An agreement was reached a few days prior to default on the debt by Washington. In the agreement reached, there will be no limit to the amount of bonds the government can offer to pay the bills of the state.
Which would seem to have been inevitable, given it was simply the Republican bourgeoisie who were having trouble with how their money was being spent by the less extreme section of the bourgeoisie, the liberal progressives.
The suggestion they lowered spending, when to pay for their day to day expenses with bonds, rather than straight out taxes, looks absurd. Rather this money, in bonds, will carry an interest rate, and will be issued by the Central Bank, as bonds. Even if they did lower spending, what is going to be spent will be more expensive than it would be if it were simply paid for by taxes, rather than the roundabout way of issuing bonds to be paid back at a later date.
Although the money comes from selling commodities, as all value is created by labour, it is claimed as profit by the capitalist, and some of it is subdivided out to pay the expenses of the capitalist state. The worker can claim this to be his, it is produced by him, but so is profit, which he cannot claim as his own. Taxes on the worker like sales taxes, which tax things like pens and papers, books, computers etc. are all simply repressive. Given the conditions, you would be hard pressed to find a worker who would agree to pay a sales tax. Yet that is the argument when taxes are due, that the state money is property of the worker, and the liberal progressive is spending too much of it.
Given it is a division of profit, the Republican bourgeoisie who comprise most of the owners of capital must see a conspiracy to spend their money due to universal suffrage they could not control. But why issue bonds? Why not lower the cost of the state by simply raising taxes to pay for what the bonds are going to?
Instead any money saved will go to paying off the interest on the state’s debt, as bonds. So where was the controversy?
In the 2008 recession the debt rating was downgraded. Prior to this, and since then, there has never been default. This time the rating has fallen, but only because the debt was in question for so long, as capitalists argued about their profits from bonds, and how much to issue. Although they never intended to not pay for the maturing bonds, a few weeks away from a default has rattled investors.
The whole issuing of bonds is speculation on the ability of the state to pay off its debts at a future date of purchase of the bond. It comes to 3.7% interest on a ten year note. There is no commodity involved, it is pure fetish. It is money that creates interest from its power as capital. It is not machines, or a product speculated on that will be built, like a ship or railroad. It is pure speculation, the trading of tax money, fictitious capital. At best the capitalist spreads around the wealth a little, as instate college tuition. But make no mistake, the repressive power of the state is not being removed. It just carries an interest rate now.
The industrial capitalist recognizes this, and deducts from his surplus value this money. It is part of the interest, which is going to bonds. Perhaps this sweetens the pot for him, so to speak, as the money is not simply taxes, it has a return date with interest for his fellow capitalists who buy bonds. But he still has to pay. The financial capital is still all created in production, and its circulation can only be made cheaper by the intervention of credit, in this case bonds. The state is using its authority to issue bonds, financial capital.
The currency is obviously a cost of production, the money stored up here for circulation an expense.
But with bonds comes interest, making it seem superficially that the state has created a profit, and paid back the bond.
This is simply not the case, the capitalist state is not running factories to pay off their debts. If there were assets that could produce a profit that were run by the state they would be privatised. There is no “ National Debt Incorporated” production facility hidden somewhere in the deep west., making profit paying off the bonds debts.
Instead, there is the surplus value, which is calculated by what is left over after the cost of labour, the variable capital, wages, are paid for by the industrial capitalist. The rest of the expenditure comes from the constant capital, the expenditure on machinery and raw materials. The latter becomes important in drawing the distinction between surplus value and profit.
The financial capital carries the interest the capitalist has to pay out as part of his expenditures. He calculates for this, and here we have him using the Central Bank for credit. It’s where the bonds are issued, the money coming from selling commodities. The fact the commodities have not been built yet changes nothing. It is a form of credit, and in times of crisis the bonds are considered viable assets, even though there are failing banks containing them. Loans to smaller banks are made by the Central Bank based on bonds as assets.
Which seems like a great deal of fictitious capital. And a group of investors who are ultimately speculating on the taxes that will have to be paid if the whole thing goes south. When the banks become “too big to fail”, it seems as though there is no cost spared to pay for the bonds that are becoming due.
The latest exercise in the issuing of bonds expands the credit mechanism of the Central bank further. With the economy coming back from the Covid crisis, short of a few notable bank failures, it seems prosperity is being felt again. At least there are still paper products on sale, rather than empty shelves in the pandemic. The Central Bank looks able to handle issuing large amounts of debt, for the day to day expenditures of the state. But in the end there will always be a question of just why taxes are being traded, rather than simply paid for by capitalists, the former what bonds really represent.
Nicholas Jay Boyes
Milwaukee Wisconsin
American Democratic Republic
6 5 2023
Ecological Era 