The bourgeois state subjects its people to the regime of capital. With its laws and institutions, it gives its businesses their private power over the nation’s work and wealth. Businessmen from other countries are excluded from the legal relations that each state establishes within its borders, binding its own citizens. Consequently, foreign businessmen are excluded from the national course of business, which must always be in the form of contract. For its own businessmen, the state cannot guarantee anything outside its jurisdiction, neither legal certainty for property and its use, nor the validity of legal tender as the representative of capitalist access power. The state power’s indispensable positive services for capitalist business life involve a negative relation to all the capital expansion and accumulation taking place outside its sovereignty over its land and people. By authorizing its citizens to put their property to capitalist use and by creating a national credit-money, it at the same time orders that domestic capitalism be separate from foreign capitalism. Foreigners are not to be trusted: that is the other side of the reliable relations the constitutional state establishes in the everyday clash of capitalist interests “at home.” And in a modern society, this elementary formula of xenophobia has serious importance particularly for those in the credit trade, whose entire business is factually based on state-guaranteed trust in payment promises of all kinds, specifically in the credit-money the state has founded.

That is precisely why the capitalist power of private property cannot forever rest solely on the legal certainty established within a given nation by the bourgeois state’s monopoly on the use of force in general and by its monetary sovereignty in particular. Restricting capital’s power of command to the territory where, and people over whom, this capital is authorized by the state to hold sway is contrary to the business interest that the state equips with the necessary legal prerequisites and resources. It is also contrary to the self-serving purpose that the state itself is thereby pursuing. Capital needs growth; this need is incompatible with its fundamental condition for growth, the state’s legal authority, limiting its growth. And states insist on expanding the foundations of their power, both within and beyond the borders of their territory. The wealth they have access to is supposed to grow and open up foreign sources of wealth for that purpose. So they do everything for the borders they fix to be open to capital, without relinquishing their hold on the economic conditions for their existence.

1. Convertibility of currencies: States internationalize the legal basis of the banking business, and its protection by monetary sovereignty

The essential, indispensable, but limiting condition of business is the national value token that has been designated by law as the general equivalent and binding means of payment. It is freed from the defect of only being valid locally by the sovereigns agreeing to declare their currencies exchangeable with each other, convertible. Foreign moneys are thereby authorized as a means of purchase for acquiring one’s own money, and, vice versa, one’s own money as a means for acquiring foreign means of payment. This does not mean states are abolishing the separation between what their own monetary sovereignty accomplishes and what a foreign one does. They neither accept foreign money as a general equivalent in their own territory, nor do they claim that their money be directly valid outside their jurisdiction. However, they are mutually conceding in principle that their respective national credit tokens all represent the same thing, namely, abstract wealth. That is, they all represent a quantitatively measured private power over everything that can be bought, over goods of all kinds.

With this decision, powers whose sovereignty is directed against each other enter into a positive relationship with each other. In the value token that they vest for their own territory with the power to bindingly represent their national wealth, they recognize each other as business partners who, though independent of one another, are equally committed to the same economic values. They are standing up for the private power of money and drawing on each other as powers that, though autonomous, follow the same capitalist ‘laws.’ On the basis of this mutual recognition, they empower their nation’s business world to make use of all national credit moneys across all national borders as a nimble means for doing business on foreign markets and with foreign resources. Although this has to be done indirectly, by exchanging for the local currency, it can in principle be done freely, at one’s own discretion.

Of course, it is not enough for sovereigns to formally agree on the convertibility of their currencies. States, which make sure with all their might that their national credit token has the quality of money within their own territory, require each other to commit and be able to actually realize the promised exchange of foreign money into their own and, above all, their own into foreign money. They each guarantee that their national value token equals money by maintaining a real reserve of indisputable bearers of value. Only with such a treasury in place can they trust each other, now that they have decided to make their currencies convertible, not merely to stick to the rules but to be pursuing a capitalist reason of state and executing their monetary sovereignty effectively. And this guarantee is the prerequisite and lasting condition for the financial institutions already taking care of money trading within the nations to become interested in exchanging national moneys and get a cross-border business life going.

In the modern global economy, this guarantee of national credit moneys is provided in the dealings between a nation’s central bank and commercial banks. This happens quite similarly to the procedure established within a state of the banking industry’s creation of money being attested in a controlled manner by the bank that issues legal tender intervening in the commercial banks’ liquidity management. The central bank confirms the money quality of foreign currencies and the use of its own means of payment as a bearer of value valid across borders by acting again as a liquidity reserve for commercial money trading, for exchanging one’s own currency for foreign ones and foreign currencies for one’s own. It accepts the means of payment that are valid in other nations as valid value for itself as well, creating its own money and paying it out for them and thereby proving foreign value tokens are actually equivalent to the home-made ones. It also takes its own tokens back again when necessary, handing over in exchange foreign currency it takes from its accumulated reserve or procures in some other way. In this way, by being willing and able to give up foreign money for its own, it attests the money nature of its products beyond the national borders within which their exclusive validity is decreed by law.^[1]

In so doing, modern states are in fact distinguishing between the value a legally recognized money has within the nation tied down to it, and the value it merely presents without actually having it, without embodying it in a universally valid way that is binding for all nations. Today’s global economic powers no longer see a need for an object representing monetary value in this demanding sense, that can therefore be exchanged directly for any national value token and thereby guarantees these tokens are exchangeable with each other. As late as the mid twentieth century, a thing like the precious metal gold or silver still had the status of a value ‘substance’ that objectively represented the value of all national money tokens and was ultimately valid directly worldwide. Today’s powers have a strictly functionalist way of dealing with the difference between value as an economic thing and the currencies that merely denote it. They treat this as a question of their own ability to attest their legal tender’s value in terms of its capitalistically effective access power beyond the jurisdiction of their laws. This question is answered to their full satisfaction by the possession of foreign moneys with which the issuer of a national currency can guarantee its exchangeability with other currencies if and as needed. The gold that is still stored in the vaults of many national banks now only functions this way alongside the foreign exchange holdings that the state’s monetary watchdogs — have to — keep in reserve, as part of the state treasury that guarantees the fundamental equivalence of one’s own legal tender with all other currencies.^[2]

Thus, states bring the same equation into effect for international business that they make good with their sovereignty at home. Money tokens, which by their economic nature represent credit, i.e., the hoped-for capitalist success of a national debt–based economy, are the measure of all private-property values and objectify the abstract wealth of nations. This equation holds by law but involves an economic inequality, which results within a nation in credit-money being relative as a standard for prices and as a bearer of value. That is, the access power that is objectified in a nation’s credit-money varies in accordance with the overall national success of a capital expansion built on debt. This economic inequality is reflected internationally in that the sums of money equated with each other by being exchanged do not represent the same quantum of access power in actual fact, and certainly not lastingly or reliably. A foreign exchange reserve is an international ability to pay, but as such is no more a fixed quantity than the sum of national money standing opposite this reserve on the central bank’s balance sheet. The reserve attests the money quality of this currency, but does not guarantee the quantitative ratios between actually exchanged sums, nor their equivalence in terms of equal capitalist power of access. This ratio is fixed and altered in accordance with the rules of the prevailing exchange-rate regime.

That’s only logical, since modern states make their national moneys convertible in order to bindingly establish, not their equal value, but their equal nature as general equivalents. The purpose is to create the certainty needed by capitalist money traders and credit creators when they exchange national credit-moneys to get international capitalist business underway. The course of this business decides over and over again how things stand with the relative value of the money tokens representing the nations’ credit business that states want. States that fix their currency’s exchange rates are betting that international money trading will prove their fixed rates right. Global economic powers that leave it to capitalist money traders to rate their money in foreign currency are assuming from the outset that the credit trade will assign their means of payment the foreign-exchange value that is economically right, i.e., useful to the nation. In any case, the business world is supposed to fulfill, for its own economic reasons, the purpose that states pursue by making their credit-money convertible. It is to confirm the money nature of their legal tender by capitalistically successful use and put it in a favorable relation with the other nations’ money.^[3]

So when states make their currencies convertible, they are entering into a far-reaching mutual relationship of trust and obligation. They are committing themselves and each other to grant the private power of capital over work and wealth the status of a universal legal right, which they respect and enforce irrespective of nationality. This commitment is not merely a voluntary one that can be revoked: states give each other credit on their national tender in the sense that they recognize their partners’ money tokens to be just as real a bearer of value as they lawfully decree and economically claim their own to be. In so doing, they are providing money owners and credit creators both at home and abroad with the real freedom to do the same thing with their assets worldwide that they do with them in their home country. These business people know how to make enormous use of this freedom, and show their thanks by giving their governments an abundance of new economic capabilities and necessities, means of power and practical constraints. When states set cross-border business free, they are consequently making themselves dependent on each other (without this meaning anything like they are equal in weight) in a way that results in a complete economic-policy agenda. By making their currencies convertible, they are defining themselves as guarantors of an international credit system, as participants in the growth of internationally active financial capital, and as competitors for the capitalist quality of their national credit and the value of their national credit-money.^[4]

Additional remarks

The relation of mutual recognition and commitment between sovereign money creators that underpins today’s international business life is an exceptional imperialist achievement. Up to the middle of the last century, capitalist nations presented each other with bills and demanded they be paid in a tangible monetary commodity: a substance — gold or silver — produced by material effort and acquired in exchange for material goods or services, a substance that all trading nations habitually acknowledged as a real, globally binding general equivalent. The money tokens defined and guaranteed by the state that were in circulation were mere representatives of such a physical treasure, even within the country as the term ‘token’ implies. Any credit balances posted in international business were claims to certain amounts of precious metal measured in weight units. When it came to money, the economic basis of trust between nations was confined to agreeing on the material form in which the value of the nations’ products was supposed to have a physical existence, separate from the products themselves and independent of having come about through the capitalist labor process. All the national monopolists on the use of force placed the power of disposal they grant property, i.e., the elementary social relation they decree between their citizens, in a sovereignly defined ‘medium’ that represented this private power in quantitative portions. And they declared gold or silver, the traditional general medium of exchange in their societies, to be the material representing the power of property as if by nature, so they could not get around it despite all their sovereignty. By all bowing before the money-commodity made of precious metal, sovereigns established the mutual trust that they would not place in the value tokens each of them dictates as means of payment within its own nation.^[5]

This fundamentally changed at the end of the Second World War. The USA, as the victorious power possessing the gold reserves of pretty much the entire world of capitalist states at that time, declared its national credit-money to be a fully valid substitute for precious metal as an international means of both payment and storing value. Via the International Monetary Fund, the national currencies of the other countries participating in the Bretton Woods system were linked to the US dollar at a fixed exchange rate, thus acting as its proxy and as an indirect payment order on America’s gold holdings. However, the capitalist nations’ international ability to pay was thus still limited by their international liquidity being tied to American gold (although increasingly outdated in practice it was still maintained in principle). This was inconsistent with the growing volume of global business developing on that basis. It became impossible to maintain the fiction of an indirect gold backing for the means of payment circulating on world markets because the US government was making excessive political use of its credit-money. Not least for financing its Vietnam war, it used the dollar to pay for deficits in its budget as well as in the nation’s balance of payments without regard for the ‘gold standard.’ After some dispute mainly between the leading Western power and its West-European rivals, the pretense was abandoned that all globally circulating dollars could be redeemed in gold, and the competing currencies were no longer pegged to this ‘gold dollar’ in fixed proportions. In the end, international business life was freed once and for all from the connection back to gold as the actual world money and to gold holdings as the means of settling accounts and transferring wealth between states. Gold was ‘demonetized,’ i.e., released from its function as the money-commodity whose weight units were the binding measure for all moneys. The originally agreed upon, direct or indirect, gold convertibility of currencies was turned into the current system of mutual exchange. The preliminary stage for this, however, was that — an exception in imperialism — a capitalist world-power had virtually monopolized the precious-metal basis of trust for cross-national monetary transactions and decreed that its credit-money was convertible into gold. With that, one national credit-money was first established as world money. And this was so effective that after the gold parity of the US dollar was challenged and terminated, there was no return to the primitive gold standard but rather the opposite. The credit-moneys of all nations were spared being ‘backed’ by national gold or silver holdings. This had never been more than a flimsy attestation anyway. If it had been invoked, it would have ended up expropriating the authority responsible for looking after capital and wage labor.

2. International trade with commodities and currencies

a) The currency-exchange business, how exchange rates come about, and their importance for international competition of capital

For companies that see themselves hemmed in by the limits of the national market and want to buy and sell all over the world, the agreements between states on cross-border trade give rise to a business need that the banking industry is prompt to accommodate: it handles the exchange of national moneys. It relieves exporters and importers from having to cope with the complication that their circuit of capital can only get going or be finished off with an exchange of national currencies, and it charges for the service. Money traders carefully calculate a difference between the purchase and sale prices for foreign means of payment to participate in the proceeds that foreign-trade merchants earn by buying foreign goods and marketing them in their own country or by selling domestic goods abroad. Banks link their service for the capital circuit of exporting and importing companies with their customary way of supplying the national economy with money, by prefinancing purchases and sales. They expand their repertoire of commercial credit transactions to include offers that relieve their customers of the special difficulties and risks of foreign business. For instance, they guarantee foreign business partners that their customers are creditworthy in accordance with the rules applicable abroad and, conversely, they exercise the rights of their domestic customers vis-à-vis foreign business partners. Financial institutions settle assumed claims and liabilities with their domestic and foreign partners in the usual way: internationally, like domestically, they replace payment by offsetting promises of payment, for which they grant each other credit they justify through liquidity in the required currency. In this way, banks constantly move wealth between nations in its definitively valid market-economy form, i.e., as convertible moneys. These transactions of theirs add up to aggregate demand and supply relations between the various currencies, which stand for the inflow and outflow of monetary wealth from one nation to the other. Money traders are now no longer merely acting as service providers for commodity importing and exporting business, they have given rise to a business sphere of their own. They turn national credit-moneys into commodities; and by their professional efforts to buy low and sell high, they set free-market determinants for the prices on their market, i.e., for the quantitative relation in which the supplied and demanded currencies with their differently defined units are to count as equal to each other. When a state allows this business and has its central bank guarantee a fixed exchange rate, competing money traders either prove the official rate right or put it under pressure by buying foreign currency from the central bank if their own money is in oversupply, or, if foreign currency is in oversupply, buying up their own money at a low price that is no longer justified from a business perspective, until the sovereign money custodians are prepared to make an adjustment. When there are floating (or flexible) exchange rates and banks move money across currency borders, they are constantly making new prices for their goods: the valuation of currencies in other currencies.

On the one hand, this result of money traders’ competition on the currency market merely reflects the surpluses or deficits that export and import companies generate in foreign trade between nations. In this respect, exchange rates represent the strength or weakness of a nation’s companies as a whole in competing for monetary proceeds on the world market. On the other hand, this means, however, that the currency-exchange business is already adding a significant effect to the transfer of monetary wealth from one nation to another. When the money that quantifies and officially expresses the wealth of an entire nation continually has its units being compared and their valuation revised, this strengthens or weakens the financial power of one country’s money owners in comparison with another’s. That directly manifests itself as a modification of the international comparison of prices, with opposite consequences for importers and exporters. Exporting firms are continuously informed what their proceeds in foreign currency will actually be worth when converted into their own currency, hence in relation to the advance they have made. This will tend to be less when their local money increases in external value, and vice versa. Importing firms are likewise continuously informed how much they have to advance in local currency to pay for the purchase of foreign goods — less if the exchange rate improves, and vice versa. So when the money-trading industry compares the competition between nations’ overall foreign trade, it confronts cross-border traders with the repercussions it causes on their business calculations. And right away it has an offer to make them for mitigating negative consequences of the overall result for an individual trader’s result. The industry will, for a fee, assume the exchange-rate business risk it has created, by offering a currently agreed-on exchange rate for future payments. It handles cross-border traders’ payment transactions in the form of forward contracts.^[6]

However, none of these insurance offers alters the fact that persistent national successes in world-market competition that are worked up by banks into lasting shifts in exchange rates modify the conditions for competition between nations. It becomes cheaper for companies from successfully competing countries to get hold of the goods offered by the rest of the world, and more expensive for those from less successful countries. Experts with a penchant for a functioning world-market economy like to interpret this as reflecting an automatic balancing mechanism. Exporters from weak countries can supposedly gain market shares with their goods that have become cheaper without any effort on their part; costlier imports will reduce their volume and provide local suppliers with greater sales; and the other way around. This will supposedly get competitive conditions back into balance automatically. In reality, there is little evidence of such ‘market self-regulation’; and that is very logical. For if the relative unprofitability of a nation’s entire commodity production is reflected in a depreciation of its currency, then the reason for it still exists, the nation’s poor competitive position and especially its causes are unchanged. Instead, this result additionally burdens the balance sheets of all firms that rely on deliveries from abroad. At best, a devaluation allows firms with above-average profitability to do better global business — just as, conversely, the appreciation of a currency due to a nation’s general competitive success will at best force producers with below-average profitability to catch up to the profitability level of companies that are successful on the world market or to give up their business in their own country.^[7] The nation’s banking industry in any case benefits directly when the economic access power that is represented in the unit of credit-money it has created increases in relative terms without the industry itself having to do anything special.

b) The balance of trade: From nations settling accounts by transferring wealth between each other, to states competing over their country’s capitalist performance

A nation’s capitalist companies are supposed to buy cheaply all over the world, not least commodities that are necessary for the economic cycle but not available locally or only at great cost. And they are supposed to conquer foreign markets with superior competitive capacities, thus increasing domestic growth and, through the influx of abstract wealth from abroad, augmenting the mass of available money capital. This will increase the credit-creating power accumulated in the country, and thus also the public power’s financial strength. All this is part and parcel of the state’s economic rationale. In order for the financial industry to provide its services that are needed and useful for that agenda, states create the preconditions for financial business and business success. They make agreements with each other on cross-border legal protection for commercial activities, issue rules for payment transactions between the various national payment systems, offer insurance or provide guarantees for orderly payment of exports, grant licenses to foreign financial firms for business activities in their own country, etc. In addition, their central banks look after the currency traders’ business in accordance with the requirements of the respective national exchange-rate regimes.

These arrangements enable the banking industry to conduct its currency transactions; the effects are in turn cause for government concern and intervention. The first thing a state’s money custodians learn from the competition of money traders, who make cross-border payments for exports and imports the first market-economy determinant of exchange rates between currencies, is that it is necessary in the interest of predictable price relations to ‘smooth out erratic rate movements,’ i.e., establish the degree of reliability that ‘markets’ need but by no means bring about on their own. When doing so, however, they have to make a careful distinction. They mustn’t be out to undo ‘fundamental,’ economically well-founded shifts in their currency’s external value; these they have to accommodate by deciding on appreciation or devaluation, as appropriate.⁸ Such shifts exist when those in charge see that the inflow and outflow of money into and out of their nation, and the corresponding pressure on exchange rates, results from their national economy’s success or failure on the world market, which is of course not so easy to assess. When a negative verdict is unavoidable, this makes responsible leaders critical of the average competitiveness of their nation’s commodity production, of weaknesses in their export industry as well as in all other domestic companies that are losing shares of the domestic market to foreign exporters. Political leaders see the trade balance and the exchange-rate movement presented to them by the money-trading industry as a summary statement about where their entire national economy stands in the competition for money to be earned in world trade. And they take this as a challenge to use administrative interventions, support measures, public loans, etc., to insert themselves as a prime mover in the competitive fight of their nation’s companies. They set themselves the task of correcting their nation’s trend toward overall defeat in the competitive struggle between national locations for capital. And this they do with dwindling resources, since it strictly follows the logic of market-economy competition that the state’s financial capacity is the worse off the more it needs an economic turnaround. The administrators of a successful nation likewise act as political general manager of their location, of course, as the responsible authority that has to find the appropriate answer to the nation’s balance of private cross-border business. For them, the imperative is to secure their success and expand it. This is an agenda that can draw on the greater mass and relative access power of the nation’s money capital and thus also the stronger state budget.

However, chronic deficits and losses on the part of the losers of competition make it impossible for the notorious winners to ensure their success. Their superior competitive power, confirmed by the money trade with a growing mass and capacity of their credit-money, undermines the solvency of their inferior partners, thereby ruining the precondition for their export success. One can see why the ideologues of the global market economy have thought up the ideal of a general foreign-trade equilibrium and are so keen on believing that markets will automatically self-regulate to that effect. In reality, of course, no economic policymaker in a successful, globally trading nation would ever dream of giving up a competitive advantage to fix any international imbalance; and no colleague in a worse-off country would expect it. Instead, the unequal outcomes lead to a growing ability on one side, and a growing need on the other, i.e., to a growing interest of both businessmen and politicians on all sides to go beyond their borders and use foreign money or access foreign resources to practice all the financial industry’s arts of money accumulation that it uses within a nation to finance the accumulation of capital, enrich itself, and give the state power access to abstract wealth.

3. World trade with money capital

a) Credit as an internationally traded commodity, and the global financial market

When the financial industry provides its services to cross-border trade in goods and establishes supply and demand relations between national moneys, this is only the prelude to internationalizing its entire business. It extends all its business practices and models to every country that has been put by its rulers under the law of private property and the regime of convertible money.

• A nation’s credit institutions create credit and extend it to business enterprises of all kinds also beyond national borders. They finance investments to provide firms on their home territory with access to labor, resources, and markets wherever business opportunities and advantageous conditions for exploitation offer themselves. They grant loans abroad, buy foreign bonds, etc., to utilize capitalist business in foreign countries to enrich both themselves and other domestic investors. By exporting capital, the banking industry gives the countries of the world a new politico-economic status: they turn national economies that participate in world trade into investment spheres for globally active finance capital.
• At the same time, the credit institutions of capitalist countries receive money from all over the world, sell their own securities and those of their corporate customers worldwide, actively procure financial means from abroad. In this way, they provide domestic industries with the power of capital, the source of increased productive force, even beyond any limits to their own ability or willingness to create or grant credit. With deposits and loans from abroad, a nation’s banking industry provides itself with additional capacity to take part in and make money on the economic utilization of its home country and the world at large. By importing capital, it thus turns the many local capital locations into one big credit generator. It turns the world into a source of financial power.
• Financial institutions conduct their cross-border lending business in both directions: continually importing and exporting money capital, selling their own securities and purchasing foreign ones, in parallel. To the extent that they succeed at this, the banks of one and the same nation providing the world with credit and themselves with access to the world’s monetary assets, they turn their national business location — and their own location within their nation — into an international financial center, that achievement of civilization quite peculiar to capitalism. Such centers represent — with all the architectural luxury the highly advanced twenty-first century has to offer — the global financial market. Here, the circle described by finance-capitalist business is completed on a world scale. This is where the credit is created that capital all over the world needs as an advance, and where this credit is justified as self-expanding money capital by flowing back from all over the world as debt service. Or not; but that doesn’t change anything, confirming instead that the provision of credit and the return flow of expanded capital meet on the global financial market and one is the basis for the other on a global scale. The lie that finance capital incessantly lives is normality for capitalist business life around the world.

  By creating the global financial market, the banking industry intensifies its power to create credit. It enables and forces its commercial customers to engage in competitive struggle across all national borders and using any sum of invested money that somehow promises a profit; with corresponding consequences for the planet and its inhabitants. And it sets new conditions for capitalist business: conditions that show themselves in national currencies, as did the consequences of the financial industry’s looking after global trade in goods. But now the effect is not simply the quantitative relation between supply and demand and the exchange rates that relation determines, but a specific quality: how suitable a currency is for finance-capitalist business.

• Even in bilateral capital exports, it is not just a matter of a few banks, firms, or private investors having money to spare for foreign investments. What is crucial is whether the accumulation of capital on a national scale, amalgamated in the power of the nation’s banking industry to create credit, provides the means to open up or conquer new fields of business abroad without compromising on the nation’s business life. That is, does it provide the means to invest on a considerable scale beyond the needs and opportunities of domestic capital expansion? If so, this nation’s capitalists do not merely press work and wealth elsewhere into service for their private business success. Their foreign business as a whole serves to economically justify the credit created within the country: the future increase in wealth that the domestic financial industry anticipates is also realized by the capital accumulation it sets in motion abroad. For this country’s credit-money, that is a confirmation not captured by the balance resulting from demand for foreign currency for investing abroad and the demand for one’s own currency for servicing loans and transferring profit when necessary. Such money represents the international success of speculative credit creation in the country where it is valid legal tender; it stands also for the capital growth in other countries that is financed by its creation. The negative counterpart is a ‘capital export’ due to lack of opportunities to accumulate capital in one’s own country (which is why it referred to as ‘capital flight’ instead). This is a transfer, not of credit powerfully brought into the world, but of realized monetary assets to another country in order to take part in business life there instead of at home, and into a foreign money in order to preserve and increase the assets’ value in that money. When national wealth in monetary form crosses borders on that basis, it reveals the incapacity of the domestic financial industry. Though banks may be enriching themselves on this kind of ‘escape aid,’ the overall effect is to narrow the base for national credit creation, meaning a further loss to the money advanced for the nation’s business, the advance already not leading to any growth. It is this loss that is represented by the money of such a country.
• It is no different with bilateral capital imports. In the positive case, money flows from abroad into a country, as a deposit, a loan, or — above all — as an investment, in order to take part in a capital growth that is strong or sound even without such an inflow and, in any case, gains soundness and strength through additional money. Importing financial resources is contributing to the power of the nation’s financial industry to exploit the whole world financially. In this case, the nation’s credit-money does not merely reflect the greater amount of demand for it, but represents the growing power of the nation’s credit. The opposite effect occurs when banks or firms borrow abroad because the domestic financial industry does not provide the necessary funds for growth on a national scale due to a lack of previous and current accumulation. The nation can then continue to do its capitalist business with borrowed foreign funds; and it might even manage to pull off autonomous growth on that basis. Nevertheless, the credit the nation is bringing about on the strength of its own capital expansion is not creating the necessary growth, at least not at first. In any case, any surplus arising on a national scale will, primarily and until further notice, service the import of capital, which is why a better name for this is ‘debt.’ The money of such a nation represents the inadequacy of the nation’s credit creation: capital is tending to be, or actually being, devalued on a national scale rather than accumulating.
• The international financial market enhances the capabilities of banking capital, giving both its positively and negatively discriminating actions a markedly greater impact, accordingly intensifying and consolidating whatever effects these actions have on the credit and credit-money of national business worlds. In countries where capital accumulation justifies any amount of credit creation, and credit creation finances capital accumulation at the highest, most competitive level, the financial industry acts as the driving force behind this market. It credits capital accumulation not only bilaterally in other locations but universally, making use of the whole world to transform its advances into accumulating capital. The money earned worldwide unerringly finds its way back to such preeminent financial centers. As a matter of course, the industry utilizes those currencies for its global business that, as evidenced by the industry’s own capacity, so splendidly prove themselves as an advance. In so doing, it gives them their own exclusive quality: the status of world money. This kind of money acts as general equivalent in the global financial business, consequently representing not merely the nation’s credit in which it circulates as legal tender, but the capitalist productive force of the credit that the whole world uses as an advance and turns into money capital. Thus, it factually, i.e., for economic reasons, delivers on what states promise when they declare their money convertible: it actually is the value the whole world is out for. For banks in other countries to be able to create credit effectively they must have a part in the world financial market, which is essentially at home in foreign financial centers. They utilize, and reproduce, their own home country more as a subordinate part of global financial business than as a decisive part of it. The credit-money that they themselves create under the direction and control of their nation’s central bank and use as a capital advance and put in circulation is at best good for financially exploiting their own nation. For them, and certainly for foreign business partners, it is only a local transitional phase in a circuit of money capital that has its starting point, endpoint, and new starting point in the global financial market and the world currencies used on that market. It may continue to be the sole means of payment locally; for exploiting the nation’s labor it will definitely serve well enough, precisely because this money is not worth much and tends to be worth less and less. For financial capital, it represents at best a state promise of money and by no means the fulfillment of this promise — unlike the leading global moneys, which therefore also serve as the reference unit for valuating all other national means of payment.^[9]

  With the license to conduct its credit business on a global scale across all borders, and driven by its endless need for growth, financial capital generates for itself the status of an authority that has the capitalist wealth of the world at its practical disposal. It turns the capital accumulation in all countries that make their money convertible to take part in global business into its disposable means, into the source of its power to create credit and allocate it across the globe at its own speculative discretion. It draws on national economies to justify its creation of credit. Accordingly, the financial industry attends to every need for money, whether its own or that of the rest of the business world and of state powers, too. It examines and evaluates nations to see if their past and expected performance makes them seem like good breeding grounds for capitalist accumulation. So it basically divides them up into two main categories. It is totally at home where a nation proves itself both as a source of credit and as a sphere of investment on a large scale and in grand style, so that the financial market shows the ‘depth’ that a modern financial industry needs. It turns the money of these countries into its value tokens, and the states responsible for them into world-money powers. Using these countries as a base, and the credit and money fabricated there, it utilizes the countries of the other main category for earning money, building them up and exploiting them according to whatever is appropriate there. The politico-economic status that nations are consequently assigned does not lead the rulers in charge to revoke the license they have granted the banking industry, but rather to a constant competitive fight between them. Most of them compete for finance capital’s interest and favor in order for their nation to gain one of the better places in the hierarchy of capital locations, which has no lower limit. The other few fight in their way for the status of leading global financial power and for the primacy of their nation’s money as a currency for global credit business.

b) The competition of states over their nation’s creditworthiness and recognition of their money

For a nation’s means of payment to be actually exchangeable, to be recognized as proper money, the state has to provide a guarantee in the form of a foreign-currency reserve. Thus, economic policymakers of all nations have to make sure their country earns money from abroad. The many countries that constantly lose money to other nations in cross-border trade therefore have a problem, but it can be solved thanks to the actions of the international financial industry. Banks help such countries overcome financial difficulties resulting from negative trade balances by issuing credit, by trading in money capital as a commodity across borders and ultimately worldwide — only in this way can a country come to post such deficits on a permanent basis. On the other side, it is not the last word that successful global trading nations accumulate a foreign-currency reserve that grows more the less it is needed to pay for imports, and is needed to attest the nation’s solvency less the more it grows with the trade surplus. The foreign exchange earned abroad, and consequently also the domestic money ‘backed’ with it, is what the banks with access to it use for operating their cross-border credit business. For them, it is a boon that national trade balances are so unequal, that some countries accumulate surpluses and others deficits. This gives them access to loads of globally usable money and presents them with numerous countries in dire need of foreign money. With this splendid condition for business, banks develop the power with their loans to allocate the capitalist means of existence to nations entirely according to their own economic criteria.

Thus the governments of both kinds of states are confronted by finance capital with legal and economic challenges and tasks that go decisively beyond controlling cross-border flows of goods and money and tending to a foreign-currency reserve for securing the country’s international solvency. Nations diverge far more deeply by their efforts to meet these challenges than by the effects the trade balance has on their money.

• The supervision of property rights that a capitalist debt-based economy absolutely needs becomes an affair between sovereign powers. The transfer of money capital across national borders gives legal persons of one state property rights vis-à-vis those of another, thus vis-à-vis the state defining and guarding their legal status. In recognizing such rights, the responsible state power does not merely concede to respect a foreign individual’s property and subsume it under the legal system it enforces. It at the same time recognizes in the foreign citizen’s property that he is subject to a foreign sovereign’s rule and thus that a foreign legal authority is responsible for persons and capital that are economically active in its own country and according to its own regulations. Conversely, the foreign rule concedes that its citizens and a property it guarantees are subject to another sovereignty. The treaty arrangements this requires show that the export and import of capital gives rise to property rights between states. One state power is liable toward another for such ‘foreign assets’ being respected and properly used. It is not just that private individuals are acquiring a source of profit; states are acquiring a certain responsibility for some of the nation’s wealth being used in another country. Conversely, when capital is imported a state is agreeing to foreign economic power of command being used in its own country, thereby agreeing to water down its sole sovereignty over its society’s economic life process to a certain extent.^[10]

  If one state tolerates its country's material resources including its labor force being used by foreign capital for the purpose of foreign enrichment, while the other allows its domestic capital to be used for the expansion and accumulation of capital outside its grasp, that affects not only the sovereignty of the supreme powers; it affects them as economic actors.

• The import and export of capital have a direct impact on the states’ balance of payments and on their foreign-currency reserves, and they create new legal obligations. Capital exports might draw on the state’s foreign-currency holdings, the consequences tending to be ruinous when capital flight is involved. In the positive case, i.e., when the nation’s business world generates profits abroad that it posts in its books at home and transfers into domestic currency as required, this benefits the state’s credit-money, namely, its validity as international means of payment. This applies even when a deficit comes about in the balance of payments. Capital imports always benefit the foreign-exchange holdings which serve the state as the basis for vouching for its credit-money’s convertibility when necessary. This means that the potential claims on these reserves also grow, but this price only becomes difficult to pay when a state has to rely on foreign credit to remain internationally liquid. In this case the growing boon of borrowed solvency might mean a growing need to go deeper into debt in foreign money.
• Interest in importing and exporting capital raises a problem for the state as the responsible administrator of a national budget. The tax department on one side won’t readily forgo its share of the profits that its taxpaying citizens’ money capital earns abroad, and neither will that on the other side forgo the customary local taxes it levies on economic activities in its country. But because cross-border investment is desired by both sides, it should not be restricted or actually brought to a standstill by double taxation. Hence there is a need for an arrangement that does involve forgoing something. And which party mainly loses follows in quite a few cases from how strong nations with an undisputed ability to pay worldwide are compared to those with a notorious need for foreign exchange.
• For the budget they govern their country with, the governments of all states make direct use of the financial industry’s services, which they give free rein to beyond their borders. They also take out loans abroad or allow their debts to be marketed on the international financial market, thus directly strengthening their financial clout with credit created abroad. In doing so, however, they expose their budget and its monetary effects to a completely different examination and challenge than if public borrowing remained a purely internal affair between government and national banking industry. In either case, finance capital is authorized and invited to judge how sound the state’s debt economy is, i.e., how successfully the national economy seems to be running on credit in general and on the state’s credit in particular. And it is invited to put a price on this in the form of an interest rate, which, following the logic of this industry, is all the higher the greater the discrepancy between government debt and how speculators anticipate the nation’s capital growth will justify this debt. But the international credit business quite considerably intensifies this effect in both directions, because it can choose. Its demand for good government bonds — i.e., ones justified by anticipated growth — leads to a drop in the interest rate charged. Its reservations about bad debt securities make borrowing more expensive; not only for the state, but also for the whole nation that is putting the national debt to such poor use by comparison. International money trading adds to this effect a comparative assessment of the nation’s credit-money. With all the vagueness and exaggeration of speculation, the fact that this credit-money’s units tend to contain less capitalist purchasing power is translated into worse exchange rates. These in turn rebound on the interest rate for debts in local currency: the interest rate has to compensate for the expected depreciation of the money. In this situation, a state is all the keener, if not ultimately desperate, to find foreign financiers for itself and its economy and to borrow foreign money. It needs foreign ‘financial backers’ to compensate for the weakness of the nation’s credit creation, and foreign-exchange loans in order to save interest and stop pushing monetary depreciation even further. Of course, such facilities have their price. In the end, the state has to use its foreign-currency reserve not just to assume liability for the validity of the national money that foreign investors earn in its country, but to vouch for its own budget debts and for the foreign-currency debts of its business people. On the other side, in an accordingly comfortable position, are countries that are attested by financial capital, with its high rating of their bonds, to have an intact relation between government-fueled credit creation and national growth. Their budget and their economy benefit from low interest rates and a money whose access power increases in comparison to other currencies. Above all, however, they benefit from the special quality of their legal tender. Since it is used universally, also by the budget specialists of other states, and by other central banks as a reserve currency, every sum of money that the official money creators in charge bring into the world is basically assured recognition as directly usable money. And that guarantees the state’s budget debts worldwide recognition as safe money-capital.^[11] So while all sovereigns become clients of the global finance business, some do so out of the need to compensate for the lacking performance of their national economy, and the others enjoy and utilize the freedom to sell their deficits directly as assets. Moreover, because some need the others’ ‘good’ money, the legal property relations between sovereigns are also affected: the private creditors of foreign-currency debtors are backed by the powers with the sought-after money not only as legal authorities, but also as creators of the loaned money and creditors of last resort that refinance the private money lenders and thus share in their debt claims.
• It follows for the governments of modern states — basically for all of them — that if they are to utilize the global financial market for their budget and their economy’s solvency, it is imperative to pursue the top-priority economic policy goal of ensuring their nation’s creditworthiness. This goal means quite different things for the various states. For some, it is a matter of getting finance capital to approve their capital location as an investment sphere, to a sufficient extent for making the nation’s capital grow and meeting the state’s needs. They also need finance capital to approve their national credit-money as a means of business that represents an exploitable and hence recognition-worthy capability of the nation for capital expansion, and is therefore actually used for that purpose and accordingly confirmed as holding value. On both scores, such nations have to stand the test in competition with their peers. The few other countries where the global financial market is at home take their creditworthiness for granted. They are sure that the country’s companies deserve credit because they will transform invested sums into accumulating money capital; that the state is worthy of its credit because its budget, including its debt, will bring about growth; that the credit created in the country will take effect as a capital advance beyond its borders and enrich both its creators and their ruler; so that the country’s credit-money is absolutely reliable. Of course, this also needs to be constantly secured, i.e., established anew and defended against competing global economic powers. So in the end, all states under the economic regime of finance capital make it top priority to follow all the imperatives of success-oriented policies for budget and economy, debt and money. They need to succeed in the competition of nations, and succeed on the right scale. The states take up this challenge, each with its own means. The big ones apply credit and national resources within the country to turn domestic firms into multinationals and breed national champions that define the pinnacle of capitalist progress. Outside the country, these states accordingly seek to reach agreements with other states (above all those with lots of money, large markets, and interesting investment opportunities) to prevent discrimination against their own companies and create chances for them to bring their strengths into play. At home, the national wage level must also constantly be given a critical look, because domestic multinationals are authorized and free to decide to exploit low wages elsewhere — which can definitely benefit their balance sheets and hence the domestic overall balance. When states pursue a social policy, it follows the guideline of ensuring that their population can be utilized for the global competition of firms operating in the country, without unproductively wasting state budget funds. That keeps the bourgeois struggle to survive fresh and lively. And a government must also be willing to sacrifice companies and entire branches of industry that cannot meet the criterion of maximum capital productivity. They ultimately only cost money and reduce the nation’s superiority in competition. Other ruling powers without such an embarrassment of riches devote all their people’s means and possibilities for survival and whatever resources are to be found on their territory to the one goal of making money out of them or having domestic and foreign investors do that. Where there are first signs of hopeful national development, governments act toward other states in as powerfully defensive a way as possible, building protective fences around industries and resources. (When they give up such fences ad hoc to big spenders rather than due to political extortion in general, they are called corrupt.) Some try to get their country a niche on the world market with some sort of special offer, and still end up dependent on being indulged by the powers that have the upper hand with their money and their markets.

  The results follow the market-economy rule that the essential condition for capitalist success is having already achieved and accumulated success, and nothing drives the accumulation of capitalist wealth better than its accumulation. It is the rare exception, in any case, that political efforts manage to significantly revise the economic sorting of countries that is produced and constantly reproduced by the international financial market. Faced with the way the global speculation industry makes use of their countries and the place it assigns them in the hierarchy of capital locations, the political power holders in charge, with all their national competitive spirit, essentially end up cementing their place as a fixed politico-economic status:

• The members of the very scanty elite are known as industrialized countries. This image of a particularly dense concentration of technologically advanced production plants stands for a capitalist success story that involves much more than the achievements of the productive capital assembled there. What matters is how outstandingly creditworthy these nations are. The mass, rate, and prospects for success of their capital accumulation testify to the fact that they are extremely attractive investment locations, which provides the basis for more financial resources to flow in and further increase their power to grow and make them yet more attractive. Their capital growth makes them at the same time, and above all, places for the most extensive credit creation by those who survey and treat the whole world as an object for their speculation; and places for a credit-money that serves finance capital as a means of business all over the world and consequently functions as world money. This success lifts such countries out of the competition of nations: they themselves are the creators of the money the world is competing to acquire by increasing it. They vie with each other in a league of their own for their credit’s share in world business, for their currency’s primacy as a global means of business and a reserve currency, for their importance as a home of the global financial market. That they are nevertheless given the label ‘industrialized’ as their distinctive feature is something like a reminder that not even the banking system or state budgets, let alone mankind, can exist on gold, promises of payment, and book entries. It is a quite unintentional allusion to the fact that global capitalism is still a mode of production.
• The other states of the world struggle with the task of bringing about growth and earning world money in order to be internationally liquid. Depending on their means and success achieved in these efforts, such countries are sorted into special politico-economic categories which are ideological in name but in substance determine their entire existence. Newly industrialized countries (NIC) are those that have become so interesting to the international business world and popular with investors that they have to be taken seriously as competitors by the industrialized countries in some areas of the global trade in goods and money. They are also called ‘emerging markets’ because, on the one hand, finance capital acknowledges them as ‘markets’ for extensive, promising, quite long-term investments. They are ‘emerging,’ on the other hand, since they have not yet managed to capture any great shares of the global financial business with their debts and national money, nor to act as a source and hub for the world’s fictitious capital.^[12] Other states belong to the category of primary producing countries, i.e., suppliers of raw materials; this characterizes their peripheral role in the global capitalist expansion process as a source of production materials rather than wealth. The real capitalist significance of such lands lies in the attention they get from speculators active on commodity exchanges in “early industrialized” and newly industrialized countries. By contrast, oil states are not only distinguished by how important their particular natural product is to the capitalist global economy and how much of the wealth accumulating elsewhere they manage to acquire. The ones with the largest ‘petrodollar’ revenues and holdings have started trying to move up to the newly industrialized category or use the financial resources available to them to establish or become centers for credit creation, securities trading, and financing global business. In addition, there are a substantial number of states that financially speaking fall in the category of ‘highly indebted’ countries or otherwise ‘failing’ or already ‘failed states’ because they are useless for any type of speculative investment due to a lack of orderly domestic conditions.

  Of course, every state represents a particular case. But they are all special cases in a world where nations compete for credit and for financial power in their state’s hands.

4. The ‘one world’ of money capital and its state guardians

a) The power of financial markets on a global scale

By financing cross-border trade, exporting and importing capital, creating a global financial market and accordingly trading foreign exchange, banks create masses of new sources of income for themselves and their clientele. The speculative uncertainty inherent in their business does not act as a barrier to its growth internationally any more than it does within the nation. In fact, ‘risks’ are the very stuff of finance-capitalist accumulation; and its risky nature as such is the stuff of hedging transactions and a vast superstructure of pure financial transactions derived from them. All the items that play a role in the finance-capitalist ‘value-creation process’ are good for business. National differences in growth rates, interest rates, government debt ratios, inflation figures, exchange rates, etc., and the way they will presumably change stimulate speculation and enrich the derivatives market. The financial sector thereby creates a considerable volume of business that contributes a great deal to its power to determine economic life in capitalist nations. And as its power grows so does the practical necessity to apply it no matter what. Once capitalist wealth has achieved the freedom to create spheres for its accumulation itself, then this freedom needs to be exercised.

The effects of this are felt, on one side, by the states lacking in national credit creation, whose credit-money is not deemed internationally usable. A positive effect is that a financial industry seeking profitable expansion worldwide floods them with productive and less productive investments when a profit opportunity opens up in their land, when state-granted freedoms to exploit people and nature outweigh all other locational disadvantages, or when the state directly guarantees an above-average return at its own expense. In such cases, the state gets lent foreign currency without excessive regard for its long-term ‘debt sustainability,’ and investors turn entire regions inside out until money grows in them in one way or another. Thanks to its globally established freedom of movement, invested money is of course just as quick to get out of a country that is far from able to generate the credit it needs itself, as soon as there is a downturn in some economic situation that the country was useful for, its natural resources are exhausted, or there is some threat of uncertainty. If a state uses its monetary sovereignty to create credit in national currency on its own authority, this is answered, usually at least and until further notice, by money traders with the currency’s devaluation and by the nation’s money owners with capital flight. The nation is left with obligations to pay interest and principal, and that in a money it does not have and is definitely unable to earn without new loans. Both the building up and the ruination of such countries show what the private power of money is capable of. Capital’s globally recognized right to increase renders economically helpless even the sovereign power that has brought this right into force in its country and tied its society down to it.

With the same heedlessness, likewise looking only to increase the wealth available to it, the financial industry makes use of the business resources and opportunities offered to it, on the other side, by more successful nations and the higher echelon global economic powers. It uses the ‘depth,' i.e., the virtually unlimited productiveness of the market for credit and fictitious capital that it itself has established, to multiply its ‘products’ and the sums of world credit-money that it keeps trade in its products going with. With financial companies’ business knowing no limits in any respect, it is obviously on a global scale that they bring about the crisis manifesting the contradiction between their vastly multiplied globally traded promises of returns and the conditions for fulfilling them. This is of course the ‘systemic’ lie their industry lives on, that promises are as good as realized wealth. When winding down their stacked-up credit business in a crisis, they are no more egalitarian about it than when accumulating loans and fictitious capital. They first take their money out of the nations that serve them as disposable sources of wealth, not as home base for their speculation, and that are most dependent on the inflow of world money. As a rule, these countries are accordingly the ones assigned the role of crisis trigger and the bad reputation of being the real reason for the crisis. If the financial firms succeed in limiting the financial crisis to these bankruptcy candidates they have targeted — who by no means need to have been the biggest contributors to fictitious capital becoming so critically oversized, i.e., to the ‘bubble bursting’ — then the business slump is regarded as a purely regional incident. However, the enormous accumulation that a globally active financial industry achieves is also good for other developments. The creators of credit can also fix their distrust on products that are generated and traded in the major centers of capital where they constitute considerable parts of national wealth. The critical acid test is then done on an industry or financial-industry sector that speculators have brought a special boom to. And if there is only a limited destruction of value, then the world has weathered a ‘real estate bubble’ or a ‘financial crash in the IT sector.’ But the banking industry is also able to stage a progressive collapse of the money capital listed in the major financial centers, ruin major banks, bring the accumulation of capital to a worldwide standstill, and even endanger business assets and solvency in the top locations. Its power is sufficient for ruining itself and thereby creating a quandary for the political authorities overseeing global capitalism.

In this situation, managers of the speculation industry don’t shy from declaring that the disaster they have caused means the whole system is at stake. This is the opposite of a critique of the system; instead they take it as the basis for claiming a right to demand an extra service, in view of their own systemic importance, from the authorities that have granted them the protection for becoming so great and powerful. They want their home states, the ones with the recognized world currencies, to create money, give it to them, and thereby hold up the otherwise unstoppable destruction of fictitious capital. In other words, the states are to compensate the banks for their self-produced losses in order to preserve the nations’ monetary assets they have gambled away and to keep the national and international payments going that mankind needs for market economy–style survival. It is remarkable how self-assuredly private businessmen in the financial sector display their entitlement mentality here, but even more remarkable is the economic substance of the rescue operation they demand of their sovereign. The global economic powers are not to use their central bank to refinance successful credit transactions as they usually do, but rather exercise the sheer authority of their monetary sovereignty to repair grandly failed credit; compensate for past and expected losses of money capital; substitute now worthless financial instruments with their own debt securities; and issue fresh central-bank money to attest that these government securities or directly those of the banking world bear value. These states are now supposed to do exactly what financial markets otherwise reject as offending against common financial-capitalist decency and punish by devaluing such irresponsible currencies. That is how ‘the markets’ behave in all other and much more harmless cases, i.e., when financially less comfortable sovereigns ‘print money’ without any prospect of redeeming it through national growth. Transforming debts into expanded capital by decree, producing value by force — this is something that state power can normally not achieve with its laws, and normally does not want to and is not supposed to. In a crisis it is still unable and not supposed to do it in a positive sense, but it can and is supposed to bring it off in a negative sense, i.e., to prevent the great revelation that the crisis has made the world’s money capital worthless. Now it is a matter of achieving financial-capitalist wealth through a sovereign decision.

For the practitioners of big banking, this is not a contradiction but rather child’s play. All they need, ‘until’ proper speculative business ‘gets going again,’ is a quantum of credit from the state budget. This time it is not for promoting business but for rescuing their firm by recapitalizing it, of course ‘just’ until ‘hard times’ have passed. Perhaps they will ultimately even need ‘only’ fresh liquidity, this time a lot for sure, but definitely not an amount falling outside the scope of business relations between the central bank and commercial banks. This actually means they are making a revelation very different from the one that their business has collapsed, namely, about what it is based on. If they need an act of state power to prevent their wealth from self-destruction in a crisis, and if the state can create money out of really nothing but its sovereign power and use it to replace financial-capitalist wealth in actual fact — that is, with full effect to secure its continuation — then, in the final instance, this wealth really has more to do with the power the state puts into force over society’s material activities than with these activities themselves. Then the economic power of finance capital consists in its politically based command. And its regime over society’s production and life process, which is lost without money circulation, is based on the fact, and offers everyday proof, that the determining factor of this mode of production and life is the power exerted over all life and production, and not any expedient organization of the necessary work and wealth of free time and useful goods.

On the other hand, even with such helpful acts of power, states do not abolish the contradiction that, in the system of the capitalist mode of production, the command over work and wealth is objectified in money, that is, it takes effect as the private power of property. For replacing the economic nature of the power of money with an act of political power the way the global financial industry demands it by resorting to the great world-money powers as helpers in times of need — for doing that the internal sovereignty of a national state power is not enough in today’s global capitalism. Most modern state powers are permanently at the mercy of financial capital, which is backed by world powers that guarantee the global validity of the capitalist property order. And these powers are not annulling this order with their act of power, but rather restoring the economic command of money on a global scale after its financial-capitalist impresarios have bungled it. That this results in sizable state deficits backed by absolutely nothing but a political will to maintain the system; and that the world market for fictitious capital nevertheless accepts these deficits as perfectly good money capital — well, this does clarify the nature of this system. Capitalism under the direction of the globally active financial industry is, and only functions as, the political economy of imperialism.

b) How capitalist world powers set free, control, correct, and strategically utilize global business with money and credit

(1) The global financial market: an American product of world war, and its contradiction

Formally, all states of the modern world are equal sovereign authors and guardians of the system under which they compete for the monetary wealth they use for their rule. But the many supreme powers have of course been spared the test of whether they are actually willing and able to create this contradiction and subordinate their competing self-serving interests in each other to a binding set of rules quite freely and with respect for their equality. The agreement they have reached, which has resulted in giving the financial industry so much decision-making power over the economic fate of nations, is based on relations of force that have been decided between the sovereign states. They were decided by the USA and in its own interest. After winning world wars, two ‘hot’ and one ‘cold,’ the USA established this regime of competition, which the national heirs of the Soviet Union and its ‘satellites’ as well as the People’s Republic of China also joined after breaking up the ‘socialist camp’ and rejecting the ‘planned economy’ conceived as the first step to communism. And the USA continues to maintain a readiness for war that it considers indispensable for making sure there are no alternatives to the capitalist style of civil dealings between states (more on this later). With this ‘world order,’ the USA embraces a contradiction. As founder and guarantor of an orderly competition of nations for the world’s money, and as creator of the money they are all essentially competing for, it has no competition. It also takes for granted its competence to lay down the rules for the proper course of the global economy. At the same time, it exposes itself — in principle without any restriction or reservation — to competition with all the other nations over which ones will be able to reap the benefits of global business and get an economic grip on its course and results. For the US, these two sides of the contradiction — its role as the arranger of competition between states, with an interest in generally respected rules, and its interest in winning out according to these rules that are equally binding for all — coincide in the certainty that if the other states follow the rules their competitive efforts can ultimately never harm but only benefit the mother country and home of capitalism. It acts as if the capitalist private power of money, which it gives worldwide validity to with its dollar, need only be exercised unimpeded to guarantee that its nation’s capital will be unassailably successful, its debt will have indestructible value, and its credit-money will be incontestably dominant. And this ‘as if’ is not just some idea but a practiced standpoint. It is not a mere claim, but the actual agenda of the prevailing global business order that financial capital owes its position of global power to.

For the US to establish and maintain this regime, it has been crucial that the other major capitalist powers have been willing to participate and accordingly take their subordinate places in it.^[13] Those with a war-ravaged economy and the world of states as a whole received from the US the offer to restart their national capitalism by using American dollar-denominated loans and basing their own currency on this credit and on acquiring US dollars through export. They took up the offer and accepted the rules and regulations of international competition, this being the only way they could see of achieving a career as a capital location. With agreements at the UN level on a monetary fund, the IMF, that was to ensure the participants’ solvency through bridge loans when necessary, and on a World Bank to serve the competitiveness of the countries, the economic dominance of the US took on the form of a general, quasi-supranational management and system of rules, which especially capitalist Europe also took responsibility for. In this form, America’s exceptional position as a competitor with no competition has been recognized and institutionalized, on the one hand, but all it appears as, on the other hand, is the US government’s especially high voting share in IMF and World Bank decisions, and the US dollar’s higher percentage in the ‘basket’ of currencies available for refinancing states in financial straits.

(2) How state bankruptcies and global financial crises are managed by the contradictory but durable collective of imperialist powers

In this hybrid order, America’s European partners have over the decades secured themselves the position of financial powers with world money at their disposal. The British pound and above all the euro are internationally used and recognized as reserve currencies. With the capitalist power of credit embodied in these currencies, they actually compete with the United States at its own level, crediting and utilizing the global economy for the success and justification of their own credit creation. This is an attack on the exceptional position of the United States and its dollar. America, in turn, uses the power of its capital and intensive economic relations with all the countries that money can be earned on, not least free access for its strong industries to the European market, to try and prevent its like-minded partners from turning into competitors on a par with it. If the euro were to become an equal-ranking alternative to America’s world money, the latter would not stand up well to the loss of its dominance in global business if only because of the vast amount of national debt whose value is maintained by the US central banking system. The competition between the great world-money powers is therefore fundamental. It relates to the foundations of their position in global capitalism. Nevertheless, it does not break their agreement about the competitive order, nor end the great rivals’ cooperation in preserving and further developing the established regime with its freedoms for capitalist property. Both sides know what they get out of it, and put up with the contradiction of one side viewing and using the supranationalism of this regime as recognition of its exceptional national position, and the other side deriving an entitlement and empowerment to fight for equal rank. After all, because, and as long as, the US and the eurozone as well as Japan and Great Britain cooperate, the global economy provides the ‘G7,’ at least for the time being, with the means to profit from global capitalism, to continue tailoring it to their needs, to maintain it even against its own ruinous and actually self-destructive effects, and to protect it against whatever they view as an attack on it or on themselves as the qualified guardians of order.

• One of the necessary counterproductive consequences of the competition of nations under the economic regime of finance capital is that quite a few candidates are unfit for the role of promising capital location that they are supposed to make themselves useful as. Either they do not have sufficiently exploitable sources of wealth to attract any business interest in the first place; or they have been defeated in the competition for a share of global business, making their money worthless and ruining their international solvency. Finance capital may write off such countries painlessly; but the key states responsible for the system will not release any member of their family of nations from the prevailing business order. For one thing, bankruptcies in the global economy give the supranational institutions of the world financial order a chance to show what they can do. When sovereigns need credit to participate in global business but can’t get any — more — from the banking industry, then the IMF goes into action. It uses the dual strategy that it has long since developed out of its original bridging function. It ties loans from its disposable funds fed by the financially strong global economic powers to tough, strictly monitored conditions with the sole aim of giving the governments — once again — access to credit markets, even at the expense of any means and possibilities of subsistence that the capitalistically useless population might still have. Conditions for business are to be created with money shelled out by the World Bank. For another thing, the governments of successful capitalist nations, which draw their financial power from global business, are generally proactive in intervening in all the doings of state powers that have lost their creditworthiness. They do not leave national deficits to the governments responsible for them, being instead prepared to trade financial aid for rights to exploit their land and people. Between the leading global economic powers and the many countries that have notoriously lost on the world market, this results in more or less pronounced patron-client relationships, which go as far as payments to maintain a foreign state.^[14]
• What poses a significantly more serious problem for the system of global finance capitalism — to the point of threatening its actual existence — is its prolonged success. For some time now, the contradiction between the accumulation of capital in all its forms and the conditions for its further expansion has no longer been resolvable by conquering foreign countries for investments, occurring instead on a global scale. When there is a crisis, those who have created it therefore confront monetary policymakers in the major economic nations with their demand to be rescued. The politicians react, quite properly, with an intense political competition over who has to bear the losses. But when the dimensions of damage are too great they have no choice but to set about rescuing the global financial system by recapitalizing a bankrupt banking world, if necessary by — at least temporarily — nationalizing it. Then they have to stop quarreling and come to an agreement. After all, in the final analysis, their credit depends on their replacing vanished credit with public debt and buying up each other’s thus created money to thereby affirm its value and the continuance of their nations’ credit that this money represents. That is why, in every major financial crisis, the major world-money rivals have brought themselves to consult with each other and bring into being the sums of money the banking industry has needed to stay in business and maintain its basic lie that its debt business is capitalistically sound. And each time, they agree to recognize each other’s authoritative intervention as fully valid backing for these sums. Finance capital responds to this act of force, for its part, by deciding to let it stand — not with any false gratitude, but unmoved. Its standpoint is to critically examine how credible the value is that the credit-money invested in its rescue is supposed to have. It owes that much to the continuation of its basic lie that its financial assets are economically right as rain. At the same time, from one crisis to the next there has been a clear shift in the standards for assessing the credibility of credit created without any economic justification, and the credit-money representing it. Now, such debts — which in some countries amount to the statistical sum of the values of all goods produced and services provided in the nation in the course of a year, the annual GDP, and thus are not likely to ever be paid back — are regarded as highly respectable money capital, as long as there is one of the great world-money powers behind them. However, the finance industry is still very interested in checking how the various nations’ bailout loans relate to the presumed economic performance of the country issuing them, and charges different interest rates — as if the fact that these debts are fictitious and the money issued for them is backed solely by the state’s monetary sovereignty were altered when one, one and a half, or two times the annual gross domestic product is conjured up as assets existing alongside it somehow. By rating so meticulously, the world of speculators coolly act as if this money were still a loan, an advance worth as much as the expansion of capital it facilitates. They disregard the fact that this money is not feigning a wealth that does not yet exist, but one that no longer exists thanks to the devaluation of assets in the crisis. In actuality, it isn’t really a matter of assessing anything like whether and by when the amount of money issued will prove to be accumulated capital, or in which case this promise can more likely be expected to be fulfilled and in which case it more likely cannot. What makes the difference to the financial industry is not the numerical ratio between the amount of national debt and the annual domestic product, but who is guaranteeing the capitalist quality of the money created by decree. It won’t rely on anything less than the combined power of the great global economic powers, but that is what it calls for — what else should it do with its crisis?! That is why it is willing to accept from these powers such absurd maneuvers as an extra money issuance that over the years amounts to the notorious 80% to 120% of the issuers’ gross domestic product — and with this capital it starts all over again… So the politicians in charge of the global credit system manage its inevitable crises using its own means.

(3) The multiple ways global finance benefits the order-maintaining and deterrence policies of those guarding the global business order

Those governing the global economic regime are also familiar with external challenges to it; and these too they can still cope with quite well somehow thanks to the works of the object under their protection, the global financial market. External challenges do not involve those problems arising from the course of economic events with its inherent necessities, but rather the overriding general problem of how willing sovereign rulers are to submit to the legally binding business order agreed on for international economic life, and how they relate to its qualified guarantors. After all, this order is not so inescapable that there is no more room for sovereign rulers to decide whether, or to what extent, to subject their country to the regime of finance capital. And if they do decide to join, this definitely does not mean they automatically recognize the authority to issue guidelines and the supervisory power that America lays claim to. There are plenty of occasions for the USA or its allied global economic powers to notice that the world of states is not fully available to global business due to foreign sovereigns acting on their own discretion. So the leading powers do not have a definitive grip on the system that they have established, not merely as a non-binding offer for everyone’s benefit, but as one that has to function worldwide for their own capitalist wealth to prosper. The way they use the world for business, they are not automatically masters over the conditions for their own success. This is an intolerable contradiction for the political masters of this global system.

The consequence is obvious. The prevailing order must not be something its sovereign actors can decide freely on; it must be respected like binding supranational law. It is not enough to go along with it in a calculating way; sovereign rulers are required to renounce using force on their own authority in international dealings. This needs to be monitored; by whom is already clear from the starting point. And for making sure all behave compliantly, forcing them to if necessary, the global financial market itself provides the leading economic powers with remarkable means.

The course of financial capitalist business itself offers levers for disciplining companies that are under foreign sovereignty, and states insofar as they are responsible for their companies, i.e., can be held accountable for their activities, and insofar as the states themselves are involved in the global financial market. This market has its financial centers. It generates its resources mainly in the countries of those economic powers with strong accumulation of capital and globally valid credit-money. Their central banks create this money, use it to refinance the nation’s credit institutions, and thereby exert influence on global finance as a whole. Therefore, whoever takes part in this market — and that includes all nations with their credit-creating and borrowing companies — is automatically subject in some bit of its financial activities to the legislation, jurisdiction, and monetary-policy regime of the states where finance capital is really at home. As a result, the global money business — precisely because it serves all needs for money worldwide without prejudice and without value judgments, with no reservations about dubious sources of money, its concern being solely abstract wealth in its purest form — becomes a sphere where the control bodies of the world-money powers extend their political power and their legal sovereignty beyond their national borders to cover all the states in the world. It is through the global financial market that its custodians with their constitutional democracies, first and foremost the USA, get a grip on all third powers and their protégés. They encroach on foreign sovereignty in a completely civilian form, without using the military force this otherwise requires.

One way of using this power is to force others to take part in conformance with the rules: banks that would otherwise respect no rules other than the right of capital to grow, and states that take liberties with the prevailing international business order. But when it comes to deciding when a rule is being violated, what in general is to be defined as a violation of the business rules governing international dealings, and how to deal with such a violation, there is no getting around the contradiction that underlies this order as a whole. The general nature of the rules needed for competition between money capitalists and states to evolve at all conflicts with the national purpose of the USA, the goal of shaping the world into a business sphere devoted to the success of American credit. The USA, as the dominant economic power and originator of the credit and credit-money globally used, takes it for granted that its own goal matches this general set of rules, wanting to achieve it as the true purpose of these rules, as the real meaning of fairness in competition. This necessarily gives rise to friction not only in relations with the companies and states that the US lays into with its supposedly generally binding legal notions. The tougher and in any case weightier differences arise in dealings with partner countries, especially the rivals bent on equal status. The state power with the dollar confronts such rivals with decisions that often enough go against their own interests, but they are supposed to accept them as prevailing legal norms, thereby actually making them binding.

Such clashes of interests inevitably arise in an even sharper form when the civilian blackmailing power that the global financial market provides its key supervisors with is applied in the other way. This is to bar powers that are pursuing some kind of politically unacceptable goals from taking part in global business in conformance with the rules. The purpose is either to make them abandon their intentions or to undermine their ability to realize them. Sanctions are sharp weapons when they block a nation’s access to the global credit business, thereby also hindering the refinancing of domestic business life, or when they even exclude it from international payments. The use of sanctions is an act of what is appropriately called economic warfare. It only works, of course, if all the important financial powers go along (voluntarily or through coercion). Though the USA succeeds at this often enough, it is by no means a matter of course. And that is not only because a foreign power’s plans and undertakings will only be defined as a violation of prevailing rules in relation to political interests that always diverge in different states to a greater or lesser degree. Economic sanctions in any case damage the states that impose them as well. They directly cause material damage due to lost business, involving above all the danger of third parties stepping in and making all the more money there. Moreover, they damage the principle of the global economic order that all participants are supposed to rely on and firmly trust: that the right of capitalist property to expand must be strictly respected regardless of its national origin. When financial business is functionalized for particular political purposes, that contradicts what is actually codified in the prevailing business order: the abstract nature of what all financial transactions are about.

The global economic powers are in fact leaving the sphere of economic interests and business benefit when they agree to use economic pressure as a means for politically blackmailing or intentionally damaging another state. They are using the means of capitalist business to transition away from exploiting how another state calculates its benefit and toward taking action against its sovereign decisions. They are abandoning the standpoint of mutual recognition, which entails acknowledging the other side’s freedom to make its own decisions, and offensively claiming to be authorized to set conditions and limits on the sovereign will of other state powers. With this transition, however, the world-ordering rulers are also going beyond the capacity of their economic power and the reach of their means of financial blackmail. They are no longer only trying to influence the use a state makes of its sovereign power, they are out to shackle this power itself when a foreign sovereign has been all too high-handed with it. It is back to the premise that states’ civilian dealings with each other are based on and that provides the world-money powers with such fine civilian means of coercion; it is back to the general, basic renunciation of the use of force. And, as no one knows better than the great world overseers themselves, this renunciation can in the end be ensured solely through their superior force. It is their potential use of superior force that takes away other sovereigns’ freedom to decide on this basic question around the globe.

This is how the world’s economic powers set about resolving the contradiction they take on by tailoring the world to suit their economic activities, the contradiction that this means making their wealth, the source of their power, and thus this power itself, dependent on what other state powers are free to decide. They need a potential use of force for effectively restricting the freedom of foreign sovereigns, deterring them from using their own force as they choose, and compelling them to respect the constraints the major powers have established. Only then are they, by their standards, masters of their own destiny. So from their side, too, the equation holds that the global regime of finance capital can only function as the political economy of their imperialism.

For this equation to work out, there must be a consensus among the major capitalist powers. This can be achieved by the US without too much difficulty, as far as the Europeans, Japan and others are concerned, if only because these partners’ economic interests ensure they will take the right side. It generally pays off for them more to cooperate with the dollar state, in international affairs involving the use of force as well, than to pursue divergent interests, which America takes as a provocation. So the established global economy proves to be productive for the interests of its top controlling power in this respect, too. However, the weightier and the trickier the questions of using force internationally are that the US puts on the agenda, the more important a completely different, extra-economic ‘argument’ becomes here as well. These rivals of America are in fact linked in military alliances with the USA as their strategic leading power. This durable relationship guarantees that America’s partners in the alliance will calculate their benefit on a higher level than economic policy. One look at their military strength in comparison to America’s regularly suffices to settle the question of who has the authority to lay down the guidelines when it comes to war and peace and consequently in their alliances.

This comparison of strength offers proof of the last, non-civilian way the global financial market benefits those who supervise it. It not only provides the major powers with instruments for economic blackmail; it gives them a financial power that enables them to develop ever more threatening weapons and arsenals, along with ever newer and more novel war scenarios. In this respect, the global financial business performs a service that eclipses all the tributes that earlier empires invented for subjugated peoples to pay for their military subjugation. The worldwide marketing of America’s national debt, this sophisticated way of making foreign wealth serve America’s financial strength and America’s power, enables the country to continually further develop a military force apparatus that, without always having to be used, is essential for disciplining the rest of the world more or less to respect America’s interests. This is how the global financial market nourishes the state power that subjects the world of states to this market.

Notes

[1] The principle of the materially underpinned convertibility of national credit moneys that is at issue here is not affected by the way a central bank obtains foreign currencies (normally from the business of its nation’s money traders and by borrowing from other central banks and supranational institutions). Nor is it affected by the rules according to which a central bank accumulates and hands over foreign currencies; or by the volume of its foreign exchange transactions in relation to those of commercial banks. It also makes no difference in what form it keeps and manages its foreign exchange holdings (it normally doesn’t stack up bundles of banknotes of course). Nor is it relevant which monetary or foreign-exchange policies it is pursuing in its day-to-day practice. Nor does it matter that the international solvency of a nation’s business world, and in particular its central bank’s, is in a bad way if a country’s monetary watchdogs are actually required to prove they are internationally liquid. What matters is the basis, which is normally taken for granted, for state sovereigns extending their mutual recognition to the money they autonomously create and for banks using their power to create credit-money to stage a global business life. The necessary basis is not just that states formally decide the credit-money they certify as national tender is exchangeable, but that they guarantee this as a basic principle and actually in material form, in accordance with rules they have laid down.

[2] Gold has had its day as an international equivalent; as a ‘near-liquid’ item in a central bank’s possession, it strengthens the bank’s ability to vouch for the money quality of its value tokens. Accordingly, the Deutsche Bundesbank, as guardian of Germany’s gold holdings, gives information about the difference between money value and value token by not explaining it but rather praising the precious metal for helping to deny it in a morally superior manner: “Gold is an essential component of the nation’s currency reserves. It serves to support the credibility of the currency guarantee domestically and internationally, and thus fulfills the function of ensuring confidence and stability.” (Deutsche Bundesbank, Die Deutsche Bundesbank. Aufgabenfelder, Rechtlicher Rahmen, Geschichte [The Deutsche Bundesbank. Tasks, Legal Framework, History] 2006, Frankfurt am Main, p. 181)

[3] This effect is by no means certain. Once the various nations’ capitalist means of business have become international, it is always possible that the currency markets disappoint a convertible currency’s creator by the exchange value they fix, or that they even call into question that a currency is suitable for doing business at all. In that case, the relevant central bank might actually be required to honor its exchange guarantee for its money, decimating its foreign exchange reserve and/or straining its ability to procure foreign currencies. This would be a sign that its legal tender was no longer recognized by the business world as convertible money but rather taken to be a mere credit token, with the nation’s banking business it represents being rated as questionable. For rescuing the convertibility of such money, states with the better money are sought — more on this later.

[4] The most recent and perhaps most drastic historical example of this is the counterrevolutionary upheaval of the Soviet economy. As if it were a purely technical modernization of their economy, the radical reformers of the ‘real socialist’ ‘system of planning and management’ were urged by their own experts and by Western advisors to make their national money convertible and release it for a modern, cross-border banking business. On such premises, they took the supposedly necessary step of internationalizing their currency. In reality, this sealed the destruction of their system’s planning lever, socialist money, and the ruin of all economic planning. For the countries of the Comecon, the Council for Mutual Economic Assistance, there was now no way out of being subjected to the domination of finance capital in the form of local ‘oligarchs,’ Western banks, and other freedom-loving concerns.

[5] Monetary theorists often like to return to this tradition — whenever a major financial crisis annuls considerable parts of the global credit superstructure and threatens to devalue important currencies. At times like this, they would rather be able to touch abstract wealth than put their trust in it existing in an adequate way through its accumulation process. When accounts are settled in a crisis, wiping out most of the value that the art of capitalism derives from future earnings, this strikes such theorists as refuting the functionalism that the banking industry so excessively practices. In reality, however, a crisis of market-economy wealth by no means reduces this wealth to its ‘true’ or ‘hard core.’ Instead, the banking industry is passing an extremely critical judgment on the rest of the economy as being unsuitable as a means for its continued growth. And so it is out for a ‘slimmed down’ business world to start over again — by means of credit. Gold, silver, or other wampum is not the truth of the modern global market economy. On the contrary, this economy’s ruin would be complete if the workings of abstract wealth were in all seriousness to be tied to the socially available quantity of some money-commodity again.

[6] Banks offer companies various alternatives here. Options trading gives the customer the right to buy or sell a foreign-currency sum that it is expecting or will have to pay at a future time at the current or a currently fixed exchange rate. The bank bears the risk of the currency relation improving or worsening and collects a premium commensurate with the risk. In a currency forward proper, the bank modifies the current exchange rate — the ‘spot’ rate — by the difference between the interbank interest rate to be charged for the amount of local currency and that for the corresponding amount in foreign currency up to the settlement date of the contract. This has the effect that a higher interest rate — usually going with a worse currency that tends to depreciate — makes it cheaper by the interest differential for the customer to buy foreign currency at a later date, and makes its forward sale accordingly more expensive, and so on.

For banks, such hedging transactions are the lucrative, but per se boring, basis for a huge superstructure of speculative deals of the derivative kind.

[7] More on the political economy of foreign trade can be found in Work and Wealth, chapter V.

[8] Under the regime of the International Monetary Fund, states have worked out a repertoire of instruments for the required interventions, the ‘stabilizing’ ones as well as any exchange-rate corrections deemed necessary. The most important are the various exchange-rate regimes that are tailored to different national problems and economic policy objectives. States that have no problem proving they are able to make international payments and that see their national industry well positioned to compete for the world’s money leave it to the competition of money traders to valuate their credit-money, and they demand the same of their weaker partners. The latter prefer a system with officially fixed currency parities and with regulations that oblige the nation’s banking world to hand over foreign exchange they have collected to a state authority, for example, or that restrict access to foreign exchange in general or, depending on the intended use, make such access more expensive or cheaper, and so on.

In a list of exchange-rate regimes as of Dec. 31, 2001, in the brochure “Worldwide Organizations and Bodies in the Field of Currency and Economy,” March 2003, p. 27, the German Central Bank (Deutsche Bundesbank) distinguishes • “arrangements in the form of a ‘currency board’” and “other conventional arrangements with fixed exchange rates (including de facto fixed rates with managed floating) — the country binds its currency (formally or de facto) to a major currency or basket of currencies at a fixed rate, with the exchange rate fluctuating within a narrow band of less than 1% around a central rate” •“fixed exchange rates within horizontal bands” • “phased rate adjustments” • “exchange rates within gradually adjusted ranges” • “managed floating without a predetermined exchange-rate path” (it knows of forty-two cases), and finally (in forty cases) • “independent floating — the exchange rate is determined by the market, and any currency intervention is supposed to dampen the rate of change and prevent excessive exchange-rate fluctuations but not to bring about any specific price level.”

[9] In money-trading practice, a handful of world currencies serve as middle links that are readily available everywhere; this earns them their technical designation as ‘vehicle currency.’ They also make the liquidity management of internationally active banks very neat: these banks can restrict their storage of liquid funds to the few currencies recognized as world money. The fact that there are several of those competing and undergoing their own rate movements against each other makes the exchange business a bit more complicated again and speculation interesting again.

[10] How greatly states see their sovereignty affected by capitalist property relations can be seen in the general political proviso they add to agreements protecting unlimited freedom of movement for capital between states, especially in the security points they put forward. One example is Article 3 of the OECD Code of Liberalisation of Capital Movements:

“The provisions of this Code shall not prevent a Member from taking action which it considers necessary for:
i) the maintenance of public order or the protection of public health, morals and safety;
ii) the protection of its essential security interests;
iii) the fulfilment of its obligations relating to international peace and security.”

Also instructive in this connection was the conflict between Europeans and Americans in the negotiations for a transatlantic free-trade agreement over setting up non-state arbitration tribunals for disputes between investors and governments. What made the matter so controversial was not the private or public status of such tribunals, but rather that they were based on no less than the American world power’s jurisdiction, which was able to enforce the execution of any judgments on property rights violations in other states, even in the EU.

[11] Central banks that accumulate surpluses from their country’s foreign trade do not save their foreign-exchange reserves for any future demand, but rather invest them in the especially ‘quasi-liquid’ debt securities belonging to the budgets of world-money nations. The Deutsche Bundesbank provides a good example:

“The Bundesbank’s foreign-exchange reserves have largely been invested in fixed-interest securities of the US Treasury, which are held with the Federal Reserve Bank in New York. A smaller portion of the US dollar portfolio has been invested in fixed-income securities of other issuers with the highest credit ratings. Besides that, the Bundesbank invests foreign-exchange reserves with selected commercial banks in the form of short-term time deposits. In addition, repurchase operations are also conducted. Yen reserves are held in fixed-income securities of the Japanese government or have been invested with the Bank of Japan. Currency reserves are managed using a multi-level approach. First, the Board makes the strategic decisions, in which a balance has to be struck between the criteria of return, liquidity, and risk. The core elements it specifies for its investment policy are the amount and structure of foreign-exchange reserves as well as the range of instruments that can be used. It sets the framework for limiting risks in terms of interest rate, liquidity and credit, and determines the organisation of the operational investment process.” (from the aforementioned brochure of Die Deutsche Bundesbank, p. 180, see footnote 8.)

[12] There is one country, the People's Republic of China, that has been resolutely, and very systematically and successfully, pursuing the project since the beginning of the century of using its large mass of export surpluses and the foreign-exchange reserves it has earned from them to ‘rise’ from newly industrialized country to a world-money power of the first category. More details on this can be found in the journal GegenStandpunkt, issues 1-14 and 4-15. (An abridged and revised version from the latter issue has been translated into English, “China’s progress on the path to financial power and world power”.)

[13] After World War II, America’s remaining capitalist rivals, ruined by defeat or worn out by the war effort, had to weigh up pursuing their national autonomy in matters of international competition against joining a newly opened-up global dollar economy. America made this decision easy for them by opening up war alliances under its own leadership against the Soviet communist ‘camp’ and thereby leaving its rivals virtually no alternative. The scenario of a final world war involving strategic nuclear weapons ensured discipline within the alliance; and that was, and still is, inseparable from junior partnership in questions of world order in general and capitalist competition in particular. In view of the ‘East-West conflict,’ there was no room for the prewar imperialist alternative, a world divided up into competing colonial empires with a sovereign center and dependent periphery. It was not only that there were uprisings in the colonial possessions. On the one hand, the former Soviet ally was supporting the anticolonial liberation movements. On the other, the American ally had a different use for the countries that the former metropoles had kept in dependency. It wanted them as a basis for autonomous anticommunist state powers and as economic zones freely accessible to US capital.

[14] These relationships are now and then criticized as a return to colonial conditions. The colonial powers, however, subjected foreign countries to their political sovereignty and allowed investments and invested themselves on that basis in order to make their possessions usable as a source of wealth. The established way foreign states are exploited today — by way of state credit and debt service — leaves it to the debtor to use force within its country and thus do everything required to turn it into a source of money. The foreign sovereign is made responsible for its country’s service to the right of property to increase in general, and to the right of foreign owners to enrich themselves in particular. That is the great advance in the history of mankind during the last century.

© GegenStandpunkt 2022