xiaohongshu

1

xiaohongshu [none/use name] @hexbear.net 8h ago

Why the cynicism?

2

xiaohongshu [none/use name] @hexbear.net 8h ago

My point is that Trump is the one who wants to decouple, not China.

Trump is the one saying “the Great American Nation has run up 100 gallons of tap water for y’all so you get to save your water. Now I’m asking you to open up your tap water and give us back some of the water we gave you”.

I agree that Trump won’t be able to materialize his MAGA plan to re-industrialize America. However, the fact that that’s what Trump wants means that he won’t start a war with China for literally giving him what he demanded, will he?

9

xiaohongshu [none/use name] @hexbear.net 8h ago

I told y’all that Mamdani will be the America’s equivalent of Lenin. If he can inspire a new wave of leftists taking office, then it will transform the political landscape of America.

4

xiaohongshu [none/use name] @hexbear.net 9h ago

Trump literally wanted to decouple from China. It has been China that, through using various of its powerful cards like rare earth export restrictions, that brought the US back into the “marriage”.

China should just take up on Trump’s offer and start importing from the US lol. Let the Americans be the world factory’s workers for once.

1

xiaohongshu [none/use name] @hexbear.net 9h ago

For a long time, especially during the gold standard era and the Bretton Woods era, economists had bought into the barter myth perpetuated by Adam Smith that money was invented as a medium of exchange because people used to trade through barter.

I highly recommend reading David Graeber’s Debt: the First 5,000 Years which was based on Michael Hudson’s research, or at the very least, read this excellent Hudson article: Palatial Credit: Origins of Money and Interest, which very much refuted the barter theory:

The Commodity or Barter Theory depicts money as emerging simply as a commodity preferred by Neolithic producers, traders and wealthy savers when bartering crops and handicrafts amongst themselves. In this origin myth bullion became the measure of value and means of payment without palace or temple oversight, thanks to the fact that individuals could save and lend out at interest. So money doubled as capital – provided by individuals, not public agencies.

Differing views regarding the origins of money have different policy implications. Viewing money as a commodity chosen by individuals for their own use and saving implies that it is natural for banks to mediate money creation. Banking interests favor this scenario of how money might have originated without governments playing any role. The political message is that they – backed by wealthy bondholders and depositors – should have monetary power to decide whether or not to fund governments, whose spending should be financed by borrowing, not by fiat money creation. As a reaction against the 19th and early 20th centuries’ rising trend of public regulation and money creation, this school describes money’s value as based on its bullion content or convertibility, or on bank deposits and other financial assets.

Governing authorities are missing from this “hard money” view, which its proponents have grounded in an aetiological scenario of prehistoric individuals bartering commodities among themselves. The policy implication is that it is irresponsible for governments to create their own money.

As Hudson pointed out in the article, money had always existed as a form of debt since the early civilizations, and debt is simply a form of promise.

As human civilization transitioned from primitive hunter-gatherer society into agricultural society, planning for the future was crucial. You need time for the crops to grow, so how do you even “pay” for goods before the harvests?

When Babylonians went to the local alehouse, they did not pay by carrying grain around in their pockets. They ran up a tab to be settled at harvest time on the threshing floor. The ale women who ran these “pubs” would then pay most of this grain to the palace for consignments advanced to them during the crop year. These payments were financial in character, not on-the-spot barter-type exchange.

As a means of payment, the early use of monetized grain and silver was mainly to settle such debts. This monetization was not physical; it was administrative and fiscal. The paradigmatic payments involved the palace or temples, which regulated the weights, measures and purity standards necessary for money to be accepted. Their accountants that developed money as an administrative tool for forward planning and resource allocation, and for transactions with the rest of the economy to collect land rent and assign values to trade consignments, which were paid in silver at the end of each seafaring or caravan cycle.

The widespread use of gold had to do with the Crusades, when medieval kingdoms did not have the means to assert their legal authorities as the currency issuer, and since they hired mercenaries who operate outside the boundaries of their legal authority, gold was instead used as a substitute form of payment.

By the 19th and early 20th century, the monetary system of most countries operated under the gold standard (and later Bretton Woods from 1944-1971).

Even though governments had at times abandoned the gold standard and turned to fiat currency, especially during war and crisis, for example the greenbacks during the American Civil War, all of these were deployed as temporary measures.

Stalin was the first to decouple the “internal” or “domestic” ruble from gold (there is also a “clearing” or “external” ruble that the USSR used for external trade that was still somewhat tied to gold, but it’s irrelevant for the discussion here):

What ensures the stability of the Soviet currency? Certainly, not only the gold reserves. The stability of the Soviet currency is ensured, first and foremost, by the enormous quantity of commodities in state hands, released into circulation at stable prices. Which economist can deny that such security, existing only in the USSR, is a more effective guarantee of currency stability than any gold reserve? Will economists in capitalist countries ever understand that they have completely lost their grip on the theory of gold reserves as the 'sole' guarantee of currency stability?

Stalin at the Plenum of the Central Committee of the All-Union Communist Party (Bolshevik), 1933

As I wrote in the previous comment, the Soviet “internal/domestic” rubles existed in two forms: non-cash (for investment/business transaction) and cash (the “money” that people use to pay for goods and services). The non-cash ruble isn’t exactly the “money” that people think of today (a commodity/medium of exchange for barter), but rather a form of debt (think credit or score, i.e. numbers) that the government (the legal authority) issues to allow for settlement between state agencies and business entities. This circuit is detached from the “money” that flows into the hands of the working people, and because they were insulated from the consumption loop, its impact on causing inflation is minimal.

On the other hand, the cash ruble was issued based on productive capacity and availability of goods and products, and because the volume was controlled by the state, it could easily ensure that people have access to the available goods without driving up the inflation.

Now, on to MMT, the genius of MMT is the introduction of a price anchor, using government-backed jobs guarantee to prevent wage-price spiral, a mechanism that solved the problem the Keynesians ran into in the 1970s causing the inflation to spiral.

With the government setting the minimum wages through jobs guarantee (because nobody would work for a private firm that pays less than the government guaranteed job), it also controls the prices of goods and services (which are priced relative to wages). Of course, there is also supply side inflation which can be caused by shortage of imported goods, international sanctions, logistics interruptions but we’re focusing on the goods and services that are produced and consumed domestically here.

Moreover, through jobs guarantee, the mechanism also ensured that when workers are laid off by private firms, it automatically offsets the loss of income that could dampen consumption, because the workers can be immediately re-hired through the government jobs guarantee program, ensuring that their income is not lost.

Most important of all, jobs guarantee anchors wages to prices, and give leverage to the workers over the capitalists. If private firms refuse to pay better wages or provide better benefits, the workers will not have to worry about losing their jobs because they can always be hired through the jobs guarantee program, and this gives them plenty of bargaining chips. And because the wage floor is set by the government, it will also not lead to a wage-price spiral.

Pay attention and compare to the Stalin’s dual circuit monetary system here - even though the forms of implementation are different, both rely on the government setting the wages (as opposed to government setting the prices), and this required an understanding the money really is just a form of debt, not a commodity/medium of exchange as perpetuated by Smith’s barter theory.

Hope this helps.

xiaohongshu [none/use name] @hexbear.net 10h ago

The next one will surely work lol!

6

xiaohongshu [none/use name] @hexbear.net 10h ago

They can if they abandon the neoliberal ideology, as I have been saying.

It is a belief system. If everyone in your neighborhood believes that you can only use tap water for no more than 5 liters per day, or else the pipe is going to burst and flood your entire house and damage your property, it’s going to dramatically alter how you live your life, and everyone else in the neighborhood. You will learn how to drink less, wash less, save water whenever necessary, and you will curb certain activities that might make you too thirsty, or need more washing.

And this will create a trading system where people who are good at saving water will sell or lend the surplus water to their neighbors who need more water for the day, in exchange for other treats. It will create an economy of its own even though nobody knows for sure whether the pipes will burst or not.

The point is that until somebody actually tried running the tap water beyond the maximum limit, it will continue to be a belief that dictates everyone’s life. And nobody dares to test it, because they are afraid that the pipes will burst, their homes will flood, and their neighbors will kill them for irreparably damage the life support system of the community.

xiaohongshu [none/use name] @hexbear.net 10h ago

Tell that to the Soviet and Chinese economists and all the Marxist economists.

8

xiaohongshu [none/use name] @hexbear.net 15h ago

That still sounds like a non-problem created by their own unwillingness to actually make that choice, they're adhering to a model that isn't necessary anymore.

The question is where is the money going to come from?

To raise wages, either the firms (private sector/capitalists) run into deficit, the foreign sector does, or the central/local governments do so.

Let’s go through them one by one:

Since the capitalists are unlikely to want to make a loss, and they aren’t exactly in the shape to do so right now because profit margin has been squeezed to razor thin due to intensive competition (involution), the wage growth isn’t going to come from there. You can see the government has started intervening with the anti-involution campaign to raise the firm’s profits so they have the money to even pay their workers. Worse, the deflation (lack of domestic consumption) is making their corporate debt even more expensive to service. The only way to offset the loss is by exporting even harder (which is why you see Chinese exporting firms are dumping cheap goods into other countries under Trump’s tariffs).

The local governments are also in a debt bubble right now. Years of over-reliance on land revenue has caused a reckless over-investment in real estate. The property prices are now plunging (land revenue going down), and with slowing consumption/export (value added tax revenue going down), and with an outsized hidden and visible debt that need to be serviced, the local governments have little capacity to spend do so.

Which brings us to the central government, the only governmental body that has the power of money creation. However, since China wants to adhere to the IMF rule of balancing the budget to keep its deficit spending low, it has to either accumulate foreign currencies (through export, or through attracting foreign investments), or borrow through bond issuance (banks collateralizing their assets to the government).

As you can see, the only realistic way to raise wages is for the central government to run deficit, but they will not be able to meet the 3-4% of GDP spending as recommended by IMF, and they will be scolded by the IMF.

Also, isn't the middle income trap just a neoliberal revision of World-systems Theory?

Yes, because the developing countries have listened to the IMF to convert their economies into export-oriented ones.

After the collapse of the Bretton Woods, the US empire found the “cheat code” by running permanent trade deficit (super-imperialism) to absorb the surplus goods from the rest of the world. This causes many governments, wanting to earn the US dollars, to become over-invested in export manufacturing capacities. As a result, the oversupply of productive capacity allowed wealthy Western countries with strong currencies to enjoy cheap goods from the Global South.

Since they have over-invested in this trade surplus strategy, the export economy became the primary driver of domestic growth. Whenever they try to raise income, their export goods become uncompetitive. This keeps the developing countries in an artificial “trap” as long as they want to rely on the export industries.

But here’s the problem: how do you transition out of the export economy? For every investment, there is always an opportunity cost. If you spend 10 years to get good at something, and suddenly the skill you’re good at is no longer needed, you find yourself difficult to compete with others because you have not invested in the other skills. This may not be a problem if you’re alone and don’t need much to survive, but what if you have to pay for the medical treatment of your aging parents? Suddenly, the decision is a much harder one to choose.

Every country has to decide how to strategically invest in their economy, and the cost of transition, even if it is overall beneficial to their own economy, will always be a policy choice with some hard decisions to make. If you give up something you’re good at, you might get overtaken by your competitors and suddenly you find yourself losing that market, and you’re screwed if that transition fails.

This is why only countries like China with very strong economy can make the transition easier than most, and they will and should have an outsized responsibility for the rest of the Global South countries.

2

xiaohongshu [none/use name] @hexbear.net 16h ago

Two different things here.

First, wage-price spiral is not a problem until you have full employment and all resource utilization is fully occupied. In that case, GDP can only be driven by inflation. Strong unions can push through real wage increase and cut into the capitalist profit, which was why the UK went into an inflationary spiral as it did in the 1970s because the capitalists did not want to give up their profit. The Keynesians did not have an answer for that, hence the neoliberals came in and crushed the workers unions.

Second, I agree with you that under current neoliberal system, where full employment is not reached, there won’t be wage-price spiral. Hence, you won’t find it in the IMF study that Roberts quoted.

However, for any socialist who is serious about bringing full employment for the economy to ensure the prosperity of the working class, you cannot avoid this problem. As I already presented, you either go with Stalin’s mechanism or the MMT price anchor mechanism.

If you ignore this problem, you WILL get inflationary spiral as the Keynesians did, and the next thing you know, your government is overthrown. Again, ignore this at your own peril. So many left wing governments continue to regurgitate neoliberal model and see how they end up.

10

xiaohongshu [none/use name] @hexbear.net 17h ago

Because China wants to have its cake and eat it too. It wants the competitiveness of its export industries (since money creation is tied to accumulation of foreign currencies/assets, and requires suppression of wages and domestic demand) and boost domestic consumption at the same time (which requires wages to increase, and giving up its net exporter status).

In fact, the IMF themselves even gave this phenomenon a name - middle income trap. The idea that a exporter country’s economy is stuck at transitioning into a high income country because the moment they give their workers high income, their export competitiveness will fall and brings them back down to middle income.

The only way out is to not play the IMF/neoliberal game.

12

xiaohongshu [none/use name] @hexbear.net 17h ago

It was a problem in post-war European social democratic countries under the Keynesian model, including the UK.

Strong labor unions had the leverage to push for real wage increase, and if the firms do not want to cut their profit, they have to mark up the prices in return, leading to a wage-price spiral.

The bourgeois establishment was afraid of the strong unions eating into their profits, and their refusal to reduce their mark up profit led to uncontrolled inflation. By the mid-1970s, inflation in the UK soared to ~20%, and combined with the falling sterling exchange rate, the neoliberals were brought in to crush the labor unions and bring the inflation to an end.

No neoliberal country actually has full employment, so this seems to contradict your earlier assertion that the wage-price spiral is fundamental.

It becomes a problem once economies gave up the neoliberal framework and start guaranteeing everyone job. In this case, a job guarantee program from the government will become the price anchor that anchors labor to wage, hence effectively setting the minimum wage to the economy. If firms do not want to raise wages, the workers will simply go find jobs from the government. If firms mark up the prices excessively, demand will fall and they will have to cut production and layoff workers. However, because of a jobs guarantee mechanism in place, the system ensures that there will not be a loss in consumption demand (since the laid off workers continue to be employed in another job and getting paid), preventing both a recession and for the firms to unreasonably drive up inflation. The situation fixes itself.

17

xiaohongshu [none/use name] @hexbear.net 18h ago

Wage-price spiral occurs only under full employment. When the productive capacity is fully occupied, GDP can only grow through inflation.

That is irrelevant to China’s problem because China doesn’t have full employment.

To understand the solution to this problem, we need to go back in time to the 1970s first before we can explain this.

After the collapse of the Bretton Woods, the IMF and OECD began to push the NAIRU (non-inflationary rate of unemployment) theory, which in simple terms, means that full employment no longer mean fully employed workforce, but a minimum level of unemployment where you do not cause more inflation. In other words, if you have too few unemployed people (too many people getting paid), you’re going to get into an inflationary spiral and it’s bad for the economy.

As a result, many countries were afraid of using an expansionary fiscal policy (government deficit spend more money) to ensure full employment. To spend more money in a “balanced budget”, you need to increase the assets you hold first. As a result, many developing countries - under the pressure from IMF, World Bank and GATT (later WTO) - converted their economy in export-oriented economy to run a trade surplus, export-led growth model. By selling cheap goods and services to wealthy Western economies, the earned foreign currencies then become part of their assets, which allowed the governments to spend more money domestically to raise the living standards of their own people.

This is all neoliberal crap, of course. The solution to preventing wage growth under full employment from causing an inflationary spiral is also where the genius of MMT comes in. The introduction of a price anchor through jobs guarantee pretty much solves the problem. When the government sets the wages through guaranteed employment, and since goods are priced relative to wages, it eliminates the potential wage-price spiral with too many people getting employed. The wage level is set as determined by the productive capacity and availability of goods and services in real terms.

Amazingly, Stalin figured this out nearly 70 years ago with the first Five-Year Plan, which involved the 1930-32 Credit Reform. Using a Dual Circuit monetary system, Stalin correctly understood that money is simply debt, and split the ruble into two largely insulated but partially overlapping circuit - the non-cash ruble circuit are investment money used for driving large investment projects, while the cash rubles circuit are the wages that flow into the working people for consumption. Since the non-cash rubles were mostly insulated from the consumption economy, the Soviet government was able to spend huge amount of money into investment projects without having to worry about inflation. Instead, the wages (cash ruble circuit) were determined based on productive capacity and availability of goods and services. This was how the Soviet economy was able to expand exponentially with very little inflation. Of course, a large portion of this mechanism was reversed under Khrushchev, and the Soviet economy began to stagnate in the coming decades.

Going back to China, as you can see, all China has to do is to give up the neoliberal framework and begin to enact jobs guarantee program. This will immediately allow the consumption level to rise, and hence solving its deflation problem. Not only that, the Chinese government can also set social safety net, such as free healthcare, such that people would be less averse to spending. Finally, wealth redistribution is also key to ensuring that the rural population (nearly 40% of China’s population whose monthly income is still around 1000 yuan (~$150) will also have the purchasing power to raise their living standards.

The increased consumption level will automatically cause wages to increase, and inflation to increase at a healthy level.

5

xiaohongshu [none/use name] @hexbear.net 18h ago

Marx made important contributions to inflation theory but remember that he wrote Wages, Prices and Profits in the 1860s, when the world was still in the gold standard era i.e. a fixed exchange rate regime that exerted a natural deflationary force to the economy.

Marxist theory of inflation has developed much further in the hundred years since. Robert Rowthorn’s conflict theory in the 1980s is a much better representation of inflation in a modern economy, which took into account of endogenous money supply, the conflicting force between firm’s mark-up profit and leverage strength of the union in pushing for real wage increase, the central bank setting interest rates, and most importantly, the collapse of the Bretton Woods causing the natural deflationary force of the fixed exchange rate regime to be lifted and made the Keynesians lost control of the inflationary spiral.

That’s when neoliberals came in and brutally crush the unions.

xiaohongshu [none/use name] @hexbear.net 19h ago

Yes, that was a problem that the Keynesians in the UK could not solve. The US inflation was more complex, because it was also driven in part by the spike in energy price during the oil crisis.

FYI I already commented to the poster that the IMF study that Roberts quoted used data from the 1970s-2010s, when the NAIRU framework was already firmly in place, so wage increase has already been heavily curbed. No surprises there at all.

xiaohongshu [none/use name] @hexbear.net 19h ago

Irrelevant. The IMF study used data from the 1970s onward to the 2010s, at which point NAIRU (non-accelerating inflation rate of unemployment) has already been pushed heavily by the IMF and OECD after the collapse of the Bretton Woods to many developed and developing economies. Neoliberalism was already in full force, of course wage is catching up to the inflation because wage growth has already been pre-emptively crushed under the NAIRU framework!

Also funny that IMF is being quoted here because that’s literally IMF justifying how their neoliberal framework was the correct one.

Applying our definition to the data sample with aggregate nominal wages identifies 79 episodes. The first episode is identified in 1973, and the last in 2017 (Table 3.2). When using the narrower but more widely available wage concept covering only the manufacturing sector, 100 episodes are identified (Table A.4). Episodes with price and wage accelerations has become less prevalent since the 1970s (Figure 3.1). This pattern is clearest when using the narrower wage concept, given the longer time-coverage of this variable (Figure 3.1, panel B).

lmao, guess what happened in the 1970s?

xiaohongshu [none/use name]

@ xiaohongshu @hexbear.net

Posts

3
Comments

704
Joined

1 yr. ago

xiaohongshu [none/use name]

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

DSA member Rae Huang announces candidacy for Los Angeles mayor

DSA member Rae Huang announces candidacy for Los Angeles mayor

They are right, the rich are right there waiting to be expropriated.

DSA member Rae Huang announces candidacy for Los Angeles mayor

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

Material conditions x vibes: theory lite for noobs

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

They are right, the rich are right there waiting to be expropriated.

Zohran Mamdani Wins New York With a Youthquake

Ridiculous Chinese censorship used AI to change the gay couple in Together (2025) to a heterosexual couple

Average working hours dropped drastically after 1917, due to fear that the Russian Revolution would inspire similar revolutions in other countries