Perhaps the best way to grasp the meaning of our New Normal is to frame it as the irreversible paradigm shift towards “crisis capitalism”. The key macroeconomic implication is that today’s capitalism no longer needs crises to enhance its capacity for growth; rather, it needs them to hide its chronic impotence. What changes is therefore the epistemic function of “crisis.” While in the past it led to new economic cycle, a crisis today serves to facilitate the aggressive management of socioeconomic decay – for the boom-and-bust engine is flooded, and Schumpeter’s “creative destruction” leaves behind only rubble. However counterintuitive it may seem, the credit addiction of ultra-financialised capitalism needs the real economy to shrink, mostly by way of a continuous stream of calculated shocks – the job of today’s “emergency industry”. And precisely because of its inherent impotence, crisis capitalism is politically authoritarian.
It is revealing that today’s critical voices, whether conservative or progressive, share the same nostalgia for a world that is withering away: that liberal-democratic “work society” which capital itself is making obsolete. Even those radical thinkers who insist on seeing an emancipatory potential in the present condition are more often than not liberals in denial, since the emancipation they invoke relies on the very categories that got us where we are. In other words, they fatally underestimate the totalitarian appetite of crisis capitalism. This is understandable, since the limits of capitalism (as a totalising social formation that blindly pursues its own end) are also the limits of our imagination: being over-determined by capital, we struggle to see past its value system. However, perhaps it is time for us to question the actual sustainability of our existential comfort zone, for history tells us that, as a rule, humanity’s descent into barbarism is expedited by political disavowal – the same stubborn disavowal that today unifies conservatives, progressives, and much of the so-called radical left. What the political class fails to consider is that capitalism is perfectly capable of reproducing its categories – from wage labour to commodity production – within a totalitarian framework; just as it is perfectly capable of faking a liberal façade while gradually suspending the social contract.
Calculated crises and selective defaults
The main lesson of the last three and a half years is that the manipulation of financial markets translates directly as the manipulation of reality. “Systematically distorted markets” equals “systematically distorted reality”. The master discourse of our time is no longer the labour-based economy, but the finance-driven supervision of socioeconomic implosion, which the “pandemic” has inaugurated globally. The growing decoupling of a work society in freefall from the artificially propped-up financial stratosphere – where distortion across the spectrum of asset classes is the norm – suggests that a new capitalist era based not merely on surveillance but especially on manipulation and control has begun.
The aim of central bank monetary policy is no longer the stabilisation of prices, but the stabilisation of decline – so that the markets can continue to flourish. For example, the Federal Reserve’s rate-hike cycle started in March 2022 is tightening credit to the real world, which is only a cosmetic measure against inflation but crushes the economic resilience of ordinary people. The crisis of US regional banks is a particularly instructive case in point. From the perspective of financial capitalism, the banking wreckage started with the collapse of Silicon Valley Bank on March 10, 2023 is, in a perverse sort of way, existentially necessary, because a credit-doped economy that has no way of re-igniting a labour-intensive cycle of growth thrives on calculated crises and selective defaults, which must be ascribed to external rather than systemic factors. The debt-soaked system piling on risk needs a steady flow not only of liquidity (credit) but also scapegoats and alibis – from “pandemic emergency” to “regional bank failure”. Why?
Financial actors know that, as far as today’s markets are concerned, any red-button alarm is followed by the Fed leaping into action to push risk assets higher and galvanize the speculative sector. Everyone, from mega banks to investment funds and retail investors, knows that the “fair value” mechanism of financial markets is rigged – which is precisely why they continue to have faith in it! In this context, sacrificial lambs like SVB trigger artificial rallies based on buy-the-dips, short squeezes, corporate buybacks and other strategies that are now factored into the “silent reward” agreement insured by the Fed. At present, it seems everyone is front-running the Fed’s pivot to lower rates, which is expected by the end of the year.
It must be added that collapsing regional banks through rate hikes was (yet another) stroke of evil genius on the part of our financial aristocracy, being predicated on the knowledge that, at this stage, the mega banks like JP Morgan would not risk contagion, since they are still (but for how long?) buffered by sufficient reserves. As a matter of fact, these banks ended up consolidating their positions thanks to cheap mergers & acquisitions (e.g., First Republic Bank) as well as billions in deposits moving out of disgraced regional banks and into their coffers. Nevertheless, we should also bear in mind that the banking crisis inaugurated by SVB was a failure of the underlying collateral – US debt securities. Essentially, SVB collapsed because it held a high volume of traditionally safe long-term Treasuries (US government bonds) that suddenly lost their value. As interest rates went up, the price of these bonds fell, making the bank’s debt exposure untenable and causing the bank runs. The overarching point being that, while an opportunistic event, the banking crisis is at the same time a symptom of systemic breakdown.
Differently put, opportunism is a form of disavowal. By choosing a scapegoat in advance, the system kicks the can a little further down the road. But how long is the road itself? Arguably, the dead end is already in sight. It is crucial to keep in mind that, once the insubstantial financial scaffolding built on “dumb money” and layer after layer of derivative bets falls apart, society will break; the whole world as we know it will suddenly decompose. The current economic system is in a perpetual state of deficit, and as deficits expand, they require increasing amounts of inflationary cash. A debt-based system like ours can be compared to a black hole sucking cash like spaghetti. Most banks’ exposure to derivatives is already through the roof (Goldman Sachs alone is exposed to over $53 trillion in derivatives). Because in our inflated environment a liquidity freeze can happen at any time, the Fed (in lockstep with other major central banks) not only has to remain vigilant if it wants to keep confidence levels high, but must also find ways of pre-emptying potential collapse. How? For instance, by nudging the system towards selective defaults through which to justify rescue & consolidation packages. Risk is still the name of the game, though of a rather different variety.
Controlled demolition now means that even the increasingly fragile financial system is being dismantled piece by piece in preparation for the new monetary infrastructure, which is likely to be based on Central Bank Digital Currency. However, a substantial crisis will be required if the new system is to be implemented successfully. We will have to be traumatized so hard that we not only accept but even beg for our new digital chains.
“Safe and effective” digital shots
In the meantime, inflation continues to rise. Even if (we believe that) its pace is slowing, the fact remains: year-on-year, inflation is still rising. Food inflation is in double digits across Europe (EU average of 19.17%), with Germany at 21.2%, the UK at 19.1%, and Turkey at 67.89%. Furthermore, most financial operators know that the official CPI (Consumer Price Index) is phoney. Using the scale that Paul Volcker used in the 1980s would push inflation twice as high as officially reported. In short, the Fed & Co. have their cake and eat it, for they need inflation to “inflate away” the debt (through negative real rates), but they can also under-report it so that their policies do not look as ineffective as they actually are.
As the debt/bond crisis turns into a banking crisis, it becomes increasingly clear that implosive capitalism needs some form of centralized mechanism of digital currency jurisdiction. The embryonic stage of this shift to top-down monetary control is what the BIS (the “central bank of all central banks”) fittingly calls Project Icebreaker. Initially, its aim is for central banks to use digital transactions among themselves. In reality, however, we have more than one reason to surmise that this is precisely only the icebreaker: the first significant step towards preparing the infrastructure that will “save us” from the next downturn. We should not forget that since the start of the “pandemic” central banks have persistently announced CBDC as the future of monetary transaction. One thinks of Augustin Carsten (BIS General Manager) and his chilling explanation from October 19, 2020: ‘the key difference with CBDC is that central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability [digital cash], and also we will have the technology to enforce that.’
It is true that, as Yanis Varoufakis (among others) reminds us, the state and the police already have the power to control our transactions, as shown with the freezing of the Canadian truck drivers’ accounts during the anti-vaccination protests of February 2022. However, that intervention required an Emergency Act – the official promulgation of a time-limited “state of exception” – which as such is still likely to be met by widespread popular resistance. Quite another kettle of fish is to authorise a centralised digital system of absolute monetary control. As a matter of fact, Varoufakis sees central bank digital technology as a democratic tool, presumably because (romantically, or disingenuously) he projects it onto an idealised world: ‘privacy could be better safeguarded if transactions were to be concentrated on the central bank ledger under the supervision of something like a Monetary Supervision Jury comprising randomly selected citizens and experts drawn from a wide range of professions.’ While this may excite us by tickling our utopian imagination, unfortunately we are still at the mercy of an aggressively implosive capitalist dialectic, which suggests that any Monetary Supervision Jury is most likely to be supervised by the ultra-rich oligarchy, in a coordinated effort to keep poverty in check while retaining power and privileges.
This is not merely a question of political imagination or desire, as money (fiat currency) is only the superficial expression of a complex and unforgiving socioeconomic condition. Varoufakis’ proposal to cut out the “corrupt middlemen” – the commercial banking system – so that central banks can pour money directly into everyone’s digital wallets (for instance, as Universal Basic Income) completely bypasses the existential dilemma that capital is facing today: its increasing inability to generate sufficient amounts of new value, and thus social wealth, through labour-intensive growth cycles, which is why it relies so heavily on mouse-clicked credit and the inflation of financial bubbles. Staggeringly, yet consistently with his position, Varoufakis prescribes more Quantitative Easing for investment in the green & digital transition, as if this worn-out Keynesian move could magic a new accumulation regime out of today’s terminal stagnation, and save capitalist societies from their grim destiny – a simple solution for a simplistic reading. In truth, both neo-Keynesian and neo-liberal recipes are yesterday’s news; they have already repeatedly proven their inability to resurrect the capitalist mode of production, since they only confront it at surface level. The deeper and most urgent issue we face is the structural crisis of value-creation of a rapidly deflating economy, which is why centralised digital currencies can only work as cynical tools for the regimentation of mass decline. Any other hypothesis is, at best, jaw-droppingly naïve.
At present, CBDC are being introduced as a “safe and effective” (rings a bell?) payment system, which, among other beautiful things, will guarantee safer banking and eliminate the risk of SVB-like failures. Yet, in all likelihood the next serious crisis will show their true face, coercing us into accepting more misery and less freedom. As with Covid, a state of exception leaves us with no real choice. For most people, keeping a job meant taking the shots. We are now moving towards a real economic slump that, regardless of whether it materialises as a deflationary market crash or a hyperinflationary cycle (or both) it will be followed by the elites offering us their prodigious technological solution: deposits will be moved to a central bank near you, meaning that whatever you owe will become a liability of that central bank, which will guarantee protection by digitally managing your money flows. As with Covid jabs, most citizens will take the “safe and effective” bait. Capitalism is really the gift that keeps on giving! The endgame is now writ large: a global economy in slow-motion collapse can only attempt to perpetuate itself by manipulating its debased currencies.
It is impossible to predict how far we are from a watershed moment that will prove to be shocking (i.e. convenient) enough for the slick introduction of the new monetary regime. Silicon Valley Bank, Signature, and First Republic were just a small taste of things to come. The system is cracking at the seams, and a credit event is long overdue – as anticipated by the repo crisis of September 2019, followed by the crash of March 2020, the UK guild implosion of October 2022, and the regional banking crisis of March of 2023. There is little doubt that the Titanic is accelerating towards the iceberg, a major accident that will be used to float in the miracle cure: a “digital vaccine” that – so it will be promoted – will protect us against an economic virus.
We have entered an age of extreme socioeconomic fragmentation which is going to be controlled top-down. The decomposition of our world manifests itself both as the fracturing of the social bond and the slow meltdown of financial markets. Yet, as Hemingway reminds us in The Sun Also Rises, bankruptcy happens ‘in two ways. Gradually, and then suddenly’. And as we brace for the hard landing, the distrust that rises from below starts clashing with the policies of crisis management imposed from above. This will increase the economic, social, military and cultural stressors. The first thing to do is to accept that, currently, there are no collective alternatives in sight. Capital occupies us all day long (precarious and/or overbearing work, mass distractions, false polarisations, cognitive dissonance, emotional blackmails) but at the same time it makes us superfluous. Whatever form a genuinely emancipatory post-capitalist society will take, one thing is certain: it will have to replace the current mode of production with a social bond where we learn to make a radically different use of our time, creativity, and modes of enjoyment – that is to say, a different use of our freedom.
In this regard, economic science is of little help, as it continues to be undermined by a serious positivistic flaw – the same flaw that has always threatened also traditional Marxism. As long as we explain our crisis solely through empirical data, economic science will offer more problems than solutions. For instance, inflation is regarded as the simple effect of an immediately visible and calculable trigger: war in Ukraine, energy squeeze, pandemic lockdowns, supply-chain bottlenecks, and so on. Hegemonic economic thought reduces all reality to quantifiable units that are observable on the surface. Whatever escapes empirical calculation is, at best, demoted to the rank of philosophical speculation. But in its arrogance, bourgeois economics proves inadequate to capture the value-substance of socioeconomic relations. All it can do is offer us jaded re-brandings of old formulas, from “Bidenomics” to “securonomics”. The latter neologism is the latest iteration of “green neo-Keynesianism” recently mobilized by the UK’s Labour Party. As usual, it promises to deliver an exciting mix of more state debt and investment in new technology (a £28 billion-a-year ‘green prosperity plan’), aimed at creating more jobs and (finally!) a secure financial environment for all British citizens.
To grasp contemporary capitalism’s direction of travel we had better leave behind the exhausted “stimulus vs austerity” diatribe and consider the following deeper indicators: 1. The increasing contraction of the overall mass of (socially necessary) value; 2. The compensatory growth of money-capital as credit without value-substance; 3. The widening of the gap between credit created out of thin air, and surplus-value created through the exploitation of labour; and 4. The global paradigm shift from liberal capitalism to the illiberal, meta-emergency world-system currently in the making. The last point is a direct consequence of the first three. To ignore this causal relationship is to engage in a critique of the New Normal that is both sterile and counter-productive.
The steady decline of economic growth in recent decades requires increasing money creation aimed at chasing the debt that is continuously put into circulation. What should be emphasized is the delayed effect of this monetary phenomenon, since today’s inflation is, essentially, the result of past credit expansion, which takes time to work its way through a system that struggles to generate sufficient value. Insisting that today’s inflationary environment can be explained solely by empirically quantifiable factors means adhering to the positivistic myopia of dominant neoclassical economics, and thus to a hopelessly ahistorical view of capitalism. Today’s secular devaluation is the inevitable result of the credit avalanche set in motion in previous decades, and particularly since 2008; an avalanche that is now ominously rolling downhill and needs to be handled with care by central banks. Sadly, we have not seen anything yet in relation to its impact. In this sense, tinkering with the calculation of the effect that the current rate hike may have on inflation is pointless. Not least because these rate hikes are limited by the destructive effect that, past a certain threshold, they unleash on the financial architecture – as demonstrated by the recent banking collapse.
It is also not enough to object that credit and interest-bearing capital have always informed the history of capitalism. Rather, what matters is the historical process that has led to our grotesque dependence on credit creation. The qualitative leap in the function of credit within the capitalist mode of production can be traced back to the early twentieth century, when additional liquidity began to supplement the mass of value produced through investment in wage labour.[i] This recourse to exogenous credit soon morphed from a sporadic phenomenon to the condition of possibility of real production itself. During the twentieth century, then, the credit leverage used for the extraction of surplus-value presents itself with different characteristics than those described by Marx in the third book of Capital. According to Marx’s reading, credit interest is derived from the surplus-value produced in the real economy, which in the second half of the nineteenth century still formed the basis of capitalism. But now that explanation needs updating.
Choking on credit
The historical growth of credit is an inevitable consequence of the development of the capitalist mode of production. As profits from individual capitals are no longer sufficient to cover increasing investment in what Marx called ‘constant capital’ (e.g., machines and raw materials), credit injections become endemic. In other words, technological acceleration begins to tighten a credit noose around capitalist corporations, as the law of competition leaves no choice but to increase costly investment in new production technologies. At this point, a mechanism is established that redefines the internal logic of the mode of production, while leaving its purpose intact: in order to gain new market shares, capitals need to accept the external constraint of credit, which gradually subjugates workers not only in terms of labour exploitation, but also via the financial speculations on which such capacity for exploitation comes to depend. And as capital begins to struggle to reproduce itself through profit investments, the dependence on credit turns into a chronic addiction.
Contemporary capitalism works as a feedback loop between the communicating vessels of compensatory credit and the stifled mass of surplus-value. While individual capitals must continue to appropriate a share of surplus-value to service their debts, part of this surplus-value has already been colonized by the expanding pool of credit. Thus, capitalism ends up prey to an optical illusion: every increase in surplus-value creation is merely the form of appearance of exponentially larger monetary expansions. The widening of the gap between insubstantial credit and real valorisation means that the retail economy itself ends up inundated with toxic liquidity. At this stage, the apparent valorisation of individual capitals already corresponds to a contraction of the total value produced with respect to the money supply put into circulation – a situation of systemic imbalance which, after a period of incubation, today manifests itself as irreversible currency debasement. An economy cannibalized by credit can only destroy the value-substance of its fiat money.
As the gap between real capital and fictitious credit widens, so does the potential for systemic collapse. At the same time, transnational capital has no other option except try to control the narratives that guarantee a continuous supply of credit. Here, then, is the paradox introduced at the start of the essay: for the credit chains to continue to stretch into the future, the real economy must be radically downsized. In order to survive its own devastating contradiction, hyper-financialized capitalism must limit and regulate real demand by turning the screw on the work society. In this kind of New Normal, the combination of impoverishment and revolt is met with mass-scale media manipulation, behavioral conditioning, and social engineering. Today, the ‘curious copulation’[ii] between science and capital brings about not only a fatal crisis of valorisation, but also the dematerialisation of the real as such, with codes and algorithms working as master signifiers for the ideological restructuring of social reality.
In regard of this depressing picture, the historical mistake of the left (including the Marxist left) lies in its fetishization of wage labour. Essentially, the left believes that work (and workers’ struggles) can either save capitalism from implosion, or, more radically, lead us beyond capitalism. Yet, the question should be posed differently: not how to save or supplant capitalism through wage labour, but how to overcome both capitalism and wage labour, for the latter has always been capital’s creation and pillar – not only its dialectical opponent, but also its condition of possibility. Wage labor is what made capital possible by socializing it into capitalism.
The contradiction that defines labour-power today is that there is too little of it for the valorisation process, but too much for the absorption capacity of the system. For this reason, it must be rationalised and regimented while also further oppressed and exploited. The necessity for capital to expand can no longer be satisfied by labour exploitation alone. Today’s “wealth-production” centre is the financial simulation of growth, which is self-propelled and without substance. Credit now functions as a surrogate for real capital in relation to both demand – which would otherwise tend to zero – and the costs of real production cycles. We are already hostage to a future in which the mass of surplus-value grows thinner compared to the mass of credit needed to keep it alive. This means that the very temporality of capital has shifted from the past (reproduction through profits that have already been accumulated) to the future (reproduction through profits that are not yet realized). While the two temporalities are intertwined, the relative growth of credit (in parallel with the growth of the share of constant capital) has fostered a qualitative mutation in the composition of capital, which is at the heart of what we are currently experiencing.
The irony is that today’s credit-addicted capitalism is choking on its own productivity. “Globalization” itself is an ideologically neutral signifier hiding the fact that global production is now chained to increasingly unmanageable deficit cycles and attendant bubble-to-bubble economy. The unravelling of globalization into socioeconomic collapse is the main driver of military conflict. Since 2001, the United States have engaged in continuous warfare, which according to a conservative estimate from a research project at Brown University, has caused (directly and indirectly) around 4.5 million deaths in post-9/11 war zones, including Afghanistan, Pakistan, Iraq, Syria, and Yemen. If the dimension of this carnage makes the news at all, it is only to appeal to a deeply hypocritical sense of guilt. What is never questioned is the causal link binding US global economic dominance to its military-industrial complex, a multi-headed hydra that will keep wreaking havoc to delay the end of the US-led economic hegemon.
At a time when its dollar-based global supremacy is at risk of failure, the US continues to rely on the military-industrial complex as the backbone of its currency. And the more indebted the economy, the more the military-industrial complex will find reasons to stretch its tentacles. The self-inflicted banking crisis of March 2023 gives us a sense of how perverse the whole game has become. In order to attempt to retain world hegemony, the debt-based economic model must continue to channel billions into the military machine. Expanding the debt allows the US to finance its mammoth military at home and especially abroad, which in turn keeps the dollar propped up as world reserve currency – a perverse geopolitical logic if ever there was one. It needs to be added that there are no winners in this contest, for we are witnessing a geopolitical showdown on the sinking Titanic, with decline and authoritarianism as the only shared outcome.
It is objectively difficult to see how the yuan – or a new BRICS+ currency – could replace the dollar. The historical growth of the Chinese economy was characterized by its monopoly on manufacturing production. It took place within the framework of global debt and deficit circuits, where the debt dynamics in the West generated demand for Chinese export, which resulted in Western markets being flooded with cheap merchandise. However, this precarious equilibrium ended with the 2008 global financial crisis, which caused the Chinese export-based surplus to decline. Since then, China’s growth – driven mostly by the housing bubble – has also been running on spiralling credit, following in the footsteps of its implosive Western “global partners”. China, then, does not seem to be in a position to repeat what the US did at end of WWII, since its labour-intensive industry is already hostage to financial excesses comparable to those in the West. China’s Belt and Road Initiative is no Marshall Plan. Rather, the multipolar world order in the making is marred by the same compulsive disorder: the self-destructive tendency of the sputtering capitalist mode of production. This suggests that a major war is now just as possible as a silent agreement between geopolitical enemies who share very similar economic destinies, as well as the same need to foist a repressive infrastructure on the masses.
Modern wars are inextricably linked to the credit-addicted economy. Throughout the recent history of capitalism, wars have been deployed to generate credit to finance armies, weapons, and new technologies. In this respect, the two world wars of the twentieth century had already exposed the state’s dependence on capital, and capital’s dependence on credit creation. Especially since the Third Industrial Revolution in the 1970s, the massive investments in constant capital imposed by technological competition crushed labour and therefore compromised the system’s value-creation capacity, while turning credit into the new gold. Hence the gradual privatization of central banks, who now have the power to influence geopolitical as well as (at least indirectly) sociocultural strategies. This is why the recent “pandemic” was immediately labelled a “war against the virus”. This is also why it was seamlessly replaced by a real military war, which is currently being prolonged into absurdity with typical capitalist contempt for human life. As I argued elsewhere, the “war on Covid” allowed the direct creation and issuance of colossal amounts of money into the system (the “going direct” strategy supervised by BlackRock), condensing into a much narrower timeframe the perverse logic of the previous two decades of “war on terror”. But as global manipulation turns increasingly perverse, so should collective awareness begin to emerge.
[i] See Robert Kurz, Geld ohne Wert: Grundrisse zu einer Transformation der Kritik der politischen Ökonomie (Horlemann Verlag, 2012).
[ii] Jacques Lacan, The Other Side of Psychoanalysis. The Seminar of Jacques Lacan, book 17 (New York: Norton, 2007), p. 110.