Stagflation: Stagnation, Inflation, and Beyond

Since my prediction in April of 2007 of an impending economic crash, I've vowed not to risk my unblemished record with any further predictions. But a simple thing that I learned from the run-up to that catastrophe was when the “little people” -- the “every man and every-woman” -- found their way into stock market speculation, trouble was looming. Early in 2007, I recall acquaintances then announcing that they were day-traders, bragging that they were making more money buying and selling on their devices than from their regular job. 

The Wall Street Journal headlined in early October that More Working-Class Americans Than Ever Are in the Stock Market. “Among Americans with incomes between $30,000 and $80,000, 54% now have taxable investment accounts. Half of these investments have entered the market in the last five years according to…Commonwealth and the BlackRock Foundation.” 

A red flag.

And also, I learned that when the investment commentariat-- not the media cheerleaders-- sound the alarm, Marxists should listen. It’s a curious thing that academic Marxist economists, who frequently claim to foresee future crises in broad terms of overproduction and rate of profit, seldom cite the views of those solely driven by money-making realities. The Wall Street Journal, hedge fund managers, investor consultants, and others of the pursuing-alpha herd are good sources of alarm for market volatility as opposed to the capitalism-boosters of The New York Times and The Washington Post.

When a few weeks pass with the front page of The Wall Street Journal warning Credit Markets Are Hot, But Froth Is Worry and OpenAI’s For-Profit Restructuring Draws Pushback, Rattling Executives and Persistent Inflation, Soft Jobs Data Pull Fed in Two Directions and Shutdown Starting To Exact Its Toll on Business and Volatility Returns To Haunt Stock Market, it might be time to sit up and take notice.

When financial sites like QTR’s Fringe Finance-- not one to mince words-- announces Sh*t is Breaking… And it’s Going To Get Worse or when Reuters Morning Bid coins the jingle Bubble, bubble toil and trouble or when Wolf Street raises the alarm that Corporate Profits in Nonfinancial Industries Plunge by Most Ever in $, amid Massive Downward Revisions, it might be just the moment to question the health of the US economy.

More red flags.

The truth is that the US economy is strapped with two intractable, life-sucking issues.

First, the post-2007-2009 economic crisis has never been resolved. The US has foisted the damage onto its partners, subsidized sick and floundering corporations, run up enormous debts through monetary pump-priming schemes, fostered new armament production through escalating global confrontations, and sold investors on shaky, over-hyped “innovations.” That same concerted effort to overcome the deflationary tendency spawned by the financial collapse overshot the mark, generating a powerful inflationary trend. 

As I’ve argued emphatically since 2021-- contrary to the punditry-- inflation is rarely, if ever, a momentary, episodic development. It does not go away with policy tinkering or rebalancing. Once prices begin to rise, businesses and corporations try to catch up or get ahead. The floodgates of profit-taking and profit-preservation will not be easily closed. For those who fashionably love to borrow Marx’s concept of commodity fetishism, the conventional thinking on inflation fetishizes price rises, hiding the fact that inflation is the result of human decisions and human (capitalist) interests. And when capitalists see an opportunity to raise prices, they seize it.

Compounding the last four years of persistent inflation is stagnation in the non-financial economy. Economic growth-- apart from the stock market, the pocketbooks of the very rich, and the bloated military budget-- is slow and slowing. In November of 2021, I reminded readers of the dangerous return of 1970s “stagflation” in an article aptly entitled When Have We Seen This Before?. Of course, the dilemma is that government efforts to invigorate the stalling economy will only further increase inflation.

Second, the economy is currently in the hands of a helmsman without a compass. President Trump’s economic policies are decidedly a departure from the conventional reliance on the Federal Reserve as a somewhat independent arbiter and navigator of economic policy, from the reliance on and guidance from Bureau of Labor Statistics and Commerce Department data, from some self-preserving restraint of corporate and financial excess, and from muting obscenely deep and unrestrained graft and corruption. Trumpism is elite enrichment on steroids, the public be damned. Reportedly, Communist Party of China Chairman Xi believes that Trump is not ideological, but “transactional.” That would well summarize his economic program.

Whether Trump’s approach is politically sustainable is one question. Whether it will add confusion and misdirection to escaping stagflation is not in question. It will make things worse.

What are the markers, suggesting economic hardship and a rocky road ahead?

• Inflation shows no sign of a letup, still well above the consensus goal. While Trump has “declared” it defeated, consumers are even more alarmed than the numbers suggest, with grocery store prices a particularly sensitive arena for shoppers. The full weight of Trump’s tariffs has yet to spread through the economy, promising even further price elevation.

• Hiring is falling off; businesses are hiring fewer people. Though limited hiring has not yet resulted in a dramatic change in unemployment, it foretells an increase in those jobless.

• Real average hourly earnings growth is tepid, growing .7% from August 2024 to August 2025. Median household incomes remained largely unchanged last year, adjusted for inflation. When higher incomes are extracted, the numbers for most households are in decline.

• Outlandish financial schemes are back and collapsing, especially around the used-car market. As in 2007-2009, irrational, super-exploitive lending patterns have generated unserviceable debt with lower-income consumers. Car-loan delinquencies have reached 5.1%, a level approaching that of the earlier financial crisis.

• While stocks appear to be booming, their price-to-earnings ratio-- a traditional measure of overvaluation recently hit 22.5, one of the highest readings in the last forty years.

• Investor fear of market volatility is reflected in the great demand for the safety of gold, a commodity hitting its all-time high in price. Other signs of the turn toward safety are emerging. 

• The driver of stock-market growth is almost entirely artificial intelligence (AI) and its data centers. With immediate investment in AI estimated in hundreds of billions of dollars (as much as three-quarters of a trillion globally), little return on investment has materialized. OpenAI is expected to return only $13 billion this year. Morgan Stanley calculates that the entire industry only sold $45 billion in products last year. Many see a bubble much like the fiber-optic mania of 2000.

• Bank failures have prompted JP Morgan Chase’s top dog, Jamie Dimon, to quip “When you see one cockroach, there are probably more”.

• Private, direct credit-- a growing factor in finance-- has a default rate of over 8%, the highest ever.

• Class divisions are intensifying. Annual wage and salary growth for the bottom third of households through August of this year was lower than any year since 2016. At the same time, growth for the top third grew four times faster than that of the lower third. For the first time, consumer spending by the top 10% of earners was nearly half of total consumption.

• The Black unemployment rate went from 6.1% last August to 7.5% this August, a harbinger of employment trends: last hired, first fired.

• Recent college graduates are experiencing one of the highest unemployment rates of the last decade, another harbinger of a weak labor market.

• More children are claimed to suffer from some food inadequacy than at any time in nearly a decade; the US Department of Agriculture estimated the number at 13.8 million in its 2023 report. The Census Bureau similarly reports that nearly ten million children live in poverty, the most since 2018. The Trump Administration has halted the USDA survey of hunger in the US.

The high interest rates established to contain inflation are predictably slowing real, material economic activity and large consumer purchases for the majority. Four years of rising interest rates have made debt service a growing burden, as well as making the refinancing of debt costly. 

Economic royalty and their courtiers are publicly downplaying the growing inflation in a desperate effort to convince the Federal Reserve to lower interest rates and stimulate tepid economic activity. Should the Federal Reserve comply, inflation will undoubtedly accelerate to the great harm of most working people. Historically, stagflation ends with a deep recession, like the painful Reagan recession of 1981-1982. 

Many in ruling-class circles believe that a new wave of innovation will rescue the sluggish, fragile economy with the exploitation of Artificial Intelligence. They foresee a new age of high productivity and growth. 

However, research by JP Morgan Chase economists has failed to find a significant connection yet between the use of AI and industrial productivity. So far, it has boosted stock market values enormously, without showing a concurrent return on investment.

James Meek, writing in the October 9, 2025 issue of The London Review of Books, may well have captured where AI has taken us and how far it has to go:

Leaving aside the known problems…-- their massive energy use, their ability in malign human hands to create convincing fake versions of people and events, their exploitation without compensation of human creative work, their baffling promise to investors that they will make money by taking the jobs of the very people who are expected to subscribe to them, their acquired biases, their difficulty in telling the difference between finding things out and making things up, their de-intellectualizing of learning by doing students’ assignments for them, and their emerging tendency to reinforce whatever delusions or anxieties their mentally fragile users already carry-- leaving aside all this, the deep limitations of generative AI make it hard to see it as anything but a dead end if AGI is the goal.

Faith that AI is more than a possibly malign novelty is based on confidence that the tech oligarchs have a vision of our future that benefits us all.

Not likely.

Is economic reckoning on the horizon?

Greg Godels

zzsblogml@gmail.com

Winter in America...

 

From the Indians who welcomed the pilgrims

And to the buffalo who once ruled the plains

Like the vultures circling beneath the dark clouds

Looking for the rain

Looking for the rain

Just like the cities staggered on the coastline

Living in a nation that just can't stand much more

Like the forest buried beneath the highway

Never had a chance to grow

Never had a chance to grow

And now it's winter

Winter in America

Yes and all of the healers have been killed

Or sent away, yeah

But the people know, the people know

It's winter

Winter in America

And ain't nobody fighting

'Cause nobody knows what to save

Gil Scott-Heron (1974) Winter in America

When Gil Scott-Heron wrote these words, the US seemed to be in swift decline. Watergate had cast a shadow over government legitimacy; the US had lost/was losing the imperialist war in Vietnam; economic inflation, unemployment, and stagnation were crushing US living standards. For many in the post-war generation, the early 1970s were a low point in the prestige and influence of the US. 

Scott-Heron was masterful at blending politics with his art, without compromising either. It enabled him to force issues like apartheid, drugs, police violence, racism, and poverty into the listeners’ consciousness, while still entertaining. Many of his songs became anthems for progressive movements.

For many of us, Winter in America affirmed the terminal decline of the US: "It’s Winter in America, and ain’t nobody fighting, ‘cause nobody knows what to save." Hope was frozen, promise was frozen, and ideas were frozen with the onset of a metaphorical winter: a political, environmental, racial, and foreign policy crisis. 

Scott-Heron’s lyrics touched all the ills of 1974, noting that “all the heroes have been killed or sent away.” The “Constitution was a noble piece of paper…” that “...died in vain.” And “Democracy is ragtime on the corner.” He warns of “last ditch racists” and laments the “peace sign that vanished in our dreams.”

But we were wrong if we thought that the US had hit rock bottom.

Nineteen seventy-four was only the beginning of the long, painful decline. Average hourly wages today are barely higher than in 1974. The minimum wage continues to shrink in constant dollars. The obscene growth of inequality in income and wealth seems unstoppable. 

Constant and persistent aggressions-- proxy wars, invasions, occupations, and remote, video game-like massacres-- have become almost routine to the point that they tragically muster little domestic resistance. 

Racism remains a scourge on the US, though more and more along a class dimension. African American workers have taken an even bigger hit than their white counterparts; the growing poverty that afflicts the population, afflicts the Black population even more; and, consequently, the neglect, contempt, and official violence that always accompany impoverishment batter African Americans severely.

The competition for jobs in the US has shaped both a narrow, xenophobic response and a wage race to the bottom. The decline of unions, the legacy of anti-Communist purges in the labor movement, has further sharpened the competition for low-wage jobs.

The raging religion of market-fundamentalism has privatized or debased public wealth, commodified social services, and devastated public education. 

Where we thought Nixon shamefully broke the public trust, corruption, political dirty tricks, and lying are political commonplaces in the twenty-first century. 

What was winter in America in 1974 is now a veritable ice age.

And what is most tragic about the continuous decline in the US empire in influence, domestic peace, and mass well-being is the hollowness and ineffectiveness of the available political options.

US politics has devolved since the purges of the left in the 1950s and the failed liberalism in its wake, becoming a paper tiger incapable of confronting the multi-faced crises spawned by capitalism.

Twenty years into the twenty-first century, political partisans, devoid of new ideas, can only reflect back on earlier times, searching for a lost “golden era.” Today’s politics is largely politics in the rear-view mirror-- a politics of nostalgia. 

For the petty-bourgeoisie and the want-to-be petty bourgeoisie-- engorging on the table scraps of the ultra-rich-- the Obama presidency brought life at its fullest and greatest. Hipsters call a sector of this strata the PMC (the professional managerial class). The Obama trickle-up rescue of the economy in the 2007-2009 crisis cemented their loyalty to globalism and elite rule. They are socially liberal and fiscally conservative. Witness their Black Lives Matter signs in their nearly all-white, segregated neighborhoods. They are for symbols and gestures, but not at the cost of redistribution of their incomes or sacrifices in their lifestyles. For them, Trump is the scourge blocking the return to Obama-like civil management of national affairs. They are the dominant force in Democratic Party politics.

The forthcoming destruction of thousands of small businesses will prove a hard lesson for many in the petty-bourgeoisie, sending them scurrying for solutions. Far too many will find succor in the bitter victimhood that has traditionally fed an ugly, twisted populism with roots going back as far as the Know Nothing Party of the nineteenth century.

A similar economic devastation drives many workers toward the bogus radicalism of right-wing populism, especially in the Midwestern states racked by capital’s abandonment of industry for investments in other sectors or other countries. Without a viable, substantial movement to direct their justified anger at capital, they find scapegoats elsewhere. 

Other sectors of the working class long for the celebrated era of “middle class” prosperity after the Second World War, what the French call “Les Trente Glorieuses.” This highly romanticized era saw wages and benefits marching in lockstep with strong productivity gains for US workers, allowing many working class families to buy homes and automobiles, to take vacations, and to envision college education and upward mobility for their children. Forgotten in this idyllic memory is the ugly oppression of Blacks and other minorities and women in this period. Forgotten is the suppression of the left, the vulgarity of culture, and the uniformity of thought. Forgotten is the bloody footprint of US foreign policy around the world.

The social contract of the postwar period came at an often-overlooked cost. Working class leaders agreed to purge left resistance to capitalism and uncritically support US imperialist foreign policy, becoming complicit in the crimes of global anti-Communism. When the moment proved opportune, the US ruling class betrayed its part of the bargain and slammed the door on working class gains.

Though memories of this lost era grow dimmer and dimmer, nostalgia for this interlude holds much of the trade union leadership wedded to the Democratic Party along with a core of organized labor’s increasingly skeptical members.

For most voters, constrained by the two-party system, a desire for an earlier, often fictionalized period inspires their politics. The Biden and Trump messaging underscores this insipid nostalgia: “Build Back Better” (Biden) and “Make America Great Again” (Trump). We can only build back or restore that which is lost. And people are confused over what and why they have lost.

This should be a moment for the left. 

But sadly, most of the left is adrift in a sea of old and failed ideas. Some imagine the noble selflessness of the local food or art coop as a cooperative model for competing with multinational corporations and bringing capitalism to its knees. Do we recall the other “anti-capitalist” fads foisted on us by academic leftists? ESOPs (Employee Stock Ownership Plans)? Micro-financing? 

All of these strategies share a profound pessimism that capital cannot be directly confronted and defeated. Instead, they propose to outfox capital by nipping away at its margins. Despite the fact that similar utopian measures have failed over centuries, influential leftists continually resurrect them.  

The notion that the perfection of capitalist-style democracy can effectively challenge the inequalities and injustices of capital pervades the US left. Since the suppression of the Communist left in the Cold War, the self-described “New Left” has invested heavily in “democratizing” the structures and institutions currently serving capitalism. Whether or not this project makes any sense, it certainly hasn’t succeeded, despite the fact that the New New Left has embraced it. Every ineffective response to the growing crises of capitalism seems to confirm that the socio-economic-political system accompanying capital is its handmaiden and is not and cannot serve as an effective tool against its inequities.

There was a reason that US capital suppressed and continues to suppress Communist and socialist-oriented workers’ movements. It is not nostalgia to recognize that the ideology and strategies devised by Marx, Engels, and Lenin have in the past rocked the very foundations of the capitalist system, sending capitalists and their lackeys into a frenzy of violent resistance. Surely there is a lesson in that fact.

The cold wave of uncertainty, fear, and despair that is now sweeping the US will not abate unless we fight for a new future. The tools are there.

Greg Godels

zzsblogml@gmail.com

October Surprise: Market Apocalypse?

Volatility!

That’s the word that Wall Street uses when investors are getting nervous. And Wall Street and the financial pundits should and are getting nervous now.

The major US equity markets-- the Dow Jones, S&P, and NASDAQ-- have enjoyed a strong, and, to many, a paradoxical recovery since the pandemic shuttered much of the productive economy. While unemployment has soared and is only slowly reversing, while growth has collapsed, and while earnings are challenged, stock markets are marching forward, restoring nearly all of their previous losses by the end of August.

To many of us, it is not unusual to see stock performance far outpace the general economic welfare of the people. That is a commonplace of the capitalist economy.

Nor is it unusual for investors to expect that the stock market will outperform the economy in general. After all, that was the point of Piketty’s celebrated, thorough historical study of capital which showed that, all things being equal, the rate of return on investment will grow faster than the rate of economic growth. As a result, capitalism necessarily generates what we Marxists insist is exploitation.

But equity markets are not free floating, independent systems; they must intersect at some point or some time with the real economy. Stock performance must reflect the underlying ability of its associated corporation or enterprise to produce something of worth to the investor: profit. 

So if stock values in the five or six months of the 2020 pandemic seem dissociated from the economy, what is going on?

The Wall Street Journal offers a useful, if incomplete, explanation of the anomaly. How Stocks Defied The Pandemic (September 15, 2020) suggests five factors: 1. Stimulus from the Fed and Congress, 2. Expectations of a strong recovery, 3. The dominance of the tech giants, 4. The return of individual investors, and 5. Momentum trading.

Certainly the Federal Reserve and the two parties’ elected officials acted swiftly in the wake of the pandemic shut-down. Absorbing the lessons of the 2007-2009 crisis, they cranked out trillions of dollars’ worth of stimulus, they sanctioned easy loans, and they collapsed interest rates swiftly. 

But it is telling that equity markets appear to have been bolstered more significantly than other aspects of the economy, including those aspects protecting or promoting the fate of those most vulnerable to the catastrophe. In short, the investor class seemed to reap the greater benefit of their actions.

Though maybe unintended, the bailout encouraged hungry investors to devour stock market opportunities, with bond yields decimated and other interest-generating instruments foreclosed by the Federal Reserve’s actions. Capitalists must land their capital somewhere in order to preserve the accumulation process-- the system’s blood flow; the impact of institutional intervention by the Fed left them few promising alternatives outside of the equity markets. And that is where they put their money.

As for “expectations” of a quick recovery, any notion that such expectations could be built on anything more solid than hope and faith must be discarded. This singular event-- a crisis of public health, economics, politics, and racial conflict-- generated profound fear more than expectations.

The WSJ correctly located the outsized influence of Tech stocks-- principally, Apple, Amazon, Microsoft, Alphabet (Google), and Facebook-- in the stock boom. Without the investment flowing into tech stocks, mainly the big five, there would be no notable market rally. Apple, alone, has gained 57% in 2020 and now has a valuation greater than the FTSE 100, an index of the top companies on the London Stock Exchange. At the same time, the frenzy for tech stocks frightens pundits and advisors. Apart from Amazon, tech stocks play in a virtual universe that challenges real-world valuation. Moreover, they have been notoriously volatile. And the gains have been concentrated in the Big Five, with other companies far less successful. 

Past stock market collapses have been preceded by a dramatic increase in individual investors bent on taking advantage of an overheated market. The return of the “rubes” has always been a signature benchmark of an impending decline. From the casual dabbler before the Great Depression to the day trader and dilettante of today, the engagement of “amateurs” is always a harbinger of market disaster. 

Some would be surprised to learn that in the modern era, individual investors-- day traders and the like-- only account for roughly one in ten trades. The rest are made up by institutional investors, funds, etc. But, in 2020, the number of trades by individual investors has doubled, accounting for about 20% of equity market action. 

With social media tipsters and discussion boards, the born-again investors have accounted for many stock valuations that puzzle and concern wiser investors. Tesla, for example, has gained 438% this year, establishing the maverick car company as the highest valued auto company in the world and the eighth largest corporation in the US by market value.

Fed by social media gossip, investors jacked up share prices of Eastman Kodak by as much as 614% before losing most of the gains! This kind of euphoria-driven investment has mature investors and advisors shaking in their boots.

Creating momentum through bets on overheated valuations only generates greater momentum. Easy money and the fear of missing a surge amplifies the momentum. Add the attraction of derivatives and the likelihood of a market bubble increases dramatically. 

Stock options-- the purchase of a contract to buy a stock at a price fixed before the actual purchase of the stock-- have exploded in 2020. They are attractive to investors who want to risk their capital on a bet of future gains and increase the potential return on the bet by spreading the capital over more, less costly options. Goldman Sachs reports that the volume of option trades exceeded the volume of stock trades for the first time this year. Three years ago, option-trading volume was only 40% of stock volume. In August, option trading topped 120% of stock trading. Small investors bought half of a trillion dollars’ worth of options in August alone, five times the amount bought in any previous month, as reported in the WSJ.

Much of this market craze is occurring against a backdrop of over three weeks of net decline in the US stock market indexes. Moreover, the employment recovery is stagnating, with new unemployment claims remaining at an historic high, and the pace of retail-spending growth slowing. Earnings-- the crucial factor in capitalist behavior-- is expected by some to fall by as much as 22% in the third quarter. 

Conditions are ripening for another market crisis not unlike that brought on by the 2000-2001 dot.com collapse. Billions, if not trillions, of nominal value stand to disappear.

Likely such an October Surprise would be fatal to Donald Trump’s reelection prospects, since most polls show that respondents see the economy is his greatest strength against Biden.

But whether Biden or Trump wins, the depth of the emerging crisis will make it almost impossible for either to rule effectively. Neither offers a way out. Only a profound, radical political realignment will blaze a path forward.

Greg Godels

zzsblogml@gmail.com

Searching for Meaning in a Pandemic

Driven indoors by a deadly virus, most people, especially in the wealthier, advanced capitalist countries, are facing uncertainties unknown in their entire lives. The virus’s ruthless defiance of borders and all but the most privileged social cleavages has cast a shadow over expectations and prospects, while bringing the global economy to a near-standstill.

What can We Learn?

For those who have money and power, their interests come before the health and welfare of the rest of us. Most bourgeois politicians, top corporate executives, bankers, and billionaire investors are willing to risk the lives of the vulnerable to secure their own status and restart the capital accumulation process. Every day, we see anxious politicians lobbied by the agents of monopoly capital. They are ready to ignore the advice of academics and professionals who are experts in disease control and public health in order to send safely isolated workers back into danger. 

In the US, we have private health insurance and market-based health services rather than universal, equitable health care. The fact that the victims of the novel coronavirus could not be promptly diagnosed, triaged, and given care, the fact that response was so uneven, and the fact that health care providers had to compete for the scarce, but essential means to combat the virus demonstrates the tragic inadequacy of an industrial model relying on the market, profit, and the fetish of “efficiency.” Tens of thousands of lost lives expose this failure.

Where politicians in other countries have callously shrunk their national health services for political expediency, they, too, must answer for the unnecessary deaths of thousands.

We should learn that health industry administrators, faced with medical supply shortages and accelerating demand, are prepared to make life-and-death decisions based on protocols devised by so-called “bio-ethicists.” Rather than rallying behind victims’ families and health care workers, rather than seeking emergency powers to ramp up production or purchases, rather than mobilizing volunteers or lobbying for a more rational distribution of national resources, hospital administrations opt to choose which victims deserve to live.
Misnamed “bio-ethicists” compete to find the most “humane” way to select those for death. Some will remember the righteous indignation over “death panels” during the Obama-era healthcare debates. With real life-or-death decisions being taken, the anti-reform zealots are remarkably silent. 

The all-too-popular slogan “We are all in this together” has proven to be nonsense. Class and race remain the decisive factors in determining who wins and who loses. It’s not that Black, Latino, and poor people are selected as victims by the primitive infectious agent, but that social neglect, inequality, and discrimination renders them more vulnerable to the virus. The behavioral choices, access to information and prophylaxis, health care, conditions of shelter, transportation options, and general resources available to the disadvantaged determine that they will more likely be victims, suffer, and die. The media feign shock at numbers that reveal the vast overrepresentation of African American cases and deaths, as though racism, urban segregation, and poverty were already conquered.

Similarly, the media are astounded by the miles of backed-up cars clogging highways waiting for relief from food banks, as though food banks came into existence when the virus struck. Before the virus, the needy were expected to stand in line in shame for their modest handouts.

The virus has shown the privilege of celebrities, the ultra-rich, and the political stratum, who have secured tests and expedited, preferred attention to the dangers threatened by the virus. Forbes magazine documents how a “loophole” in the recovery act could allow up to 43,000 of the richest people in the US to enjoy a gift of up to $1.7 million while everyone else tries to pay their bills and live on a $1,200 stipend from the US Treasury.

The bottom feeders-- the scam artists, the predators on the elderly, the price gougers, the hoarders-- have come out in force to take advantage of fear. Despite unleashing these vermin in an era of deregulation and laissez faire, the government that spies on everyone shows no desire to stop the predation of a populace experiencing unprecedented insecurity.

The lessons learned in the last economic disaster go unheeded. Once again, the banks and monopoly capitalist firms are assured that their vulnerabilities and missteps will be publicly covered, even rewarded. The once detested excuse of “Too big to fail” has roared back with a vengeance. Despite the collapse of real economic activity, the equity markets have begun to recover and, shamefully, bounce back when new, unparalleled unemployment numbers are announced. Even The Wall Street Journal is compelled to notice “..a confounding reality: soaring share prices and a floundering economy” (4-17-2020). Investors know that relief for capitalism will always be in the wings, even if there is no bailout for the rest of us.

We should learn to scoff at talk of “recovery.” Since 2000, “recovery” has only meant that global financial institutions will manipulate interest rates, juggle questionable, inflated assets, and create new financial games of chance in order to put lipstick on an ugly capitalist pig. That corpulent pig-- stuffed with near-worthless financial junk-- has threatened to deflate for over twenty years. Only persistent manipulation by central banks has re-inflated the global monster. The “product” that economists and statisticians purport to measure is really bloated equity markets, debt-driven economic activity, and unhinged property values; all connection to reality-grounded value is long broken.

While this fictional “recovery” has been heralded, the circumstances of those who work for a living has stagnated or sunk (median household income in the US has risen by less than 4% since 2000), buoyed only by taking on more and more debt. The “desperation”  indicators-- like the inability of 40% of the people to sustain even a $400 unexpected bill-- are well documented. The coronavirus crisis has only brought into the spotlight the desperation that has followed in the wake of low wages, gig jobs, grinding healthcare costs, unaffordable housing, student-loan debt, and declining public services. For the vast majority, talk of a recovery is an insult.

Should we not ask why it is that the People's Republic of China has avoided the worst consequences of the virus, especially since they were the first to face its devastation? Could we learn how it is that the International Monetary Fund expects that the PRC economy is expected to grow this year, while the US is projected to decline by 5.9% and the EU by 7.5%? Could it be that its state-owned enterprises were able to respond quickly and decisively? Should we see the fact that the PRC banking sector is largely publicly owned and able to put the prompt and rational distribution of financial assets above profit-taking? Does it matter that the political leadership of the CPC-- the Chinese Communist Party-- is more responsible to the public than the soulless bourgeois parties of the West? Is it a coincidence that the Democratic Republic of Vietnam has accounted for no coronavirus deaths? These are ideas that never enter the conversation in the West.

What can We Expect?

As with the last major crisis over a decade ago, this crisis spawns numerous analyses and prognostications. Uncertainty breeds speculation and “experts” feel compelled to venture opinions. 

The truth is that even the experts remain baffled by the course of the coronavirus. Its behavior and the effectiveness of chaotic Western public policy are uncertainties at this stage, rendering the media blame-game meaningless, if not harmful. The exposure of the systemic weaknesses of capitalism in arresting a pandemic and serving the people is far more significant and immediate than the Trump-Biden horse race.

The state of the US economy is another matter. The nearly universal declining numbers do not lie. Nor does the immediate expectation of further decline. We also know that, in many ways, the economic collapse is unprecedented in the lifetime of almost everyone living today. 

In a short span, JPMorgan Chase forecast an annualized GDP drop of 25% and a rise in unemployment to 10%, only to revise their estimates to a 40% decline in GDP accompanied by 20% unemployment. Goldman Sachs projects that the downturn “will likely be four times worse than the financial crisis [of 2007-2009] and the U.S. will see its highest unemployment rate since World War II…” But the forecasts turn more pessimistic almost before the ink dries.

Ahead is a massive restructuring of global capitalism. Where it goes depends, of course, on subjective, political factors. But history teaches that the trajectory of capitalism, when experiencing a severe economic collapse, will generate a process of what Joseph Schumpeter, an apologist for capitalism, euphemistically called “a gale of creative destruction.” What that process produces, of course, could be deflected or shaped somewhat by political forces of right or left, but the prevailing tendency will be for stronger countries to shift their distress to weaker countries. The tendency will be for big capitals to smash or absorb smaller capitals, for concentration. The tendency will be to use unemployment and its accompanying pain to cheapen the cost of labor, to increase the rate of exploitation. The tendency will be to shift the balance of economic and political power further toward elites. In short, capital will attempt to restore its health by shifting its problems to the weak, destroying many and much in the process. 

Whether this trajectory is repeated as it was after the 2007-2009 crisis depends upon subjective factors-- today’s politics. 

Sterile debates, like the argument between the debt scolds (advocates of minimal government spending, austerity) and the new-age proponents of Modern Monetary Theory (the uncoupling of money expansion from a long-thought rigid relation to negative economic consequences like inflation), are not helpful today, though they are crowding other political options off the stage. 

The last 20 years of persistent, deeply rooted global deflationary pressure have left the zealots for balanced budgets and “moderate” debt with no argument. Central banks have injected trillions into economies with barely a hint of inflation resulting. Relatively extreme monetary inflation has barely contained the underlying deflation plaguing world economies. Thus, none of the near-hysterical inflation warnings proved justified.

The Modern Monetary Theory (MMT) proponents took this relatively limited experience of mounting debt and tepid inflation to demonstrate that MMT was more than a policy of limited application to a specific time and place, but a universal theory of money. In fact, it is a conditional theory, conditional upon very specific, historically determined conditions being met. 

In practice, MMT disconnects monetary policy from any objective standard of value (like gold, for example) and attaches it to the ultimate subjective standard, a fiat national currency. In as much as subjective confidence persists, MMT can persist. But a subjective standard-- because it is decoupled from objective value-- masks the underlying dynamics of the capitalist system; it distorts, rather than settles the chronic problems that plague the accumulation process. The massive bailouts of the last decade and of today appear to use central bank monetary activity to restore equity markets and financial institutions, but they merely isolate the rot and postpone a day of reckoning. The underlying problem remains unresolved, only to surface again, triggering another deflationary spiral, an unloading of “assets” without real value.

It would appear that bourgeois politics has found no other policy approach than austerity or MMT. Austerity, the prescription of the right and much of the center, has failed again and again, bringing countries like Greece to the brink of collapse.

And MMT-- applying a sling to a broken arm-- is the last gasp of the social democratic left, a panacea that promises to bring the best of all possible worlds: giving more to the needy without taking from the greedy. MMT sells an easy tactic that kicks the can of capitalist failure further down the road.

What is needed today is a radical solution to radical, unrivalled problems. 

Standing in the way of an effective approach is a wimpy, Nostalgia Left. 

For most of the trade union leadership, the dream is a return to the 1950s when the pesky Reds were subdued, the bosses allowed wages and benefits to track productivity in return for labor's cooperation with imperialism, and Blacks and women were not disrupting labor peace. 

The current centerpiece of the US Democratic Party-- financially secure, suburban social liberals-- long for a time before Trump when politics were courteous and the vast, growing economic inequalities were an unsightly, unfortunate, but tolerable blemish on the harmony of US civil society. 

Nearly all that remains of the old Democratic coalition, today ignored by the Democratic Party leadership, dreams of the era before Reagan, when Democrats actually gave a tepid voice to economic justice and worshipped at the altar of equal opportunity. Devoted to a fading memory of the New Deal, they place their hopes in a Democratic Party soul transplant. It’s not capitalism, but its ugly stepchild, neoliberalism, that they abhor. 

Too many of the aging radicals of the Old New Left were terrorized by McCarthyism, leading them to forage for something distant from Communism, to the left or right of real, existing Communism. Their search dashed, they have settled for a stale, visionless pragmatism. Their old 1960s antagonists would surely be amused at the irony. 

Thankfully, there are new generations of the left searching for big answers to the big problems of the moment. The last twenty years have shaped a less-than-promising future for millions of young people. And the spring of 2020 only promises far, far worse. To meet these challenges, one can hope that their journey takes more and more of them to revolutionary socialism, to the socialism of Marx, Engels, and Lenin, to the socialism that animated the working class movements for most of the last century and a half.

Greg Godels

zzsblogml@gmail.com