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The Great Devaluation

by Ernst Lohoff and Norbert Trenkle Wednesday, May. 09, 2012 at 3:40 AM

Democracy, risk and liability are turned upside down when trillions bailout the banks and workers, pensioners and unemployed must pay the bill. We live from those who say No to corruption, to the state reduced to a trough or errand boy for the banks (Bill Moyers).


By Ernst Lohoff and Norbert Trenkle

[This introduction to the 2012 German book “Die grosse Entwertung” (The Great Devaluation) by Ernst Lohoff and Norbert Trenkle, Munich is translated from the German on the Internet,

S Walther Rathenaus’ hundred year old dictum “The economy is our fate:” sounds threatening today. The economy, the Holy of Holies of this society and its practical pivot, is out of control. Until recently the economy was regarded as the refuge of a higher reason. Today in reading economic news, we feel regularly transposed into a lunatic asylum. Since the subprime crisis brought the global financial markets to the edge of collapse in the fall of 2008, the world economy has only been stabilized for the short-term. The political movers and shakers and their economic sages had hardly proclaimed the “end of the crisis” in an instrumental optimistic way when new bad news was at the door. As soon as one fire or troublespot was buried with new masses of fresh money, the fire blazed at two or three other corners of the capitalist world system. Through the emergency nationalization of rotten credits, a policy of the cheapest money and massive state indebtedness, governments and central banks successfully averted the threatening global economic collapse. However they only prepared the next, even greater crisis. Now the bursting of the state bubbles threatens to drag the world economy to the brink.

A catastrophic confusion of opinions accompanies this dramatic development. Hosts of dece4ivers explain to the public at what point “our economy” diverted from the path of free enterprise virtue and with what therapies the lost economic reason can be drummed into our heads again. The authors of this book do not join in this charade. They regard the assumption underlying the current debate that the present crisis can be solved with the capitalist production method as essentially inverted. The alleged “degeneration” of the glorious market economy responsible for the present disastrous state of the capitalist world system is understood as a revelation process. The capitalist production method is an extremely irrational form of wealth production programmed for self-destruction. Deregulation of the financial markets, speculation, excessive state indebtedness or whatever else is offered on the market of opinions as causes of the present malaise are in truth only symptoms of a much deeper crisis process. We face the dissolution of the foundations of the capitalist world system, not some “malformations” that can be cancelled.

This idea is taboo in the public debates with the loud ostentatious “capitalism criticism” hurled at us from all the media. This criticism is largely limited to crash bashing of the financial markets – undergirded with personalized condemnation of “bankers and speculators.” The obvious insight that the system of capitalist wealth production could be untenable is repressed. Reality presses to the idea of a fundamental crisis but the dominant consciousness with all its strength diverts from this reality. The fear of a great catastrophe is certainly in the air. However this remains diffuse and channeled either in esoteric fantasies of world destruction like a supposed Maya prophesy, wildly proliferating, partly anti-Semitic, conspiratorial fantasies and individual attempts at escape from the daily routine or is contained by the notorious faith healers who trivialize the crisis by means of their sedatives or tranquilizers.

The silent background of this schizophrenic mood is the social-psychological preparation of modern individuals after thirty years of radical economizing of all areas of life that make another form of social interaction than the commodity form, spending of abstract labor power and money seem impossible. In addition the dogma of the lack of alternatives to capitalism is conflated to common sense with the collapse of command socialism. “Command socialism” was nev3er anything but an authoritarian variant of capitalist modernization backed with a bizarre ideology of the “dictatorship of the proletariat” and in no way stood for a perspective of social emancipation. However its existence alone seems proof to many that there can be an alternative to the orientation of all social relations according to the principle of economic rationality. For that reason, its destruction has not expanded the horizon of emancipative thinking but on the contrary cements in heads the lack of alternatives to the free enterprise-capitalist way of life and production. The notion of a fundamental system criticism is implicitly under a taboo in that the mere possibility of an emancipative mastery of capitalism is dismissed as a crazy idea of unrealistic dreams and incorrigible diehards. It cannot be understood as a crisis of an obsolete historically-specific production method but appears as an apocalyptic event like a global nuclear war or the crash of a giant meteor by parts of the political class. The austerity commissar Peer Steinbruck said he “looked into the abyss” in the shock of the financial market crash. A spontaneous horror at the consequences of one’s actions is sometimes expressed. But this ultimately serves as legitimation of those drastic austerity measures and sacrifices exacted on the population to keep the economic dislocations under control. Thus the apocalyptic vocabulary stands here for a variant of the notorious TINA-principle: There Is No Alternative. This sentence was never presented so often and so full of conviction as after the bursting of the real estate bubble and the shockwaves triggered by that bursting. One cannot be squeamish when world destruction threatens.

The many crisis gurus that have appeared since the fall of 2008 use this model. Their success is based on their addressing a subliminal social mood with their alarmism and painting pictures of overwhelming dislocations in contrast to the squad of faith healers and appeasers. But despite everything they share the social consensus that the crisis doesn’t have any fundamental systemic character but can be solved through resolute political actions and intensifie4d austerity efforts. The idea that the capitalist production method can become untenable and be carried out ad absurdum is completely alien to them. Fixated on the surface of the crisis, they polemicize against alleged “malformations” like “boundless state indebtedness,” “excessive claimant thinking” or unrestrained speculation” that must be finally stopped if society doesn’t want to be swept into the abyss. According to the crisis-gurus, the restoration of a healthy prosperous capitalism is only a question of political and social will. They cheerfully join in the great trivialization,

The most successful German representative of this guild, Max Otte, understands the crisis as a chance, as a collective and individual occasion for successful re-positioning in the capitalist competition and obviously not as a change for developing a counter-praxis to the current madness (Otte 2006, p.193). The opportunity to improve its position in the world market competition is offered to location Europe. Excellent possibilities for multiplying its last few pennies on a “bear market” are proffered to the clever investor. Despite all the economic dislocations, a shaking of the foundations of the capitalist system is inconceivable for Otte. The world market continues functioning to the end of days. The holiest determination of human existence will never be changed. Optimizing one’s capital formation will always be possible and remains the center of all earthly striving.

The prognoses and diagnoses of the diverse crisis-gurus differ in their details. In his book written before the crash of 2008, Otte interprets the crisis primarily as a deflation crisis in which stock price s fall and securities change into junk. Other authors warn of a collapse of the international monetary system and of a hyper-inflation. This fear is in no way taken out of thin air. The current crisis process must flow into a crisis of money and of the monetary system. We will discuss this in the second and third parts of this book. Today’s monetary order with the dollar as world money and the Euro as the second key currency cannot hold on in the long run. This development was long everybody’s secret. The crisis-gurus cannot look into the dark tunnel without seeing a golden glimmer at the other end. The prescription presented by Nathan Lewis in his book “Gold. The Currency of the Future” (Lewis 2008) enjoys great popularity among other great and small neoliberal crisis-gurus. The states, Lewis says, should allow indebtedness and return to a gold-based monetary system. Then the monetary foundation will be created for a renewed, solid and prosperous world economy.

Such proposals can only be made when all sense for the logical and historical development of the system of capitalist wealth product ion is lacking. That this grew in the course of many decades from the gold currency was not an accident or the result of a mistake of misguided politicians that could be cancelled as Lewis and his kindred colleagues imagine. Rather it was the result and prerequisite for the enormous expansion of capitalist product ion and its triumphant march over the whole globe. The capitalist growth-push of the last decades would never have been possible ion the foundation of the “barbaric metal” (Keynes) subject to a natural limitation because of its material substance. The transition to pure credit money was indispensable. It is entirely conceivable that attempts will be made to dock national currencies to gold in some way at a late stage of the decay of the world economy and the breakdown of money. However such monetary reforms would be the result and development of a disastrous shriveling process of the system of capitalist wealth production. They have as much to do with a future-oriented reconstruction as the spontaneous formation of cigarette currency after the Second World War…

Dubious crisis-gurus like Otte and Lewis are not the only ones who lack any understanding for the fundamental character of the present crisis process. If the largest part of the public debate on this theme clings to the surface of events and the symptoms of the crisis are mystified into its causes like the independence of the financial market or the exploding state indebtedness, that reflects more than shrinking from the enormous range of the capitalist system crisis. Economics across all rival schools is unable to conceive a fundamental crisis with their basic theoretical assumptions and paradigms but immunizes itself.

Since the days of Adam Smith and Jean-Baptiste Say, economics almost without exception resisted that capitalism produces crises out of its inner logic. Even though the capitalist dynamic obviously produces constant imbalances and incongruities that detonate in crises and always are contained by merely provisional solutions, the economics marked by classicism and neoclassicism see reliable guarantors of balanced states in the market. According to their understanding, economic crises on principle cannot be explained by an inner economic crisis but by definition are the result of exogenous or non-economic factors like natural disasters, wars and political slips. In this way, all these crises that accompanied the rise of capitalism were already ideologically mystified. The inner capitalist contradictions that inevitably had to lead to recurring dislocations were defined away. With Keynesianism, an economic school arose for the first time in view of the worldwide economic crisis of the 1930s that partially weakened this dogma while continuing it in other ways. According to Keynes, the preference of money over other forms of wealth (“liquidity preference”) can impair the production of economic balance and bring about a structural under-employment by removing this potential disturbance through corresponding monetary and fiscal-political measures. The state comes into play as an actor. However its task consists in restoring the harmony-creating power of the market where this was suspended by temporary disturbances.

Even if all past crises were successfully trivialized, it cannot be surprising that a fundamental crisis of economics seems completely unthinkable. The economic definitions and basic ideas developed in the last two centuries do not allow the formulation of such an idea. As long as they are stylized as self-evident foregone conclusions, immunity is guaranteed whatever picture of the capitalist world system may occur empirically. In the last years given the rage of the crisis, some representatives of economics condescend to discuss the “end of capitalism.” Like the dubious crisis-gurus, this emphasis on second view turns out to be a mere code for an alleged “derailment” of the market economy which only needs to return to the true path of virtue.

Capitalism is evil and the market economy is good. That is the credo that always only denounces “excessive speculation” on the financial markets. In this version, arch-liberal hardliners like the flat tax propagandist Paul Kirchoff are invoked. In the ZEIT-series “Is Capitalism Finished,” he pleads for a “responsible market economy” and insists “we may not be driven into a corner by a financial market that has become wild” (Kirchoff 2011).

This distinction of “market economy” and “capitalism” has a tradition. In the era of the Cold War, it was the core of the West’s legitimation ideology that sold its “social market economy” as the third way between capitalism and communism. In the era of crisis capitalism, it gains new importance in warding off the threatening idea that the whole system could be up for disposition. Still the roots of this base immunization go much deeper. They arise from the self-image of economics which itself is a child of the capitalist production method but cannot speak of this historically-specific form of socialization without mystifying it into a general human way of life. Where the exploitation of capital hardly calculable in the capitalist reality – the abstract end-in-itself of making more money out of money – is the pivot of the economic process and production of goods is merely the secondary means to realize this goal, economics wants to see nothing but harmless “goods production” as it always existed since the ancestors of Homo sapiens climbed down from the trees. Every economics textbook begins with the unquestioned axiom that t6he purpose of the economy is providing people with useful things and goods production, money and the market are only presented as very sophisticated means to reach this goal, the organization of the social division of labor and the “optimal allocation of resources.” The essential reversal of means and ends that belongs to the nature of the historically-specific character of the capitalist production method is made invisible. The resulting inner contradictions are extinguished and the notion of a crisis resulting from them becomes meaningless.

A special incompetence of this generation of economists cannot be made responsible when the crisis analysis of expert economists turn out so superficial and helpless. The problem is its basic structure, not the deficient command of economic instruments… Whoever wants to understand this in its depth must change into another theoretical reference system that breaks with the base harmonist assumptions of economics and can grasp the historically-specific characteristics of the capitalist production method.

150 years ago Karl Marx laid the foundations for such a theoretical reference system. Starting from a criticism of goods production and its inner contradictions, Marx described the capitalist production method as an extremely irrational fetish system governed by an uncontrollable historical dynamic that ultimately must bring about its own self-destruction if humanity does not abolish it. Astonishingly these insights didn’t play any practical role in the past crisis debates. In the last years there has been a certain “Marx renaissance.”… The insane pranks of crisis capitalism and the unreasonable social demands that it involves awaken a longing for principled social criticism for which the name Marx is a kind of code. The real explosiveness and actuality of Marx’ criticism of political economy is more blocked than revealed by such reminiscences.

Some conjure a return of the class struggle and reactivate that part of Marx’ theory that had an enormous effectiveness ideologically and politically in the past. This may be hopelessly outdated today. Marx as a chief witness for the abridged criticism of unfettered financial capital that supposedly “overgrew” the "real economy” and therefore must be restrained. In his time, Marx sneered at these middle class fantasies of a healed capitalist world. Finally there are academics who bring down Marxist thinking to the theoretical reference syst4em of economics and thus rob it of its critical substance. They declare Marx a kind of predecessor of Keynes or put the subjective value-theory of neoclassicism on him. On the other hand, that part of Marxist theory that has its full explosiveness today, the fundamental criticism of goods, labor, value and money and the crisis theory based on that is almost completely fade4d out.

If we follow this theoretical strand and develop it further, capitalism and its crisis-susceptibility appears in a very different light than in the axiomatic and unhistorical harmony models of economics. The historical crises that cannot be explained within this model point to the irrational and self-contradictory character of the dominant production method are also stepping stones on that long way that leads this method to its inner limit.

The narrow-minded end-it-itself of capital exploitation is incompatible in the long run with the enormous potentials of material wealth production that it produces because that process goes along with an inexorable reduction of necessary working hours in goods production. Under different social conditions, these potentials could be used to make possible a good life to all people without destroying natural life and the foundation of life. However under capitalist conditions, the constantly increased productivity undermines wealth production and the foundation of capital exploitation. Therefore a point must be reached sooner or later at which the attained level of productivity becomes incompatible with the capitalist form of wealth.

Seen this way, the current worldwide economic crisis in no way a result of excessive speculation and indebtedness for which the bill must be paid now. Conversely the gigantic inflation of the financial markets as a reflection that the labor force in the core sectors of capital exploitation has become “superfluous” and wealth production is declining absolutely. The triggered structural crisis that was clearly manifested since the 1970s as a crisis of labor could only be outplayed and delayed by the enormous accumulation of “fictional capital “on the financial markets. The devaluation of that fictional capital now swings over the whole world as the sword of Damascenes. The superficial all-clear crisis announcements are as wrong as the Cassandra cries of the crisis-gurus who admonish conversion to a “healthy market economy.” Just as invertedly as the all-pervasive demands for “taming the financial markets.” The fundamental structural crisis may be delayed by another inflation of fictional capital and different measures of emergency administration but cannot be solved within the capitalist logic. If this logic is forcibly maintained, a great c catastrophe threatens as the crisis intensifies. It can only be averted if a social alternative can be developed and implemented globally beyond goods production.

The arrangement of this book follows the following structure. In the first part – written by Norbert Trenkle – several basic ideas will be explained that are indispensable for understanding the historical dynamic of capitalism and its underlying inner contradictions. Then we will investigate how this contradiction became a vital motor of capitalist execution in the postwar boom and then changed into a driving force of a fundamental structural crisis in the course of the third industrial revolution. A self-sustaining push of capitalist exploitation is not possible any more on the achie3ved level of social productivity.

The fundamental structural crisis can be delayed through the inflation of the financial superstructure. The second and third parts of the book – written by Ernst Lohoff – carefully analyze3 fictional capital. Part 2 develops the theoretical foundations for understanding this sort of capital and its position in the capitalist accumulation process. He shows that the property titles from which fictional capital is composed represent a special category of commodities, goods of the 2nd order that have a future value and a specific practical value. Whether and under what circumstances this anticipation of the future can be fulfilled and where the logical limits lie will be explored.

Part 3 analyzes the ranking and function of fictional capital in the historical course of the capitalist development method. If it was only of secondary significance in the age of the industrial revolution, it already played an important role in the epoch of Fordism as an impulse-giver and motor of accumulation since the enormous investments necessary for installing industrial mass production could only be financed through anticipation of the future. While this anticipation could only be fulfilled through actual wealth production, this is not possible any more in the era of the third industrial revolution. Fictional capital changes into the motor of accumulation which can only be maintained through a repeated anticipation of the future. However a gigantic devaluation fictional capital must occur where limits of this anticipation are reached. This devaluation reveals the underlying structural crisis and must also be expressed in a devaluation of the money medium.

Several theses on social emancipation in light of the crisis are offered as the conclusion of the book. The so-called “austerity pressure” as invoked with the picture of the “Schwabian housewife” is a complete madness that only results from the mad logic of the constant production of social wealth as a waste-product of capital exploitation under the standards of “profitability” and “financiability.” If we can be free of this project, it turns out that “we” in no way have lived “above our means.” Rather the society has been too rich for the narrow-minded form of capitalist wealth production. The existing potentials of productivity can only be used reasonably and meaningfully to make possible a good life for all people and to permanently maintain the natural foundations of life if this form is successfully stripped off.


[1] Bild:ße_entwertung2.jpg

[2] Zahlungseingang:


Altvater, Elmare, “The Great Crash or the Century Crisis”

Batko, Marc, “Sjpuiting from the Caboose”

Konasz, Tomasz, “The Crisis Explained”

Reiber, Norbert, “Stagnation as a Trend

Ac hutze, Ingo, “Our Beautiful New Clothers”

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