interest. What passes for insight into the columns of current rate figures is merely a list of cited interests, i.e., of calculations of the advantages and disadvantages envisaged by the various entities engaged in foreign trade; for them, the exchange rate at any given time is a more or less useful instrument for their calculations. It does not bother the economic journalists who take the part of these interests in their essays in the least that the different claims contradict each other a bit: they simultaneously present themselves as advocates of branches of industry, of owners of securities, even of consumers and the central bank, demanding of the exchange rate that it satisfy competing business interests. More often than not, this habit results in accusing the actually valid rate of a currency of not being the correct one. Such idealism openly makes an appeal to the nation whose right to any amount of profit from foreign exports is taken for granted by economic journalists. And, whenever they notice that they are simply speaking out in favor of some imperialistic activities in their “analyses” of oh-so-peaceful foreign trade, they supplement their partisanship by the impartial hypocrisy of caring for the “world economy” as a whole, whose beneficial progress in everybody’s interest naturally requires suitable rates of exchange…

In all these currency-qua-weather reports involving dollars, euros, pounds, and yen, one thing is revealed: these are matters of the highest importance for the nation. Nothing is heard about the reasons for the ultimate importance of the currency rate and its fluctuations in a liberal economy; the question, why the weal of great companies and the woe of entire nations is decided in this way is not even posed, let alone answered. Instead, the explanations given more or less concede the irrationality of capitalism, to wit: “the markets” firstly bring about changes in the exchange rates of currencies; and secondly, weigh their two forces, supply and demand, in accordance with their strict criterion of the trust the currencies inspire.


The findings gained on the grounds of these economic dogmas are helplessly circular. The justifications cited for the gain or lack of trust in, for instance, the dollar in relation to the euro all more or less boil down to the banal statement that the one has become more attractive and, obviously the dollar has been known to be “overvalued” for a long time… None of the additional remarks make the given reasons for currency change any more plausible. “Fundamental” factors are supposed to speak well for the currency — the pundits are all the more amazed when financial market participants sell dollars in spite of “good economic trends.” That is why the business circles that haven’t been sticking to their own criteria voice concern as to the “volatility” of the markets that have overwhelmed them.


It can not be overlooked that the characters involved in the global currency trade have become skeptical — less about their own arguments than about the successful outcome of the activities they participate in on account of their profession. They worry about the precarious state of the international money market, the unpredictability into which they have maneuvered it by their own bizarre calculations. Having taken out a subscription for making a profit on expert appraisal of the financial trade’s tendencies, they lose their faith in the reliability of their criteria for action. It’s no surprise that the participants in the global financial business perceive its precarious state. It is more astonishing that nobody can be found willing to distance himself from the daily disseminated concerns about the latest “developments” on the financial markets, and to criticize the circus that plays itself out in elaborate contrast to unemployment and starving Africans. Especially as this circus arises from the antagonism between the various nations in which the free market economy is raging, and gives this antagonism a new impetus.

The reason for the comparison of currencies
What the exchange rate really brings into relation

a) In agreeing to the exchangeability of their currencies, sovereign states aspire to transcend the territorial limitedness of their national moneys in order to gain access to worldwide resources of wealth.

Currency — that is the money which a nation reckons in. What is counted in terms of this national standard is as different as the classes and ranks of a society organized and demarcated by a state. Many people acquire money by work, for which they are recompensed, more or less, by others; and they spend their earnings right away on the necessities of life. A minority do not really spend their money at all, but invest it in order to accumulate it. The public sector deducts part of the money income of its citizens in order to create a huge, powerful state. Poverty, wealth, power – the most contrasting things are measured by money. Yet, the standard of money unites capitalists and workers, bankers and politicians. It is unmistakably national.

Take a different state — and things are reckoned differently. However, the types of calculation, the modes of expenditure of money do not differ. Elsewhere as well, money is the purpose of all economic activity, and is earned and spent according to the amount of it somebody has already acquired. Since the demise of the Soviet Union — the last adverse exception to the system — anyone can rediscover the familiar functions of money across any border, though in a different monetary unit. Where national sovereignty ends, so does the usability of a national money, and so also begins the territorial validity of a different means of purchase and payment.

It is by this that people become aware of a fact they would otherwise never think of, namely, that money is a topmost question of sovereignty. Attached to these banknotes — that say dollar, pound, euro or yen — is a private power of disposal only because a state backs this private power with all its sovereign supremacy. These notes have no use-value[1] on their own account, but only because the state ordains that, in general, every use-value, indeed any act of utilization and consumption, depends on acquiring, holding, and handing over these slips of paper. In no way are they just some sort of arbitrary units for measuring material wealth that could otherwise just as well be determined by its useful qualities. Nor is money some kind of coupon for distributing the national wealth. Instead, as the bearer of the right of disposal, they are the actual wealth of those nations that run a capitalistic economy, and that means of all of them.

Admittedly, only as far as the reach of national sovereignty. This is implied in the fact that this particular kind of wealth is a social relation powered only by force. It is not at all intended, however, that everything should revolve around money only within a nation, whereas between nations a different definition of wealth should be valid. If the wealth of a nation really exists in its money, then the economic power of a nation and its moneymaking citizens also and especially over foreign countries lies in the money that is earned there. The private power of disposal over the world of commodities, the very essence of money, is intended by the state that guarantees it to be the exclusively valid form of wealth.[2] The validity of the national currency may indeed end at the national border, yet this form of wealth exists beyond the border, opposing the universal claim that money represents if its power of disposal is restricted to the territory of the issuing country. Money is more than its nationally limited formula — this is intended by any state that prescribes the making of money to its nation as the economy’s aim.

And states agree on that once they declare their currencies to be exchangeable, or “convertible.” Through the exchange of currencies they recognize the absolute validity of money that all currencies aspire to.

Incidentally, in the times when precious metals were actually used in circulation, this connection was a little more concrete, as the material form of money[3] was the same for all trading nations.

b) By means of a treasury, a state guarantees the outflow of world-money from its country as a condition for the exchangeability of its national money.

The functions carried out abroad by a nation’s currency are the same as its domestic functions: purchase and payment. Hence the challenge for everybody to ascertain the difference in the use of foreign money, namely, to compare whether foreign money achieves the same results in its familiar functions as the one at home that has been exchanged for it. This is not self-evident, not only because nationality plays a part in this examination once again; but also what matters is who is drawing currency comparisons and to what purpose. The one who blows what’s left of his annual income on foreign meals and beverages reckons differently with the “purchasing power” of his money than does the business world, which is concerned with the relative performance of domestic and foreign money as far as accumulation is concerned. This includes the purchase of commodities abroad, which, however, does not exhaust the matter. The profitability of an investment also lies in its sales proceeds; and the average consumer may gather from the daily published level of interest rates and other yields that there is more to compare in the performance of national moneys than just the cost of a beer at the beach and gas for the car.

In any case, it is not crucial whether or not the standard of limiting all the requirements of living, defined by the amount of wages, is exactly the same everywhere. It is important, however, whether capitalistically employed wealth holds its value and its accumulation proceeds at least as well when exchanged into a foreign currency. That is how national currencies measure each other in the exchange rate; the exchange subjects them to a comparative test.

And the result is normally anything but equal validity. The states that have ordained capital as the means of existence for their societies themselves know this from the start when they, in order to promote the growth of capital, agree to go beyond the local limitation of the usability of their currencies by making them exchangeable. This is in no way finished with the opening up of foreign trade by means of fixing the exchange rate. Sovereign states demand an economic guarantee from each other for the inter-national validity of their respective money. The exchangeability of all revenues and profits gained in a particular currency by businessmen from all over the world must be ensured by the currency’s custodian whenever owners of those funds do not want to reinvest them in the country where they were earned. The sovereign therefore needs a treasury with which it can vouch to its foreign “partners” for the all-round usability and undiminished competitiveness of the money that it has brought into circulation and is earned by foreign entrepreneurs. Here also things have changed a bit since the days when precious metals circulated, as modern nations use a gold treasury to fulfill their obligation to settle foreign claims only as a last resort. From the first they use reserves of foreign currency, which build up as long as their entrepreneurs earn foreign money. What is vital in any case is that a state be demonstrably solvent in a currency other than the one it guarantees by its power alone. It must have on hand a currency that assures each creditor — the possessor of either its money or of claims on it — access wherever some promising business attracts him; a currency that thus allows the limitedness of locally earned money to be stripped off; a currency over which the obligated state has disposal because of the successful economic activities of its society, and not just because it “minted” it — in this respect, therefore, true world money.

This requirement is informative. It informs us what matters in the exchange of currencies.

c) In free trade, the productivity of the different national economies are compared. The exchange rate expresses the necessary result: the one-sided expropriation of national wealth.

If international trade is to proceed on an ongoing basis, not only do all technical precautions have to be taken so that purchasing and selling, investing and profit-taking can be done across the boundaries separating currencies. The master of money, the state, has to vouch for real, capitalistically usable wealth — i.e., money — being able to flow out of the nation. And this not only from time to time, and in order to be regained right away. From the start, the state has to take precautions against a case occurring as a consequence of permanently negative trade balances: the result that foreign trading partners are no longer prepared to carry away their earnings in local currency in order to pile up a valuable store of foreign reserves at home, but want to see a different currency. The nation has to ensure this claim will be met by its stock of gold and foreign reserves, i.e., guarantee a transfer of wealth which will continue even if the convertible currency of the country — its autonomous monetary wealth — is no longer desired. This is the imperative condition for taking part in international business. That condition given, free exportation and importation will — with a certain logical consistency and determination — amount to one nation’s one-sidedly appropriating wealth at the expense of another; in other words, transferring wealth in the form of money.

This ultimate aim of the whole undertaking that so innocently begins with some exports and imports is not apparent in the individual foreign trade business. We have a capitalist buying and selling in order to attract purchasing power to the products of his business by superior profitability, to boot competitors out and to make profits. If he thus ruins his domestic competitors, he has pushed through a new level of prices and profits there, and on this new basis competition for the most profitable production will continue. As capital grows so grows the wealth of the nation. But in foreign trade it is different. Abroad, the competitive success of a foreign entrepreneur will bring the production of some local wealth to a standstill or keep it from emerging; this in and of itself isn’t necessarily considered bad, since cheap, foreign goods can often improve a nation’s productivity and therefore its competitive position. But with increasing foreign trade and the emergence of a world market, what starts as a way to include foreign suppliers and buyers in a capitalist’s business and expands to a competitive struggle between capitalistic firms transcending borders, turns into a competition that all entrepreneurs must stand up to, which therefore affects the nation as a whole with all its usual prices and profit rates. If everything normally working inside a nation is no good internationally, if failures in competition are not offset by successes but become a trend due to inadequate capital productivity as a whole and on average, then the national trade balances will show increasingly clear red ink. Cross-border moneymaking — from which some businessmen in the losing country may all the same continue to profit — turns out nationally to be a loss-making business. In this case it’s irrelevant that commodities have always been supplied for money, that equivalents have in this respect been exchanged between the nations. It is revealed as a matter of fact that only abstract wealth existing as money is final, real wealth in capitalism. This wealth wanders over the border, against the flow of more profitably produced commodities. The nation which lives on the products of foreign producers does not have an easy time of it; it becomes poorer instead.

That is what has to happen when nations compare what their own money achieves in comparison to a foreign one. Money is money; but when a nation gets mixed up in world trade and thus into international comparison, and if national production then turns out to be less profitable on average than elsewhere, then domestic purchasing power nourishes the competitors’ growth — and worsens the nation’s competitive position even further.[4] The other way around, the reverse is true. By civil means, the exchange of currencies carries out effectively and continually what wars had been necessary for in the distant past. While successful businessmen are occupying the world’s markets, their home countries “capture” the money of other nations. In the face of their own successes, they raise anew the question of how much real wealth is still represented by the money of a nation whose accounts are permanently in the red. States whose capitalists do well worldwide and bring growing wealth back to their own lands become very demanding. Because they enrich themselves at the expense of foreign countries, they demand that their defeated partners hold foreign reserves to insure that the enrichment works out.

Of course, this assurance is quite necessary for another reason as well.

d) The exchange of national moneys also compares the inflation of national moneys. The result is once more the one-sided transfer of national wealth out of one country into another.

By fixing an exchange rate between their currencies, states plainly acknowledge these to be money, precisely in a fixed ratio to their own currency. But things don’t stay that way. Having obligated their citizens to acquire the national means of payment, the nations exercise the freedom due a sovereign ruler to incur debts within their territory. On the one hand, the states authorize their banks’ creation of credit. The resulting growing demand for the generally accepted means of payment is met by their central bank in accordance with fixed rules. As a consequence, the amount of money capitalists are able to earn is fundamentally emancipated from the sum of commodity values they produce. On the other hand, the states themselves create, out of thin air, considerable amounts of money that set worthwhile goals for the capitalistic pursuit of profit. They do so in accordance with their custom of running up debts with their society; a habit they have copied from their capitalists and freely varied. In other words, they attract part of the purchasing power of society they create in their role as central banks by issuing paper money. This method, which conforms to the capitalistic system, has generally been the way by which modern nations have entirely unburdened their money from the necessity of being itself of value, or at least of being some sort of promise for a certain quantity of pure, precious metal. Since then, in all the nations which have made everything dependent on money, large amounts of tokens of credit “secured” by nothing but the force of state power circulate instead of money.

All states do this, as mentioned above. But they do it to different extents and in different relations to the money wealth produced by their societies. All states thus indeed create plenty of room for the banal art of the entrepreneur of exploiting all effective demand with their supply, in other words, of taking whatever they can get hold of. In the end, however, they increase domestic prices so extensively that the custodians of the currency view the result with some degree of concern, namely, as inflation; that is, as — literally — an inflation of credit and money without a corresponding growth of value. And value is the stuff that is anticipated by credit, and of which money is after all the sole and definitively valid representative. This inflationary trend logically turns out to be the more severe the more a government disregards the amount of actually produced national wealth in creating its own solvency. It may do so only because the amount does not suffice for its needs; it may in fact intend to boost growth of the capitalistic economy by an “injection of money” — need and wishful thinking are to no avail: a state’s indebtedness makes the measure of national wealth itself variable.

The effects on international business and the comparison of currencies don’t fail to materialize. On the one hand, there are the foreseeable effects on the competition of capitalists of different countries. The price level on the basis of which those with their higher rate of inflation have to compete, compared to the price level with which others are able to compete (their money losing value at a lower rate) favors those countries with the more stable money. Profit can more easily and one-sidedly be made at the expense of a country with the higher rate of inflation.[5] Thus, the liberties nations take with their credit money clash with the international accounts by which they set great store. On the other hand, the business partners of a country with a noticeably high rate of inflation are confronted with the practical and urgent question of what the money earned there is really worth. The fact that more of it can be more easily earned doesn’t help if it achieves less and less in relation to the stronger currency — not only as a means of payment, but especially as an advance for profitable investments. Moreover, this weakness not only affects the amounts earned at the moment by one or another businessman. All that has been earned earlier and is now lying about in different nations as their foreign reserves becomes (more and more) useless for the purpose for which these nations generally store such sums in the first place, i.e., as an assurance for foreign trade. It is revealed once again that the influx of wealth in the form of a convertible, national currency from a trading partner by no means suffices. Precautions must especially be taken that all foreign currencies coming in are and remain real value and not just increasingly useless credit tokens.

It is therefore doubly wise to keep a special eye on the weaker partner’s currency reserves. If one nation’s businesses, along with the state that vouches for their success, want to make money off of a weaker partner, demands have to be made not just for earning money in general, but rather that the earnings will be paid out in a currency more stable than the local one. Of course in this way, the exhaustion of its currency reserves is all too foreseeable, as is the affected nation’s disclosure that its self-created money no longer represents money at all — at least not as much wealth as promised in the exchange rate. This disclosure is not made definitely and finally on one given day, but in the form of successive devaluations. Step by step, a nation’s entire wealth is diminished by adjusting its binding standard in relation to other currencies in a new, that is to say smaller ratio. Each given exchange rate is the practical, critical test of whether or not a currency, in its capacity to preserve and accumulate the nation’s wealth, can cope with being compared to other currencies. Each revision of the exchange rate confirms by how many percentage points a currency’s comparative quality of being money once again has failed to satisfy.

In this way, the comparison of currencies continually takes stock of how far the ruin of a national money has come, due to the one-sided outflow of national wealth — and conversely, to what extent the more successful country becomes bloated with the wealth its businessmen earn abroad. And thus, by converting and exchanging currencies, the winners and losers of world trade are perpetually parting ways.

e) The ultimate result of global money-making — the insolvency of entire nations — has been suspended by international agreements, according to which debts replace actual payments. The role of debtor nations on the world markets becomes the servicing of its debts, and not the accumulation of its wealth.

Lest foreign trade come to a standstill due to the weaker partners’ insolvency, just when it is most attractive for the winners, modern nations have ceased to absolutely balance their claims and liabilities by taking hold of the store of foreign reserves abroad — or respectively, resorting to their own resources. Instead, they allow business to continue one-sidedly, chalk up the debts, insist on their repayment with interest, and use the debts as if they were themselves money.

This bad habit began with the founding of a common fund, a kind of international treasury, fed by payments from the participating states: the International Monetary Fund (IMF). These payments could be made in gold as well as in one’s own currency, which was thus acknowledged as a national expression of the absolute monetary wealth aimed at by all nations. Nations with payment problems have been allowed to fall back on this fund in accordance with strict rules, in order to balance their deficits by their precisely quantified special “right” to “draw” recognized money out of the common pot due to their “special” position — the Special Drawing Rights or SDR. The idea was that nations might now and then have “liquidity problems” which they could be helped to get over right away to prevent them worsening — of course with the knowledgeable advice of experts from more successful nations. This founding idea of the IMF has always been a bit of a lie, however. What is minimized there as a mere “shortage of liquidity” is indeed nothing other than the consequence envisaged in advance, namely that states would have to disclose, as a result of having taken part in international business, that they possess no more money. By setting up the IMF, rather more has been in fact set in motion than a system of stop-gap relief.

The global economic powers have agreed to suspend disclosures of insolvency that are technically due, and thus to prevent “partners” from bailing out of world trade despite having every reasons to do so. They have, by this means, not just postponed balancing accounts between states through payment of abstract wealth, the only form of wealth all the nations with their convertible currencies are equally out to get but so differently realize. Instead, these settlements have been replaced by the decision to acknowledge promises to pay among each other, thereby letting these promises count as money. This is not really anything new. Within their territory, and by virtue of their financial sovereignty, they take the liberty of satisfying their need for money by issuing unsecured notes that, as substitutes for circulating money, inflate the nation’s solvency. They just mutually grant this same liberty to each other by convention. They cancel the result of the permanent test to which the comparison and exchange of currencies subjects the national production of wealth and the resulting money. This generous concession towards the weaker states pursues and thus realizes the goal that the transfer of wealth from losing countries to nations which one-sidedly profit from them is not disrupted. To ensure the continuity of their access, the winners of international competition even go to the absurdity of writing down the deficits of their ruined partners as actual assets in their accounts and to insist imperturbably on their quality of being money. Of course, the debtors must vouch for all this. They have to prove the monetary quality of their debts by punctually paying interest on them — even if these payments are, never without protracted negotiations, given a respite and burdened with obligations to pay interest on interest together with the principal sum…

f) Creditworthiness has become the decisive criterion for the comparison of currencies, and the authority to judge this creditworthiness has been handed over to international money traders.

As a result of that trick, certain innovations have been introduced into the everyday life of comparing currencies.

What we have here are states — not only the so-called developing countries but respectable nations — which continue their economic life with chronic trade deficits year in and year out. Their solvency is maintained by trans-national acts that look after the international usability of their currency. Otherwise, an enormous amount of wealth, which others have gained from these countries, would have to be annulled and the continuation of business would suffer. Of course, this scheme gives rise to completely new standpoints for comparing currencies. For nations that have exhausted their solvency, whose capacity to take part in world trade therefore rests on the decision of the community of sovereign competitors to give them credit, a new situation arises. The exchange rate of the currency of such a nation no longer merely reflects their — diminishing — national productivity as means to earn money on the world market. Rather, the exchange rate is predominantly a judgment on the creditworthiness of the nation in question; i.e., on its relative trustworthiness as a debtor and payer of interest to its foreign creditors.

When this state of affairs becomes established, a new factor becomes decisive for determining exchange rates. Of all the functions and achievements of money that the exchange rate compares, the power of money to attract investment into national financial assets becomes crucial. On this basis, nations are compared economically as to the relative stability of the credit they have issued, and as to the profit attainable thereby; the success of creditor nations in earning money on debtors, not what the debtor nations can earn for themselves, becomes the decisive element for exchange rates. Trade gains as such are now only factors in the profitability of outside creditors. This puts private foreign investors in the role of decision-makers on nations’ money-earning capabilities: as expressed in the rate of return on financial investment. In such a complicated way, the nations that generously do without payment in money among themselves come back to the elementary truth of their economic system. Ultimately, it is not worthless scraps of paper for which they compete — what counts among themselves is in the end absolute, abstract wealth.

The “agency” that carries out the comparison of currencies is a creature of the global trading nations, authorized by them, dependent on them, but not under their control. We are talking about the global financial markets, “the markets” for short. The valueless scraps of national credit paper, not validated by some superior sovereign power, but by the collective decision of all the major powers, are entrusted for further capitalistic utilization to the business acumen of finance capitalists. The nations’ confidence in financial capital is only logical. Within their sovereign domain, bourgeois states already arrange and guarantee a credit system that uses debts as payment and suspends the fictitious character of this dubious equation by successfully operating with it — as long as the business deals thus initiated remain successful. It is established practice to use debts as money capital, to consider the interest as proof of the debt’s solid quality of money. That is, to derive a fictitious principal amount from earnings that this amount would yield as interest; to write down this amount as existing wealth; even to sell it or lend money on it. So cashing out is replaced by chalking up between nations, extending the old practice to the handling of international debts as well. This enables finance capitalists to prove their ability in this new arena to equate debts with definitive money in a cool and rather definitive manner — though once and for all they are not the same thing — and to use them indiscriminately — or even to value the accepted credit paper more than ready cash. Of course, along with this goes the risk that the finance business, well-known for its mercilessness, will prove the — relative — lack of value of some paper, just as it repeatedly does within national economies. States count all the more on money capitalists treating the capitalistic substance of their cross-border debentures objectively and professionally when considering them as material for their business deals. They are perfectly sure, with their new procedure to carry their competition for the world’s wealth beyond the point of solvency of entire nations, that they must conform perfectly to the logic of their favorite economy if a whole world of financial business arises from it. As if the nations’ credit paper actually had to be value when taken as such by speculating money traders, and not just declared to be value by convention! And more, as if the economic success of nations were guaranteed once the “ruling” capitalist class, in addition to their intra-national activities, also made the comparison of national debts into a profitable business for themselves.

In fact, the global trading nations dissolve their capitalistic Holy of Holies — money as the ultimate material of wealth throughout the world — into the functionalism of finance. Yet they see it the other way around and that is the way they want it: they intend the credit industry to be the practical guarantor for the ultimate equation of their debts with money, and at the same time the appropriate final authority in this system over the relative equation of their debts with money.

“The markets” have taken up this task. With such a gigantic business beckoning, they do not shirk their imperialistic responsibility.

The course of comparing currencies
How exchange rates are made

Up until several decades ago exchange rates and their alteration were affairs of state of the highest order, in the wake of which governments could fall. Today, they are the everyday business of the financial markets — a noteworthy example for the successful privatization of a public service. And, indeed, it really cannot be said of the most important nations of the capitalistic world that they have done badly with “deregulating” the comparison of currencies, that is, with handing it over to professional foreign exchange traders. All the more interesting is the question of how these guys always manage to actually come up with the right exchange ratios — or are they really in the end the wrong ones?

a) The banking sector, by handling the foreign exchange needs of importers and exporters, comes to judge the various currencies as good or bad; the exchange rate incorporates this summary judgment.

Foreign money is earned by exporters, required by importers. This branch of the business world reckons — just as does the tourist — with given exchange rates. It calculates — a bit differently from the tourist — with double prices, since business opportunities at home are compared to those abroad. But it doesn’t set the exchange rate. Producers and merchants who want to earn money across the border find themselves confronted by the exchange rate with an already-existing comparison of currencies, between the money valid in their original place of business and the money they want to earn or invest profitably elsewhere.

It is the business of their bank to procure the foreign currencies they need, as well as to keep, manage and make further use of the foreign exchange they have earned. This banking branch of business has already concentrated within itself the monetary wealth of society so as to turn it and any monetary transaction incurred in the nation’s business life into a means for its own credit business. No exception is made for foreign-denominated money, though with a supplemental fee for the act of exchanging: foreign currencies are bought at a discount and sold at a premium.

For what service the banks let themselves be recompensed in this uncomplicated way, well that depends. It depends above all on what is handed in or needed by their customers engaged in foreign trade. For a bank, after all, which collects all that and keeps an eye on the aggregate of all gained and desired currencies, one foreign currency is in no way as foreign as another. Instead, the supplied or demanded foreign currencies and, accordingly, even the domestic currency reveal specific qualities for a bank, of which the customer, with his particular and limited business interests, does not have the slightest knowledge. There are some currencies coming in and going out in large quantities. Trading those is easy, as ample influx and outflow produces fine profits on both sides. Keeping a store of them on hand is as nice an asset as is one in domestic money, for it means secure collateral for credit transactions in any currency whatever. For, such a liquid currency is quickly and easily changed in case of need into any desired means of payment. Beyond doubt, it is a good money we are dealing with here. Good currencies are, just as obviously, those which are in abundant demand, but only flowing in sparingly. In this case, however, the bank will charge more for getting hold of them, as the required amounts cannot be met out of the flow through the bank’s foreign currency accounts but must be borrowed or purchased from foreign partners. This necessity does not put the domestic currency in a good light, as there is obviously too low a demand for it. Cross-checking is provided by business deals in the other direction, namely the demand of foreign colleagues for the domestic currency. The stronger and the more one-sided they turn out to be, the larger the margin to sell the local currency dear. That speaks well for the currency in banking terms. The opposite is true the other way around. After all, there are always some currencies to be found flowing in from foreign trade customers and foreign currency traders alike in which there is no business to be made except on the fee for purchasing them. They are not asked for, hence not easily exchanged into saleable currency, hence not a suitable collateral nor basis for the creation of credit. In this case, the exchange transaction is really not finished until the currency has been changed into usable money, in the worst case at the responsible foreign bank of issue. This is a complication the customer has to be charged for by a special deduction from the official rate when redeeming it. There is doubt about such a currency. It is bad money.[6] The ongoing practice of this business delivers the summary judgment.

So, banking serves its clients engaged in foreign trade, but this is only the beginning. More, it unites the proceeds and needs of foreign traders on a national scale; that is to say, with its exchange services it transfers, on balance, wealth from one nation to another. It summarizes in practice the results of all money flowing in and out, as far as the nation, together with its trade partners, is concerned. And, by thus comparing the overall results, the currency traders make their money. Their deals are based on the final result of wealth flowing in and out, that is, on the value the respective national currencies have in relation to each other, and on the ease or trouble therefore of exchanging them against each other. This branch of business produces a comparison of what nations achieve in relation to each other, and in fact lives off it. It does so by taking into account, with its surcharges and discounts, which nations engaged in world trade, as far as it affects their own nation, come out of it wholly or predominantly with an outflow of money, and which nations enrich themselves and how one-sidedly. Business thereby is always focusing on the money of one’s own nation.[7] The foreign exchange business works in principle according to what sort of nation it belongs to. Its means consist in the value the national currency as such has — and not in the kind of capitalistic project that could be initiated with this or that sum at home or elsewhere; that is rather the business of those engaged in foreign trade.

Towards those foreign traders, the banks represent the standpoint of the overall balance of the national accounts and thus stipulate the decisive condition which trade deals are subordinated to. Foreign traders can observe from the exchange rate — on which the money traders profit — to what extent they are mere components of a nation’s overall economic life, and yet again become mere elements of a different economic territory by their cross-border business. All actual foreign trade operations are subordinated to the comparison — between what one nation achieves in relation to another — carried out by the exchange of currencies and made into an irrevocable business condition by the exchange rate. That is what the bank works with and makes money on. Starting first as a mere service for settling the financial side of export and import, the banking sector now faces producing and trading capitalists in the role of the real national collective capitalist which, with the price of currencies, gives effective notice of where the nation’s wealth stands in comparison to the rest of the world. It cares nothing at all about the particular, individual interests of its clients.

Nor are the banks guided in their unerring, overall balance of accounts, by the interests of the ideal collective capitalist, the state, the one that creates the money they assiduously exchange. For them, it is true that a nation’s currency provides the decisive unit for calculations, but no more than that. It is no more and no less than the material by and on which they wish to make money. Certainly, they also have — as does their state — a fundamental interest in having a good money at their disposal, and nobody else knows better than they do how much that depends on their nation’s achievements. Their interest, however, has nothing to do with worrying, as do governments, about the way good account balances are brought about. As finance capitalists, the practitioners of the entire, national, financial business do what they can to make use of even a bad currency — therefore at the expense of the state and import and export firms — and to earn the more easily on a good currency.

They do so in accordance with standpoints and in deals which, step by step, leave the realm of common sense behind, without thus losing any of their imperialistic expediency.

b) Money traders speculate independently of their clients needs for foreign exchange; their search for solidity results in exchange rate volatility.

In everyday foreign exchange dealings, banks satisfy the foreign-oriented commodity traders’ needs for foreign currency, exchanging earned foreign currencies for the domestic one. However, this supply and demand arising from commodity trading is only the starting point for the foreign exchange market. From the banks’ standpoint of accumulating money by trading it, they are already freed of their dependency on the level of incoming orders that continually arise from the merchants’ realized or calculated profits in purchasing and selling commodities. Right from the beginning, currency traders open their particular market intending to make use of differences which the domestic currency promises in exchange for another one. Any ups and downs in the course of business are an opportunity for them. When and how big, with how much of an advance of their own money in one or another currency they step into the action in order to take advantage of marginally lower buying or marginally higher selling prices — this is not decided in accordance with the current desires of their customers but according to the margins they calculate. As agents of the national creation of credit, after all, they do not have a problem of money supply in the sense that they might not be able to spare any for profitable business deals. As far as timing and scale are concerned, the foreign exchange transactions carried out by the financial sector are determined by nothing other than the possibility of making a profit by reversing the transaction later on. In this way future deals call current ones into being. In relation to this, orders from commercial clients to buy or sell are of a rather subordinate importance, at any rate only one of many factors. The supply and demand ruling the foreign exchange market are created by the foreign exchange dealers’ own speculation.

This kind of business has been functioning since the days when the global trading nations still kept their exchange rate strictly under state control — there were always margins to make use of there. But of course, it has soared enormously since all the important economic powers expanded the responsibility of their respective national credit industry. As at home with the interest rate, they are supposed to also determine the fair and proper price for the nation’s money abroad, with the exchange rate. Since then, money traders have been confronting each other with their bold calculations derived from their findings of whether a currency is good or bad, obstructed in no way by the authorities. Freely and grimly they haggle over amounts of hundredths of a penny until they agree on a rate of exchange at which their speculation will work out — or maybe not. In this way the exchange rate itself advances from being the starting point to being the object, means and — permanently revised — result of a trading business which bets on changes it has itself brought about.

This progress has consequences. The course of speculative foreign exchange dealings no longer merely has an influence on the conditions, i.e., on the judgments about good and bad currencies expressed in exchange rates are indeed the conditions under which those engaged in foreign trade get their currencies exchanged. Once those who serve the exchange of currencies turn exchange rates into the objects and results of their speculation, they firstly make the proceeds of foreign trade volatile to a previously unknown extent — and not only these proceeds, but secondly all the nations’ entire money wealth, private as well as public. No longer is there any money that is protected by a state power, and thus safeguarded in its legally determined value. Yet this is exactly how the global trading powers wanted things to be so as to have access to the wealth of all nations, and so that their competition would decide over its distribution. All financial assets, the most secure papers of all nations, commercial papers as well as treasury bonds, are subjected to the comparison of currencies and become unstable in value.[8] All who have to bear the especially hard burden of being rich not only have to worry now about yields. They must additionally see to it that their assets not lose value by existing by dumb luck in one currency instead of another, but rather take part in any relative increase in value that occurs.

Naturally, they can rely on their bank in this as well. The finance sector itself turns any and all investments into material for its own speculation; or more precisely, by including the exchange rate as a “factor,” it turns the financial speculation which it pursues in any one nation into an international one; consequently possibilities and risks multiply. One may advance interest rates as an argument against expected revaluation; or maybe rate crashes resulting from the comparison of currencies against predicted sudden increases in interest rates…; new constellations possible in the future give rise to actual, new options that can themselves be sold like financial commodities. The ultimate, overriding point of view in all this is thereby somewhat primitive. Since the speculators make everything insecure, every security volatile, they pursue a hoarder’s ideal; namely, the stability of value. By pursuing the ideal of an indestructible financial investment they actually admit the truth — denied a million times — that genuine money, and nothing else, matters in capitalism. Conversely, their tireless search for the most stable currency is the driving force in the uncertainty which they themselves bring into their own world of interest-bearing securities. — And, of course, banks encourage their clients to participate in all their financial adventures, and even more readily make them liable with their deposits.

It is precisely by means of this circus that the worldwide distribution of credit is decided, the credit with which producing and trading capitalists of all the various nations do business, and their states engage in economic policy. And, in this tricky way, the flow of wealth between nations is steered, the nations’ competition decided and advanced. By putting the nations’ credit money at the mercy of their speculation, “the markets” with their infinite array of financial instruments rise up to the function of a real international collective capitalist that turns the money of the entire world into the basis of a global credit superstructure handled by them. This is the consequence of the fact that the leading nations of the capitalist world have empowered their financial entrepreneurs to undertake every sort of cross-border financial activity.

Indeed, a new exchange rate results every day. How they continually bring this about, the interpreters of “the markets” themselves don’t rightly know — but none of them lose faith in the madness they help foster.

c) In all the absurdity of speculation on their own speculation, money traders are ultimately drawn to a nation’s international business and political success, to which they make the exchange rates conform.

The exchange rates produced by speculators are in no way the “equilibrium prices” at which some sort of “real” supplies and demands intersect. They are themselves taken as arguments in investment decisions and determined by the latter. Yet, how are these decisions made?

To proceed properly in this, the foreign exchange traders have to know about everything but need comprehend nothing — neither the essentials of their business, nor the causes for national competitive successes, nor for currency crises. It would indeed only be an obstacle for them if they understood what is actually brought into relation by them, compared in practice and even ultimately decided by them. What they do need for their business is “information,” precisely about indicators of “where the trends are heading.” And these, “the movement of the markets,” are in fact their own movement, on which consequently all depends for them. Bet earlier than others on a persistent rate movement, then the days and hours they have in advance of, and the cents they can scrape off their colleagues makes up their profit — provided of course the rest of the guys follow and confirm the tendency. Otherwise, those who have speculated in the opposite direction will win. As a consequence, it is necessary to notice the indicators the “markets” follow before “the markets” do. It’s all fine and dandy if they follow for no other reason than that somebody has noticed something or other, since the best speculation is the one which sends out the most effective signals.

Of course, all that is hopelessly circular, and that is also no secret for the “bulls” and “bears” on the world’s markets. Rather proudly, they admit the irrationality of their business. Although if asked they can give a reason for every movement in rates, they know as well that the same movement may persist for quite a different reason only an hour later, or that quite a different trend may follow for exactly the same reason. They occasionally shake their heads about themselves and their kind while once more betting on a new trend. In all their lunacy, they ultimately consider themselves bold and adventurous, and once more thoroughly delude themselves.

For, although everything imaginable concerning the question of indicators for successful speculation can be assigned a meaning — economic “fundamentals” and political “facts” all jumbled up, credit decisions here and bankruptcies there, a failed legislative initiative in an important country, a strike, or even the President’s cough — the point of view, however, from which the speculators search the world for indications, taking note of some things but not of others, is perfectly clear. They direct their attention to anything remotely related to successful business and successful power, i.e., to the ability, inherent in the capitalistic wealth a nation has at its disposal, to push through politics; and to the economic means of a state power which has global political ambitions. Not a bit of “risk” nor “anything goes.” It is precisely the speculators incessantly running from one trend to the next who are the most anxious and hard-boiled opportunists of power — they don’t want to miss the boat on the newest politico-economic power shifts that they themselves help to bring about.

So, what do the foreign exchange traders achieve for their money?

To start with what they don’t do: they do not add anything to the wealth of this world. For all their hustle and bustle and pomposity, they do not alter the banal truth that the capitalistic wealth of nations is exactly as great as commodities can be sold at a profit, and that tokens of credit do not increase this wealth one bit. The world would not be poorer — in any useful goods, nor even in genuine, abstract wealth — if the world of currency speculation did not exist.

Nevertheless, international capitalism in its entirety could not exist without this superstructure. Currency speculators mediate the course of business between nations. They put the states’ decision to open their entire national economy to international competition into action. They handle the money of sovereign states as currencies promising real value and, by exchanging them, subject them in practice to the test of whether they can, on a comparative basis, keep this promise. In this manner, they compare nations according to their overall capitalistic success in the world, and consequently bring about the shift from the worldwide competition of capitalists to the competition of national sites for capital accumulation. They reshape that competition into a comparison of national credit papers that they measure in terms of solidity. They create international credit where they bet the course of things most likely justifies their “boldness.” In this way, they make true the absurd equation, “credit equals trust.” In doing so, they shunt the wealth of nations in its highest, most precarious and at the same time most binding form, namely in the form of speculation on debts, all around the globe exactly to where it belongs in accordance with imperialistic relations of power. It is precisely the most adventurous techniques of their business which perform its imperialistic service.

Because of all this, the game is far from over. For no sovereign state, even if it has agreed on this wonderful mechanism, submits to its decisions without second thoughts. Not even the winners like to be subjected to the judgments of private moneybags. Speculation consequently challenges state powers to react. It challenges not only objectively and as a result, but also intentionally — with speculative intentions, of course. Money managers provoke their comrades in politics to powerful deeds on which they can bet, because the freelance currency dealers know themselves and their business to be dependent on the political powers who create, by agreement, the entire national and international monetary system.

And they get their reaction: an extraordinarily adequate one — up to now. Since otherwise, they would not have become so big, so bold and so crucial.

Monetary policy
How the state reacts to the comparison of currencies

a) The result of money trade is a final parting of ways between states. Successful nations compete to flood the world with debts denominated in their own national moneys while counting the losers’ debts as their own assets.

The global trading nations, by their convention on international debts and freely established exchange rates, have created a global money and credit market. They accept this market in principle as a condition for their competition for capitalistic wealth, and endeavor to use it as their competitive means for obtaining the resources for their national prosperity. They have thus removed the principal barrier between the domestic creation of credit, and monetary claims on and from foreign countries. That is to say, their internal debts are supposed to enjoy the status of international credit and be honored as investments; foreign debts are to be the normal way to tap the monetary wealth of all the world, and to open up all the world as a sphere of investment for domestic finance capitalists. Thus, these nations relinquish the elementary service of state sovereignty: guaranteeing an unconditionally valid money for one’s own society. Instead, they compete on the world money market through their own credit money for their share of the world’s money. This is the modern method by which states try to enrich themselves through the world market — and no longer by simply gathering foreign currencies as national reserves.

This peculiar method of competition brings about, as its first effect, a gigantic inflation of internationally circulating credit; namely, a growing quantity of state debts supplies the speculation business with its material. The second effect is a vigorous sorting out of nations, because when the domestic indebtedness of states is at the same time a contribution to the world finance market, the comparison of currencies becomes all the more sharp a critic of the liberties taken by states in creating credit.

Not only do lots of states have to put up with a defamatory appraisal of their creditworthiness, with being classified as a risk. Even more drastic is the decision which certain states are informed of by the financial markets as soon as these states intend their national credit paper to be recognized as speculative material able to circulate, and their credit money recognized as a business-friendly currency. For some time now, credit traders have brought about circumstances that the world trading nations had originally intended to eliminate when they established a world market of convertible currencies. That is, “the markets” deprive most currencies of any suitability to be world money, denying them de facto any recognition as moneys that would be suitable equivalents to any other currency — given the proper exchange ratio. They are simply not traded, nor is any rate of exchange negotiated for them. The affected nations still have credit — expensive credit, meaning at high interest rates, in accordance with the risks; — however, only credit in the money of other nations, therefore on condition that they vouch for the debt service by the foreign currencies they earn. For such states, the competitive struggle for shares of the wealth of this world is thoroughly lost. Whatever they achieve does not supply them with any financial resources but only serves the function of proving the monetary quality of the creditors’ claims against them. By no means are they thereby released from the competitive battle, however. Rather, they have to fight for export markets just in order to maintain their role as victims of the global system of debts, have to decree calorie-free diets for their people according to IMF advice, and eventually beg for more favorable terms in the necessary rescheduling of their debts.

The more successful nations hardly have less debts than do such “debtor nations,” many times more in fact — but in their own money. With their state-backed debt securities, they bring acknowledged credit into this world, i.e., credit respected by the financial markets as being a useful and secure object of speculation. The money they create is the very money international financial markets are themselves nationally “at home” in. Whatever of value the capitalists of the whole world bring about accumulates in this money. This provides the resulting wealth of these nations with an unexpected quality, namely, their credit money is not only as good as world money — it is world money; the credit they take is nothing less than internationally valid abstract wealth.[9]

Thus, despite all their own indebtedness, these states are indeed creditors vis-à-vis the “debtor nations.” They treat the deficits of the latter as assets, while at the same time acquiring political power over them, in that they decide the global economic services other nations have to perform, and set the conditions under which they have to accomplish them. They let themselves be paid in political subservience for granting credit, be it granted by the IMF, or government-to-government, or by hints to the finance sector concerning the covering of a certain country-risk. In any case, they don’t have any scruples when it comes to interfering in the government of poorer countries — of course without answering for any of the devastating consequences of their being at work there. Wealth creates rights in the civilized world.

And anyway, the important nations usually have more important worries than the poverty of the poor.

b) Political manipulation of interest rates and the money supply is aimed at steering the markets towards nationally favorable exchange rates. International monetary cooperation countervails and supplements international competition in the interest of the system as a whole.

The global debt market earns the leading capitalistic nations their peculiar superiority by elevating their currencies to world credit money, for which the wealth of all nations serves as a foundation — but which is, however, still not the same as genuine world money, i.e., the realized value of commodities. Even for these nations, therefore, the international credit business boils down to the test of how well the few, good, national currencies, in comparison to each other, fulfill the ambitious function of being the token of credit accepted worldwide. The fact that speculation revolves round these currencies does not preclude, but rather entails that they will also be speculated against. There is no ultimate assurance in the world of free money markets that the virtuous circle of success will not turn itself into a vicious circle of self-established and intensifying failure, threatening to withdraw a reputable currency from circulation. That is why precisely those states with much to lose find themselves especially challenged to bring their political power into action for the permanent and stable success of their credit money.

Therefore, the modern state assumes the right to judge the results of the comparison of currencies — a task it has handed over to “the markets” — in accordance with its own interests and to work towards a correction when the totals and deficits are not suitable. In doing so, it by no means cancels the assignment on which the imperialistic family of nations have agreed and which they have institutionalized. At most, free currency exchange is temporarily suspended and the speculators are put in their places by decree — with the purpose of averting a serious predicament, and in accordance with the relevant international regulations. The state in fact sticks to the principle that its credit money, while circulated and judged by international financial markets, is to remain its very national means of growth and the source of its power. It intervenes accordingly. Whenever the results are not suitable, it offers evidence that “the markets” are simply in the wrong as far as the economy is concerned; they have to revise their perverse tendency. And, to prevent such false results from ever coming about in the first place, all the decisive capitalistic states influence the course of the speculative comparison of currencies in the spirit of the latter, making offers in accordance with world money market criteria in order to steer it properly as well as in their own favor — believed to be the same thing anyway. In other words, they make monetary policy.

Through foreign currency operations, the state influences the amount of material that speculators can use for gambling with supply and demand. It either purchases its own currency or buys back debt certificates denominated in its own currency with resources from its own treasury — that is what a treasury is good for nowadays! The intention is to get “the markets” to treat one’s own credit money with more care and evaluate it with more stability. The amount of financial means and claims, however, that the foreign exchange business can mobilize is long since far too large for a central bank to fundamentally correct business conditions by buying and selling. Rather than buying off speculation, it more likely runs the risk of encouraging the trend and sacrificing its reserves. Intervening in foreign exchange markets in favor of one’s own currency has more the effect of a signal therefore, yet all too often taken in the opposite sense, namely as a sign of weakness, and punished by the currency exchangers with intensified downward speculation. The business world is more impressed by high interest rates, which the state pays for its debts and, in the form of the central bank, charges for credit in its own currency. This is because, first of all, finance capitalists can best be influenced by presents of money. Secondly, high prices for money are taken as evidence of the care the state is devoting to the stability of its currency’s value. Financial managers, however, master the opposite version just as well. A state that is paying high interest rates burdens its budget and worsens the national debt. Besides, it obviously needs to bribe lenders, which also doesn’t speak well of its debts. And, as soon as it charges its economy more for credit, it jeopardizes national growth, providing reason once again for being worried about the currency’s stability. Because financial policymakers know this version only too well, they try now and then, sometimes even successfully, to send a signal of national self-confidence by lowering interest rates. Cheapening credit inevitably leads to fresh growth — at least according to the indestructible superstition of economic theory. As stated by the same catechism, inflation fears will unavoidably spread at the same time, which can best be combated by prudent economizing measures. “Economizing” here is not to be understood in the sense of reversing the trend in borrowing or paying off a considerable amount of old debts. Rather, it comprises an elaborate ensemble of cuts in “unproductive” state expenditures — in other words funds on which merely people live — which accompany an increase in the national debt for other, more worthwhile, purposes; the cuts are meant to contribute to the assurance that the national credit remains reliable despite inflation. A signal with the same message is sent by the organizational trick of institutionally separating two public functions, i.e., separating the creation of credit money from public borrowing, and by placing autonomous currency custodians on the board of the central bank. That this institution’s autonomy and professional devotion to the ideal of fostering genuine monetary stability is believed in, is absolutely the most important of all its policies, be they interest rate, money supply, or exchange rate policies, which, all the same, are ambiguous in themselves.

With their currency policy manipulations, states, on the one hand, present themselves as affected by the machinations of the financial markets, which mess up the outcome of their efforts concerning world trade. They observe, in the condition of their currencies, to what extent the internationalization of business has been remunerative for them. On the other hand, they try to influence the markets’ decisions, because they take the exchange rate as an instrument for the continuation of their foreign trade and want to make sure it stays useful for that. To this extent, the custodians of national credit, with their exchange rate interventions, generally put themselves on critical terms with the findings of finance capital, yet without infringing on its business nor suspending it. They want to make the most out of the calculating way in which the “markets” handle credit of all national colors and steer it into a direction convenient for them. However, the measures they take — or let the “markets” take — to reverse disadvantageous outcomes all too often hurt the interests of the other national currency custodians, whether expressly calculated to do so or not.

For all their competition, the monetary policies of the decisive world trading powers have not reached the point where the self-assertion of one national credit intends the ruin of another. Even in the numerous cases where the balances of accounts, the decisions of the money markets, and the judgment of the few creditor nations clearly cried out “insolvency,” this judgment has not been executed. Instead, and to avoid this ruination, the political measures each country takes to secure a nationally advantageous use of its currency have been supplemented by a special kind of international cooperation for supervising all national balances of payment. The IMF organizes the profitable continuation of world trade with partners who have gotten themselves into the hole of a chronic shortage of money, and therefore have to deal with a correspondingly chronic devaluation of their currency; its regime has been widened to encompass the additional task of managing the mountains of debt that accumulate in the course of this practice. New institutions have been founded for the sole task of securing and acknowledging the credit quality of old and new debts by mutual agreement, even though all those concerned know full well that the debtors in question will never be able to pay them back; year after year, the famous “G7” have reached ever new agreements on how to cope with the “world credit crisis.”[10]

What has really been achieved by these two complementary methods of currency politics is not very well known:

  • On the positive side of the balance, the salutary purpose of modern currency politics is chalked up; namely, the enormous expansion of world trade and the huge growth rates attained by the countries of the “first world.” And that much is certainly true: barriers have been removed from international trade by limiting currency policy in the main to “signals” — changing interest rates and similar measures — that respect the functioning of “the markets,” and by avoiding measures — currency controls, politically enforced exchange rates and the like — that directly confront the currency policies of other countries; the moneymaking classes of all countries need not fear state intervention and have only to calculate with the perils of the exchange rate. On the basis of the supranational guarantee of the equivalence of debts between nations to real payment, trade relationships have been continued and expanded that would never have materialized without such creation of worldwide “liquidity.”

What is less taken into account — even though it constitutes a major source of preoccupation for the functionaries of the world trade system — is the state of the “world currency system” itself and of the diverse national credit moneys that constitute the “wealth of nations:”

  • Fifty years of world trade have come down to the fact that nowadays only a handful of states have “good money” at their disposal; namely, those states whom the rest respect as “industrial nations” and the decisive “world economic powers.” Their national credit has assumed the function of world money: dollar, yen and euro perform every function of money everywhere on the globe. These currencies are either immediately exchangeable for all kinds of material wealth or perform all the functions a capitalist heart could wish for by being exchanged for the minor, local kind of money. They can be set to work in all forms of capital investment: for the opening up of a factory, for the extension of credit at interest, and, last but not least, for acquiring assets that promise to preserve the value of one’s financial property — something private moneybags are always eager to obtain.
  • The substance of this “good money” is — a huge mountain of credit, consisting firstly of debts that the political masters of Europe, America and Japan have put into circulation; secondly of debts they have accepted from each other as means of payment and treat as equivalent to their own; and thirdly of debts incurred by other nations and entered in the accounts of banks and the national budgets of the economic powers in lieu of payments.
  • The use of this “good money” is the affair of those who possess it. They place their trust in the guarantee of the states who have given the money its national name. These states, on their part, place their trust in the profitable use that the private money owners make of their respective moneys; namely, that they employ it successfully in all markets, underscoring its intrinsic quality of being a means to enrich its owners and thereby proving the equivalence of national credit and money. To the extent that this proof is established, the political guardians of national credit acquire the freedom to use their national credit as money themselves: they possess the means to increase their political spending power simply by increasing the national debt. To the extent that these national credit moneys prove to be a successful means of business and therefore a profitable business article, their political guardians acknowledge the money quality of their respective currencies and leave it to the “markets” to determine the right exchange rate, i.e. the relative quantity in which this quality manifests itself. In the decisions to buy and sell, to invest and speculate, to give and take credit, favoring now one currency and now another, international financial markets not only affirm the quality of the three currencies as world money, but also generate the bulk of it, the mass of credit circulating as world money. Productive capital carries out the rest of the business; in spite of its relatively small size compared to the sums active as finance capital, its services are not to be underrated. Not only — as the name indicates — does it take care of production; it also does its part in the transfer of wealth between nations according to the direction of trade, which not only contributes to the changes in the relative assessment of currencies, but also provides its decisive causes. On the other hand, the financial gains one nation obtains against another are at the same time affected by the current rate of exchange; so that this rate itself functions as an instrument of international trade, besides providing the measuring rod for private and national economic success.

c) There remain but a few economic powers competing for the status of their debts as world-money. Since credit constitutes the wealth of nations, defending international trust in the national currency is the overall goal of economic policy.

The states that — with the leadership of, and guidance by, the U.S. — established the free world market, and invented the elaborate currency system that goes with it, do not owe their economic standing in the world to this masterstroke of monetary policy they succeeded in establishing. They were able to decide the competition for credit, i.e., for the distinctive status of their national debt as money, for themselves, because under their control, on their territory, and therefore on the basis of their national money, the largest sums of capital were active; because this capital put the natural and man-made riches of other nations to profitable use; and because finance capital, before it attained the freedom of worldwide money transfer it enjoys today, first followed the reliable necessities that arose more or less automatically from the hierarchy of economic potential among nations. And — notwithstanding the respect that the madness of speculation deserves with its contradictory motives and tautological calculations — the financial world has, on the whole, always quite tamely reserved its ultimate trust for those nations with whose money the best earnings are to be made, because the most earnings are made in them and by them. That is not extraordinary; ultimately, the speculation on future balances takes its criteria from those already chalked up.

One thing, though, has not changed for the governments and central banks of the global economic powers in whose currencies the enormous, worldwide expansion of fictitious capital has taken place: they have to earn the trust of the financial markets ever anew by the wealth their economies achieve; the competition between nations by means of an international money market that has cost quite a few currencies their global use does not suddenly turn into peaceful coexistence just because only three currencies have survived. However, the conditions for earning this trust have changed a bit. Credit itself, validated on the markets and by the other nations, has become the means of access to every kind of moneymaking at home or abroad. Credit is no longer just a means to promote capitalistic wealth, but the wealth of nations itself. Consequently, everything the rich nations do achieve in terms of economic success and everything they can afford in fostering it depends on the credit they enjoy internationally. And not only this: all state expenditures, including the all-important outlays for military might, are financed by national debts, and therefore depend on the status of the national credit. The belief of international investors in the future of business in a country decides on the existence or non-existence of the monetary means the nation disposes of so as to be able to initiate and promote this future business — which in turn is to justify this crucial trust. A loss of trust expropriates the nation’s means to earn it again. As soon as global trust vanishes in this world of open markets, national money loses even its internal usability and value. Servicing and defending the nation’s money, i.e., promoting international trust in it, is therefore the highest economic priority of a nation.

There is no other way to defend a national world money than by the issuing state guaranteeing every holder everywhere a profitable use of it, by ensuring that ownership of this credit money is profitable for native citizens and foreigners alike, i.e., on the entire world market. This is the requirement that has to be met by each of the three sound currencies; each of them must hold its own in comparison with the two others as regards its quality as valid world money that proves itself to be the better capital investment wherever it may be engaged. This is the comparison that the financial markets are licensed to execute; this, then, is the substance of the “attractiveness” the three world moneys compete for, each at the other’s cost.

Coming after decades of enormous expansion of fictitious capital around the globe, the efforts to guarantee this attractiveness are as necessary as they are deleterious and contradictory. Every movement of money from one “sound” currency to another, instigated by whatever irrational expectation, enhances the wealth of the favored nation by destroying wealth of its counterpart. The latter is left with a heap of devalued capital while the other side enjoys a mountain of good assets. However, the global opportunities to invest this good and reliable money are reduced by the ruinous devaluation of every form of capital on the losing side. Victory in monetary competition is less than satisfying when ultimately no use can be made of “good” money other than that of taking up the offer of the issuing central bank to earn interest. Circumstances where the central bank alone can and has to sustain its tokens of credit as valid money are the basis for the complaint that the attractiveness of the national money is “purely speculative.” As keen as the world money powers may be on finding demand for their currency in the financial markets, they know the difference all the same between a “healthy” and a solely speculative demand that only serves to increase their liabilities, not their revenue. They become aware of a build-up of credit apart from, and not maintained by, growth; a build-up that they therefore fear would fuel inflation and harm business at home and abroad — and by this they mean “real” business as opposed to financial operations that merely lead to a further build up of speculative capital.

It is in assessments of this kind that the economically most powerful nations acknowledge the precarious achievements of their world currency system. In issuing ever larger quantities of credit and allowing them to circulate internationally, they have given all owners of capital the freedom to substitute debts for payments on an international scale; now here, too, the illusion holds sway that production meets no constraints in the product markets. On the one hand, those producing for the market are licensed to take advantage of the additional purchasing power created by credit; on the other hand, credit allows them to greatly enlarge the mass of capital they employ in competition for sales and profits. It is no wonder, then, that in international trade too, markets periodically inform producers that there is not enough purchasing power to return profits on all the gigantic investments made for the sole purpose of profitable selling. At the same time, as long as the payment of interest on the debt taken up to produce these profits is sustained, these profits constitute, in the last instance, the sole proof that the invested credit constitutes capital property in the hands of its private owner. This interest must be paid; if not, not only one or the other debt but the whole system of reciprocal indebtedness is destroyed.

The necessity to secure the money quality of the nation’s credit in the face of an enormous build-up of debt — a debt whose interest payments far exceed the sum of profits that could ever be made in the “real” economy — gives a new accentuation to the competition for credit between the major economic powers: there are just too many tokens of credit around, i.e., too many promises of future profits, and therefore a lot of reasons for distrust in the national uniforms of this credit, distrust which menaces now one, now another of the big three. Defending the national money, though, has — as mentioned — some circularity to it: it is easy enough to guarantee the holder of a currency that it can be internationally and profitably used, as long as the markets show trust in its stability. Then, every global profit opportunity can be exploited, and this in turn contributes to the proof that this money is a reliable source of property increase. Should the markets, however, contest the reliability of a currency, it looses its function as a stable store of value, and therefore its international and even national usability for profits.

This circularity compels the leading financial powers to concentrate on the one guarantee they themselves can give — as far as giving guarantees is at all possible in this world of competition. The nation, together with its credit — which always depends on the judgment of internationally calculating finance capitalists — has another important lever of profitable investment at its disposal: its power over its own territory and people. Ruling in a manner that ensures — again, at least as far as possible — profitable returns on investments within the national realm is the first and most enduring guarantee that the great capitalistic powers can and do give the global financial community — which in turn shows its appreciation by investing international capital in the country.

In this way, the nations that have established their credit as the money of the world are reminded that the capacity of their national economy to generate world money is the lasting foundation of the worldwide economic power their credit bestows on them. For the sake of their money, they accept this capacity as the very object of competition between them; whether and to what degree a nation’s productive base is “used” by investors as a means of conquering the world market, and so as a source for accumulating property, determines the validity of the credit piled up in the nation’s money. Therefore, they devote their economic policy and state finances to this end.

This, then, is the new standard by which the ruling political economists of all nations measure a nation's economic success: the extent to which its living and lifeless inventory proves itself a successful means of competition for the attraction of capital on the world market, thereby securing the validity of the mountains of credit piled up in the national money. The profits that are made in the industrial sector of the national economy no longer constitute the nation’s wealth, but are assigned the function of a means to secure the trust of the financial markets in the national credit money. The power of politicians over their economy is wielded to forcefully remind their people of the service they must render to the national community; i.e., that it is their job to secure its competitiveness according to the standards of the world market, and thereby by the international attractiveness of the nation’s money. The business community does not need much reminding; it is self-evident for them that their private wealth is the result of successful engagements in international trade. The rest of the population has to learn that the world market does not provide jobs, but that, quite the contrary, jobs have to be made to fit the demands of world market competition in type, number and earnings. Politicians in all states set out to ensure that their nations live up to the demands of their fundamental economic calling: to prove themselves successful as a site for capital. This project adds some new features to economic policy.

d) The leading economic powers mobilize their productive sectors in order to monopolize markets. By damaging other currencies, they undermine the global system of mutually acknowledged debts.

“Site policy” is a new name for the endeavor to make the productive base fit for this sort of international competition. Modern statesmen insist on increasing the profits made in their country, as well as profits made by the country on the world markets — without in the least acknowledging that the conditions of production and of realizing profit simply do not coincide, indeed diverge rather thoroughly. As far as they are concerned, it is not important what the market is not handing over, but rather that it is not granting it to “us.” Site policy is the decision to oust competitors, i.e., other nations, called “partners” in other circumstances. The tried-and-true method consists in mobilizing the sources of national wealth: capital and labor. Hence the initiative runs as follows:

  • “Our” firms are to become more productive, and therefore more profitable than, first of all, previously; and secondly, than firms abroad. This is to make their goods superior to those of others in the comparison of prices, leading to sales and earning the companies a profit and the national account balances a surplus. The prevailing standpoint is that of an export nation which intends to sell its goods worldwide at the expense of other export nations. The required measures are largely covered by the ABCs of business management. In some cases, however, state aid is requested so that the down-sizing, mergers, and raising of capital will not fail for lack of money. The goal of a profitable market price requires the lowering of costs; thus laments about a too-expensive working population as well as the removal of this drawback become a national campaign.
  • Domestic firms are to go abroad wherever their domestically produced export goods are inferior to the competition, or where costs are more favorable abroad than at home. The tricky question of whether abandoning the national territory would not involve a loss of national income, has this answer: the national cause is not only served by local patriotism, but also by financial patriotism. After all, only growing firms pay out interest and dividends — and the firm’s banker accepts foreign currencies, too. The prevailing standpoint is that of compensating for the locational advantage of countries that provide markets for competitors, markets which accrue to “us” as soon as location is changed.
  • Foreign investors are to commit their capital to “us.” This eases the creation of the amounts of capital necessary for the capacity required for competition, spares state subsidies, and — assuming the right patriotic arrangements are made concerning money — stimulates demand for “our” currency.
  • Where a review of the world markets leads to the depressing diagnosis that other nations are hopelessly superior in terms of high-technology and the amount of capital invested in this area, all is not lost. Government loans forge mergers of firms to form an adequately sized match to competitors.
  • The expansion of jurisdiction over additional territory is not to be scorned either. When the domestic market is considered to be too small to function as a home base for success in the world market, it can be enlarged by mutual agreement with neighboring sovereigns. The European Union is just such an arrangement to ideally share a market in common: the reality of course is that it functions as an economically unified base for the winners of intra-European competition, in first place Germany; the calculation of the losers being that it were better to be used in this manner than not at all.

As can be seen, nations which have elected capital as their means of existence do not really fit the notion of what is commonly called the “international community.” This selfsame means, capital, is not to be had nor cultivated without being the object of contention by the political masters of all nations, or at least the most important ones. The use of their own as well as foreign societies has no content other than the nationalism of money. Securing and accumulating ever more of this stuff — which endeavor is sold to the designated domestic victims as an objective constraint — includes adversarial dealings with the powers abroad. Site policy is always the forceful, official denial of the international myths — deduced from the nations’ dependency on each other and on the global economy as a whole — that their commercial relations were all about cooperation and common values. The only value that international trade actually is about is the object of competition, i.e., money.

The whole predicament the leading nations set out to overcome is only reason to become more ambitious. They attempt to enforce their right to the monetary wealth of the free world and turn the “innocent” instruments of a market economy into commonplace weapons of competition.

The first weapon is the credit they have. Far from restraining themselves and economizing, they finance business deals on all sorts of markets which go explicitly at the expense of foreign countries. They pursue their interest to “underpin” their endangered credit precisely with an increase of their debts and the demand that others stand behind them. This includes impoverishing their trading partners and devaluing their credit as a consequence of having lost their sources of revenue. They assign their partners in world trade the role of payers and debtors.

The second weapon is one’s own nation — in its quality as a source of money. Private property, active by an old state dispensation, is supposed to do its job, economic growth, in accordance with the national mission and the state’s economic plight. The bulk of the citizenry without property, who therefore have to serve property, are subject to new working and living conditions as well as to the nationalistic message that their upkeep only pays so long as it returns profits from the world market to capital and state. That is why European, American and Japanese jobs have for a long time now been a matter of either/or.

The deployment of these weapons among the remaining three owners of world money has consequences of course. It damages the sources of wealth of the other nations, limiting the gains that their credit depends on.

Each of these three preferred currencies stands as a deposit not merely in the accounts of the respective guaranteeing power and its citizens. Their acknowledged equivalence to world money has in fact offered the “markets” in general, and indeed anyone in the whole world looking for stable money, the guarantee of not making a fundamental mistake with any of the three, and of achieving the desired security by spreading one’s assets among them. Losses made due to the devaluation of one of these currencies most certainly cannot be localized.

No less is the loss of solvency suffered by one nation and its business world restricted to that nation alone. This is because the utilization of its purchasing power, the stability of the money value of contracted payments, is always a condition for the success of site policy of any other nation for conquering the world market. The transfer of wealth by means of export is guaranteed after all by the stability of the received national means of payment. If this stability wavers, a degree of speculation will turn foreign trade into a risky venture.

After all, the financial markets not only record each of the rate fluctuations they themselves produce, but also propagate their customary estimations and projections about them. This again qualifies the fruits of victory in competition. Speculation will not only take place on the devaluation of one of the three world currencies, but on the actual and supposed effects the rate fluctuations have on the business life of all commercially-engaged nations.

In short: the strategy pursued these days aimed at the incontestability of one of the three big world currencies is undermining the fine world currency system, since not only the defeated nation is affected. It does not help that a considerable expenditure in national and private debts brings about a considerable amount of forces of production and lines up the finest products for sale. The whole arrangement is as little meant for use-values as for peoples’ consumption.


[1] Use-value: the thing considered as useful for production or consumption, as opposed to a means of exchange, or money-making.

[2] That is why capitalistic nations simply find it unbearable if a different concept of wealth is valid somewhere in the world, for then the absoluteness of the value they vouch for and use to get at the world’s wealth is thereby negated.

[3] To avoid misunderstandings: it is truly madness that real wealth of society does not exist in its useful goods but in the abstract exclusive right of disposal over them, and that this same right has its material existence and its quantitative standard in money. But also in those former times, when gold coins were being circulated and paper money was actually just an order for quantities of specie; in those times too was this madness not a property or emanation of the metallic material of money. Instead, just as it is now in our modern paper-money economy, this lunacy was the deed of the supreme power.

[4] Incidentally, this is the whole secret of the notorious “terms of trade” which were declared to be the epitome of scandalous injustice by Utopians dreaming of a more humane world market — far back when the madness that is capitalism still had a “real, existing” socialist alternative and therefore had to put up with idealistic animosities. The fact that poor countries have to hand over more and more commodities for money and can buy fewer and fewer commodities from the leading nations with the money they earn, is indeed scandalous but entirely apropos. The only real wealth — i.e., monetary wealth — that these countries can bring about by their production of coffee, bananas and the rest is ascertained in the exchange rate. With it, they are given confirmation in an irrefutable and capitalistically objective way of just how unprofitable is the labor exploited over there, and therefore of how little of value are the commodities they can export . On the other hand, the fact that the money of more advanced nations can be used for incomparably more capitalistic, i.e., profitable things makes their currencies so valuable. The world market does not really compare sacks of coffee to locomotives, even less does it compare working hours from one locale to the next so as to supposedly pay the working population a just income — it compares currencies. What is compared with these is nothing but the competitiveness of capitalists, i.e. the profitability of their masses of capital that make up a national economy.

That is why, by the way, things are like this: if the “disadvantaged” nations always got the same for their products, if prices and exchange rates, the “terms of trade,” thus remained unchanged, the banana republics of the Third World would have long since gotten their nationally symbolic fruit from Dutch hothouses…

[5] To make this clear, one should not object that the different rates of inflation of various currencies affect the exchange rate, such that the currency more weakened by inflation also has less purchasing power abroad. This effect only occurs because foreign capitalists are better able to cover their expenses with comparatively cheaper prices at home and thus to profit from a country’s rising prices. As a consequence, but only as a consequence, the correspondingly worsened trade balance requires an “adjustment,” i.e., a new exchange rate.

[6] As everybody knows, banks have in the meantime simplified the exchange business. There are only a few currencies left they bother to trade. All the same, the distinctions clarified above made by the banking business in practice are not rendered invalid. The banks have actually reacted to these distinctions by clearing out of their assortment of currencies those which would only burden their exchange trade with risks and troubles.

[7] The domestic credit business of banking also is done with the nation’s money, on which this business founds the national credit. The price for the national credit money it creates is calculated in the interest rate. By analogy, in foreign trade, the bank is out for differences it can make use of as far as the value of the national currency is concerned; it makes profit on its value by assessing it in foreign currency. At home as abroad, this particular magnitude, the price of national money, is the business means of finance capital.

[8] The consequences for states are dealt with in the following section.

[9] The ultimate basis for such a heavenly state of affairs is the tried and true strength of national capitalism, i.e., the mass, growth rate and international business success of the capital accumulating in these nations — and on the other side, the availability of weaker competitors that not only suffer as a source for wealth concentrated elsewhere, but also render their duty even beyond the limits of their solvency. As soon as, on this basis, the global comparison of currencies has gone on long enough making the good currencies better and sorting out the weak ones, it is then the case that debts immediately count as world money.

[10] Things have changed a bit since this article was first published in 1994, but events have actually come nearer to the results already anticipated then. In the case of Argentina (2001), the leading financial powers, for the first time, decided not to prolong the capability of an insolvent nation to participate in world trade with foreign, political credit. In the context of an ongoing, worldwide economic crisis, they overrode their own interest in continuing the one-sidedly favorable trade with this country because of their preoccupation with their own credit and the reputation of their own debts. In order to salvage the system of mutual credit between the great economic powers, they insisted on debt payments from abroad instead of investing ever more in the future profitability of an insolvent trading partner. Their denial of new credit forced Argentina into a national bankruptcy, with all the nasty consequences, including some pain as well for the banks, merchants and manufacturers of the metropoles.

© GegenStandpunkt 2003