IV. International finance and the competition of nations
‘Convertible currencies’ — a complete politico-economic program:
States internationalize the foundations of the financial business in terms of monetary policy and law so that their financial power benefits from its cross-border growth
In order to satisfy its insatiable demand for productive economic sources of its might, the state uses the power that private property unfolds in the service of finance capital: it grants the banking industry the license to use credit tokens as means of payment and to make debt act as money-capital; it instructs the central bank to create legal tender and use it to engage in the liquidity management of banks, which confirms their money and credit creation as the valid method to make the power of money freely available and bring it into effect. This is how the growth of the ‘abstract’ wealth of the nation, in the tangible form of money, really gets going; the ruling power shares in that growth and additionally gains the freedom to fund its budget with debt, at least so long and to the extent that the money-capital created under its sovereign supervision proves its worth as such.
Nevertheless, there is a serious catch to the services the state provides in order to unleash the financial industry: they restrict its business to the territory of the sovereign lawmaker. Outside the nation’s borders, neither the complicated property protection required and exploited by the financial industry in order to construct and market its business articles, nor the means of payment the state authorizes its credit institutions to use and accumulate, are valid. This restriction is incompatible with the business interests the state provides with the necessary legal requirements and means, as with the self-interested purpose the state thereby pursues. Capital needs growth; the fact that its basic condition for growth, the legal authority of the state, limits its growth is an intolerable contradiction. And states insist on expanding the foundations of their might, both internally and beyond the borders of their sovereign territory; the wealth they have access to has to grow and make foreign sources of wealth available. For this, they harness the self-interest and the capacities of the financial industry and do everything to make the borders dividing the globe porous for its business activity.
The essential, indispensable, but restrictive business condition, namely, the national token of value designated by law as the general equivalent and mandatory means of payment, is freed from the deficiency of having merely local validity through the agreement of sovereigns to declare their currencies to be interchangeable, to be convertible. They thus authorize the use of foreign moneys as a means to purchase their own respective money, and conversely, they allow the use of their own money as a means to acquire foreign means of payment. On principle, states concede to each other that their respective national credit tokens all represent the same thing, namely, abstract wealth: quantitatively measured private power over everything for sale, over goods of all kinds. National credit tokens are to serve as a ready means for the business use of foreign markets and resources, even if only indirectly by conversion into foreign currency, but in principle across all national borders. Of course, it is not enough for the sovereigns to reach a formal agreement on the convertibility of their currencies in order that financial institutions, which already see to the domestic money trade, also make the exchange of national monies their cause and set in motion a cross-border business world. In relation to moneys from other sovereign nations, the state proceeds in a manner analogous to what it does within its own sovereign territory, where — as stated above — it has its central bank supervise banks’ money creation, authorizes the former to use its legal tender to engage in the liquidity management of banks, and so confirms the financial means created by them as suitable representatives of the abstract wealth of its society. Abroad as well, the central bank affirms the money quality of foreign currencies and usability of its own means of payment as legal bearer of value across borders by also in this case serving as liquidity reserve for the commercial money trade, exchanging its own for foreign currency and foreign currency for its own. It acknowledges means of payment that are valid in other nations as valid representatives of value and accepts them in exchange for the money it creates and pays out in return, thereby proving in practice the equivalence of foreign value tokens with those of its own production; it also takes these back again as required, handing over foreign exchange it takes from its accumulated stock or otherwise procures, thus confirming, through its willingness and ability to deliver foreign money for its own, the money nature of its products beyond the national borders in which the lawmaker decrees their exclusive validity.
Hence states — on the one hand — make a fundamental distinction between the value tokens that their central banks issue and that function by act of law as the nation’s definitive means of payment and as the point of reference for the banking world’s circulating promises-to-pay, and the value that national moneys denote, the quantified power of property. They neither accept foreign money as universal equivalent in their own sovereign territory, nor do they demand that their money be accepted as immediately valid beyond their borders; in order to equate their national moneys practically, which is done in the exchange of currencies, states demand and offer a buyback guarantee to ensure the money quality of their respective currency, apart from the sovereign decree of the state that issues it. As long as this guarantee is reliable, or is considered reliable on the basis of predetermined rules, states view the possession of foreign credit money — on the other hand — as proof of international liquidity and as a material guarantee for the international validity of their own currency as a kind of wealth that achieves abroad what states accomplish at home by virtue of their monetary sovereignty. When it comes to cross-border transactions, they want to hear of no other universal equivalent and refuse to recognize as binding any bearer of value other than the currency they create and whose value they vouch for on the basis of as a stockpile of foreign currencies globally usable money, a treasury consisting of foreign currencies held in reserve with the central bank in some liquid or “near-liquid” form.
Thus states bring the same equation into force for international business that they make valid by virtue of their sovereignty at home: money tokens, which by their economic nature represent credit, i.e., the hoped-for capitalist success of the national business with debts, are the measure of value of all property and the objectification of the abstract wealth of nations. The economic inequality included in this legal equation — which, in the inner life of nations, results in the relativity of credit money as standard of prices and store of value, namely, the change in the power of money to command wealth, depending on the success of the nation’s debt-driven capital expansion — asserts itself internationally in the fact that the sums of money equated in exchange do not really, consistently, and reliably represent the same quantum of economic power of access. A treasury of foreign currencies is internationally usable ability-to-pay, but not of fixed magnitude; though it attests the money quality of the exchanged currency, it doesn’t guarantee the quantitative equivalence of the exchanged sums: it is determined and modified according to the rules of the exchange rate regime prevailing at any given time.
This is only logical, since modern states do not make their national moneys convertible in order to fix an equal value for their respective national value equivalents, but rather to officially determine their equal nature as general equivalents, and thereby to provide the certainty needed by capitalist money dealers and credit creators when they get international capitalist business underway through the exchange of national credit moneys. Therefore, it is only logical that the course of these transactions always decides anew on the relative value of the monetary tokens that represent the nationally desired credit business of nations. States that set the exchange rates of their currency count on the international money trade verifying the value they have determined for their currencies; global economic powers that entrust the valuation of their money in foreign currency to capitalist money dealers assume from the start that the banking industry will attach the economically correct, i.e., nationally useful external value to their means of payment. In any case, the business world is to execute, for their economic reasons, what the states aim to achieve by establishing the convertibility of their credit money: by making successful capitalistic use of their legal tender, they are to confirm the latter’s nature as money and to set it in a favorable ratio to the money of other nations.
By establishing the convertibility of their currencies, states enter into an extensive relationship of trust and obligation with one another: they grant each other credit on their national currencies in the sense that they regard them not just as mere political promises to pay, but at the same time as the redemption of these promises, guaranteed by the national treasury, thus recognizing them as bearers of real value. They thereby authorize and enable money owners and creators of credit at home and abroad to do with their assets everywhere what they do with them in their home country. With the convertibility of their national moneys, states raise the private power of money and its capitalist activity to the rank of a legally protected right, whose enforcement they owe and guarantee not only to economic actors, but to each other. The economic consequences and the kind of support a government has to lend to its business entities is something the latter spell out to their political rulers; and the kind of problems the business world creates for the guardians of the common good is something they then really notice. In any case, the liberation of the banking industry from the limits of a merely national money leads consistently to an interdependence of national economies and the internationalization of credit, which implies a complete economic policy agenda: by making their currencies convertible, states define themselves as guarantors of an international credit system, as participants in the growth of internationally active finance capital, and as competitors over the capitalistic quality and the value of their national credit.
The relationship of mutual recognition and obligation among the sovereign money creators that forms the basis of today’s international business life is an extraordinary imperialist achievement. Until the middle of the last century, capitalist nations presented their bills and demanded payment from each other in a tangible commodity money: in a substance produced with material effort, procured in exchange for material products — gold or silver — that all trading nations routinely acknowledged as the real, globally binding, universal equivalent. Nationally defined and guaranteed money tokens circulated — ideally even within the country — as a mere representative of such a material treasure; credit balances posted in international business transactions were claims to quantified portions of precious metal. When it came to money, the economic foundation of trust between the nations was restricted to a consensus on the physical form of the fundamental irrationality of the economic system practiced by all of them: the power of disposal granted to property by national monopolies on the use of force — i.e., the basic social relation between their citizens — was placed by the nations in an officially defined “medium” materially representing that private power in quantitative portions; and they declared gold or silver, the traditional general medium of exchange in their societies, to be the material in which the power of property appeared virtually by nature. The joint genuflection of sovereigns before the precious-metal money-commodity mocked by Marx as a “fetish” established between them the trust that they would not place in the value tokens that the other sovereigns prescribed to their respective nations as means of payment.
This insistence on a quasi-natural money commodity as the indispensable medium of the international financial business limits its growth in a manner that virtually contradicts the system, for then bills due for the credit that merchants of various nations grant each other are bound by law in one form or another to the quantum of precious metal that international trade sweats out and that the banking industry including the state bank has put away in its vaults. And this has the consequence that international credit is not, as would be appropriate for finance capital, created to an extent that it speculates on future earnings, but in a legally defined proportion to the volume of surpluses realized in international business and stored as reserves. At the end of the second World War, then, the United States rendered outstanding services to the expansion of the international credit business — at first not yet to remove its capitalistically counterproductive restrictions. As a victorious power in the possession of the gold reserves of just about the whole capitalist world of states at that time, it declared its national credit money to be a full-fledged replacement for precious metal as international means of payment and store of value, and, with the International Monetary Fund, established a system of controlled credit financing of cross-border business transactions in which even the national currencies of the other participating countries, although only to a limited extent and at a fixed value ratio to the U.S. dollar, acted to that degree as its representative and as an indirect payment order on America’s gold reserves. The basis of the capitalist nations’ international ability to pay, however, was still limited by the sum of U.S. dollars earned by them or invested in them; the growth of their cross-border business was still limited by the fact that the international liquidity of nations was tied to the amount of money flowing out of America. The deficits in the corresponding U.S. balances could therefore, on the one hand, not be big enough for its business partners, but, on the other hand, had to remain small enough that the worlds of business and states could continue to operate with the pretense that every earned dollar could be redeemed in gold.
After a quarter century, this fiction became untenable. The U.S. government, not least to fund its war in Vietnam, used its credit money without regard to deficits in the budget and balance of trade, and heedless of the “gold standard”; after some dispute, especially between America’s West European competitors and the leading Western power, the illusion that all globally circulating dollars could be converted into gold and that all competing currencies could be linked to these “gold dollars” in fixed proportions was given up; in the end, the international business world was finally freed from having to take recourse to gold as actual world money and from having gold reserves as a means of settling payments and transferring wealth between states. Gold was “demonetized,” i.e., released from its function as the commodity money whose units of weight were the binding measure of all moneys; it was degraded to an article of value whose value, now on its part measured in national credit money, suddenly “exploded” and henceforth experienced rapid speculative price movements. The originally agreed on direct or indirect gold convertibility of currencies was transformed into the present system of mutual exchangeability. The preliminary stage, however, was the exceptional imperialistic circumstance that a capitalist world power established a monopoly over the basis of trust for monetary transactions between states — precious metals — and decreed the gold convertibility of its credit money. So first, one national credit money was established as world money; and it was done so effectively that after the gold parity of the U.S. dollar was questioned and then terminated, the primitive gold standard was not reinstated, but instead, conversely, the credit moneys of all nations were deemed to be general equivalents. In this way, the U.S., with its world power and its balance of payments deficits, spared the capitalist world the test of whether its sovereign rulers would have even managed solely on the basis of their own calculation to put aside their distrust in each other’s national money creation and recognize each other’s national credit tokens as equally valid bearers of value.
At any rate, it is now the case that national value tokens, which economically indicate and quantify the future success of credit-financed national capital expansion, mutually attest and at the same time relativize each other as the definitive form of abstract wealth in the world, and no money commodity functions anymore as an absolute reference point. And capitalistically speaking, that is right and proper, inasmuch as internationally, too, what matters is not money as a fixed quantum of value and even less as a stockpile of reserves[] but as credit: as an advance that causes and anticipates its own accumulation. For tangibly representing this relation — the productive power of debt — and letting it take effect in practice, paper tokens, or better yet, electronic posting files are certainly more suitable than heavy metals, which only cost money and then simply lie around.[] Admittedly, even in the twenty-first century, some experts view the precious metals as the better money, because this alternative guarantees a much higher degree of reliability and stability — especially when a major financial crisis annuls considerable parts of the global credit superstructure and threatens to devalue leading currencies. Then they would prefer to be able to touch the abstract wealth instead of trusting that it has its adequate mode of existence in the process of its accumulation; they regard the settling of accounts that occurs in a crisis, and that leaves little remaining of the value the capitalist art derives from future revenues, as a refutation of the functionalism the credit industry practices so excessively. But in fact, the crisis in no way reduces market-based wealth to its “true” or “core” value. Rather, the banking industry passes extremely critical judgment on the unsuitability of the rest of the economy as a means of its continued growth. And so it aims at the rebirth of a “streamlined” business life — by means of credit. Gold, silver or other tangible monies are not the truth of the modern global market economy, on the contrary: its ruin would be complete if one wanted in all seriousness to tie once again the functioning of abstract wealth to the socially available quantity of some commodity money. What a credit industry thoroughly emancipated from this obstacle can and does bring about on a global scale is treated in the following subsections.
The business of exchanging currencies and establishing exchange rates: From serving world trade to modifying the outcome of international competition and defining conditions for the competition of nations
The foreign trade balance: From the account for wealth transfer between nations to the competition of states over the capitalist productivity of their countries
Along with the agreements among states on cross-border trade, a business need arises in companies that find themselves hampered by the limitations of the domestic market and want to buy and sell around the world, a need that the banking industry promptly takes account of: it handles the exchange of national moneys. It relieves export and import merchants of having to cope with the complication that their circuit of capital starts off or comes to completion with an exchange of national kinds of money, and for this it collects a fee: with a well-calculated difference between the buying and the selling price for foreign currencies, money dealers participate in the proceeds that traders realize in purchasing and marketing foreign goods in their own country, and domestic goods abroad. Banks link their servicing of the capital circuit of exporting and importing firms with their usual kind of supplying money to the national economy, the advance financing of purchase and sale. They expand their repertoire of commercial credit transactions with offers by which they relieve their customers of the special difficulties and risks of international business, for instance by vouching to foreign business partners for the creditworthiness of their customers under foreign rules, and conversely, by looking after the rights of their domestic customers vis-à-vis foreign business partners. Financial institutions, with their domestic and foreign partners, handle the claims and liabilities they assume in the usual way: internationally, too, they replace payment with the settlement of promises-to-pay, for which they give credit to each other, which they justify through liquidity in the required currency. In this manner, banks constantly move wealth between nations in its definitively capitalistically valid form of convertible currencies. Their corresponding transactions add up to total demand-and supply-ratios between the various currencies in which the inflow and outflow of monetary wealth from one nation to another appears. In the process, money dealers are already not merely acting as a service provider to the business of commodity exporters and importers, but as the originator of their own business sphere: they turn national credit money into a commodity; and with their professional efforts to buy cheap and sell dear, they set the market-economic determinants of prices in their market, i.e., of the quantitative relation in which the supplied and demanded currencies with their variously defined units are to count as equal to each other. Insofar as a state allows this business, and its central bank guarantees a fixed exchange rate, the competition of money dealers either proves the official target right or puts it under pressure by taking foreign exchange from the central bank in the case of excess supply of its money, buying up its money in the case of excess supply of foreign currencies at a no longer commercially justified cheap price, until the sovereign money guardians find themselves ready for a correction. In the case of floating exchange rates, the banks, with their money flows across currency borders, constantly establish new prices for their commodities: the valuation of currencies in each of the other currencies.
This result of the competition of money traders in the currency market reflects, on the one hand, only the surpluses or deficits generated by export and import enterprises in the foreign trade of nations. Exchange rates, as far as that goes, represent the strength or weakness of the totality of firms of a nation competing for monetary proceeds on the world market. On the other hand, however, the business of exchanging currency already adds to the transfer of monetary wealth from one nation to another one a significant effect: the continually revised comparative valuation of the units of money in which the wealth of an entire nation is quantified and officially expressed strengthens or weakens the financial strength of the money owners of one country in comparison to those of another. That immediately asserts itself as a modification of the international comparison of prices, with opposite consequences for importers and exporters. Export firms are continuously given notice of what their proceeds are actually worth in foreign currency after being exchanged into their own, i.e., in proportion to the transacted advance — tending to less in the face of increasing external value of domestic money, and vice versa. Import firms also receive ongoing notice of the amount of the advance in local currency they must pay for the purchase of foreign goods — less with an improved exchange rate, and vice versa. In this way, foreign traders are confronted by the financial industry with the repercussions it produces of the nations’ total foreign trade on their business calculations — and immediately are provided with an offer to mitigate the negative consequences of the overall results for the individual company’s profits. The industry, in exchange for money, takes on the business risks it creates due to changing exchange rates, by providing a currently agreed-on exchange rate for future payments: it handles the payment flows of foreign traders in the form of futures contracts.
All such insurance offers, of course, change nothing about the fact that sustained, national competitive successes in world markets, which are used by banks for permanent shifts in exchange rates, modify the competitive conditions between nations; and indeed in the sense that access to the goods offered by the rest of the world becomes cheaper for firms from strongly competitive countries, and more expensive for those from weakly competitive countries. Experts interested in a functioning world-market economy like to derive an automatic equilibrating mechanism from that: exporters from weak countries can gain market share with their products that have been cheapened without their having had a hand in it; more expensive imports will see a reduced volume and allow domestic suppliers greater sales; and vice versa; in this way, the conditions of competition will automatically straighten themselves out. In reality, of course, this kind of “self-regulation of markets” is little to be seen; and this is very logical. For if the relative unprofitability of a total, national production of goods is reflected in a depreciation of its currency, then this result does not undo its reason, does not remove the competitive weakness and certainly not its cause, but instead additionally burdens the balance sheets of all firms dependent on deliveries from abroad. At best, a devaluation allows firms with above-average profits a better global business — just as, conversely, the appreciation of a currency due to the general competitive success of a nation entails at best for producers with below-average profits the practical necessity of catching up to the level of profitability of companies succeeding on the world market. In any case, the nation’s banking industry immediately takes advantage of a relative increase in the economic power of access represented in the unit of credit money it creates, without having to have done anything special for it.
The nation’s capitalist companies are expected to buy at favorable prices all over the world, not least essential supplies that are necessary for the economic cycle but not available locally; and they are expected to dominate foreign markets with superior competitiveness, so that domestic growth improves and, through the inflow of abstract wealth from abroad, the mass of available money capital, thereby the power of credit creation accumulated in the country, and thus also the financial strength of the state increases: that is part of the economic reason of state. In order that the financial community perform its necessary and useful services for that, states create the preconditions for its business and business success. They agree among themselves to cross-border legal protection for commercial activities, adopt rules for the flow of payments between the different national payment systems, offer insurance or provide guarantees for the proper payment for exports, grant licenses to foreign financial firms to do business in their own country, etc. In addition, their central banks see to the business of currency traders in accordance with the requirements of the given national exchange-rate regime.
These regulations enable the banking industry to make its currency transactions, at the same time turning their effects into a matter of state concern and state intervention. Thus, from the competition of money traders, who make cross-border payments for exports and imports the first market-based determinant of the exchange rates between currencies, national money guardians take, first of all, the necessity of “smoothing out erratic price movements” in the interest of predictable price ratios, i.e., establishing the levels of reliability “the markets” need but don’t create by themselves. However, they have to distinguish carefully: they may not want to override “fundamental,” economically well-founded shifts in the external value of their currency, which they have to accommodate if necessary with decisions to devalue or revalue, as the case may be. Such shifts take place when those in positions of responsibility discern, in the inflow of money to their nation and the outflow from it and in the corresponding pressure on exchange rates, the consequences of the global market success or failure of their national economy, which naturally is not so easy to estimate. If a negative judgment is unavoidable, then political leaders draw a critical conclusion from it on the average competitiveness of the national production of goods, on the strengths or weaknesses of their export industries as well as all other domestic businesses that are gaining shares of the home market or losing out to foreign exporters. They understand the balance of trade and exchange rate movements the money-trading industry presents to them as an accounting of the position of their entire national economy in the competition for the money that can be earned in world trade, and take this accounting as a challenge to intervene as a player in the competition of the nation’s companies and act as a mover of global economic events. The political authority of a successful nation acts as a matter of course just as much as the general manager of its national site, as the responsible authority that has to find the right answer to the national balance of private foreign transactions. For the managers of successful national sites, this means the imperative of ensuring and expanding success; a program that, for its realization, provides the extra mass and relative access-power of the nation’s money capital and thus also the funds to strengthen the national budget. The others are faced with the task of checking the tendency toward overall defeat of their nation in the competition among locations for capital, with dwindling resources, since the financial strength of the state is, strictly according to the logic of market competition, in a worse way the more necessary its need for an economic turnaround.
With the chronic deficits and losses of the losers of competition, however, even the success of the notorious winners cannot be ensured. Their superior competitiveness, acknowledged by the money market with a growing mass and power of their credit money, undermines the solvency of their defeated partners, thus ruining the precondition for their export achievements. One can understand why the ideologues of the global market economy come up with the ideal of a general, foreign-economic equilibrium and are so ready to believe in an automatic self-regulation of markets to this effect. In fact, of course, no economic policymaker of a successful nation in world trade thinks seriously of giving up a competitive advantage and bringing about an international equalization for the disadvantaged; no colleague of his in a worse-off country counts on anything like this, either. Instead, with unequal outcomes, the ability grows on the one hand, the need on the other hand, i.e., on all sides grows the interest of businessmen and politicians, across borders, i.e., with external money or access to external resources, to practice all the arts of the financial-economic accumulation of money, with which the banking industry already makes tons of money in the national framework, providing the state access to abstract wealth.
Capitalist property as an internationally traded commodity: capital export and import and the global financial market.
The competition of states for the creditworthiness of their nation and their money; the separation of national credit moneys into ‘reserve currencies’ and second-class moneys
The financial industry, provided with a license to exchange currencies and to finance cross-border trade, claims foreign countries as targets and foreign credit-moneys as means for its entire business activity. As with the trade in goods, it mediates and finances the export and import of capital goods; it borrows and lends money-capital across national borders, in all the approved currencies. It thus provides domestic capitalists access to labor, conditions for exploitation, and resources beyond national borders and, in general, all money owners, especially themselves, access to investment opportunities of all kinds around the world. At the same time, it procures itself and its customers money-capital from other countries, i.e., additional capitalist productive forces, if necessary beyond the limitations of its own capability and willingness to create credit. Driven by its own growth needs and the interests of its moneyed clientele, banks establish finally an international capital market. With their business operations, they free themselves from being restricted to their home country and bound to its credit-money; they draw to themselves the power to create credit and allocate funds — concentrated in their hands at the national level — on a global scale; they thus make the capitalist capacities of global monetary wealth available to themselves and distribute these according to their interest and speculative discretion around the globe in the national spheres of investment. They act as an authority that takes up and examines every need for money (their own as well as that of the rest of the business community and the states to boot ), rates the creditworthiness of borrowers, compares entire countries in terms of their proven and expected capabilities as hotbeds of capitalist accumulation, and, accordingly apportion the power of growth residing in credit.
Barter with the various national credit moneys not only thereby gets an enormous amount of new material, but a new political-economic significance, and the valuation of traded moneys orientates itself to new criteria. With the export of capital, money doesn’t just flow away to a foreign jurisdiction, but rather acts as an advance to increase the property of the exporter by the externally earned surplus, i.e., to enhance its economic power. Inflow of money through capital import doesn’t just mean making lots of money on foreign territory, but also involves the obligation of services to foreign capitalist property. The corresponding transactions and their impact on exchange rates do not reflect in this respect the competitiveness of the totality of a nation’s commodity producers in relation to that of the capitalists of other nations; instead, they reflect, on the one hand, the relation between the ability and interest of a nation’s business world to generate credit for investments in the whole world’s capital accumulation and, on the other hand, the expectations in terms of capital accumulation directed at this nation on the part of financially strong investors from around the world. With the progress of creating a global financial market, banks take the liberty of deciding, generally just themselves according to their own interests and calculation, on the currency in which they produce and trade fictitious capital. The exchange ratios between currencies arise in this respect from the judgment passed by the financial-market players on the currencies’ relative suitability as means of business for the international financial industry. The decisive factor in this is given, above all, by the mass of credit generated in a nation and finding investment, i.e., the contribution from the national to the global market for fictitious capital and the rate of capital accumulation that the firms of a nation bring about. The standing of the national economy and its state as creators and consumers of credit, as issuer and financier of fictitious capital on the international market for financial investments, thus shows itself in the use, increase, and valuation of national money. The decisions the banking industry makes on such a basis on its general equivalent still include the impact of the global trade in goods on the comparative valuation of currencies, reduced, of course, to the viewpoints of speculation on the capitalist productivity of competing capitalist world-market participants. The exchange rates, or their trends that result from that, play, on their part, an important and now and then decisive role in the financial capitalist ‘value chain,’ namely, in the management of internationally composed securities portfolios; the commercial and financial risks created in the process establish in turn another department of futures transactions.
The selective use of the various national credit-moneys by the finance industry leads to distinctions between currencies that do not merely affect their valuation, but also bring a new political-economic quality into play. Moneys that serve on the international financial market as a universal equivalent represent in this respect the credit not only of the nation where they have the status of legal tender; they also act as tokens for the global credit business; the credit industry of the entire world is busy making these denominations of credit function as money capital; by their success, they are confirmed as reliable representatives of the world’s capitalist wealth. Such credit moneys are regarded by money dealers as money par excellence: as tokens of value that keep, independently of state acts of authority and rate fixings, what states promise with the convertibility of their currencies, namely, to be the value they designate. The other convertible moneys accordingly suffer a qualitative debasement to mere representatives of currencies used as real world money. Within their home country, they still assert their right to be sole legal tender, also always rendering their service for local exploitation; they may even occasionally report a rate increase in relation to the major world currencies. For financial capital and its business needs, however, they represent more a financial claim than its redemption. In the banks’ exchange business, they act as merely locally useful material, in contrast to the preferred credit moneys that act as a standard of comparison for the other currencies, which the conversion of monetary units and the comparison of the many bilateral exchange rates enormously simplifies. In addition, the liquidity management of internationally active banks becomes very clear; it can limit its stockpiling of liquid funds to the few currencies recognized as world money.
In this manner, the banking industry gives the nations a proper sorting out: according to their quality as a source of credit, as a sphere of investment, and as a money creator.
The foreign business of companies is not supposed to suffer from the effects of the foreign trade balance; their growth should not be restricted by their own and other countries’ ability-to-pay that is generated in and limited by foreign trade: that, too, is part of today’s generally prevailing reason of state. The national market economy must be present in the world markets and remain there, even if the money earned barely covers imports, and funds for more competitive exports fall short. Foreign resources and markets have to be utilized, even if the supply of goods manufactured there is barely competitive and the foreign nation’s ability-to-pay is sorely limited. States expect to have these desiderata fulfilled by the cross-border credit business of the banking world, and even further benefits: with the import of capital, it is not only the country’s ability-to-pay that grows, but also its potential for capitalist growth and successful competition; the national debt enjoys recognition as money-capital when it is traded internationally; the demand for domestic currency raises and maintains a good exchange rate for the national credit money. With the export of capital, the nation’s large corporations participate in capital growth differently; they accumulate rights to foreign wealth, in the case of purchase of government securities rights vis-à-vis the sovereign power that has disposal over the wealth of its society by law; the national currency, with its use for investments abroad, gains acceptance as an internationally acknowledged bearer of value. Though the one benefit does not include the other, it does not at all exclude it either: the benefits add up when foreign money owners invest their wealth in the capital advances of firms in a country, in the debt of its government, and in the national uniform of money valid there, and at the same time all the world is keen on credit from the financial sector of that nation and on its credit money as a universally usable means of business.
In order that the finance industry provide this service to states, a lot of licenses, authorization procedures, and controls are necessary; also agreements between the states that provide for reciprocity or equally for the multilateral or universal acceptance of granted freedoms. A capitalistically mature rule has even more to do in dealing with states whose legal system leaves a lot to be desired in terms of the exacting standards of a modern financial industry, or which have economic- or monetary-policy reasons to regulate cross-border monetary transactions restrictively and prohibit some business activities completely or for ‘non-resident’ interested parties: states like this need to be committed to good financial customs, with investment protection agreements, for instance, and with insistent legal advice. But also between equally progressive governments, there has to be action taken from time to time opposing discrimination against one’s own merchants, arguments over the principle of ‘most favored nation,’ and in any case the determination of which tax authority may collect tax on proceeds of cross-border invested money capital.
This extensive need for regulation arises from the very fundamental relation of reciprocal obligation that states enter into when, true to the principle of the convertibility of their credit moneys, they grant capital the license to contract indebtedness, market its financial products, and establish branches across borders. When they, in this manner, open up the entire globe as a sphere of activity to the private power of property, which they guarantee with their locally restricted legal authority, and make their own national economy accessible to capitalist property from abroad with its interest in expanding, then the ultimate powers are reciprocally committing themselves to make capital’s freedom of decision and action in its mobile form of credit the guiding economic thread of their reason of state. With the right they grant and procure for private wealth to function freely everywhere, they are committing themselves and their peers to respect this right as a principle of international law that binds them to each other.
Capital export means that the one state draws on the sovereign legal authority of another rule for the free activity of capital whose profits are generated abroad and to that extent also fosters foreign growth, but at the same time and above all is to benefit it, namely, increases the wealth of the country of origin. This is not just the case of a private businessman exploiting foreign resources, but of a nation increasing its foreign assets. Conversely, with the import of capital, a state incorporates into itself, namely, into its national economy, a piece of capitalist wealth that has come about under foreign rule and is still part of the mass of economic resources the latter has disposal over; this is not just a case of a private business being licensed, but of a foreign rule being served. The fact that states take seriously this type of economic interconnection in a way that goes beyond considerations of benefit is shown as much by restrictions as by political objectives in the transfer of capital: the granting of credit in another country establishes influence, however much or little, and presumes that influence is also permitted; cross-border proprietary relations consequently affect national sovereignty. For that reason, states, as a matter of basic principle, subject the import of capital to a political proviso, to a strategic point of view, and as part of security policy tend to prohibit foreign investments completely or from certain countries of origin in “sensitive” firms or industries. In this case, it is immediately understood that states are relativizing their sovereignty over their economic base to the right of a foreign rule when they make use of financial assets from its jurisdiction.
That, of course, is exactly what they are doing normally all the time quite expediently, not just selectively and bilaterally, but all around and quite generally, when they allow the financial industry to stage a global financial market and grant it the necessary legal protection in line with their decisions and agreements on general principle. Therefore they obligate each other to recognize the power of private property as something sacrosanct under legal protection. States make the cross-border business relationships that financial companies maintain among themselves and with their global clientele a matter of their sovereign power and give private business calculations and actions an obligatory nature that no sovereign is able to ignore or simply override by law. This is how “the markets” attain the status of a quasi-supranational authority, from whose operations the political powers-that-be learn what their country is good for as a site for capital.
So it is also already certain which all-important requirement their economic policy has to satisfy: in order that their state system leads to success in competition for the wealth of the world, they have first and foremost to prove the creditworthiness of their nation — creditworthiness in the double sense that it deserves the world’s credit because it converts any invested amount into accumulating money capital, and that their credit money is good as a reliable capitalist means of business. What is required, therefore, is a growth policy that has to satisfy absolutely contradictory requirements. On the one hand, the conditions for accumulation that states offer to capital have to surpass those offered by their peers, which means expenses and foregone revenue. On the other hand, they have to convince financial markets that their nation’s fictitious capital is the best of capitalist commodities, and accordingly impress them with a stable credit money; they need to avoid or undo all the negative effects on the value of the national means of payment arising from a monetary and fiscal policy structured to give a generous boost to growth, which means saving while incurring debt, keeping inflation “under control” while promoting the creation of credit, and doing it better than the others. After all, every weakness in growth, whether recorded or expected, as well as in the consequences of the indebtedness of companies and government agencies for the soundness of the national credit and the stability of the national credit-money, whether already occurring or speculatively anticipated, is identified by the financial industry and comparative evaluated; and that is done quite tangibly with the establishment of the exchange rate of the currency and the interest rate at which business and the treasury of a country can obtain credit. Any relative deficiency results in restrictions on already inadequate “forces for growth,” just as, conversely, superiority brings about a further relative increase in economic power. This is how the subordination of the monetary and credit sovereignty of states to the success criteria of financial capital asserts itself in practice: states can no longer freely organize their budget, neither in its application nor in the procurement of its means.
With consummate ease, budget policymakers draw consequences from that for the expedient use of their monopoly on power. It is not enough for them to stimulate growth and to strengthen the export industry: the only industries and companies worth keeping are those whose profitability can withstand every international comparison. They prefer to promote national “champions,” whose size and mass of profit will guarantee assured global success; companies and entire industries that are not fit for that are sacrificed. Central banks take on the difficult task of attracting credit from around the world and stimulating demand for their own currency with good interest rates, simultaneously spurring on growth with low interest rates without causing an “overheated economy” and the formation of a “bubble”; all while glancing at the competitors, who are doing the same. Therefore they also need a monetary policy that, through the buying and selling of the nation’s money on the currency markets, affects supply and demand, i.e., corrects the markets in line with maintaining the international use of the national money, while at the same time its external value remains stable. Finally, the competition of nations over the world’s credit also exacerbates demands on the labor ‘factor,’ i.e., on a national wage policy that continually improves the relation between performance and price of labor. Social policy faces the task of ensuring the usability of the people for international competition without unproductively squandering national budget funds for the mere subsistence of destitute parts of the population. In the developed capitalist nations, therefore, established systems of social provision prove again and again very quickly to be insupportable, systems for qualifying the people for the requirements of global business show themselves to be inadequate or faulty. The bourgeois struggle for survival is accordingly constantly being re-instrumented and restaged.
A few items for states’ foreign policy agendas are added to the tasks of their internal capital site policy. States, precisely because they allow the financial industry so much freedom and give it so much economic power, even over their own budget management, have all the more to pay attention to the soundness of the global financial business and mind that the national legal systems and enforcement authorities do what is required. At the same time, the politicians in charge know that the affected companies consider the obligation to manage business in a sound manner as a costly deprivation of liberty, and make their location decisions also depend on the national regulations that apply to them; therefore, governments argue both for and against generally applicable terms and conditions for the banking industry. The governments of countries that are still not so developed in terms of a banking industry protect the accumulation of capital in their country, and their own ability-to-pay besides, through currency controls, capital flow controls, or also by placing the banking sector under state control, or impeding or possible prohibiting its takeover by powerful foreign banking institutions; the rulers from the home countries of the global financial business have to defend its freedom and act against the liberties their colleagues take. The less-developed countries, on the other hand, cannot become legally incapacitated; that is why a big export nation stands by its weak currency partners with bilateral currency loans if need be, so that they can continue to function as sales markets — of course not universally and in general, but for their exporters, leading inevitably to conflict with the liberal traditions of the world markets, i.e., with competing trading powers. Apart from that, concern for the lasting success of their internationally active financial and other corporations leads the governments of financially strong countries to interfere, with loans to foreign rulers, in their fiscal policy in general and the promotion of growth in particular — and the set of interests of the bosses of weaker nations offers them opportunities and handles to that end. With this, an entirely new relation between states is instituted: States become creditors and debtors to each other. A credit-granting state is now present in a foreign sovereign territory as an interested power with its own assets, no longer simply as guardian of the private property of its money owners and financial institutions and the freedom of capital in general. Added to its political interests in a foreign country as source of wealth and to its policy instruments to influence the foreign power is the right to another state’s debt service, i.e., the right to use a foreign state as a source of financial gain; a right that establishes for this other power a material responsibility to generate the owed wealth in its country. Besides the corresponding claim on its material and living resources, the debtor country can be certain that its creditor is concerned, at least in principle, that the creation of value function somehow in the country; and the debtor also has the freedom to look around for additional or alternative financial backers. And so on.
As a rule, what serves as financial resources for these and generally all financial relationships between the ultimate powers are the currencies that the banking industry uses on its global market as universal equivalent. The central banks officially utilize these moneys as reserve currencies. Possession of these alone establishes the liquidity of nations whose legal tender has not attained this quality; their reserves, just like their debts, are, in the final analysis, denominated in such currencies. The economic capacity of weaker countries is thus based on the acquisition of financial means that the world’s major economic powers feed into the global circulation of money. The issuers of such currencies enjoy the freedom of being able to create their own international ability-to-pay as required. This freedom is limited only by the multiplicity of such moneys: each individual money is replaceable in principle by others; hence their creators also compete for the financial world’s demand for them. Even so, the relative freedom to create money recognized worldwide is used in abundant measure, by the sovereign issuer and even more by commercial money creators around the globe. Thanks to the unlimited availability of such good business means, their business has grown tremendously — and has produced at the same time the limits to its growth.
The growth of the global speculation business and its self-produced limits: state bankruptcies and financial crises
Precautions taken by the world of states for the functioning of the global financial system; sorting the nations according to financial capitalist criteria; crisis policy of the global economic powers
With the financing of cross-border trade, the export and import of capital, the creation of a global financial market and associated currency trade, banks create new revenue sources on a massive scale for themselves and their clientele. The speculative uncertainty that characterizes their businesses acts as little as a barrier to their growth internationally as in the national framework; on the contrary, ‘risks’ are the stuff of finance capitalist accumulation; and their risky nature as such is the stuff of hedging transactions and an enormous superstructure of derived, purely financial transactions. All the items that play a role in the financial capitalist ‘value chain’ act in a manner conducive to its business: the national differences between growth rates, interest rates, government debt ratios, inflation numbers, exchange rates, etc., and their conjectured changes stimulate speculation and enrich the derivatives market. The financial sector thereby establishes a business volume of considerable magnitude, which contributes much to its power to determine the economic life of the capitalist nations, both positively and negatively. With the completion of a global financial market, the banking industry multiplies its means to finance these “underlying transactions” and stimulate the competition of nations for shares in world trade, for investment, and for access to sources of wealth all over the world. And it subjects the course and results of these “underlyings” to a comparative speculative evaluation. That decides in the end on how much credit flows into national spheres of investment and out of them; also on what the capitalist wealth of nations, as measured in a key currency, is really worth; it determines the actual standing of a state competing for financial power. In this way, the financial industry drives capital accumulation forward on a world scale, and at the same time continually scrambles the hierarchy of national capital sites (at least in the mid ranks), providing for rise and fall in global competition. Besides that, it also again and again financially embarrasses entire governmental entities when the very credit that they put into them for good speculative reasons doesn’t rectify their lack of competitive capital and foreign exchange, but rather magnifies it by the requirements for debt service, and forces the government to pledge all the country’s goods that can be marketed somehow.
The power with which the financial industry functionalizes nations for its growth exists in the form of currencies, backed by the world’s great economic powers. The guarantee of these powers that their credit money represents universal economic power of access is the precondition for this private industry being able to create and use limitless credit and employ it in the creation and marketing of its various productive and derivative financial instruments, and having confidence that the earnings it credits itself with amount to valid and durable abstract wealth and can do everything that money can do in the capitalist world. Conversely, the financial institutions with their wide-ranging business constitute the living proof that the national value tokens they use are in fact fully functioning economic means of access. The fact that the speculator community conducts its business with them and imagines its winnings to be secure in them attests them finally as real world money — the ultimate consequence of the principle of convertibility.
With their global business, financial institutions produce a growth that consists in ‘risks’ built up one on top of each other, i.e., in promises of returns recorded and functioning as abstract wealth that to a considerable extent attest each other. They accumulate financial numbers that represent, in a normally functioning course of business, real financial power, universally employable and variously employed economic power of disposal in both private and state hands, capital in its purest form. The fact that many of these numbers are posted on items that more or less equalize each other, that some profit results directly from the losses of other market participants, that countless acts of speculation do not work out: these are all part of normality in this sphere. The logic of accumulation of fictitious capital also includes the fact that not only does the failure of transactions cost their originator its profit, and the irredeemability of promises of returns harm their owners, but that asset titles that form the basis of or secure other asset titles are thereby annulled. Failures lead to doubts about the ‘intrinsic value’ of a beforehand uncertain amount of financial assets. Their accumulation is therefore always good for tipping over into a chain reaction of terminating credit and progressive destruction of fictitious capital: a devaluation whose notorious “spiraling” on the expected negative effects is considerably accelerated, under some circumstances even set in motion, through derivative speculation. It thus turns out that the banking industry has, with its accumulation, manufactured an overaccumulation of money capital. And as it, with its growth, turns all nations into sources of wealth as investment spheres and objects of speculation, and constantly weeds them out anew as capital site competitors, its crisis also effects all nations and their capital site competition.
In this, the financial institutions proceed as little in an equalizing manner as they do in the accumulation of credit and fictitious capital. They organize the devaluation as a speculative acid test on the nations’ credit; and these tests are aimed regularly, first and foremost, on candidates whose debt-financed growth is deemed most dubious by the speculation business: whether it is because such ‘fundamental’ data as the inflation rate or the increase in public debt look bad in comparison to economic growth and anyway the banks have already pronounced their critical judgment with higher interest rates; whether it is because professionals’ own wild speculation on the future growth on that site appears to them at some point in time as excessive; whatever the reason for doubt, the banking industry — in order to secure invested capital and in the end at least partially save it — clears up its own overaccumulation by withdrawing credit and capital from countries that it itself used as investment spheres and speculated on. At the same time, increasingly powerful actors turn up that hurry along the devaluation of the wealth of entire nations by betting and profiting with every available financial instrument on rising interest rates, falling asset prices, and a decline in the currency — betting and profiting especially greatly on central banks that try to counteract the decline in the value of their credit and their credit tokens by purchasing their own currency and national bonds.
The professionals of the derivatives department, if they simply act proactively and quickly enough, also use what investors and creditors lose for a source of profits that helps invested money capital get a nice return. Their clients make money on the decline up until the state bankruptcy they help bring about; for that reason, they do not shy away from the ruination of entire local business spheres. In the most favorable case for the global market economy, so much fictitious capital and speculative financial wealth is written off in the periphery of major global business in this way, the removal of questionable commodities that have thereby become excess has proceeded to such an extent, that credit creators and securities dealers restore confidence in the growth of their business, give each other credit again, stop the cycle of devaluation, and initiate a new round of (over)-accumulation. If they succeed in limiting the financial crisis in this way to the bankruptcy candidates they have targeted — for which most of them by no means had to have contributed to the critical mass of excess fictitious capital, i.e., to the “bubble bursting” — then the business collapse is regarded as a merely regional incident; what the community of speculators took as grounds for their unappeasable mistrust is regarded as the reason — now happily cleaned up once again — for the crisis, which is then also readily named after it (e.g.., the mortgage crisis, the dot-com crisis, the Argentine crisis, …)
The enormous accumulation achievements of a global financial services industry, however, are also good for other crisis scenarios. The mistrust of credit creators may also attach itself to products that are created and traded in the major capital sites and form the basis of considerable parts of the national wealth there. The critical acid test will then typically hit a branch or sector of the financial business where speculators have run up an exceptional boom; and if it remains a limited destruction of value, then the world has survived a “housing bubble” or a “financial crash in the IT sector.” But the banking industry can also stage a progressive collapse of the money-capital quoted in major financial centers, ruin large banks, bring worldwide capital accumulation to a halt, and even threaten credit balances and the capacity for payments of the economy in the leading capital sites. In this case, too, there are always (at the latest in retrospect) culprits, whose misconduct is enough to prove that a crisis would not have been necessary had only all the actors been prudent — it’s only a pity that even the most preposterous explanation creates no certainty that the crises of the major financial businesses might even be over with at some point. In actual fact, the banking community proves the opposite: the wealth it creates and so effectively runs the world with is based on the steady progress of its business, and consequently falls into crisis when credit is terminated in unsuitable places.
In order that global capitalism can continue on without alternative after a crisis — whether limited by region or sector, or global; in spite of all the negative consequences of its profit-seeking, hence regardless of individual state bankruptcies — the banking industry relies on political power: on states, with their sovereignty over money and credit, seeing to the contractual capacity of bankrupt nations and rescuing the system in case of a general collapse. And the industry is right in this, for what banks cause affects not merely private property, but also puts the financial power of states at risk — and challenges the highest authorities to prove in practice that the whole system of money and free world markets ultimately depends on their power.
States compete against each other over their national economy being popular with finance capital as an investment sphere, over their debt as material for the financial markets, over their money as a worldwide means of business: that is the overarching, guiding principle of their economic policy. In times of a general upswing, the growth that thereby comes about makes use, stage by stage, of many nations. At the same time and all the more in critical phases, it divides the world of states into winners and into losers that run up ever-greater deficits and debts with the funds provided by the international credit business, sometimes all the way up to state bankruptcy. And it always turns into a spreading termination of credit and general destruction of wealth. Economic policymakers perceive the inevitable negative consequences of the growth of international financial capital as a danger they have to avert and, when the damage actually occurs, one they have to dampen and constructively overcome.
With payment problems and all the more with the ruin of a weak competitor comes the threat of losses in the commercial business of successful nations, as well as losses on loans and advances to the former, hence on the foreign assets of capital-exporting nations. The solvency of the losers of international competition, i.e., saving or restoring their creditworthiness from the ruinous judgment of financial markets, is therefore in the interest of the winning states; primarily those who benefit the most and whose currency serves as a store of value for the global speculation business. These above all, but also all other sovereigns whose countries are “integrated into the global market” to their advantage or disadvantage, find themselves challenged to defend and guarantee the continued existence and functioning of the global credit economy from its effects.
The world of states has taken its precautions against just this. The states responsible for the largest amounts of foreign loans and foreign assets are as a rule already intervening with official loans in the economic policies of debtor countries. They do not leave national deficits to the governments responsible for them, but are prepared instead to swap financial assistance for access rights to the debtors’ national resources, human or otherwise. This is how marked differences in clientele relations between the leading global economic powers and the many countries that notoriously lose on the global market arise, relations that extend to the support of foreign governmental entities. For the case — not just allowed for as an exception — that such countries, but also the more important ones, fail to service their debts to several creditor states, the great financial powers meet in the ‘Paris Club’ and decide on rescheduling and debt relief; especially from the standpoint that no other creditor state gets preferential treatment in the process of canceling debts, or benefits from its own credit assistance to the debtor. For under the conditions of the established global credit economy, that is the permanent contradiction of financial responsibility for competitively weak countries by external powers: assistance to maintain or restore the creditworthiness of a nation affects their ability to function in general, i.e., secures their usability for the international business world and does not in the least guarantee the exclusive benefit of the donor country — which logically leads to the creditors contending over precisely this.
Besides that, a very general provision for the always somewhere endangered solvency of nations has been institutionalized across countries within the framework of the UN: for countries with balance of payments problems, the International Monetary Fund steps in as a lender in accordance with established rules. It draws the funds for this from a fund into which all participants deposit their own money according to a formula that reflects their economic strength. Each member has access to funds to pay off foreign obligations proportionate to its quota as well as to the extent of ‘special drawing rights’ allocated to it. The fact that this doesn’t suffice for the competitively weak countries corresponds to the mission, which is not intended as a substitute for commercial loans through funding from the ‘community of states,’ but rather to bridge periods of illiquidity for the purpose of immediate restoration of recognized creditworthiness. The progress of the global economy, however, has already for quite a while required a broad interpretation of this founding mission. For a number of national emergencies, which go far beyond short-term balance of payments difficulties, the Fund grants loans that correspondingly exceed the ‘drawing rights’ acquired with membership and deposit of the national quota, as well as the regularly allocated ‘special drawing rights’; for that, the Fund is allowed as need be to borrow from its affluent members. What was originally conceived as professional assistance for the immediate cleanup of shortcomings in the management of external public debt has in this manner turned into a kind of supranational regime over the budget-, foreign trade–, and debt policies of numerous IMF members, especially from the category of “developing countries.” The goal is of course still the (re-)establishment of the creditworthiness of the supported nation, i.e., its fitness to be used by the business world and thereby for the interests in growth of all the powerful global economic powers. Loans that, in addition, aim to strengthen national productive forces but are not considered worthwhile by the banking industry can be had from the ‘sister organization’ of the IMF, the World Bank; likewise with the professional discretion of neutral experts. The result is the tight integration of all nations within the world economy, on its own account and therefore absolutely heedless of the limits of the capitalist capacity of countries; all are drawn into a ruthless competition to use and be used, and sorted out accordingly into a hierarchy according to the political-economic criteria of the banking industry.
The rank in the hierarchy of capital sites and credit-money creators that the nations win, or to which they slip down, defines what they can do economically, what they can materially do with each other, and what the states expect of their people in order to hold their own against each other. With their competitive efforts, the countries sort themselves out into political-economic categories whose designation is ideological, but whose content is crucial for their entire existence.
The members of a very tight elite — the United States at the top, Japan and the leading powers of the EU as the main competitors — operate under the name of industrial countries. This gives the idea of a special density of technologically advanced production facilities for a capitalist success story that doesn’t at all revolve around the performance of the productive capital gathered there. Instead, these countries are really characterized by their convincing creditworthiness in the double sense that the mass, rate, and reliability of capital accumulation on their soil identify them as an excellent investment location, and that the financial world uses their debt as money-capital and values their credit-money highly as a currency in which their speculative profits are safe. Somewhat outmoded is the category of developing country, with which the discontent of the majority, especially sovereign state entities newly established in the postwar era, has been transformed in the face of world market demands into the hopeful prospect that something could come of them. Some originally classified this way now rank as newly industrialized countries, by which is meant that industrial countries have to take them absolutely seriously as competitors in various areas of international trade. They are also called emerging markets, because, on the one hand, they are deemed worthy by finance capital as ‘markets’ for extensive and promising investments that are definitely intended to be permanent; yet they are, on the other hand, still ‘emerging’ insofar as they have still not gotten to the point of winning noteworthy shares in the global financial business with their debt and their national money, and acting as a source and trade center for the world’s fictitious capital. Other developing countries belong to the category of raw materials–, primary production–, or commodity countries; this indicates their peripheral role in the global capitalist expansion process as a source of raw material means of production, not of wealth. The real capitalist significance of such estates lies in the attention paid to them by speculators active at the commodity exchanges of the industrial and newly industrialized countries. In contrast, oil states are characterized not only by the importance of their particular natural product for the global capitalist economy and their considerable holdings of wealth accumulating elsewhere; with the relatively largest revenue in and holdings of petrodollars, they seek to move up to the category of emerging markets, or, with the mass of financial resources available to them, to found or become centers for creating credit, trading securities, and financing the global course of business. In addition, there are a considerable number of states that, in terms of finance, belong to the category of failing or already failed states, because, due to a lack of orderly domestic conditions, they are not good for any sort of speculative investment. So far as there is at least a government acting with the acknowledged ability to function, it finances its presence on the world stage at best with money from the IMF and the World Bank, otherwise with donations from the great global economic powers, which are prepared to spend a bit for the existence of a political address in the region and book these expenses as credit to a foreign sovereign. And so on. Of course, every state is a special case. But all are special cases of a world in which the competition of nations for credit and national financial power prevails.
In any case, states achieve one thing with their competition for better positions in the hierarchy of the capitalist powers: through the accumulation of capital in the successful industries of their country, by marketing their debt as fictitious capital and issuing credit money through commercial banks with the help of their central bank, the global credit business grows, and in fact, time after time, grows to the point of periodically canceling more or less large parts of the accumulated capital. Such financial crises occur fairly regularly, but are perceived, defined, and treated each time by the leading global economic powers as a unique problem depending on the immediate cause and extent. In the worst case of a threat to the entire, worldwide banking industry, states — of necessity — resort in the first instance to their ultimate and heaviest weapon, and replace the devalued assets of the financial world, and the means of payment that banks no longer accept, with their authority: with government guarantees and the provision of liquidity from their central banks — a remarkable clarification about the “fetish” of the bourgeois world, namely, that the private power of money, in the last instance, depends on the states’ monopoly on the use of force and nothing else. Of course, they already make this admission in the system-conforming form of booking their act of power as public debt. They authorize the forcibly rescued banking world to apply its economic standards of comparison to this debt. They thus make the efficacy of their sovereign guarantees and the means of payment put into circulation by decree depend on how these are critically evaluated by the financial industry, i.e., on being confirmed in practice as a viable means of business. On this basis — and, as always, with a view to the good opinion of financial capital for their debt and their location for capital — states compete over the distribution of the harm caused by the financial crisis to the capitalist wealth of their nation, and over the burdens for them that arise from the fact that their interventions aimed at halting the ongoing devaluation of private wealth, and the provision of means of payment according to the rules of the art of the financial economy, incur payment obligations that they vouch for.
The result of overcoming a crisis is the initiation of the next cycle of capitalist (over)accumulation — under new business conditions. Now and then, the rules of international competition are altered; in any case, the nation’s means of competition are reformed: more stringent criteria for profitability provide for a new sorting of economic branches and enterprises, and for a demanding, through-and-through sorting of the available workforce. The crisis itself, its consequences, and nations’ success or failure in addressing them have repercussions for the position of countries in the global economic hierarchy, which position all governments incessantly work towards improving anyway. Of course, the established system of competition over the power of money has — up till now — not been fundamentally damaged by either crises or shifts in the hierarchy; but only for one reason, however, whose permanence is anything but certain: the position of the leading powers with currencies acknowledged as world money has — so far — not been called into question in such a way that they would feel forced to terminate crucial business conditions. Nevertheless, there is no guarantee for maintaining a once gained leading position. And the system, even more, doesn’t ensure that the notorious discontent of its most important members will not take a serious turn. Their crisis policy already sometimes comes down to a rejection of principles of the prevailing competitive regime. This regime is remarkably stable, to be sure. But it is the work of world powers that expect that their nation will benefit from it, and is thus as durable as their calculation that they will succeed best in exploiting the states of the world in this way for their international standing.
The global regime of finance capital:
the work and productive force of the world ordering power of the U.S.
The competition of nations over capitalist wealth according to the rules, requirements, growth conditions, in short, the interests of finance capital means world order. This expresses the fact that practically all states in the modern world align their policies to this competition, that therefore the life and survival of humanity is subsumed under it — and that this is all in order.
This organization of the world is based on force. Not only on the monopoly on force that states set up within the country when they tie their nation to the private power of money as the sole means of life; that goes anyway without saying. States also operate among themselves as guardians of the law they create as the ultimate power when they, in authorizing a cross-border course of business and the establishment of an international financial market, mutually commit themselves to pursue their national materialism in the competition for credit. After all, they thereby expect of each other the obligation to relativize their sovereign control over the conditions, criteria for success, and ultimately crucial means of their economic existence: a binding of the free will of national force monopolists that consists in a political-economic calculation of benefits, but is based on and ensured by the coercive power with which states can force each other to comply with commitments they have entered into and to respect rights they have acquired. Not in the sense that dealings between states would only be as reliable as the means of violence that the participating governments deploy against each: the capitalist world market in general presupposes legal relations between states — the principle of “Pacta sunt servanda, agreements must be kept” — guaranteed by the many sovereigns dealing with each other. And the firmly institutionalized global regime of credit in particular is based on the fact that a globally respected power sees to a universal respect for an international legal order that consists in — among other things but not least — the principles of the political economy of finance capital. The quartet of “freely usable” world currencies shows clearly enough where this ordering power is at home: the military “superpower” USA operates as guarantor of the prevailing set of global economic rules and regulations with the strategic alliance it has entered into with the leading powers of Europe and with the capitalist power at the other end of the Eurasian continent.
This alliance is the result of two world wars — one hot and one ‘cold’ — that have produced the global balance of power that gives current international law its obligatory nature and the supranational institutions codified therein their power, and in this way guarantees the prevailing capitalist rules of procedure in the world of states. After all, there were alternatives. One of them “really existed” in one part of the world up until two decades ago: in the form of a Socialist Camp under the regime of a second “superpower” that organized the relationship between people and state according to legal principles other than those of capitalist competition — namely, those of a popularly oriented national planning and management of industry and commerce — and instituted and generally strove for cross-border relations with its client states that followed the pattern of political party allegiance. There was also a cross-border trade in goods; this, however, did not really orient itself toward profit but rather toward the — somewhat contradictory — maxims of an ‘international division of labor,’ and put into practice ‘international solidarity’ with ‘oppressed peoples.’ The other, far less deviating alternative was practiced for decades by those very same leading powers of today’s global economy. They carved out colonial empires, i.e., subjugated under their rule countries as far outside their ancestral national territory as can be, and there established conditions for capital accumulation for their own capitalist class. Sovereignty over land and people beyond their own borders was the obvious precondition for the nation’s capitalist property to be invested and turned loose there in a big way. The result was a division of the world into several conglomerates of countries with a legal system that discriminated between a sovereign center and a dependent periphery, conglomerates that economically were entirely oriented toward their respective metropolis. Between these colonial empires, and between those and the other capitalist countries, international legal relations prevailed, naturally, on the basis of mutual recognition; and on this basis, a foreign trade and the credit transactions necessary for it took place, also loan transactions, acquisitions, and investments. However, one could not really speak of a legally based regime over an “international community” composed purely of sovereign states; and consequently there was nothing like that which makes up the modern competition between states: the free use of national wealth as loan capital in foreign, sovereign territories and the competition of sovereign states over the nation’s standing with internationally created credit under the direction of supranational institutions.
So the world of states can also be “ordered” in these ways. And it is simply not the case that the legal system of free competition of sovereign states and the economy of free movement of capital between them triumphed “by themselves” over those other alternatives. Overcoming colonialism required nothing less than the Second World War and subsequent colonial or liberation wars around the world of the fiercest caliber: the Allied victory in the World War ruined the operation of Japanese military power and National Socialist Germany, to wrest by conquest a redivision of the world under their authority; and it additionally ruined the democratic colonial powers of Europe. They could not restore their empires with all their might; not only due to turmoil in their possessions, but chiefly for two, global political reasons. One of the world war Allies — in pursuit of its socialist alternative —supported the anti-colonial emancipation struggles and liberation movements economically, militarily, and morally. The other one, a victorious American power unrivaled among the capitalist nations, pursued the other way to restore capitalist use conditions in the devastated world: it incorporated its defeated enemies, its capitalist Allies, and the majority of the newly created sovereigns in an international legal system, whose economic substance, namely, a system of free competition in goods and money, was agreed on at Bretton Woods and afterward single-mindedly institutionalized; for capitalist profit making, there were U.S. dollars equivalent to gold from the start. The U.S. did not succeed in convincing the world of states to take part in this political-economic regime with friendly persuasion, either, but rather again with a world-war strategy: the impact of armed confrontation with the Soviet Union, the preparation of a global nuclear war that challenged the protection needs of all the other capitalist powers and overtaxed their military capabilities, provided for unswerving loyalty to the alliance as if under real war conditions. This ‘cold war’ was waged with numerous hot “proxy wars” on Third World fronts and in the form of an “arms race” in such exquisite categories as “first-” and “second-strike capacity,” “mutually assured destruction” through “overkill,” i.e., with the option of a destruction of mankind many times over, “militarization of near-earth space,” etc.; this is how “defending freedom” took place, which finance capital knew how to make considerable and extensive use of. The Soviet enemy, which was so useful for the durability of the military alliance forged by the U.S., could ultimately no longer endure this confrontation and gave it up for lost — remarkable evidence for the achievement of not only the relentless world-war strategy of the West but also of the market system, which supplied the means for this strategy.
The need of the leading states for military force and its qualitative development has since moved away from nuclear world war scenarios; it has not fallen away, rather the contrary. That, and the various military deployments of the world’s great ordering powers testify to the continuing necessity for national armament and military readiness for the world peace needed by the globalized market economy; a peace that really consists in the universal freedom of profit-making and the states’ competition over its proceeds. At the same time, they show how the necessary force is procured and set to work these days. Not — or at most rather tangentially, for instance when necessary to fight a newly resurgent piracy — as a police force that steps into action across borders to enforce property rights. Also not — or only exceptionally when deemed appropriate to support state-founding wars — as a force for occupying land and sources of wealth. The force that secures modern world peace operates as oversight of the use of force between — or if need be, within — states all over the world. Its use — whether really threatened or actually put into practice — follows global strategic considerations: the requirements for far-reaching control of the balance of power between states and its alteration.
In principle, all the major states maintain ambitions in regard to such a controlling power. These ambitions are realized in an exemplary and standard-setting way by the United States. As the only nation since the demise of the Soviet Union capable of such control, it takes every relevant stirring in the world of states as a matter for itself and its controlling power; it defines any use of military force by others as a challenge addressed to itself and reserves an intervention for itself. It consistently arranges its ubiquitous oversight in such a way that it includes as many other states as possible — and especially the few ambitious powers that are themselves out to decide at their own discretion over the violence-laden legal claims of states against each other — as partners in its control regime: whether in the form of strong alliances, whose strength admittedly depends on the danger posed by a jointly identified enemy; whether as an ad hoc forged “alliance of the willing”; whether finally by means of the offer to more distant powers, in association with the world power, to participate much more effectively in controlling the balance of power between states and the organization of world peace than would be possible on their own account. After all, that is the basis and contractual foundation of the invitation for strategic cooperation continually offered to all states: that even the largest competitors, in their attempts to decisively and formatively influence, effective threaten, and reliably provide military security guarantees for a foreign balance of power, are much less capable than the United States, hence without it have little chance and against it no chance.
That also already settles the level of ambition to which the United States measures its armament and orients its war readiness — that is, the actual quantity and quality of force requirements of the prevailing world peace order. As guarantee power of this peace, the United States must be present in every region of the world with a military force that is superior on location to every conceivable opponent and in addition deters any third power from effectively intervening against America. Competing states produce occasions for intervention all the time; the world power examines these cases, reserves their evaluation for itself, defines some coarser violent affairs with consideration of their strategic importance as cases for war, making an example of them with “shock and awe”; this is how the credibility of its readiness for war and the persuasive power of its military always stays fresh. This job of perpetual omnipresence as an unquestionably superior world peace power brings with it the necessity for the United States to keep at least a qualitatively decisive step ahead of all potential rivals in terms of the art of war and weapons technology; that relentlessly drives the corresponding technical advances, and in the most extreme way. The level of development of the armaments industry is in turn a key lever for the efforts of the world power to create alliances for itself all over the world: in order to be perceived at all as a sovereignly acting power, to be respected by one’s peers, and be of interest to the world power, a twenty-first century state needs military equipment only a few nations are at all in a position to develop and produce, equipment the North Americans are leaders at making more effective. The world of states therefore is keen for their weapons, and is for the most part ready to pay for them not just with money but also by voluntarily fitting into the American oversight regime.
This regime guarantees the general recognition of international legal principles and the authority of the supranational institutions, i.e., the validity of the rules of procedure according to which states compete against one another — by and large peacefully; militarily only in exceptional cases, when the world power grants them the license for war under international law, or when it on the other hand steps in with superior means of force, a “coalition of the willing,” and an international law mandate. These rules of procedure include, in part implicitly, the canon of rights and duties that forms the basis of the political-economic demands states challenge each other with in their competition for credit, that therefore has its effect as the solid legal foundation for the global operations of the banking industry. It is in this sense, then, that globalized capitalism thrives on the military force of the U.S. In return, this economic system brings in to its American guarantee power the financial means for permanently strengthening such an apparatus of force: an abstract wealth that permits the United States to develop, plentifully supply, and deploy appropriate sized, ever new and ever more perfect implements of war. This very special productive power of the global market economy is based on the fact that it is not just the production of weapons — and nowadays also the provision of armed personnel — that constitutes a tremendous business for capitalist producers and employers. The debt with which the state pays for its military machine and its suppliers is, according to the rules of this system, itself quite a respectable form of wealth, namely, fictitious money-capital tradable worldwide. The financial sector makes government spending for pure destruction — squandering in its most brutal form — the source of asset titles that serve money owners from around the world as investments. They contribute to the growth of transactions whose capitalist productivity the global financial market vouches for and makes all the nations vouch for that make use of the credit money of the “superpower” as their international means of business and reserve currency. This system not only organizes the accumulation of wealth by the leading powers, it also makes the expenses of world domination itself a source of financial capitalist wealth and makes the entire world of states economically responsible for its profitability with their own interest in the market economy. Hence it enables its main beneficiaries to accumulate the military force that the enforcement and maintenance of the world order tailored by the world power is based on. It is very clear to money and credit traders anyway without further theorizing that this system is in turn dependent on the world-ordering power of the U.S.; that the private economic direction of the distribution, utilization, and accumulation of the capitalist wealth of the world is not based on an irrevocable, voluntary consent of the powers involved, but on the validity of the rules of procedure established by the U.S. without alternative, and on the fact that states define and practice their materialism according to this guideline. Of their own accord, traders incorporate in their speculation their reflection on the balance of force in the world of states. And as long as they still believe in America’s deterrent power, they take unerring refuge in the U.S. dollar as soon as any kind of strategic front opens up and uncertainties become the norm somewhere.
The U.S. has established a regime over the world of states that does not negate the self-interest of states, but rather points it to the path of competition; a free competition, for which America specifies the meaning and conditions for success. The “superpower” makes all states and especially its powerful rivals the offer to play a part in its control regime over the global balance of force — in none other than the one under its aegis, but according to their constructive contribution and absolutely with their own interests and objectives. The system of economic competition for financial power established under this regime offers every state its chance of success, even permitting the strongest to wage a battle for the top of the economic hierarchy, i.e., to compete to rise up to a rank of economic power economically equal to that of the U.S. — the Europeans have been working away at this for some time; the PRC is now treated as the candidate with the best prospects. The system rewards competitive success — especially, therefore, the success of the leading power that sets the terms. That is the secret of success of modern American imperialism.
Of course, it is also part of the system that the phenomenal success of the leading power is not automatically guaranteed. Its leaders know this more than anyone. They fight in any case without letup — still from a position of unparalleled strength — over their economically leading position and over their monopoly to determine the balance of power in the world of states.
 How a modern state uses the power of finance capital internally, for which it empowers and enforces the capitalistic logic and self-interested necessities of this industry, what follows from this, and how a modern authority deals with the consequences: all this is explained in the previous part of this article, Finance Capital III. The ‘systemic’ importance of finance, and the public power. [GSP 1-10]
 The manner in which a central bank obtains foreign exchange for itself (normally without any problem from the business of its national money traders as well as in loan transactions with other central banks and supranational institutions); the rules by which it accumulates and hands over foreign exchange; the scope of its foreign exchange transactions in relation to those of commercial banks; the forms in which it holds and manages its foreign exchange reserves (it normally does not stockpile bundles of banknotes); the monetary policy objectives it pursues in its everyday business practice; and also the fact that the international solvency of a national business community and specifically of the relevant central bank is in poor shape when the money guardians of a country actually demand proof of its international liquidity: all that is all irrelevant when it comes to the principle we are speaking about here, the materially underpinned convertibility of national credit money. What is relevant here is the basis — which is normally taken for granted — for the fact that the banks use their power to create credit in order to engender global business. To do so, it is not enough for states to just formally declare the convertibility of the credit money they certify as a national means of payment, they also have to guarantee it materially, which they in fact do in accordance with predetermined rules they themselves lay down.
 Gold has had its day as international equivalent; as a “near-liquid” item of value in the possession of a central bank, it strengthens the latter’s ability to vouch for the money quality of its value tokens: “Gold is an essential part of national currency reserves. It aids in ensuring the credibility of currency hedging at home and abroad, thereby serving a confidence and stabilizing function.” (Deutsche Bundesbank, Die Deutsche Bundesbank. Aufgabenfelder, Rechtlicher Rahmen, Geschichte [The German Federal Bank. Areas of responsibility, legal framework, history], 2006, Frankfurt am Main, p. 181) More on this in the ‘additional remarks.’
 With the internationalization of the capitalist means of business of the various nations, this effect is by no means certain; it is always a possibility that the money markets will disappoint the creator of a convertible currency with their fixing of its exchange value, perhaps even call into question the suitability of a currency for business. If that happens, the central bank might actually be required to redeem its promise to take back its own money; then its currency reserves might be decimated or perhaps its ability to procure foreign currency would be impaired. These are all signs that its means of payment is no longer recognized as a convertible currency by the business world, but rather regarded as a mere token of credit, and that the nation’s credit industry, which it represents, is found questionable. Then the states with better money are called upon to the rescue the convertibility of such money — more on that below.
 The latest and perhaps most powerful historical example for this consists of the counterrevolutionary transformation of the Soviet economy. The introduction of the convertibility of its national money, setting it free for modern cross-border banking business, was urged on the radical reformers of the ‘real socialist’ ‘system of planning and management’ by local experts and western advisors as a purely technical modernization of its economy; it was under such circumstances that the step toward internationalization of the currency, deemed long overdue, was taken. In fact, the destruction of the system-conforming planning lever — socialist money — and the ruin of all economic planning was thereby sealed; the submission of the countries of the “Council for Mutual Economic Assistance” to the dominion of finance capital in the form of local “oligarchs,” Western banks, and other liberalistic groups got irrevocably under way.
 Even central banks — at least those that are certain they need not worry about their liquidity — manage their foreign exchange reserves as profitably as possible: “The foreign exchange reserves of the Bundesbank are for the most part invested in fixed income securities of the U.S. Treasury, which are held by the Federal Reserve Bank of New York. A small proportion of the U.S. dollar portfolio is invested in fixed income securities of other issuers with high credit ratings. Besides that, the Bundesbank places foreign currency reserves in some selected commercial banks in the form of short-term time deposits. In addition, repurchase agreements (repos) are carried out. Yen reserves are held in fixed income securities of the Japanese government or invested with the Bank of Japan.
“The management of the currency reserves follows a phased approach. Initially the Board makes strategic decisions to strike a balance among the criteria of return, liquidity, and risk. It specifies as core elements of investment policy the level and structure of foreign exchange reserves, as well as the range of applicable instruments, sets the framework for limiting interest, liquidity, and credit risks, and determines the organization of the bank’s investment process.” (From the already quoted brochure of the Deutsche Bundesbank about the Deutsche Bundesbank, p. 180)
 This, too, was something Marx already knew; see, for example, Capital, Volume 2, Chapter 17: The Circulation of Surplus Value, MECW 36, p. 342.
 Banks offer their corporate customers several alternatives for this. With an option transaction, the customer acquires the right to sell or to buy an amount in foreign currency, which it expects or must pay at some future time, at the current or at a currently fixed exchange rate; the bank bears the risk of worsened or improved currency relation and collects a premium corresponding to the risk. With an actual forward exchange, the bank modifies the current exchange ratio — the “spot rate” — by the difference, which has to be calculated up to the settlement date of the contract, between the interbank rate for the amount of domestic currency and the corresponding amount in foreign currency; this has the effect that a higher interest rate — the norm with a worse, depreciation-prone currency — cheapens the customers’ purchase of foreign money at a later date by the interest rate differential, and makes the forward sale correspondingly more expensive. And so on.
For banks, such hedging transactions are the lucrative but, taken individually, tedious basis for a vast superstructure of speculative transactions of the ‘derivative’ type, which are categorized in the fourth section of this chapter.
 Under the regime of the International Monetary Fund, states have worked out a repertoire of instruments for the necessary interventions, the “stabilizing” ones as well as corrections to exchange rates deemed due. 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 their international payment capability, and find their national industries ideally positioned in the competition for the world’s money, entrust the valuation of their credit moneys to the competition of money traders and demand the same from their weaker partners; these latter prefer a system of rules with officially fixed currency parities and regulations that, for instance, obligate the national banking community to deliver earned foreign exchange to a national authority; restrict, raise or reduce the price of access to foreign currency generally or depending on the intended use: etc. In a statement from Dec. 31, 2001 — in the brochure, Worldwide organizations and bodies in the area of currency and economy, March 2003, p.27 — the German Bundesbank distinguishes “regulations in the form of a “currency board’” and “other conventional schemes with fixed exchange rates (including de facto fixed exchange rates with managed float) — The country binds its currency (formally or de facto) with a fixed rate to a major currency or a basket of currencies, whereby the exchange rate fluctuates within a narrow range of less than 1% around a central rate —”, “Fixed exchange rates within horizontal bands,” “phased rate adjustments,” “exchange rates within gradually adjusted bands,” “managed float with no predetermined exchange rate path” — it recognizes forty-two of these — and finally (in forty cases) “Independent floating —-The exchange rate is determined by the market, in which any foreign exchange market interventions are supposed to dampen the rate of change and prevent excessive exchange rate fluctuations, without, however, leading to any specific price level.”
 Under this heading, market-economy experts understand — in this case H. E. Büschgen, Das kleine Bank-Lexikon [The pocket banking lexicon], Düsseldorf, 2006 — “the (notional) ensemble of markets in which money, capital, credit, securities, foreign exchange, etc., are supplied and demanded.” The expression is also used roughly so undifferentiated below. The differentiations that are offered on this conceptual basis by the world of experts are guided by criteria that are clearly relevant for the execution of the relevant transactions, such as “term or maturity structures, degree of organization, market participants, market objects and, in addition, — with the demarcation of international markets —currencies or regions” (loc cit, p. 367) For the political-economic concept of this sphere, other distinctions are important to us, namely, those between loan capital, fictitious capital, and derivatives, as they are taken up in Chapter II of this essay in volume 2-09 — how and why they are important is hopefully clear from the argumentation. If at times “capital market” or “international credit business” is mentioned, we are not thereby suggesting the demarcation of sub-markets by (mainstream) economics, but rather, in naming the object, bringing to mind various aspects of the prevailing capitalist debt economy — still such a non-differentiating designation.
 The money-trading business brings about the conversion of most currencies into each other by exchanging first for the credit money of one of the major world financial powers and subsequently purchasing the required type of money with such currencies. These latter thereby earn the scientific designation of ‘vehicle currency.’ The fact that there are several of them measuring themselves against each other and performing their own price movements relative to each other makes the exchange business again somewhat more complicated, but again especially interesting for the higher stages of speculation referred to below in section 4.
 In what follows, the various forms of capital transfer from one country to another — by lending, business formation, portfolio investment … — will be lumped together, because it is only important that a capitalist asset acts on one side of the border as an advance for a capitalist expansion process, and on the other side as the legal title to the proceeds: a doubling that doesn’t just generate a credit relationship between private parties, but establishes a relation of obligation between states. In which industry this asset is utilized and what results in practice in the one country, and whether it continues to exist in its home country as an item of a company’s balance sheet, as a claim, as fictitious capital having a separate existence as a commodity, or as anything else, doubtless matters for the owner and is recorded by the state in different categories of its external balance. For the relation to be explained here, however, between the right that the state provides capitalistic private property subject to its jurisdiction, and the demand it makes on other states to respect this right when it grants license for cross-border activity to capital, “resident” as well foreign, this plays no role: what matters is the general concept of this particular legal situation.
Incidentally, this legal situation is codified virtually as a fundamental law in the treaties founding the ‘Bretton Woods’ system. Ever since, it has been consistently developed in this sense, namely, that a capitalist asset should be allowed to operate freely in any country under its legal system, regardless of its origin — and that any national law is to give capital the same freedom of action customary in capitalism’s most successful countries.
 Sovereigns concede this proviso to each other absolutely and also formally in their formal agreements on the unlimited freedom of movement of capital. Article 3, “Public order and security” of the OECD Code of Liberalisation of Capital Movements: 2011 Edition may serve as an example:
“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.”
 The clientele relationships that tend to arise from such inter-state financial relations are now and then criticized as a revival of colonial relations. In fact, the colonial powers subjected foreign countries to their political sovereignty and, on this basis, approved and even themselves made investments, in order to make their possession useful as a source of wealth. These days, the way the utilization of foreign states is carried out, namely, through or based on government credit and debt service, leaves the political sovereignty, and thereby all efforts to arrange the country as a source of money, up to the debtor; the foreign sovereign is responsible for using its monopoly on force for the service of its country to the right of the owner to make money out of its property. This is the great advance in human history of the last century. Section 5 of this article returns to this point once again.
 The IMF — a topic of the next section 4 — refers to a preferentially used credit money on world markets as a “freely usable currency” (Article XXX of the IMF Articles of Agreement). The U.S. dollar, the European euro, the Japanese yen, and the British pound are presently regarded as such.
 For clarification of the principles of this business sphere in which the financial industry speculates on the chances and risks created by it as such, refer to Section 5, “Speculation on speculation: The derivatives business,” in Finance capital II. The development of finance capital’s credit power: The accumulation of “fictitious” capital in volume 2-09.
 Politicians whose financial policy calculations don’t work out have a tendency then to bemoan a “speculative distortion” of actually splendid “fundamentals.” Their successful counterparts just can never admit that they are right.
 The experts of the capitalist system, of all people, the ones who declare the financial industry to be the most modern branch of industry and normally have not the slightest doubt in the value of its products, regularly interpret a crisis situation as the retroactive appearance of what was actually from the beginning the definite nullity of business activity that was only artificially inflated; “financial bubble” is the keyword that sums up this interpretation. They fabricate a difference between a durable credit business that can really never “burst” and an unsupportable banking division whose growth is nothing but a mistake, a foreign body in the honest banking system and basically completely alien to its honest economic logic. In the practice of banking, the difference is, of course, nowhere to be identified and just as little to be determined theoretically. Nevertheless, the distinction between a good and bad banking business is fully maintained ideologically. It testifies to the unconditional will to make the concern for the success of all market transactions the guideline for thinking about them, even if this might really turn out to have no practical contribution to make.
In fact, the same kind of ‘value chain’ that the financial business contributes to the growth of capital and the same ‘logic’ by which it creates and accumulates abstract wealth are also responsible for reversing the movement and reducing the swollen power of credit. Overaccumulation is already part of any piece of accumulation of real financial power on the basis of debt, i.e., the reason that the interruption of the cycle of enrichment triggers a cycle of destruction of economic wealth. It is always only a question of where it starts and whether it is limited to specific regions or sectors or categories of investment, when it can be stopped and whether it “degenerates” into a general financial crisis. Details on this matter are contained in “Additional remarks 3. On capitalist crises in general and in particular” in Chapter II of this article, volume 2-09.
 The collapse of a subdivision of the derivatives market escalated into such a case three and a half years ago. Explanations of the events can be found in volumes 3-07, 4-07, 3-08, 3-09, 1-10, and 3-10 of this journal.
 These ‘rights,’ defined as a “currency basket” of the — currently four; see footnote 15 — “freely usable” kinds of money, are allocated to all members in a fixed amount according to their quota; they can be converted into liquid funds with other central banks.
These ‘SDRs’ were originally introduced to allow for a rule-based increase in the liquidity of the capitalist nations over and above the sums available to them in currency reserves and in tight supply because too little world money in the form of gold-covered dollars were being sent out into the world from the U.S. With the rapidly increasing deficits and capital exports of the world power and the abolition of the gold standard and fixed exchange rates between the U.S. dollar and other national moneys, this problem was dealt with speedily and thoroughly. Looking back critically, the German Bundesbank— in Worldwide Organizations And Bodies In The Area Of Currency And Economy [Weltweite Organisationen und Gremien im Bereich von Währung und Wirtschaft], March, 2003, p.15 — remarks: “The concern that in the future, with U.S. balance of payments deficits, not enough dollars would be produced to supply a sufficient amount of currency reserves to the other countries, led in 1969 to the creation of the system of Special Drawing Rights (SDRs). As a new reserve asset, these were to close the expected “dollar gap” and meet the global demand for currency reserves. At the same time, with the creation of SDRs, gold and the most important reserve currency, the dollar, were superceded as central reference points (numéraires) in the IMF by SDRs. In contrast, actual developments in the late sixties to early seventies resulted not in a dollar gap but in an excess supply of dollar reserves. Because the dollar holdings by central banks outside the United States gradually outgrew the gold reserves of the United States, and consequently the convertibility of the dollar into gold, a cornerstone of the parity system, no longer seemed assured, a crisis of confidence ensued. The creation of the SDR system was based ultimately on a false estimation of later developments.” [our translation] This judgment has now of course itself proved to involve a certain false estimation: in light of the growing payment needs of IMF members due to the financial crisis, SDRs have been rediscovered as a means of increasing the international liquidity of central banks, with their strained balance sheets; their circulation has increased tenfold. (IMF, “Factsheet / Special Drawing Rights,” December 9, 2010).
 The standout is the Peoples Republic of China (PRC). In the opinion of the world of experts and, in particular, its ‘Western’ business partners, it stands on the verge, with its accumulation of foreign exchange, of taking the next step toward issuing a currency respected as a world money. The ruling party, however, is exercising caution. Apparently, it is aware of the great political-economic difference between a national ability-to-pay that is due to and uses the funds of such a large and growing national treasury, and having a credit-money that is used everywhere as the universal equivalent and means of business by the finance industry. In any case, it expects that this industry, if it were allowed to operate freely with Chinese money, would speculate without mercy on its appreciation and thereby destroy an important condition for the export success of the nation, i.e., for its enrichment on the money of the leading powers of global capitalism, without qualitatively raising up the renminbi to the status of a universally used world money. In fact, far more is required than a lot of merchandise exports— namely, at very least, exporting capital worldwide in this currency, and achieving the status on the capital markets as a unit of value for portfolios of fictitious capital and derivatives as well as means of payment for financial transactions. The government is working to make progress in this direction; though it hasn’t yet made its currency freely convertible, it is already urging for the inclusion of the renminbi in the basket of currencies that defines the IMF’s Special Drawing Rights. In the meantime, the IMF still refuses: the “Chinese renminbi” does not yet meet the criteria of the fund for “a freely usable currency” (IMF, “Review of the Method of Valuation of the SDR,” 2010).
 The crisis competition of the major global economic powers is characterized — even today, in the first great financial crisis of the twenty-first century — by the fact that the most forward-thinking politicians recall the time-honored recipes for one-sided moneymaking on the world market, namely, through a protectionist trade policy and a correspondingly tailored monetary policy. Even essential components of the global credit system, above all the still dominant role of the U.S. dollar but also the floating exchange rates between the major world currencies, come under criticism. It goes without saying that within the country, everything is done anyway to compensate for the loss of capitalist capacity by reducing the cost of the people, namely, the part still used and above all the part that is useless in terms of the market economy: though impoverishment of the people is, for the state, the feeblest of productive forces, it is still the sole domestic productive force for international competition to be produced by political means.
More on this can be found in the articles on the financial crisis already mentioned in footnote 19) — to be continued.
 The political economy of real socialism is treated to some extent in the (untranslated) books of Resultate-Verlag dealing with the end of the German Democratic Republic — Peter Decker & Karl Held, DDR kaputt — Deutschland ganz. Eine Abrechnung mit dem „Realen Sozialismus“ und dem Imperialismus deutscher Nation, Munich, 1989, and Der Anschluß. Eine Abrechnung mit der neuen Nation und ihrem Nationalismus, 1990 — and in the anthology, Karl Held (ed.), Das Lebenswerk des Michail Gorbatschow. Von der Reform des ‚realen Sozialismus‘ zur Zerstörung der Sowjetunion, Gegenstandpunkt-Verlag, Munich 1992. In the English language there is Karl Held & Audrey Hill, From 1917 to Perestroika: The Victory of Morality over Socialism, Resultate-Verlag, Munich, 1989.