The Philosophical Salon

September 5, 2022

By Fabio Vighi

Credit: Lona Mody

We have entered a global cycle of secular inflation that is unique in history. The cynical attempt to preserve a system based on the ontological assumption of permanent monetary injections now entails the controlled demolition of the real economy and the world it supports. Ever-expanding artificial liquidity can only destroy currencies. The immediate consequence of this implosive process, however, is not liberation from capitalism, but a new capitalist phase of ideological manipulation and authoritarian violence, which is now upon us. Each step in the global economic downfall will continue to be matched with emergency narratives of corresponding gravity. This is why any resistance to the new status quo in the making, whether motivated by the unsustainable rise of the cost of living or the increased discrimination over human life, will entail a struggle to define the cause of our predicament as systemic rather than exogenous.

The inflation genie

What sort of world do we live in? There is one answer that takes precedence over all others: our globalised world is a debt-based system of simulated financial growth that relies on the continuous expansion of liquidity, which is created “out of nothing” in the form of debt/credit. Our civilization is addicted to money printing and asset bubbles, a dependence that can hardly be broken. In a debt-soaked world like ours, nothing is more dangerous than interfering with the expansion of fake liquidity; nothing more threatening than a sudden “credit crunch”, a haemorrhage of freshly minted money. The cash-flow heading to the stock markets must continue to increase, whatever it takes. As I have argued in my previous pieces on this matter, COVID-19 was, in essence, an unprecedented attempt to restore the expansive capacity of artificial liquidity at a critical time in the history of casino-capitalism. By the end of 2019 the financial sector was, again, at risk of rapidly becoming illiquid as the Monopoly money was drying up – a predictable occurrence that had already triggered the Great Financial Crisis. However, in 2019 the stakes were much higher than in 2008, for the system’s monetary addiction had reached breaking point. Today, in seemingly post-pandemic times, we remain hostage to a Ponzi scheme where toxic liabilities act as collateral for other toxic liabilities, in what is an endless trail of insubstantial paper. Central Banks expand their balance sheets to purchase these liabilities merely to prevent their loss of paper value.

Putting an end to monetary expansion is like provoking a cardiac arrest. If the money supply curve declines or even flattens, our world experiences convulsions, withdrawal symptoms, and goes cold turkey. Eventually, it collapses. With a grotesquely over-leveraged financial industry like ours, the entire economy and social fabric is hanging on the edge of a cliff. The choice faced by most countries, including the affluent ones, will soon be either default or hyperinflation of the currency needed to repay the IOUs. This means that capital accumulation itself is now on life support, as its managers are caught in what can only be described as a lose-lose situation. On the one hand, they know that they must find reasons to pull more liquidity (debt) into the present by dint of what is conventionally known as “printing it.” On the other, they also know that this hardly original escamotage can only lead to runaway inflation, and then hyperinflation. What takes place today as a matter of monetary normality used to characterise wartime economies, namely direct financing via the money presses. While this can only result in depressing the real economy, simultaneously generating the highest wealth inequality on record, what should give us pause is the thought that a world hostage to bubble inflation inevitably “melts into thin air”, losing its social grounding as well as the language to articulate any form of resistance. Collapse is at once economic, socio-political, and cultural.

In August 2019, Blackrock (perhaps the most powerful single entity on the planet) issued a white paper unambiguously titled ‘Dealing with the Next Downturn: from Unconventional Monetary Policy to Unprecedented Policy Coordination.’ The paper warned against two strictly interrelated risks: first, that markets were becoming illiquid while the policy toolkit was empty (interest rates being already negative); second, that continued monetary expansion carried the risk of Zimbabwe-like hyperinflation. Betraying more than a hint of anxiety, Blackrock urged Central Banks (the Federal Reserve) to find ‘unconventional’ remedies to avoid the coming downturn. Specifically, they pushed an ‘unprecedented response’ described as ‘going direct’: ‘Going direct means the central bank finding ways to get central bank money directly in the hands of public and private sector spenders’, while making sure that such monetary behemoth does not trigger a potentially devastating inflation. A few months later, something truly unprecedented happened: COVID-19, followed by what continues to appear as an unstoppable stream of global emergencies. As I have argued in more detail elsewhere (here and here), Virus allowed the ‘going direct’ plan – the methadone-like injection of trillions in mouse-clicked cash – to be executed in safety mode. The hyperinflationary tsunami feared by Blackrock was postponed courtesy of, again, ‘unprecedented’ lockdowns, which prevented the liquidity-flooded economy from overheating. Unsurprisingly, however, after the first year of deflationary Covid hysteria the monster came out of the closet with a vengeance, reminding us of Blackrock’s existential dilemma: ‘how to get the inflation genie back in the bottle once it has been released.’

Keeping up appearances

The key to understanding our economic predicament is to realize that inflation – or more precisely the calamitous devaluation of the money-medium – is now structural, since the simulation of monetary growth has penetrated all forms of capital. Insubstantial financial liquidity has long colonised commodity production and consumption, making both hostage to the credit industry. The financial sector responds to what happens in bond markets, which are increasingly propped up artificially by Central Banks’ monetary inoculations. Bonds are issued to raise money, and pay regular fixed interest to the bondholder. However, bonds are also tradeable, which means they give returns called bond yields. When, in a critically stressed economic environment like ours, bond yields rise sharply and in seemingly uncontrolled fashion, it is usually a sign that bond prices are falling at a similarly dramatic pace. This suggests that investors are pulling out and, as a consequence, the bond market is tanking – which is bad news for the debt-doped stocks. In short, the cost of financing one’s debt surges rapidly, and the insolvency ghost rears its ugly head. Because debt-binging went through the roof after 2008, any turbulence in bond markets is now registered as a shock in stock markets. It is very much like clockwork: when bond yields rise fast, stocks get a hit, which normally prompts the Central Bank cavalry into action. The only way to keep bonds from deteriorating is for Central Banks to use their unlimited firepower and print more cash to buy the unloved debt securities; which is intrinsically inflationary, thus dealing yet another fatal blow to the purchasing power of fiat currencies.

Consider the benchmark yield on the 10-year US Treasury: when that yield spikes rapidly, it indicates that investors in US debt are running to the door, which spells doom for Wall Street’s credit-craving “creative finance”. So, what happens when investing in debt – the lifeblood of contemporary capitalism – loses its appeal? On June 13, 2022, the Italian bond yields breached 4% causing a “fragmentation” in the cost of borrowing across the EU. With lightning speed, the ECB (European Central Bank) ran to the rescue selling German and other Northern European bonds close to maturity to buy Italian and other Southern European bonds – a subterfuge that hardly thrilled the “frugal” northerners. Moreover, it instituted the TPI (Transmission Protection Instrument), also known as “anti-spread shield”, which allows for targeted and unlimited debt purchases – de facto, putting the countries who need TPI under external (ECB) administration. The point, however, is that any such Central Bank intervention continues to be inflationary, which brings us back to the original quandary of irreversible money debasement.

Despite first denying inflation, then calling it ‘transitory’, and eventually blaming it on Putin, our political leaders (the executors) and their central and not-so-central bankers (the enforcers) have recently had to admit that “we have an inflation problem.” So, when on August 10, 2022 President Biden prompt-read from his White House podium that in the month of July the US had been blessed with 0% inflation, adding that the US economy is in fact booming, we should of course smell a rat: the blatant distortion of reality is not only an electoral stunt in view of midterms, but would also seem to prepare the ground for a “Fed pivot”, i.e. a stop to rate hikes and a return to Quantitative Easing (easy money). This is because if rate hikes were to continue beyond the current cosmetic levels, and the cost of borrowing rise substantially, the debt-saturated markets would crash, along with currencies and everything else. A return to QE legitimized by a narrative of peak inflation (including oil prices) appears like a credible scenario for the near future. However, while QE would fulfil its task of keeping the markets liquid, it would nevertheless turn back the clock to 2019, with the system requiring even more ‘unconventional’ ways of dealing with the inflation monster. Such as (again) lockdowns.

Hot Autumn in Europe?

When looking at the ongoing energy crisis, which threatens to bring Europe to its knees no later than this Winter, lockdowns (or similar restrictions) cannot fail to appear as the most “practical” way of achieving large-scale energy savings. Social restrictions would not only tame inflation but also help us conscientious citizens to “do our bit” against climate change, feeding the noble illusion that a zero-net “Green New Deal” – supported of course by a massive programme of fiscal stimulus (i.e., more debt) – will unleash a new era of capitalist growth. Adopting lockdown policies may well be the only way for “green capitalism” to affirm itself, for the system needs to keep both the inflationary spiral and the impoverished masses under control. The key point here is that “sustainable growth” through green technology remains a pious illusion for a system that requires increasing levels of labour-intensive production to generate real economic value. Every leap in post-industrial technological innovation driven by capital, no matter how green or desirable, will cause unemployment and poverty to grow, together with the imposition of widespread repressive measures upon entire populations.

In this respect, a new pandemic wave starting this Autumn might provide further cover for the social and economic disaster in the making. In recent weeks virologists, health ministers, mainstream media, and the WHO have started “voicing concerns” about new and rapidly spreading Covid variants in the ‘European region’, which are expected to become dominant already in September. Germany, a country at high risk of energy rationing due to its dependence on Russian gas, has already approved a new package of pandemic restrictions, which will come into effect on 1 October and will last till 7 April of next year. These will include not only mandatory facemasks but also, where necessary, proof of vaccination and negative testing. In short, the corona spectre is still haunting Europe, suggesting that the unmanageable contradictions of contemporary capitalism will continue to be tackled in authoritarian ways, and by conning people into obedience.

As confirmed by Greta Thunberg’s disappearance from mainstream media (where she now appears to be berated) this is probably not the best time to preach the capitalist net-zero agenda – which is one of the underlying reasons for the energy shortages that the war in Ukraine has exacerbated (not caused). Europe, rather, is prepping for the coming energy-crunch scenario. Germany is planning public warm-up zones for those who cannot pay their energy bills. In France (and elsewhere) night illumination is being switched off, while Emmanuel Macron warns of the coming ‘end of abundance’, conveniently blaming it on the war in Ukraine and climate change – as if destitution was not already rampant. In the UK, thousands have joined a “Don’t Pay” campaign against the rising cost of energy bills. And the Vice President of the European Commission is encouraging people to fight Putin by not washing their clothes.

Will the wealthy technocrats manage to convince the impoverished, cold, and unwashed people heroically to form a united front against Russian gas in the name of the debt-creation programme also known as “green(washing) transition”? Will the people warm to their politicians’ patronising suggestions to “weatherize” their homes and shift to prohibitively expensive electric vehicles? Or will our leaders need a new “pandemic emergency” to conclusively persuade us? Whatever the outcome, the bottom line is that, no matter how many times Wikipedia changes the definition of “recession”, this Winter many Europeans and Americans will be forced to choose between putting food on the table and footing their energy bills. It will be a matter of heating or eating – an absurd alternative considering the technological and productive potential at our disposal. Needless to say, the problem is not technology per se, but its being tied to a declining and hence particularly virulent economic logic based on mass extraction of surplus-value from human labour. The world has more than enough human and technological capacity to satisfy the needs of all, but because this potential remains subject to the blind dynamics of capital, it cannot be utilized for the common good.

Remember the “lock step” scenario in the 2010 Rockefeller Foundation pamphlet, which predicted so accurately both a deadly zoonotic pandemic (‘the pandemic that the world had been anticipating for years finally hit’) and the ensuing imposition of ‘airtight rules and restrictions, from the mandatory wearing of face masks to body-temperature checks at the entries to communal spaces like train stations and supermarkets’? Which also foresaw that ‘the Chinese government’s quick imposition and enforcement of mandatory quarantine for all citizens, as well as its instant and near-hermetic sealing off of all borders, saved millions of lives, stopping the spread of the virus far earlier than in other countries and enabling a swifter post-pandemic recovery’? And which moreover prophesized that ‘after the pandemic faded, this more authoritarian control and oversight of citizens and their activities stuck and even intensified. In order to protect themselves from the spread of increasingly global problems—from pandemics and transnational terrorism to environmental crises and rising poverty—leaders around the world took a firmer grip on power’? What is spelt out in this remarkable piece of creative writing from the Rockefeller think-tank is, ultimately, the connection between Lockdowns and Poverty: ‘authoritarian control’ helps against ‘global problems’ like ‘rising poverty’. Is this authoritarian world not the world we already live in? Is the fiction not more real than reality itself? Those who believe that lockdowns are a thing of the past, had better think twice. The normalisation of repression and surveillance that began with 9/11 and continued with COVID-19 is now about to accelerate.

Two roads, one destination

In the meantime, the globalized West is engaged in a wacky race to the bottom. Europe is leading the way, thanks to the all-too-predictable backfiring of the sanctions against Russia. Having made itself dependent on Russian gas, Europe has scored the clumsiest of own-goals – intentionally? For how could European leaders who invoked and even engineered the draconian sanctions (while also hoping to continue to buy Russian gas on the sly) not see that these sanctions would boomerang to hit Europe on the head? It is either a case of extreme incompetence, blind submission to external (US) dictates, or deliberate self-immolation – perhaps a mix of all these. The likely outcome is that as soon as the recession is officially declared, and new social restrictions are in place, we are going to see Central Banks moving from hawkish (rate-hiking) to dovish (rate-lowering), i.e. the Fed & Co. will return to a policy of more inflationary large-scale asset purchases and cheap money.

The only other available option is running the markets to the ground through sustained and significant rate hikes. This scenario would be deflationary, but only at the cost of a sudden and devastating depression pulverising capitals both in the financial markets and on the ground, causing sweeping job losses, business closures, rioting, looting, and so on. If liquidity does dry up, we will hit the deflationary spiral, like drink-driving at full speed against a wall. Whatever can no longer be financed through credit will be brought to a standstill. Banks will refuse to lend and bank accounts could be frozen. Deflationary capital destruction through the meltdown of debt & stock markets would annihilate currencies and livelihoods. The least one can say is that for this to happen as a controlled accident, reliable (authoritarian) countermeasures aimed at controlling social unrest must already be in place.

For most of us, then, the future seems to offer a choice between structural stagflation (stagnant economy with high inflation) and an abrupt deflationary depression – like a choice between bleeding to death and suffering a heart attack. Either way, the divide between the super-rich and all the rest will increase further, with catastrophic consequences for humanity. It is no longer the classic swing between boom and bust, or a financial cycle ending in a “Minsky moment”, for we have reached the absolute limit to capitalist expansion. It is important to reiterate that we are facing systemic implosion, not a crisis engineered by evil bankers motivated by sadism and greed. While the latter are the main attributes of the capitalist drive as such – since capital is nothing but a perverse end in itself – the current implosion reflects the historical exhaustion of the value-creating substance of capital; the fact that the fundamental ingredient of value itself – labour – is vanishing irreversibly while automated (technological) productivity takes off. It should be enough to observe that in a healthy capitalist economy the price of labour would rise. Instead, labour has been devalued for decades, which dramatically confirms that any monetary boost to the economy is without value substance, and destined to cause further misery. It is therefore inevitable that, at some point soon, capitalist reproduction will be brought back to the ground through the severe contraction of insubstantial masses of money (“bubbles”). Fictitious liquidity, created without any basis in real production, will be violently debased.

From denial to sacrifice

What continues to be denied, then, is that the devaluation of the money-medium is the key symptom of the implosion of capitalism as a global commodity-producing work society mediated by the market and driven by the blind pursuit of profit as end in itself. What is most painful about this denial is that it has long conquered the heart and soul of (what still dares to call itself) the left. The political left is either opportunistically ignorant or caught in the neoliberal illusion that a virtualized type of financial capitalism is possible – perhaps even “with a human face”. As a result, hardly anyone on the left dares or is even able to connect the rapid deterioration of socio-economic conditions with the authoritarian turn of today’s “emergency capitalism” – already explicit in the brutally discriminatory treatment of “the unvaccinated”, or in the rising levels of our mainstream media’s propaganda. Is it not yet clear to the left that the political face of “breakdown capitalism” is fascism, albeit articulated in new and more sophisticated (progressive!) forms of violence and repression? The only way our comatose system can prolong its lifespan is by ditching its liberal façade and dramatically increase its inherent capacity for barbarism.

In capitalist terms, we are facing an ironic twist on Margaret Thatcher’s infamous TINA: there is no alternative. Whatever happens, we will continue to see a drastic devaluation of fiat currencies, and the rapid dissolution of the social bond. As I see it, the endgame involves two main strategies: 1. The manipulation of a continuous stream of fear-inducing global emergencies, whose ultimate function is to shift the blame for systemic implosion onto some external agent while ushering in 2. A novel social-credit system (or rating system) based on mass immiseration and CBDC (Central Bank Digital Currencies), which are now being tested in more than 100 countries.

The subject enslaved to capitalist dystopia “will have nothing, and yet be (convinced that they are) happy”, both through fear and, especially, the internalization of a new system of values based on collective guilt, responsibility, sacrifice, and obedience. In other words, we will not only have nothing, but most crucially we will be persuaded “to enjoy it.” The consumerist ideology that drives modern capitalism is already being replaced by the injunction to “enjoy (having) nothing.” Whether such conversion to a punishing form of capitalism will succeed, it remains to be seen. For sure, a paradigm shift of this calibre needs the support of a belief-system capable of transforming consumerist hubris into slave-like submissiveness. Humanity (particularly the middle classes) will need to commit to common causes that might justify their being deprived of the “gift” (even as a fantasy object) of boundless consumption – fear alone will not suffice. For the neo-feudal paradigm to succeed, the “work and enjoy” fantasy that keeps the modern consumer ticking must fade into the background and be replaced by a new ethics of sacrifice. As spelt out by Macron in his already mentioned “end of abundance” speech, we are at a point where ‘our system based on freedom… can demand sacrifices from its citizens’. Here is the ideological ruse of senile capitalism: riding an endless wave of “global emergencies” that might induce us to accept the loss of elementary freedoms in order to save the freedom of capital.

What changes here is the subject’s relation to nothingness: if in consumer capitalism “nothing” is disguised as “more” (since the capitalist logic of desire relies on never having enough of “it”), in neo-feudal capitalism “more” will be sold as “nothing”, that is to say, a quasi-religious attachment to renunciation. Harnessing human desire to a new social contract predicated on protecting us from global calamities will be crucial for the system’s capacity to reproduce itself. Emergencies are the new capitalist “gift”, and they keep on giving. The potential of this modern-day Leviathan could be unlocked by a new spirit of collective sacrifice, which is why contemporary capitalism is so eager to hijack the rhetoric of the left: it “knows” that only in the name of “progressive ideals” can the exploited masses accept new forms of domination disguised as necessary sacrifices. If that is the case, supposedly “progressive” and “humanitarian” narratives will translate into higher forms of conservatism and tyranny.

Today, this logic emerges clearly with the emotional blackmail concerning climate change: progressive individuals are supposed to take on drastic lifestyle changes (for the worse) through sharing guilt for causing harm to Mother Earth, while the planet continues to be exposed to the (re)productive, market-mediated dynamics of capital. This attitude can be recognized in the well-known phenomenon of “celebrity eco-warriors”, a spin-off of “philanthropic capitalism”. Leonardo DiCaprio, for instance, regularly tweets about the collective fight against climate change (e.g., ‘If we don’t act together, we will surely perish!’), but does so from his 315ft, helicopter-decked, 110-million-dollar superyacht, which by travelling only a couple of miles pollutes as much as your average car does in a year – hardly “acting together.” Precisely as an actor, however, he should know better, for he started with Titanic and we all know how that film ended. In other words, the devious elitist attempt to co-opt the leftist spirit of engagement to a collective cause might, at some point during the system’s downfall, backfire – which is probably the only hope we have.