Thought I’d check in after 5 years of hibernation. It’s been a remarkable run, right? Fear of a virus is racist, no wait it’s actually a global pandemic, J6, Russia invading Ukraine after apparently consulting a Magic 8 Ball, Epstein doing something or other with somebody or other, Twitter hating Musk so much that the company sued Musk in court to force him to buy it, the rise of Greta, the fall of Silicon Valley Bank, the Durham report, whatever Bud Light is doing, and so forth.
Except, not. It’s the same soup warmed over. Nothing has fundamentally changed. The world still works the same way it worked previously. Once you see that MMT is the funding mechanism for the global power structure, you can't unsee it. Strange and disconnected phenomena make more sense.
The tl;dr version is this: everybody saying that de-dollarization is imminent, that the petrodollar is the core of the current system, that the BRICS or SCO or whatever alphabet soup geopolitical group are introducing a new international financial system that will radically change global power, has a basic burden of proof to describe what the purported alternative actually is. Boil away the academese and there are only a small handful of choices for a different reserve asset to move away from the imperial quad of USD/GBP/EUR/JPY.
Really just four choices: the Chinese yuan/renminbi as a different national currency, the IMF SDR as basically a more official global union of empire+China, gold (or possibly gold+silver) harkening back to a more physical financial world, or bitcoin (embracing techno utopianism in all its futuristic glory). That’s it. No other concept, commodity, or country (or group of countries) comes close to having the transnational economic clout of DC and Beijing.
(As an aside, if you didn’t know that the Chinese and American currencies have been closely linked for years, stop and think about that. The first thing that an alternative system has to do is break that link…and deal with all the consequences that would occur if the yuan/renminbi actually appreciated meaningfully against the US dollar.)
Russia is the interesting exception that proves the rule, a country big and powerful enough to be mostly independent and yet what that means is Russia has comparatively little integration with the global financial system. As a simple example of scale, the niche blogging company that Sergey (Mikhailovich) Brin, who was born in the USSR (in Moscow no less), co-founded with Larry Page has larger revenue than the volume of trade between Russia and China.
As someone who has found himself at a rather unique intersection of business and public policy, history and current events, critiquing MMT (Modern Monetary Theory) from ‘the left’ rather than ‘the right’, from the perspective of someone who actually believes both parts of that disruptive and increasingly quaint phrase ‘limited government’, I have watched somewhat bemusedly as waves of sensationalist prognostication have crashed on rocks of reality.
One of the ways to rebrand the politicization of fiat currency has been the term multipolarity. Basically, the idea that it’s not just the US national currency that matters, but also national currencies from other important countries around the globe. This is especially popular among English-language commentators who carve out a niche that purportedly critiques US (or ‘Western’) imperialism. Yet coincidentally a common theme amongst them is that they are unable (unwilling?) to address the current economic power base of wealthy and connected insiders or offer a concrete proposal of an alternative international financial system that would actually change anything.
If we are trying to understand what is happening in the world - both for the existential value of truth itself and perhaps also a more practical value of feeling less overwhelmed by a seemingly chaotic world - then realizing that multipolarity is simply another iteration of the longer running MMT fad helps make sense out of that perceived chaos.
The short story is this: MMT/multipolarity defines the existing power structure. It is the funding mechanism that drives every policy American “progressives” and foreign anti-Americans claim to despise so much. It is how governmental and nongovernmental officials coordinate policy all over the planet. Multipolarity is not a change from the current international financial system but rather the continued operation thereof.
Look at who manages the Bank for International Settlements (BIS) and International Monetary Fund (IMF) as of May 2023:
BIS General Manager - Agustín Carstens (Mexico)
BIS Deputy General Manager - Luiz Awazu Pereira da Silva (Brazil)
BIS Secretary General - Monica Ellis (New Zealand)
BIS General Counsel - Diego Davos (Belgium)
BIS Head of Banking - Peter Zöllner (Austria)
IMF Managing Director - Kristalina Georgieva (Bulgaria)
IMF First Deputy Managing Director - Gita Gopinath (India)
IMF Deputy Managing Director - Antoinette Monsio Sayeh (Liberia)
IMF Deputy Managing Director - Kenji Okamura (Japan)
IMF Deputy Managing Director - Bo Li (China)
Not exactly a grouping of ordinary ‘Muricans with high school diplomas from Texas or Appalachia.
Hat tip to CJ Hopkins for inspiration for the title (GloboMMT). He’s been developing an angle on describing our current brand of trending authoritarianism as GloboCap, short for global capitalism. Personally, I think we’re so far removed from capitalism at this point that the word is unhelpful, but Hopkins’s turn of phrase has a lovely overall ring to it. Plus, it centers the reality of global coordination instead of the shell game of national competition.
What follows is my take on a longer version of the story. Buckle up (remember cars?) future archaeologists/alien overlords, it’s a lot to digest. But it’s worth it just in case you read the short story and are intrigued but don’t quite buy it. Or you’re stubborn and want Tom Cruise to yell show me the data a little louder.
For starters, here is a recent event that you can’t make up if you tried. It’s not a big, flashy scandal. Rather, it’s the pedestrian, mundane nature of it that is so illustrative. Leon Botstein, the President of Bard College in New York, Leon Levy Professor in the Arts and Humanities, and Chancellor of the Soros Open Society University Network (OSUN) received $150,000 from deceased pedophile Jeffrey Epstein (). But he only admitted this after the Wall Street Journal found out about it. Before, his story had been that he had solicited money from Epstein but was unsuccessful. Botstein simply forgot $150,000 in payments in 2016.
For any ordinary person, receiving $150,000 in one year from a well-connected financier would be a notable event. That is an amount greater than the entire net worth of the median American family. You’d remember both soliciting and receiving that much money for the rest of your life. But this is so common in higher ed and the world of global power that it is unremarkable to the people involved.
Bard is a particularly intriguing place because it’s both an institution with traditionally liberal/leftist interests and, simultaneously, a place with remarkable coziness with the existing power structure of the international financial system. Located in Annondale-on-Hudson, it’s less than 100 miles from Wall Street. The same Leon Levy whose professorship Botstein holds is also the namesake of the Levy Economics Institute of Bard College. That think tank has attracted arguably the main enclave of American academic MMTers, such as Senior Scholar Larry Randall Wray, Research Scholar Pavlina R. Tcherneva, and Research Associate Stephanie A. Kelton. The Open Society network funded website hosting for much of the University of Missouri - Kansas City’s old Center for Full Employment and Price Stability (UMKC CFEPS) working papers at Bard’s website.
Although interestingly, Wray’s classic - Working Paper 3 - isn’t available for public review at that site. You have to know it’s from CFEPS and then use the wayback machine at the internet archive to find it. If you’re not an Econ nerd or otherwise familiar with that document, here’s an example of how MMT perpetuates the same assumptions, biases, and systems that the ruling class has used for decades. This quote comes from page 4 of the document published in January of 2000 when Wray (and some other MMTers affiliated with Bard) was at UMKC:
“For the sake of our discussion in this section, we will assume that the government's announced wage (BPSW) is $6.25 per hour…We will also assume that this is a "living" wage…”
One of my favorite jokes about economists from business school was to imagine that you’re marooned on a desert island and you discover a cache with lots of intact canned goods. Yay! Now, how do you open them? If you’re an economist, you assume a can opener.
All joking aside, these are the folks who have been pocketing cushy salaries in academia for decades while demanding that a reserve army of the employed be paid minimum wage using terms like Employer of Last Resort (ELR) and Job Guarantee (JG). In a remarkable coincidence, they don’t want the basic public sector wage to be applied to themselves. Nor do they propose that employees in the various imperial fiefdoms they proclaim to detest so much be paid minimum wage. Those workers, according to MMT, also deserve higher compensation.
To glimpse the story in basic math, as an example Wray was paid a salary of $106,630 by the economics department at UMKC in the 2008-2009 academic year in the heart of the GFC (Global Financial Crisis). According to Social Security Administration data that put Wray at the 94th percentile of all workers in the US economy(!).
MMTers still offer no explanation for why they should be paid so much more than child care workers or home health aides or food service workers or any of the millions of other employees (and prisoners) already making $15/hr (or less) or the potential additional millions they would add to public sector employment - but at a minimum wage, of course, because buffer stocks work so well at containing inflation, after all. Mostly they hope people don’t notice. Sort of like how the President of Bard College didn’t notice when somebody gave him $150,000 for no reason.
Then there’s the more global focused English-language anti-imperialists who don’t actually offer solutions to defund empire. Michael Hudson is a big name in this arena, especially the critique of “finance capitalism” as if finance is the only industry that’s bloated and predatory or that anything about global finance resembles market-based economics. He has spent decades generically decrying imperialism yet declines to offer concrete proposals for what areas of government spending and regulation he would actually cut.
As a concrete example, following are the approximate sizes of various parts of the official US economy (what’s captured by GDP, which of course is itself a flawed metric):
$1.3 trillion - financial services and insurance
$1.4 trillion - intellectual property
$1.9 trillion - nonprofit institutions
$2.2 trillion - durable goods
$2.5 trillion - food (combined on and off-premise categories)
$2.5 trillion - nondurable goods (excluding food)
$2.7 trillion - health care
$3.0 trillion - housing and utilities
$4.4 trillion - government (consumption and investment)
How can one look at that list and conclude that financial services is a unique problem in the economy, that the US doesn’t make anything anymore, or that the core macroeconomic problem is a lack of socialism because we don’t spend enough currency units on government? The numbers simply don’t tell that story. The story isn’t about aggregates, it’s about how we spend currency units. What do we get for the money?
Another great source of purportedly anti-imperialist multipolarity commentary is authors like Pepe Escobar at The Cradle. Shortly after the Russian SMO (special military operation) in the Ukraine in early 2022, Escobar excitedly posted about the game-changing nature of Russian gold, Chinese petroyuan, and Sino-Russian coordination to circumvent the US dollar:
“The Eurasian system will be based on “a new international currency,” most probably with the yuan as reference, calculated as an index of the national currencies of the participating countries, as well as commodity prices. The first draft will be already discussed by the end of the month.”
Except, not. Here we are 14 months later. There is no new international currency. And that notion of an index of participating countries and commodity prices is gobbledegook. An index of multiple national fiat currencies is an even more unstable concoction than using a single currency.
The Chinese ruling class, like they have done for decades, continues to partner with the ‘Western’ ruling class. There is far more alignment than disagreement between ‘the West’ and ‘the East’. Larry Fink, CEO of Blackrock (the asset management company that owns lots of proxy voting shares in all the other transnational companies that the multipolarists claim to decry), was not only allowed to visit China but was allowed to leave the country without arrest. More broadly, China has not issued an arrest warrant for a single major financial fraudster or war criminal from corporate executives to government officials to billionaire oligarchs. And here we are in 2023, and the Chinese yuan (and Hong Kong dollar) are still linked to the USD.
To critique empire, you have to offer an alternative. And the folks stuck in an MMT framework can’t (won’t?) extricate themselves from that framework. So here I am, as anti-imperialist as the next guy, yet paradoxically quite bullish on American empire for the foreseeable future based upon how the past five years have unfolded. Because even the multipolarity advocates who claim to dislike the current global power structure of the past 6+ decades can’t actually bring themselves to abandon it. As a systems thinker, that unwillingness to walk away from a system you don’t like fascinates me.
It’s like when retailers such as Walmart and Target created CurrentC and bad-mouthed the credit card companies. Yet they refused to take the obvious step of actually walking away from credit cards, continuing to allow customers to use them for payment throughout the comically absurd lifetime of the Merchant Customer Exchange.
That’s how powerful the current international financial system is. China isn’t doing what Hudson and Escobar and others say they want of creating a new system. Instead, China has spent considerable energy integrating into the existing global system, partnering with the BIS and working with the UN system of institutions including central players like the World Health Organization (WHO), joining the IMF SDR currency basket, and advocating for the UN Sustainable Development Goals (SDGs - a/k/a Agenda 2030). So long as Beijing and DC work together, there is no individual country or regional bloc that has meaningful influence to do anything about it.
You don’t need hippie tree-hugger perspectives to see it, by the way. Simply take publicly available data from the heart of the power structure, the CIA’s World Factbook.
If you break the world up into regional blocs, what becomes clear upon examination of the data is that South America, Sub-Saharan Africa, and the Indian Subcontinent (Greater India or South Asia or other preferred description for the area between SE Asia and West Asia) make up a large part of global population yet a small part of global finance*. In contrast, the empire+China accounts for approximately 66% of global GDP. Also 71% of global gold reserves and 100% of the IMF’s SDR basket. Think about that last one for a minute if you didn’t know that particular factoid.
Some time in the future, will the yuan and dollar float (or disappear) rather than being linked? Will China officially claim much larger gold reserves, or alternately, claim that empire doesn’t have the gold reserves it claims to have? Of course. But that’s a bit like pointing out that in the future, the continents as we know them today will collide again, swallowing up some oceans and creating others.
So, back to hibernation for another few years. Although, do wake me up if MMT/multipolarity/anti-imperialists explain what exactly the new global financial system is going to be and when it will arrive. Because this article from Escobar from April of last year typical of the de-dollarization hype hasn’t aged well, unless one defines ‘soon’ on geological time scales:
“You are at the forefront of a game-changing geo-economic development: the design of a new monetary/financial system via an association between the EAEU and China, bypassing the US dollar, with a draft soon to be concluded.”
*Update: Thought I'd post the numbers behind this for handy reference over time. CIA World Factbook data in GDP at Purchasing Power Parity (PPP) in constant 2017 dollars. IMF SDR basket as of 2022 weighted percentages. Regions are my categorization. EEZ is exclusive economic zone (waters outside national territory to which nations have certain economic rights). Gold ounces are the internationally claimed official reserves converted to troy ounces (it's all secret, so who knows of course what the actual numbers are, but until another nation challenges the figure, the official figure is the figure). Empire (the 'West' or 'NATO & Friends' or the 'Golden Billion' or whatever) is the sum of the first three groups. To make everybody super happy, I conveniently split the Ukraine 50/50 between Non-Russian Europe and Greater Russia. Three minor blocs are not listed here (Central America, Oceania, and Non-Imperial Lands, a sort of none-of-the-above for surrounded countries like North Korea).
Imperial Lands is the one non-geographic bloc. It's all the countries that would fit in a regional bloc but are more connected to an imperial institution instead. For example, Turkey one day in the future might have a serious enough dispute with Greece specifically, or Europe generally, that drives them from NATO. But until that day, Turkey isn't merely a minor periphery of empire pulled more to West Asia. Rather, it's been a member of NATO for 7+ decades, has NATO's second largest army, and houses facilities like Incirlik and land command.
NAFTA
- GDP - $25.4 trillion
- Geographic area - 21.8 million sq km
- EEZ - 20.2 million sq km
- Gold - 265.4 million ounces
- IMF SDR - 43.4%
- GDP - $24.4 trillion
- Geographic area - 5.6 million sq km
- EEZ - 29.3 million sq km
- Gold - 397.3 million ounces
- IMF SDR - 36.7%
- GDP - $13.3 trillion
- Geographic area - 11.5 million sq km
- EEZ - 20.8 million sq km
- Gold - 59.5 million ounces
- IMF SDR - 7.6%
- GDP - $25.4 trillion
- Geographic area - 9.6 million sq km
- EEZ - 0.9 million sq km
- Gold - 64.7 million ounces
- IMF SDR - 12.3%
- GDP - $5.4 trillion
- Geographic area - 21.2 million sq km
- EEZ - 7.6 million sq km
- Gold - 100.6 million ounces
- IMF SDR - 0%
- GDP - $11.9 trillion
- Geographic area - 4.5 million sq km
- EEZ - 4.2 million sq km
- Gold - 28.1 million ounces
- IMF SDR - 0%
- GDP - $8.3 trillion
- Geographic area - 4.5 million sq km
- EEZ - 9.5 million sq km
- Gold - 23.6 million ounces
- IMF SDR - 0%
- GDP - $7.7 trillion
- Geographic area - 4.5 million sq km
- EEZ - 12.8 million sq km
- Gold - 49.1 million ounces
- IMF SDR - 0%
- GDP - $4.4 trillion
- Geographic area - 24.3 million sq km
- EEZ - 11.7 million sq km
- Gold - 5.6 million ounces
- IMF SDR - 0%
- GDP - $6.5 trillion
- Geographic area - 17.7 million sq km
- EEZ - 12.3 million sq km
- Gold - 15.4 million ounces
- IMF SDR - 0%
"...the world's new powers gather to upend the US-concocted rules based order..."
"This will be the biggest upheaval in international finance since 1971. It's taking direct aim at the dollar."
