back in my map era, we're ukrainemaxxing right now
Declarations of the imminent doom of Ukraine are a news megathread specialty, and this is not what I am doing here - mostly because I'm convinced that whenever we do so, the war extends another three months to spite us. Ukraine has been in an essentially apocalyptic crisis for over a year now after the failure of the 2023 counteroffensive, unable to make any substantial progress and resigned to merely being a persistent nuisance (and arms market!) as NATO fights to the last Ukrainian. In this context, predicting a terminal point is difficult, as things seem to always be going so badly that it's hard to understand how and why they fight on. In every way, Ukraine is a truly shattered country, barely held together by the sheer combined force of Western hegemony. And that hegemony is weakening.
I therefore won't be giving any predictions of a timeframe for a Ukrainian defeat, but the coming presidency of Trump is a big question mark for the conflict. Trump has talked about how he wishes for the war to end and for a deal to be made with Putin, but Trump also tends to change his mind on an issue at least three or four times before actually making a decision, simply adopting the position of who talked to him last. And, of course, his ability to end the war might be curtailed by a military-industrial complex (and various intelligence agencies) that want to keep the money flowing.
The alignment of the US election with the accelerating rate of Russian gains is pretty interesting, with talk of both escalation and de-escalation coinciding - the former from Biden, and the latter from Trump. Russia very recently performed perhaps the single largest aerial attack of Ukraine of the entire war, striking targets across the whole country with missiles and drones from various platforms. In response, the US is talking about allowing Ukraine to hit long-range targets in Russia (but the strategic value of this, at this point, seems pretty minimal).
Additionally, Russia has made genuine progress in terms of land acquisition. We aren't talking about endless and meaningless battles over empty fields anymore. Some of the big Ukrainian strongholds that we've been spending the last couple years speculating over - Chasiv Yar, Kupiansk, Orikhiv - are now being approached and entered by Russian forces. The map is actually changing now, though it's hard to tell as Ukraine is so goddamn big.
Attrition has finally paid off for Russia. An entire generation of Ukrainians has been fed into the meat grinder. Recovery will take, at minimum, decades - more realistically, the country might be permanently ruined, until that global communist revolution comes around at least. And they could have just made a fucking deal a month into the war.
Please check out the HexAtlas!
The bulletins site is here!
The RSS feed is here.
Last week's thread is here.
Israel-Palestine Conflict
Sources on the fighting in Palestine against Israel. In general, CW for footage of battles, explosions, dead people, and so on:
UNRWA reports on Israel's destruction and siege of Gaza and the West Bank.
English-language Palestinian Marxist-Leninist twitter account. Alt here.
English-language twitter account that collates news.
Arab-language twitter account with videos and images of fighting.
English-language (with some Arab retweets) Twitter account based in Lebanon. - Telegram is @IbnRiad.
English-language Palestinian Twitter account which reports on news from the Resistance Axis. - Telegram is @EyesOnSouth.
English-language Twitter account in the same group as the previous two. - Telegram here.
English-language PalestineResist telegram channel.
More telegram channels here for those interested.
Russia-Ukraine Conflict
Examples of Ukrainian Nazis and fascists
Examples of racism/euro-centrism during the Russia-Ukraine conflict
Sources:
Defense Politics Asia's youtube channel and their map. Their youtube channel has substantially diminished in quality but the map is still useful.
Moon of Alabama, which tends to have interesting analysis. Avoid the comment section.
Understanding War and the Saker: reactionary sources that have occasional insights on the war.
Alexander Mercouris, who does daily videos on the conflict. While he is a reactionary and surrounds himself with likeminded people, his daily update videos are relatively brainworm-free and good if you don't want to follow Russian telegram channels to get news. He also co-hosts The Duran, which is more explicitly conservative, racist, sexist, transphobic, anti-communist, etc when guests are invited on, but is just about tolerable when it's just the two of them if you want a little more analysis.
Simplicius, who publishes on Substack. Like others, his political analysis should be soundly ignored, but his knowledge of weaponry and military strategy is generally quite good.
On the ground: Patrick Lancaster, an independent and very good journalist reporting in the warzone on the separatists' side.
Unedited videos of Russian/Ukrainian press conferences and speeches.
Pro-Russian Telegram Channels:
Again, CW for anti-LGBT and racist, sexist, etc speech, as well as combat footage.
https://t.me/aleksandr_skif ~ DPR's former Defense Minister and Colonel in the DPR's forces. Russian language.
https://t.me/Slavyangrad ~ A few different pro-Russian people gather frequent content for this channel (~100 posts per day), some socialist, but all socially reactionary. If you can only tolerate using one Russian telegram channel, I would recommend this one.
https://t.me/s/levigodman ~ Does daily update posts.
https://t.me/patricklancasternewstoday ~ Patrick Lancaster's telegram channel.
https://t.me/gonzowarr ~ A big Russian commentator.
https://t.me/rybar ~ One of, if not the, biggest Russian telegram channels focussing on the war out there. Actually quite balanced, maybe even pessimistic about Russia. Produces interesting and useful maps.
https://t.me/epoddubny ~ Russian language.
https://t.me/boris_rozhin ~ Russian language.
https://t.me/mod_russia_en ~ Russian Ministry of Defense. Does daily, if rather bland updates on the number of Ukrainians killed, etc. The figures appear to be approximately accurate; if you want, reduce all numbers by 25% as a 'propaganda tax', if you don't believe them. Does not cover everything, for obvious reasons, and virtually never details Russian losses.
https://t.me/UkraineHumanRightsAbuses ~ Pro-Russian, documents abuses that Ukraine commits.
Pro-Ukraine Telegram Channels:
Almost every Western media outlet.
https://discord.gg/projectowl ~ Pro-Ukrainian OSINT Discord.
https://t.me/ice_inii ~ Alleged Ukrainian account with a rather cynical take on the entire thing.
Educational post: here we will debunk the myth of China’s dollar-denominated bonds in Saudi Arabia for those who are interested in learning about how the system actually works, and those who need a little help with connecting the dots.
A few months ago, some multipolar bloggers were jumping up and down about Saudi Arabia “ending its 50-year petrodollar contract” and how that is going to “end dollar hegemony” (I already wrote a whole post debunking that). Today we see the same people saying that China issuing dollar-denominated bonds in Saudi Arabia is actually genius and how that’s going to “end dollar hegemony”. So which one is it?
The answer is neither, and far simpler than you think. But to even be able to answer this question, we need to learn a bit about the fundamentals of the financial system, and especially to debunk the many misconceptions about the role of US treasury.
Don’t worry, I have deliberately stripped all technical jargons from this post, so anyone will be able to understand even if you know nothing about banking and finance. This post is meant to be educational - I firmly believe that learning about how the economy and the financial system operate can shield us from falling for right wing propaganda, and that is my goal of spending many hours writing this post here.
First, let’s lay out the main misconceptions that have been perpetuated on social media about the China’s dollar bond in Saudi Arabia, and what questions do we need to answer:
Let’s go through this point by point.
What is the role of US treasuries?
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Many people will tell you that a government needs to borrow (treasury issuing bonds/securities) to finance its spending. Here, we see the same narrative that if everyone stops buying US treasuries, the US government would not be able to finance its imperialism.
This is no different than the popular neoliberal myth perpetuated by both the Republicans and the Democrats that “we have to cut our spending and bring our deficits down because we have borrowed trillions of dollars from China!”
What they really mean is that “we have to cut funding to this and that public utilities and services so all the wealth can be concentrated to the top 0.1%”. In other words, myths like this allow the ruling class to institute austerity on the working people, otherwise “your children and grandchildren will become debt slaves to China who owns our country and they have to work so much harder to pay back our debt to China!”
Let’s dispel this myth once and for all by learning about where did this myth even comes from.
Do government have to borrow to finance its spending?
You see, a long time ago when governments peg their currencies to gold (or under Bretton Woods from 1944-1971, to US dollar which is in turn pegged to gold), they run on a fixed exchange rate. This means that the government promises that its currency can be exchanged for gold (or dollar) at a certain price. If the government cannot keep that promise, they will have to default, or depreciate the value of their currency (exchange rate goes down, imports become more expensive).
A main attraction of pegging your currency to a stable metal like gold, or another stable currency like the dollar, is that it helps boost the confidence and usage of your currency. This was especially true for post-war European countries after their economies had been wrecked by WWII, and those governments desperately needed their citizens to use their currencies again (that were worth very little because the productive capacities had been destroyed) instead of foreign currencies. And so during the Bretton Woods conference, they decided that their governments would peg their currencies to the dollar, and the dollar itself to gold, with the hopes that this will help stabilize the currency exchange rate and hence the development of their economies.
However, there is a huge problem when you run on a fixed exchange rate - you need to have a reserve of the metal/foreign currency in order to defend this exchange rate, and this quickly becomes a problem when it comes to fiscal operations (government spending):
Let’s say you are a government with $100 billion worth of gold reserve, and have issued $100 billion of your currency to circulate the economy. Now, you want to spend $10 billion to build new hospitals for the country, to improve the healthcare standards for the people. Of course, you can just print $10 billion and credit the bank accounts of contractors, raw material suppliers and manufacturers and let them get to work, but you will now have $110 billion circulating the economy with only $100 billion worth of gold reserve, and this is a problem because you do not have enough reserve to defend the fixed exchange rate you have set.
You have several options here:
One, you can increase gold supply
Two, you will have to somehow take $10 billion currency away from the economy.
There are two common ways to do this - first, increase the taxes so you can subtract $10 billion from the economy, which brings monetary base down to $90 billion, and this frees up the space for you to issue a new $10 billion currencies to build the new hospitals.
This is where the popular misconception that taxes finance government budget come from. But as you can see, the taxes really only serve the purpose of taking money out of the circulation so new money can be added to finance new projects. Those taxed money are instead destroyed in the central bank, contrary to the popular myth that they are being used to finance government spending.
Governments that can issue their own money don’t need your taxes - why would they do that if they can already print them? The purpose of taxation is to drive the value of your currency (you are forced to earn the currency because you have to pay taxes with them), and to re-distribute wealth within the society (rich people accumulating too much wealth? Tax them away so they don’t grow too powerful, not because the government needs to be financed by billionaires - of course this does not apply in governments that have been captured by the wealthy elites, but the concept of the power of the State still applies)
The second way is to issue government securities/bonds (in the US, this is known as the US treasury bills/notes/bonds). Instead of taking away your money which many people hate, here the government says: ”hey what if you give me some of your money and I’ll keep them safe for you and in a few years’ time when they mature, I’ll pay you back with interests?”
As you can see, the function of a government bond is the same as taxes - taking money out of circulation, except that instead of the money getting destroyed through taxation, your money is being safekept in a special government savings account (the government’s version of certificate of deposit) and you are not allowed to use them until the bond matures. Then you get your money back with interests.
Because the government is technically “borrowing” from you, this is known as government debt, and you are the creditor lending money to the government. This is where the popular misconception that government debt finances government spending comes from. But really, they just want to take some money out of the circulation so they can defend their exchange rate during new budget spending.
And finally, if the government cannot fulfill its promise of exchanging their currency at the price they have set with reference to gold/dollar, they will have to default, or depreciate the value of their currency.
The above was how they roll during the fixed exchange rate era, and where all these misconceptions about US treasuries comes from.
(continued)
What is the role of US treasuries post-1971?
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However, after 1971 the US has abandoned the Bretton Woods (Michael Hudson calls this the superimperialism phase) and the dollar is now a fiat currency with a floating exchange rate. It is no longer pegged to anything, and there is nothing to defend. As such, the government cannot go default from overspending.
So, then, what is the role of US treasury post-1971 where the US dollar is now a fiat currency?
While technically the US government no longer need to issue bonds (debts) to “finance its spending” (more accurately, now that we have learned, to take money out of circulation), the US treasury as an institutional mechanism is still useful when serving as a drain for interbank reserves (to maintain the interest rate set by the federal government) and for the excess dollars spent overseas (Hudson’s superimperialism). In other words, the US treasury is simply serving as a drain or a “sponge” to soak up all the surplus dollars/reserves.
We will now look into each of these roles, because it is very important to get this into your head that the US treasury does NOT finance US government spending.
First, let’s look at how the US treasury helps maintain the target interest rate set by the central bank aka Federal Reserve in the US.
Have you ever taken a check to a bank and deposit it into your account? How does this “transfer of money” work, especially if the payer has an account from a different bank? Does the payer bank ships its money to the recipient bank?
The answer is no, they simply run up and down the numbers in their reserve accounts held at the central bank (Federal Reserve in the US). All commercial banks have special reserve accounts at the central bank and this is a very important part of the banking system to ensure that millions and millions of transactions taking place every day can be rapidly validated and cleared. Without such a system in place, there is no way for the government to monitor and validate billions of dollars worth of transactions that occur every single minute across the entire world, and without which some banks will very quickly run out of money when large transactions take place! Imagine what chaos that would be.
Every commercial bank is required by law to maintain a minimum (and positive) daily reserve (although technically they are only checked over the weeks or through averages over time, not every single day). This means that at the end of every day, some banks will have a surplus (more) of the minimum required reserve in their account (maybe because more checks transferred more money to their banks) and some banks will have a deficit (less) of the minimum reserve required (maybe because a lot of withdrawals took place in their banks).
In any case, the banks that do not meet the minimum reserve requirement will have to fill up that reserve account, and banks that have a surplus of reserve will be looking to lend them out (because every single excess dollar is dead money and banks really do not want to carry any dead money that does not bring any profit!)
Of course, because the central bank (Federal Reserve) will never run out of money, the commercial banks running low on reserves can always borrow from the central bank to fill them up. However, to discourage such persistent behavior of commercial banks keep running out of reserves, the central bank typically charges a penalty rate every time a commercial bank asks to draw from this discount lending (this is known as the “discount window” in technical terms).
As such, commercial banks would typically avoid borrowing directly from the central bank, and instead borrow from the interbank market that occurs within the central bank (the Fed fund market). This is where the banks with surplus reserves will be looking to lend out their extra reserves to the banks that need them. However, because of competition, and every bank really really does not want to hold even a single extra dollar above their minimum requirement for reserve balance because it doesn’t bring any profit, this competition to lend out their reserves will very quickly drive the interest rate down to 0%, and this is a problem for the central bank whose mission is to target a particular interest rate.
Let’s say the central bank (Federal Reserve) wants to target a 2% interest rate, and they want to prevent the interest rate being driven down to 0% in the Fed fund market, so here the Federal Reserve can sell government-backed securities (US treasuries) at a specific rate (say 2%) to set the minimum price of borrowing, and thus stopping the competition from driving the market interest rate down to 0%. Commercial banks with surplus reserves will now prefer to lend to the government (2% interest) than to compete in the interbank market which is being driven down to 0%. Thus, simply by selling US treasuries at a certain price, the Federal Reserve can maintain its interest rate target and ensures that no bank will lend below 2% among each other.
In other words, the US treasuries act as a drain that soaks up the excess reserves that are flowing in the Fed fund market while allowing it to target a particular interest rate.
Now, there is another role for the US treasuries that Michael Hudson described in Super-imperialism, which is to act as a vehicle/drain to soak up excess dollars that the US empire has spent overseas. Because the US federal regulations prohibit foreign governments and entities from purchasing critical assets, most net exporter economies who sold their goods and services will end up with surplus dollars (after spending their trade revenues to import whatever they need in dollars). Where else could all these dollars go? Nowhere except US treasuries because that’s where you can at least earn some interests.
This is also the reason why China has largely stopped buying US treasuries since 2013 and started to lend out their dollar revenues in the Belt and Road Initiative, because they have realized that they were simply accumulating junk papers after selling actual goods and services made using Chinese labor and resources to America. At least with BRI, you are gaining some diplomacy benefits by helping the developing countries build their infrastructures.
But the fundamental problem remains the same: this simply kicks the can down the road and the BRI countries now have to earn dollars to pay back their Chinese creditors. And this is part of the reason why all these talks about China accumulating more dollars make no sense at all.
To conclude, the US treasuries (government debt) do NOT finance US government spending, and it doesn’t matter even if nobody buys US treasuries since it only functions as a drain for the surplus dollars.
The misconceptions about it persist because many people are still thinking in gold standard/Bretton Woods terms. This works neatly into the neoliberal narrative that the US has run into too much deficits and that austerity is needed to make sure that “our country will not be owned by China and our children won’t have to pay back the debt we are accumulating.”
The US government (or any government with monetary sovereignty) is thus not constrained by such spending rules. The power of fiat currency backed by the state has been discovered many times (e.g. greenbacks during the US Civil War, Beihai currency issued by the CPC Beihai Bank in Shandong during the war against Japanese and KMT invented by the legendary Marxist economist Xue Muqiao), but the first known case of this usage in peacetime was Stalin’s war communism, 40 years before the US independently discovered it!
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What can a $100 billion dollar-denominated bond issued by China do?
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We now answer the question based on the wild extrapolation that somehow, this $2 billion dollar-denominated bond, if being scaled up to $100 billion dollar, will somehow wreck the US financial system.
Let’s have some perspective: the $780 billion US treasuries currently owned by China comprise about 2.7% of the total treasuries, or ~9% of all treasuries held by foreign owners, amidst a gigantic $27 trillion US treasury.
Even if China sells off its entire reserve, it would barely make a dent to the US treasury market, let alone a $100 billion bond. This is pure scaremongering tactics used especially by the Republicans to make the American people fear about a foreign threat coming to take away their life savings.
What China can do, however, is to strategically use those dollar reserves to pay back Africa’s $700 billion dollar debt, and quickly flush the region with yuan (the institutions need to be well prepared in advance, of course), and that would be a real challenge to the US hegemony in the region and tip the balance of US monetary imperialism by allowing African nations to escape the US debt trap.
However, if China had wanted to do that, they can simply do it directly. All the fantastical imagination about how China issues more dollar bonds (which effective dollarizes the world) and accumulate more dollar surplus (which would require someone or some countries to sell more shit to America in order to earn the dollars to buy the China-issued bonds) so that China can somehow use those money to help the BRI countries pay back their dollar debt (which are mostly owed to private creditors including many Chinese creditors) is quite preposterous if you think about it.
Remember that the US can pump out dollars like opening a tap, while China and the rest of the world have to earn those dollars with real labor and resources. You are already at a huge disadvantage if you try to play the dollar game. China cannot control the dollar in the same way that the US cannot control the yuan. Monetary sovereignty confers the currency-issuing government with a lot of power to perform their tasks.
(continued pt.3)
What is the intent behind China issuing dollar-denominated bond in Saudi Arabia? Can it really help Belt and Road countries pay back their dollar debt?
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The answer is so ridiculously simple that I don’t even know why there are so many mental gymnastics involved: the Saudis don’t want to buy the bonds in yuan, they want to pay in dollars (because they have a shit ton of those), and so China obliged because they want to build a closer business relationship with Saudi Arabia who supplies them with oil.
Of course, any investor can buy those bonds, but the sentiment remains the same: the Middle East is not going to be yuanized for sure.
The goal of Saudi Arabia is to dollarize the BRICS countries (in this case, the Middle East), not to help them de-dollarize. There is simply no incentive for Saudi Arabia to do so, and China also benefits from a dollarized world since they have committed to a net exporter status for the longer term, and so they would prefer others not to save in yuan (rather, they want people to use yuan to import stuff from China, not as a saving instrument like the dollar).
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I hope this very long post has been educational to those who are interested in learning. There are so many misinformation around the internet these days, and it is easy to fall into their narratives (especially since I am seeing more “multipolar grifters” taking advantage of the anti-imperialist sentiment to promote gold and crypto by scaring people into thinking that their dollar savings will be worthless because the US dollar is going to collapse anytime soon).
Learning about how the system works from a materialist and Marxist perspective can at least shield us from these propaganda that only serve to strengthen right wing neoliberal ideology, and the unfortunate fact that many on the left has subscribed to and continue to believe in such nonsense that only harms our cause.
I appreciate the effort post. There are a few things that I would like to question.
RE 1,2 The purpose of China's bond issuance is to attack the ability of the US to spend dollars by decreasing the supply dollars available to the US government.
As you said correctly this is nonsense, the purpose of an American Bond is to remove excess dollars from circulation and to prop up the value of the of the US dollar.
This however is not the purpose of a Chinese issued dollar denominated bond. For the Chinese there is no incentive for them to maintain the value of the US dollar by not spending it. For them a bond is a short against the American dollar. The less valuable the dollar is the less valuable the interest they have to pay on the bond is.
Thus the avenue of attack is on the US is an attack on their currency like the 1997 Asian Financial crisis. The Chinese bonds would deprive the US an avenue to soak up dollars in circulation and cause their currency to devalue. Addressing point 2, how much of an effect can they have. The extent they are able to do this depends not on their dollar reserve but other dollar holders willingness to buy their bond.
While dedollarization is necessary to weaken US hegemony, it is not something that China can achieve unilaterally. While paying off the debts of other nations may allow them the material conditions to dedollarize, China would have to bet that they have the productive/ideological forces to do so, which they might not. If they were to lose this bet, this would mean they have lost their dollar reserve and their ability to do this at a more ripe time, which had taken them decades to build.
Chinese policy making has historically been risk adverse. Expectations that they take drastic actions as opposed to laying foundations are unrealistic. For China laying foundations means weakening the US Dollar, increasing the productive forces in prospective nations and building a shared community for a multipolar world.
You are correct that those were not China’s intentions.
It should be noted that the US literally printed $2 trillion during Covid as stimulus as if nothing happened.
There has been a lot of narrative about how the Covid stimulus was causing the inflation, but this is a right wing propaganda aimed to disparage government spending on social programs. As Michael Hudson and others had pointed out, it was a supply-side inflation caused by energy price inflation (due to sanctions against Russia), supply chain disruption (caused by Covid lockdowns the exacerbated by the Russia-Ukraine war) and monopolists price gouging. Consumer-side inflation can happen only when the economy has full employment and people have so much money to spend that they drive the prices up.
So, no, it doesn’t matter whether China issues a $2 billion or $200 billion bonds. In fact, the US is already on its course to reverse the flow of dollar after sucking in so much international capital from the past two years of 5% rate hike. It’s time to flood the world with dollars again if they want the countries to regain the dependence of those countries again.
What the world needs is to use the opportunity to de-dollarize while the dollars fled their countries, not entrenching further into the system where one side controls the tap that can pump out countless bottles of water while the rest trades the water bottles among themselves.
Thanks for the quick response.
I don't disagree that dedollarization is a necessity, I do disagree that this does nothing towards that end.
I tried to be precise in the language I used to make a distinction between inflation and the value of currency. While the two are correlated, that correlation is not exact, if they were purchasing power parity would not be a thing and we could be able to directly compare economies using nominal gdp.
While the forces that drive inflation are relevant for Americans, the forces that drive currency exchange are what is relevant for the rest of the world. I brought up the Asian Financial Crisis, because I felt that was the closest analogy to the effect of these actions would be. While the US would may have mechanisms to contain the fallout it would not be without consequence.
Dedollarization is difficult. There is groundwork that needs to be laid and it will not be in a single step nor in a single agreement. For those of us who look at this action and see promise; it is because this moves ultimately signals that the Chinese are committed to a long term devaluation of the US dollar. Short term yes there are more dollars floating around, but the move long term makes the move away from the dollar more palatable to countries beyond those who are already committed.