On June 2, 2020, Jan Dehn of Ashmore Investment Management Limited remarked:
If central banks were to allow asset prices to reflect the actual underlying fundamentals – record levels of debt, record low productivity growth, record unemployment, record populism – the resulting crashes in financial markets would be so large that most Western economies would be plunged into deep and lasting depressions.1
Putting aside the fact that many countries and regions are already in a deep and lasting economic depression that started long ago, the stock market is once again rising thanks to massive non-stop infusions of digital dollars from the private institutions of the rich like the Federal Reserve. Central banks in other parts of the world are also printing colossal sums of money around the clock. However, no jobs or social programs are being printed.
Like the banks, the stock market produces nothing. Neither creates value. Both are driven by anti-consciousness and both are a drain on the socialized economy.
While the stock market reflects the contradictions inherent to the capitalist economic system and is not an entity unto itself completely detached from the production of goods and services, stocks themselves are not the economy. Stocks are largely property titles to claims to anticipated wealth. An increase in the price of stocks, for example, does not necessarily represent an increase in real wealth. In short, there exists a mediated relationship between the stock market and the actual production of real value.
Today, stock values have become very far removed from the value of real assets and material goods and services. The idea of “bubbles” reflects this growing disconnect between the economy and the stock market. In 2008, for example, most could not even explain what “derivatives” were because they were so convoluted and so far removed from reality. It was next to impossible to determine which claims of wealth (real and fictitious) belonged to whom because toxic financial instruments were essentially made-up and resold over and over again.
In reality, much of the stock market relies on fictitious capital—value beyond what can be realized in the form of commodities. It is capital above and beyond actual capital. Fictitious capital is parasitic and can arise from printing money, lending between banks, compound interest, credit, speculation, fractional banking, fake toxic financial instruments, and more. Fictitious capital spontaneously duplicates and triplicates real capital. It is not real value produced by real workers in the sphere of production. Workers do not produce fictitious capital. Speculation, for example, represents a projected legal claim to value that may or may not materialize in the future. It is a gamble. It is akin to trading in promises and risks, without actual existing funds. Not surprisingly, risk-taking and recklessness have reached new heights under the current surreal circumstances.
The “free-market” under conditions of imperialism causes many individuals and organizations to become blind to reality and the laws of motion of economic development. Many get lost in a radically-detached subjective reality where anything goes (so-called “animal spirits” take over). The market appears as a land of infinite unicorns and rainbows. Material reality dissolves. After all, the private Federal Reserve has repeatedly signaled to the mega-rich that they have nothing to worry about: the super-rich will be taken care of under all circumstances. Since they are “too big to fail and too big to jail,” digital dollars will keep flowing to them perpetually. This eliminates risk for a tiny few.
Keeping in mind the important principle that what is not produced cannot be distributed, the stock market mainly re-divides and re-distributes already-produced value. It represents the parasitism and decay within the economy. It is an arena in which the richest and most powerful capture the wealth seized not only by weaker and smaller owners of capital, but also the pensions and other funds that belong to workers and the public. “Might makes right” prevails throughout the obsolete “dog-eat-dog” capitalist economic system.
The notion that “money begets money” (“capitalization”) is a capital-centered prejudice that fosters the illusion that production does not matter and workers are irrelevant; workers supposedly have nothing to do with the production of social wealth. Money just arises magically. But the fairy tale that “money begets money” is a main reason why the stock market always becomes “over-valued” and eventually crashes. Asset valuations and speculation may extend well beyond the stratosphere, but ultimately they are governed by the laws of motion of economic development and must return to Earth. The chickens always come home to roost, as the saying goes. The “good times” never last. Anxiety and insecurity are always around the corner. Unplanned and anarchic economic activity cannot escape frequent catastrophic reckonings.
Such crashes and the havoc they wreak are inevitable in an economic system based on the private ownership of competing parts of the economy. The generalized anarchy of production in society negates conscious human control and planning of the economy and inevitably leads to disharmony between production and consumption, resulting in regular upheavals and chaos. Sustained prosperity, peace, and stability for all are impossible under such outmoded conditions and further reveal the need for new relations of production. A new direction and motivation for the economy are sorely needed.
The economy, properly speaking, is the relations people enter into with each other in the course of producing value. Every society has to produce and reproduce their means of existence. Any society that fails to do so, even for a few months, will experience serious problems.
Capital is the dominant unequal social relation in modern society. Workers and owners of capital enter into a relation with each other that legally permits owners of capital to seize the added-value stemming from the labor-time of workers. The claims of workers and owners of capital over this added-value clash frequently, and today this unequal social relation is in deep crisis and needs to give way to a new relation in which the working class controls what it alone produces.
To be clear, value comes only from the labor-time of workers producing goods and services in material space-time. Only the work-time of the working class can impart value to commodities. Without workers, there would be no social wealth. In this sense, owners of capital are historically superfluous, a drain on society and the economy. They are not needed. They play no positive role. They are not interested in nation-building and have not solved any problems. Owners of capital are blocking social progress by preventing the rise of new relations of production that are in harmony with the socialized nature of production.
All the chicanery, parasitism, and schemes of the imperialist oligarchs, including the stock market, will only intensify economic and social problems. Inequality, unemployment, and poverty will continue to worsen as private central banks print more money and stock markets climb.
The law of the falling rate of profit is coercive and inescapable. Under capitalism, the amount of capital invested in production eventually necessarily exceeds the profit returned. And eventually a point is reached where there is no incentive to invest, thereby establishing the conditions for crisis. Efforts to counter this law are temporary and ineffective in the long run; such efforts cannot avert crises altogether. Attempts to avert this law lead only to more tragedies for the people. The law of the falling rate of profit is a main reason why, over the past few decades, owners of capital have reduced investments in real production and shifted towards financial parasitism. According to some, the rate of profit in the U.S. has been steadily declining for 70 years.
In the coming months, the domino effects of the current world-wide economic fiasco will become even more painful and visible. The consequences of the global economic collapse will be unfolding for some time. More social unrest is bound to arise at home and abroad. And to be sure, finding a vaccine for Covid-19 will not end the depression or its torturous consequences. The obsolete capitalist economic system has been in decline for decades.
Nonetheless, while multiple overwhelming crises are unfolding simultaneously, this is not the time to drown in pessimism and hopelessness. That won’t help.
Taking up the hard and drawn-out work of developing independent thinking and politics is critical at this juncture. There are openings to do this. The social unrest unfolding worldwide provides an opening to advance ideas, thinking, perspectives, and measures that advance the general interests of society and its members. For instance, people everywhere are raising demands for accountability for state violence in its many forms. They are also rejecting past symbols of oppression. A new form of consciousness is unfolding and its direction and content are up for grabs. When far more people start to say things like “nothing surprises me anymore,” it is clear there are significant contradictions in motion.
Growing social unrest is intensifying the need to reject the ideas, views, agendas, arrangements, and fear-mongering of the rich and the democrats and republicans who govern on their behalf. Conditions are compelling more people to take nothing for granted and to investigate things and phenomena for themselves. There is a heightened sense of skepticism about information from mainstream sources. In the current rapidly-changing context, one must persistently engage in a conscious act of finding out and not automatically believe the rich and their political and media representatives. The mainstream media and the cartel political parties work tirelessly to impose ideas, agendas, and arrangements on people that deprive them of their own outlook, motivation, drive, and path forward.
Women, students, youth, workers, and senor citizens must take up serious investigation and analysis of what is unfolding and connect the dots. Action with no analysis won’t work. Nor will blindly repeating what the mainstream media or social media says. That just increases confusion and incoherence. Resorting to knee-jerk reactions, one-liners, or clever idioms will not do either. The need for analysis and coherence is more critical than ever.
Old ideas and old ways of thinking are not going to be useful moving forward. People must establish their own reference points and their own perspective on how to move society forward. A new direction, aim, motivation, and organization of society and the economy are needed and possible.
People everywhere want real decision-making power over their lives, society, and economy. This power is key to unleashing the human factor essential to building the new and guaranteeing the rights of all.
- Jan Dehn. June 2, 2020. “When market valuations become too high to fall“, June 2, 2020.