The crisis of bourgeois economics

[blindpig]

“HUNGER and CAPITALISM: Pals.” Drawn by Hahn (Notecracker). From Volume 1, Number 2 of The Masses. WikiMedia Commons, Public Domain.

The chimera of a stabilized capitalism
By Prabhat Patnaik (Posted Sep 03, 2025)

Originally published: Peoples Democracy on August 31, 2025 (more by Peoples Democracy) |

THE vision of a capitalism that is “stabilised” through a rectification of its “excesses”, and hence pre-empts any social challenge to its existence, has always endured in one form or another among economists. This vision is in sharp contrast to the Marxist perception which holds that the only way that the so-called “excesses” of capitalism can be got rid of, is through a transcendence of capitalism itself. This vision of a rectified, and hence “stabilised” capitalism has of course been shown repeatedly to be a chimera; but that fact has not prevented the persistence of such a vision in one form or another.

The English economist John Maynard Keynes had seen this “excess” as consisting in the large-scale involuntary unemployment that the system was forever saddled with, not just in depressions when this unemployment got hugely magnified, but even in its ordinary quotidian existence. The mode of rectification according to him was through the intervention of the State by injecting demand into the system; and yet the capitalism which had supposedly been “rectified” with Keynes-inspired State intervention, instead of getting stabilised, got re-saddled once again by substantial unemployment, regarding which the State could do little in the new situation.

In a different context, in third world societies where the workings of capitalism have unleashed mass poverty that is increasing over time, a vision was held out that this situation could be stabilised, that the exclusion from resources of ever-growing number of people could be arrested, and even reversed, through the infusion of micro-credit, without any need for transcending the system. The World Bank was an enthusiastic promoter of the idea that while individual marginalised households might not be able to access credit on non-exploitative terms and hence take any initiative to improve their miserable living condition, through, for instance, the setting up of micro-enterprises, they could overcome this predicament by forming self-help groups. Institutional credit on easier terms could be accessed by such groups who could then take initiatives to improve their lot through small local business ventures.

What was striking about this World Bank vision is that it did not involve any simultaneous attempt on the part of the State to curb capitalism, to put restrictions on its spontaneous tendencies. In India for instance bank nationalisation was used to partially redirect institutional credit away from monopoly houses towards agriculture and small borrowers, which was an interference in, indeed a partial reversal of, the spontaneous tendency of capitalism to effect a process of centralisation of capital. The World Bank vision on micro-credit did not entail any nationalisation or any interference by the State in the spontaneous tendencies of capitalism. It visualised poverty and unemployment disappearing through the provision of micro-credit within the framework of capitalism itself (entities like the World Bank of course do not see capitalism as being characterised by any spontaneous tendencies whatsoever). So, for them it was a case of “having your cake and eating it too”; you could have your capitalism and yet overcome poverty, not through the usual route of transferring vast masses of hitherto unemployed or underemployed workers to capitalist enterprises, but by developing micro-enterprises locally, where the poor themselves live, through microcredit.

This of course was contrary to all experience. Wherever the setting up of micro-enterprises has succeeded in helping the poor, it has done so through significant State intervention rather than through the unrestricted functioning of capitalism; the obvious example here is the Kudumbasree experiment in Kerala, where, with the help of the state government, a large state-wide women’s cooperative has made significant progress in entering a diverse range of activities. But the World Bank, and a section of economists sympathetic to its view, persisted in believing in and propagating this chimera of micro-credit-sustained micro-enterprises eliminating poverty within the framework of an unrestricted capitalism.

Now a comprehensive study carried out by the All India Democratic Women’s Association (AIDWA), which approached 9,000 women to share their experience of micro-credit, has revealed a truly alarming picture. The main findings of the AIDWA study which were presented along with testimonies by several witnesses at a public hearing in Delhi on August 23-24, were the following.

First, commercial banks, including even public sector banks like the State Bank of India, simply do not lend to women borrowers without some collateral and without several documents being presented which the potential borrowers find difficult to obtain. As a result, women borrowers from marginalised households are more or less completely excluded from direct institutional credit.

Second, these commercial banks lend instead to Non-Bank Financial Companies (NBFCs) and Micro Finance Institutions (MFIs) controlled by capitalists, which function as intermediaries. They borrow from banks at low rates of interest, less than 10 per cent, and lend to the final borrowers at exorbitant rates ranging between 21 and 26 per cent; and, what is more, such loans by banks to what are de facto the modern counterpart of the old village moneylender, are counted as priority sector lending!

Third, these NBFCs and MFIs resort to “loan pushing”, demanding very few documents from the borrowers, other than easily available ones like Aadhaar cards. But once the loan is taken, they harass the women ceaselessly for getting the EMIs, and subject them to terrible verbal and even physical abuse.

Fourth, since loans are often taken by the women for meeting education expenditure of the children and healthcare expenditure in case of sudden illness, which do not necessarily increase their income stream in the foreseeable future, repayment becomes difficult; and the exorbitant rates of interest further aggravate the problem. As a result, the borrowers are compelled to take loans from multiple sources on increasingly onerous terms, using a later loan to service the earlier ones. They get inexorably pushed into a vicious cycle of debt from which there is no escape. Thus, microcredit that was supposed to be an antidote to mass poverty within capitalism, becomes itself an instrument of pushing people, including women, deeper into poverty.

Ironically, this altered role of microcredit, from alleviating poverty within capitalism to accentuating it, occurs because of the functioning of capitalism itself. There are two ways in which the functioning of capitalism subverts what was considered to be an instrument of poverty alleviation into an instrument of poverty accentuation. The first is the macroeconomic consequence of the functioning of capitalism, which manifests itself in multiple ways: through the privatisation and hence commercialisation of services like education and healthcare that raise the costs of these services and necessitate borrowings by households that cannot be easily paid back; and through the crisis of stagnation of the material productive sectors, with which the system inevitably gets afflicted and which reduces employment opportunities, reduces household incomes, and hence pushes households further into debt. In other words, far from microcredit acting as an antidote to the tendency towards immiserisation that is immanent in capitalism, the microcredit system itself gets caught within the operation of this tendency and gets subverted over time, because it cannot prevent this tendency at the macroeconomic level.

The second way in which the functioning of capitalism subverts the microcredit system that is supposed to stabilise it by alleviating poverty, is by entering into this system itself. Capitalism in other words does not leave the microcredit system alone; it enters this system just as it enters into every other sphere where it sniffs some opportunity for making profits. As a result, instead of self-help groups of women from marginalised households getting institutional credit on cheap terms, NBFCs and MFIs controlled by capitalists become the receivers of cheap institutional credit and they try to make a “killing” by charging exorbitant rates to the marginalised households.

The tendency of capital is to enter every sphere where it sniffs an opportunity to make a profit, whether it is high finance or the manufacture of military equipment or retail trade; it should hardly be surprising therefore that it would also enter the very sphere that was created to provide an antidote to itself.

It is a chimera to believe that the immanent tendency of capitalism to create wealth at pole and poverty at another can be halted, and the system stabilised that way. It is a chimera to believe that arrangements like microcredit can be devised within capitalism itself to counteract the effects of such an immanent tendency. The entity that makes all such beliefs into a chimera is none other than capital itself.

https://mronline.org/2025/09/03/the-chi ... apitalism/

[blindpig]

Stablecoins Could Crash Our Economy
Posted on September 8, 2025 by Conor Gallagher

By Richard Murphy, Professor of Accounting Practice at Sheffield University Management School and a director of the Corporate Accountability Network. Originally published at Funding the Future

Stablecoins are being sold as safe, secure cryptocurrencies. In reality, they are shadow banking in disguise – with the same risks that nearly destroyed the global economy in 2008. Nobel Prize–winning economist Jean Tirole is worried, and so am I. If these private tokens collapse, the public will pick up the bill. It’s time to call stablecoins what they are: a threat to financial stability and democracy.



Stablecoins could crash our economy.

Now, admittedly, they will probably crash the US economy before they crash the UK economy, but once one economy crashes, most follow on. And stablecoins are a fundamental threat to our financial stability at present.

Let’s be clear what stablecoins are.  They are simply a form of cryptocurrency that are supposedly asset-backed. In other words, if you buy a stablecoin, and $280 billion has been invested in these things at this moment, then you buy an asset that is supposedly backed by US government bonds, and therefore, they are secure.

The emptiness of Bitcoin and other cryptocurrencies is avoided, supposedly, as a consequence, but as Nobel Prize-winning economist  Jean Tirole said recently, he is very, very worried by stablecoins. And he’s right to be so, because although people talk about them as if they are money, they are not.

They carry no guarantee from any government. And worse still, they’re not subject to any real supervision.

The danger is simple. When they collapse, and they may well do so, taxpayers are very likely to be forced to pick up the bill.

Tirole issued his warning in an interview with the Financial Times when he said that there is insufficient supervision of stablecoins. It’s a point I’ve made on this channel before now, and I’m glad to see somebody like him joining in, because what he’s saying is that  the whole multi-billion-dollar stablecoin market is at risk of failing, and that could create a future financial crisis,  and I really do not think he is over-egging his claim.

If depositors, whether retail or institutional, believe that they’re holding safe deposits, and that is the impression that they are given, then, when everything goes wrong, they will demand a government rescue. And governments fearing contagion and public anger will, at that time, probably have no choice but to intervene.

Now, what are the parallels?

Stablecoin recreates the dangers of shadow banking that we saw before the 2008 financial crash.

They pretend to be fully backed assets, just as the bonds that were marketed at that time claimed to be. But the risk is that the US Treasury bonds, that stablecoin funds are supposedly invested in, provide too low a yield in real terms to provide the backing for those who promote these funds, and they will therefore abandon this form of asset backing and instead go for riskier assets with higher returns. At that point,  the very idea of stability, which is implicit in the name stablecoin, will disappear, and one shock could collapse the whole system.

I’m already aware of the risk to US financial markets from the overvaluation of tech companies as a consequence of AI.  The S&P 500 is massively overvalued, as is the FTSE 100 in the UK. But stablecoins exaggerate this risk and elevate it to a different plane.

And that’s particularly the case because of the political involvement in stablecoins. Let’s be clear.  The US administration from Donald Trump onwards is heavily invested in stablecoins. In fact, in many cases, much of their personal wealth will be dependent upon the success of the stablecoin market.

As a consequence, they are likely to understate the need for effective regulation. Weak regulation is already a problem, but it’s going to get worse with cronyism, corruption and inevitable disaster, potentially following.

And the scale of the problem is big. I’ve already mentioned  $280 billion is now held in so-called stablecoins, and that’s not trivial.  It is a systemically significant sum equivalent to the size of a major bank failure. And when we know that major bank failures were the cause of the 2008 financial crisis, the world could not  afford Lehman to go, as happened, then we can see that this is something that could unravel and could unravel fast, creating the pressure for a taxpayer-funded bailout.

Stablecoins, however, do something even worse than bank failures did.  They actually link themselves to the US dollar. But at the same time, they are not dollars. They are not money, but they undermine, by the way in which they’re issued, the ability of the government and central banks to control money.

Effectively, they’re creating a parallel private currency, and they shift control over money creation to private speculators and crypto-oligarchs as a consequence. That means democratic states could lose the ability to run their own economic policies.

And when we look at who is behind these currencies, we might believe that this is deliberate because, remember, the far-right and some crypto enthusiasts in the USA are closely related. And the far-right has no love for the US state or the state in any other country , or the power that it has over economies.

So is the risk another 2008?

Could we have a repeat of the financial breakdown of that year when shadow banking nearly destroyed the global financial system?

The answer is, of course, that is possible.

Private actors now chasing high returns, just as they did in 2008, when regulators looked the other way,  could exploit the current situation when regulators are going to be doing exactly the same thing under pressure from the Trump administration.

When the bubble burst, governments bailed out the system in 2008. The risk is that the same might happen now.

This risk is something that we have to understand. Finance loves to dress old risks in new language and call them innovation. Stablecoins are just another form of unregulated deposit-taking, in fact. They aren’t innovative. There is nothing genuinely new about them, or in pretending that private tokens are as safe as state-backed money.  All the gains go to speculators. The losses will be dumped on the public.

And stablecoins aren’t just a technical issue. That risk of failure also makes them a democratic one. If private money creation replaces public authority, accountability disappears. The economic policy risk that could flow from this, as a consequence of the greed of oligarchs and their political patrons, is to the whole idea of elected government.

Stablecoins erode democratic sovereignty and hand control to unaccountable elites.  So, regulators must stop pretending that stablecoins are harmless experiments. They must recognise them for what they are: systemic risks in the making. And governments should not allow the private minting of tokens that mimic safe deposits.

Every single stablecoin must come with the most prominent government-issued economic health warning because they really do require them.

The fact is, money is and must remain a public good managed under democratic authority. And that is the role of democracy. The debate is not about financial stability. It is about political power.

Who controls money creation, governments or private speculators?  Stablecoin has tilted power away from democracy, at the time being, towards oligarchs and political insiders. Now we have to be honest. There is a fight on our hands as to who is to run our economies and in whose interests.

Jean Tirole is right in that sense to be very, very worried, as he said he was to the Financial Times.  But you don’t need to be a Nobel laureate to be so.

Stablecoins are shadow banking with new branding, cronyism, plus systemic risk, in other words.

The path that they set us on is one to bailouts, lost sovereignty, and weakened democracy.

If we value stability and democracy, governments must act now to shut them down, whatever those who are making a supposed fortune at present from those who are depositing funds, which are put at risk as a consequence, will say.

The technocrats, the oligarchs, and those who are exploiting the weaknesses of regulation have to be prevented from destroying a great deal that is of value in our societies.

https://www.nakedcapitalism.com/2025/09 ... onomy.html

[blindpig]

A.I. Valuations Reach La La Land

The Artificial Intelligence mania has officially reached la la land.

Oracle, OpenAI Sign Massive $300 Billion Cloud Computing Deal (archived) - Wall Street Journal
The majority of new revenue revealed by Oracle will come from OpenAI deal, sources say

OpenAI signed a contract with Oracle to purchase $300 billion in computing power over roughly five years, people familiar with the matter said, a massive commitment that far outstrips the startup’s current revenue.
...
The Oracle contract will require 4.5 gigawatts of power capacity, roughly comparable to the electricity produced by more than two Hoover Dams or the amount consumed by about four million homes.
Oracle shares surged by as much as 43% on Wednesday after the cloud company revealed it added $317 billion in future contract revenue during its latest quarter that ended in Aug. 31.

The increase in Oracle's potential future revenue (not profits) does not justify the increase of its share price. Especially as the whole deal is unlikely to ever being fulfilled:

The OpenAI and Oracle contract, which starts in 2027, is a risky gamble for both companies. OpenAI is a money-losing startup that disclosed in June it was generating roughly $10 billion in annual revenue—less than one-fifth of the $60 billion it will have to pay on average every year. Oracle is concentrating a large chunk of its future revenue on one customer—and will likely have to take on debt to buy the AI chips needed to power the data centers.

OpenAI promises to pay $300 billion for computing power provided by Oracle. It is unlikely to ever make that much in revenues. Oracle does not have the money to build up the computing power it has sold. It is also already over-indebted:

Compared with Microsoft, Amazon and Meta, the biggest spenders of the AI age, Oracle has a far greater debt load relative to its cash holdings. The cloud company’s spending to keep up with the AI boom is already outstripping its cash flow, according to S&P Global Market Intelligence. Microsoft has a total debt to equity ratio of 32.7% compared with 427% for Oracle.

OpenAI is making large losses and is unlikely to be profitable within the next five years. The company does not even have a profitable product that could allow it to sustain the cost of the Oracle deal:

OpenAI’s billions in annual losses are set to accelerate in the near term. Altman told investors last fall that OpenAI would lose $44 billion through 2029, the first year in which he predicted the company would turn a profit. It also faces other challenges, like converting its corporate structure to a for-profit. Roughly $19 billion of committed funding is conditional on OpenAI completing that restructuring.
...
The company is expecting that money will flood in from corporations paying for more advanced features and other AI companies using its technology. But that rests on an assumption that its AI models will improve dramatically—and that companies will find ways to wring profits from the technology.

The launch of ChatGPT 5.0, the latest Large Language Model (LLM) OpenAI provides, was a disappointment. The new version is little better than its predecessor. LLMs continue to based on be pretty simple machine learning technics. They do not have an internal 'world model' that would allow them to contextualize the static results their machine learning parts are generating:

Many of generative A.I.’s shortcomings can be traced back to failures to extract proper world models from their training data. This explains why the latest large language models, for example, are unable to fully grasp how chess works. As a result, they have a tendency to make illegal moves, no matter how many games they’ve been trained on. We need systems that don’t just mimic human language; we need systems that understand the world so that they can reason about it in a deeper way.

In the quest of a general artificial intelligence machines LLMs are a dead-end street.

Gary Marcus, who has forgotten more about AI than I know, calls the Oracle-OpenAI deal Peak Bubble - It’s hard to see how this won’t end badly:

]Oracle’s new market cap, near a trillion dollars, up nearly 50% this week, driven largely by this one apparently non-binding deal with a party that doesn’t have the money to pay for the services, seems more bonkers than most.
..
It’s not just Oracle, though. The other problem here is that the total value of the tech market as whole, which is supposed to reflect the future of value of the companies within it, far exceeds what is likely ever to be delivered.
...
We are well past peak bubble, in fact, and into peak musical chairs. It’s not going to be pretty when the music stops.

Even the Economist is warning of the oncoming crash:

What if the $3trn AI investment boom goes wrong? (archived) - Economist
Even if the technology achieves its potential, plenty of people will lose their shirts

IT ALREADY RANKS among the biggest investment booms in modern history. This year America’s large tech firms will spend nearly $400bn on the infrastructure needed to run artificial-intelligence (ai) models. OpenAI and Anthropic, the world’s leading model-makers, are raising billions every few months; their combined valuation is approaching half a trillion dollars. Analysts reckon that by the end of 2028 the sums spent worldwide on data centres will exceed $3trn.
The scale of these bets is so vast that it is worth asking what will happen at payback time. Even if the technology succeeds, plenty of people will lose their shirts. And if it doesn’t, the economic and financial pain will be swift and severe.

When the bubble burst comes, and it will come, there will be little of value left from it:

What would such an ai chill be like? For a start, a lot of today’s spending could prove worthless. After its 19th-century railway mania, Britain was left with track, tunnels and bridges; much of this serves passengers today. Bits and bytes still whizz through the fibre-optic networks built in the dotcom years. The ai boom may leave a less enduring legacy. Although the shells of data centres and new power capacity could find other uses, more than half the capex splurge has been on servers and specialised chips that become obsolete in a few years.

The AI stocks are all overvalued and their shares, which currently make up a third of the total S&P500 market value, will eventually crash. The consequences will be harsh:

To make matters worse, falls in the stockmarket could cause asset owners to cut back on their spending. Because the valuations of ai-related companies have rocketed, portfolios today are dominated by a handful of tech firms. And households are more exposed to stocks than they were in 2000; if prices fall, their confidence and spending could take a knock. The poorest would be spared, because they tend to hold few stocks. But it is the rich who have fuelled consumption in America over the past year. Robbed of its sources of strength, the economy would weaken as tariffs and high interest rates take a toll.

I well remember the crash of dot-com bubble as many of my friends in the IT industry got hurt in it. The upcoming AI-bubble crash is likely to have a worse outcome.

Posted by b on September 12, 2025 at 13:09 UTC | Permalink

https://www.moonofalabama.org/2025/09/a ... .html#more

[blindpig]

“US Will Drive Its $35T Debt Into Crypto:” Senior Putin Advisor Anton Kobyakov

This accusation was made during an Eastern Economic Forum symposium.
Karl Sanchez
Sep 25, 2025



The crypto world’s media websites and even some mainstream ones like Forbes have covered this latest issue that has yet to go mainstream, which it might not given the implications if Mr. Kobyakov’s correct. A Yandex web search using Anton Kobyakov stablecoin as the search terms yields many pages of results most of which are articles that echo each other, although the sites aren’t very user friendly with all their ads. I did manage to find a very informative article that I’m about to share from crypto.news that covers the history of previous Outlaw US Empire manipulations to offload its debt issues onto the global system. Given the gangster behavior of Team Trump, such a scheme cannot be discounted, and IMO must be anticipated. So, without any further introduction, here’s “US will drive its $35T debt into crypto”, Kremlin warns — reset or propaganda?

Is the US preparing a debt escape plan hidden as Putin’s adviser suggests — one that could devalue trillions and force the world to adjust?

Kobyakov’s debt reset accusation

During the Eastern Economic Forum in Vladivostok on Sep. 6, Anton Kobyakov, senior adviser to Russian President Vladimir Putin, gave a sharp view on how the U.S. may be attempting to manage its $35 trillion national debt.

He claimed that Washington is exploring a strategy to transfer part of its liabilities into cryptocurrencies, specifically stablecoins, which he described as a kind of “crypto cloud.”

In his view, such a move could allow the U.S. to devalue its obligations and trigger a rapid financial reset, once again pushing economic risk outward onto the global system.

Kobyakov presented gold and digital currencies as increasingly viable alternatives to traditional government-backed money. He argued that these instruments could be used to ease domestic fiscal strain while reshaping the global financial order.

To back his claim, he pointed to earlier turning points in American monetary history, including the 1930s abandonment of the gold standard and the 1971 exit from the Bretton Woods agreement.

Both episodes, he said, reshaped global monetary dynamics and shifted the costs of adjustment onto other nations. He also suggested that a similar transition today could unfold within 3 to 5 years.

Let’s try to understand what may be occurring behind the scenes and examine whether these claims stand up to the current realities of global finance.

How the U.S. used rule changes to manage its debt

Historical records show that the U.S. has, at key moments, altered its monetary system in ways that allowed it to manage debt pressures without defaulting in formal terms.

While domestic reasons such as deflation, reserve imbalances, or inflation control were cited as triggers, the outcomes frequently involved global ripple effects that supported U.S. solvency at the expense of creditors.

The first instance unfolded between 1933 and 1934 during the Great Depression. Faced with plunging prices and widespread bank failures, the Roosevelt administration moved quickly to break the dollar’s link to gold.

Laws were passed to seize gold holdings, nullify gold-payment clauses in both public and private contracts, and revalue gold from $20.67 to $35 per ounce.

That change alone created nearly $2.8 billion in paper profits, which seeded the Treasury’s Exchange Stabilization Fund, a vehicle used to influence currency markets with minimal Congressional oversight.

These measures not only lifted domestic prices but also reduced the real weight of dollar-denominated debt, in part because contracts once tied to fixed gold weights were now settled in paper currency that had already declined in real terms.

The Supreme Court upheld these changes in 1935, effectively insulating the U.S. from legal challenges to the re-denomination of obligations.

Nearly four decades later, a second transformation took place. The Bretton Woods system had anchored the global monetary order since the 1940s, with the dollar convertible to gold at a fixed rate of $35 per ounce.

But in the 1960s, rising external liabilities and insufficient U.S. gold reserves created doubts about that commitment. Stopgap measures such as the London Gold Pool and the introduction of IMF Special Drawing Rights delayed but did not resolve the imbalance.

In 1971, President Nixon suspended gold convertibility for foreign governments and imposed domestic price controls. The move unilaterally ended the dollar’s gold backing and forced the rest of the world to absorb a floating fiat regime.

In 1973, global currencies were no longer anchored to gold, and the dollar’s value was now shaped by market forces rather than metal parity.

These two episodes are widely studied for their effects on debt dynamics. After each shift, U.S. inflation accelerated. In the 1970s, consumer prices rose more than 13% annually at their peak while interest rates often lagged behind, resulting in negative real returns.

That meant creditors holding fixed-rate claims, whether pension funds, savers, or foreign central banks, saw the real value of those assets shrink. In economic terms, the government reduced its debt burden through inflation and currency devaluation without missing a payment.

Viewed from this perspective, Kobyakov’s argument is not without precedent. In both cases, the 1930s and early 1970s, the U.S. changed core monetary rules in response to internal pressures while the financial cost of adjustment was partially absorbed by external creditors.

That distinction forms the basis of what critics have long described as an asymmetry embedded in the dollar system.

The phrase “exorbitant privilege,” coined in the 1960s by French finance minister Valéry Giscard d’Estaing, captured this frustration by pointing to the ability of the U.S. to borrow in its own currency, rewrite rules when necessary, and leave others to adjust.

GENIUS Act formalizes the crypto–debt connection

In July, President Donald Trump signed the GENIUS Act, creating a federal framework for payment stablecoins and opening a new chapter in how crypto finance connects with government debt. Sovereign debt refers to the money the U.S. borrows through bonds and Treasuries.

The law sets strict requirements for issuers. Stablecoins must be backed fully by cash or short-term U.S. Treasuries; issuers must publish monthly reserve disclosures, follow anti-money laundering rules, and obtain direct federal licenses.

Its passage comes at a time when stablecoin reserves are already becoming intertwined with the U.S. public debt market.

Leading issuers such as Tether and Circle back their tokens with short-dated government securities and repo instruments. Repo instruments are short-term loans secured by Treasuries. That practice creates a direct link between crypto platforms and government funding.

As of Sep. 9, the combined supply of stablecoins stands near $300 billion. Tether accounts for roughly $169 billion, while USD Coin is close to $72 billion.

The figure remains small compared to the $35 trillion national debt, yet the reserves behind these tokens represent a steady source of demand for Treasury bills. Crypto platforms are now tied into the short-term borrowing system Washington relies on to keep its financing running.

Concentration risk adds another layer. Tether’s most recent attestation showed holdings of more than $127 billion in Treasuries, an amount comparable to a mid-size sovereign nation’s creditor position.

Tether is based offshore and serves a global user base, so its inflows and redemptions follow international market conditions rather than U.S. domestic cycles. Sudden changes in activity can shift demand for Treasury bills and ripple into the broader market’s liquidity.

The connection matters because stablecoin reserves do not reduce federal liabilities, but they influence how those liabilities are financed.

Continuous demand for Treasury bills helps anchor the short end of the yield curve, pushing yields lower and reducing government borrowing costs.

When inflation runs above those yields, the real value of debt shrinks over time. The burden is not eliminated but instead transferred onto global holders of tokenized cash, ranging from everyday users to large institutions in crypto markets.

The pattern recalls earlier U.S. moves that reshaped debt repayment terms without outright default. Whether deliberate or emergent, the stablecoin structure now makes it possible to ease the real weight of federal debt while leaving existing contracts formally intact.

The “crypto cloud” doesn’t erase debt

The issue raised by Kobyakov is not whether the U.S. can erase $35 trillion in liabilities through stablecoins. The more pressing question is whether the global financial system can withstand another shift in U.S. monetary rules without breaking trust in the dollar.

The dollar has anchored international finance since the mid-20th century, and its importance was never only about convertibility or trade. It was also about consistency.

After the collapse of the Bretton Woods system in 1971, the dollar remained dominant. Its share of global reserves peaked around 85% and still stands near 58 to 59% today, according to IMF data.

That share is no longer fixed. Central banks have been steadily diversifying their reserves. IMF reports show more allocations to the euro, gold, and smaller currency baskets that include the Chinese yuan.

The World Gold Council reported record levels of official gold buying in 2023 and 2024. Central banks in China, Turkey, and India added hundreds of tonnes combined, pushing gold’s share of global reserves closer to 24%.

Alternative systems are also growing. China and Russia have expanded cross-border settlement in local currencies. Trials of China’s digital yuan have processed billions in volume, and Russia’s central bank is running pilot programs for a digital ruble.

That environment makes U.S. stablecoin legislation more complicated in its effects. On one hand, the GENIUS Act and the participation of large asset managers in tokenized funds expand the reach of the dollar into digital finance.

On the other hand, the structure brings more users and institutions into a system where U.S. policy choices directly shape their returns.

That broader participation changes how risk is spread. In the past, monetary shifts were absorbed mainly by foreign governments or large institutional creditors. The stablecoin era creates a much wider base.

The concept of a “crypto cloud” does not remove debt from view. It spreads the consequences across a larger pool of holders many of whom may not realize the part they play in carrying that burden.

Here’s what Mr. Kobyakov said while a symposium panelist at the Eastern Economic Forum that also includes video or his performance:

The U.S. is now trying to rewrite the rules of the gold and cryptocurrency markets. Remember the size of their debt—35 trillion dollars. These two sectors (crypto and gold) are essentially alternatives to the traditional global currency system.

Washington’s actions in this area clearly highlight one of its main goals: to urgently address the declining trust in the dollar.

As in the 1930s and the 1970s, the U.S. plans to solve its financial problems at the world’s expense—this time by pushing everyone into the “crypto cloud.” Over time, once part of the U.S. national debt is placed into stablecoins, Washington will devalue that debt.

Put simply: they have a $35 trillion currency debt, they’ll move it into the crypto cloud, devalue it—and start from scratch.

That’s the reality for those who are so enthusiastic about crypto.”

Since he was a panelist, it must be assumed he said much more than the 75 seconds we have on record. I haven’t done a deep dive to try and find more; my effort was more like a very shallow dip. Escobar was at the Forum yet has said nothing about this very important issue. Dr. Hudson was asked about the stablecoin during his quarterly Patreon chat on 13 June which I’ve reported on before. Here he explains it beyond what was relayed above:

Well, the dollar’s gone down 10% so far under Trump, and falling.

So suppose you say: Oh, I’m going to buy 10-year Treasury securities. They’ve been yielding 4.5% for the last couple of months.

Well, what’s the point of investing in Treasury securities, getting your 4.5% in dollars? That’s okay, but if the dollar goes down by 10%, then you end up losing 5.5% on your investment. So it’s not really something that is safe at all.

This is the same problem with stablecoin. Stablecoin says: We’re investing every dollar that you put into the crypto stablecoin in Treasury securities.

Well, that’s fine. That means that the holder of stablecoin gets a Treasury security, but he or she doesn’t get any of the interest payment on it.

It’s the stablecoin or the other crypto company that organizes the crypto that says: Okay, you know, we’ve invested their money in stablecoin. We’re taking all of the interest for ourselves. We’re making billions and billions of dollars on this.

Well, one problem is they also will get the capital gain, if the dollar goes up, or the capital loss, if the dollar goes down.

So, suppose that you’ve invested in stablecoin and now all the investors say: Okay, we don’t want to be part of an international financial system whose purpose is to finance America’s military deficit and NATO’s war on the 85% global majority. So please give us our money back.

Well, the stablecoin company [says]: Alright, we’ll sell all of the Treasury securities that we’ve invested your money safely in.

But as they sell these securities, they’ll be getting much less dollar money than was put in because the interest rates will probably go up, meaning the price of these securities is going to fall as people cash into securities and make withdrawals.

Even though it’s all safely invested in securities, the securities prices go up and down.

For many years, I watched Dr. Hudson as a guest of Max Keiser on his Keiser Report that heavily promoted bitcoin and other crypto; and while Max clearly valued Dr. Hudson’s macroeconomic views, he could never get him to endorse crypto, nor could Max refute Hudson’s strong arguments against crypto. Another voice that sang in the wilderness on this issue was Yanis Varoufakis issuing the alarm over Technofeudalism. In this recent short essay, he describes why stablecoins are a threat and offers a very unique way out from the problem. Yet, he also shows why his suggestion will be rejected by the West’s bankers. In this long conversation with Dr. Hudson, Yanis gets into the issue of cloud capital and the threat it poses which he sees as the basis for the rise of technofeudalism. Digital national currencies aren’t the problem as they’re merely a medium different from paper or metal and are controlled by central banks that issue transparent reports to their citizen (in most cases) bosses.

The bottom-line problem was announced above—the dollars consistency, or nowadays with its having been weaponized, its great inconsistency and massive lack of trust in the system the Outlaw US Empire created in 1944-5 that it upended on one major occasion and seems bent on doing so again. Thus, the global migration away from the dollar. What appears to be the preferred method out of this dilemma for the Global Majority is to use their national currencies for most commerce and to use special central bank digital currencies (CBDCs) to deal with trade imbalances, both of which circumvent the dollar. CBDCs will require a specialized bank and transmission network to properly function, and both are now being formulated. If the world is to avoid getting financially screwed again by the Outlaw US Empire, it must hustle to finish its new international financial system before the stablecoin scam gains enough capital to become detrimental internationally. The oligarchs behind and within Team Trump have figured out a way to use debt as a weapon but it takes awhile to load the gun. The Trade War won’t end with Trump; the interest on the debt is too big a problem as it must be paid annually without relying on the printing of more money to pay it as that’s very inflationary. And much of that interest is owed to US-based oligarchs who will demand it be paid—their wealth is the debt owed to them. If the debt isn’t paid, their wealth disappears.

https://karlof1.substack.com/p/us-will- ... nto-crypto

[blindpig]

Private data tells the story Washington won’t: Jobs are disappearing

Originally published: The Black Press USA on 2025 by Stacy M. Brown (more by The Black Press USA) (Posted Oct 13, 2025)

With the federal government shutdown grinding on, the nation’s economic picture is collapsing into silence and uncertainty. For the first time in decades, there is no official monthly employment report from the U.S. Bureau of Labor Statistics–the same agency many now say can no longer be trusted after the White House moved to control its data release following a weak jobs report earlier this year. In the vacuum, private firms have stepped forward with independent analyses that show the country losing jobs and faith at the same time.

ADP’s National Employment Report found that private-sector employers shed 32,000 jobs in September, reversing the modest gains of the summer. Annual pay for job-stayers rose 4.5 percent, showing that wages are inching up even as hiring slows. “Despite the strong economic growth we saw in the second quarter, this month’s release further validates what we’ve been seeing in the labor market–that U.S. employers have been cautious with hiring,” said Dr. Nela Richardson, ADP’s chief economist. The ADP data showed the heaviest losses in manufacturing, construction, and professional services, with small and medium-sized companies suffering the steepest cuts. The Midwest lost 63,000 jobs, and gains in the West could not offset the slide.

Bank of America’s Institute Employment Report reinforced that picture, finding “a continued cooling of the labor market.” Its data showed a 10 percent year-over-year rise in unemployment payments made to customer accounts, nearly double the most recent increase reported by the government before the shutdown. Lower-income workers continue to trail others, with after-tax wage growth of just 1.4 percent compared with 4.0 percent for higher-income households.

Goldman Sachs produced its own estimate after the Labor Department was forced to halt publication. The investment bank calculated that initial claims for unemployment benefits rose to 224,000 in the week ending September 27, up from 218,000 a week earlier. The number of people receiving benefits slipped slightly to 1.91 million, using state-level data and seasonal adjustments that were pre-released before the shutdown. Reuters reported that the Chicago Federal Reserve used private “real-time” indicators to estimate the national unemployment rate at 4.3 percent, though without federal verification, that figure is uncertain.

Global investment firm Carlyle also stepped in, releasing its own economic indicators drawn from its portfolio of 277 companies and nearly 730,000 employees. Carlyle estimated that U.S. employers added only 17,000 jobs in September and that real private residential construction spending declined 2.5 percent, even as business investment rose 4.8 percent, driven by technology and artificial intelligence projects. “Corporate spending, particularly in technology and AI infrastructure, continues to power growth while household consumption ends the quarter on a high note,” said Jason Thomas, Carlyle’s Head of Global Research and Investment Strategy.

Yet while private analysts fill the gap left by a silenced federal government, the shutdown’s impact on workers and families has become its most defining consequence.

A newly revealed memo from the Office of Management and Budget claims that federal workers forced into furlough during the ongoing shutdown may not receive back pay once the ordeal ends. In open defiance of the law, the administration argues that the 2019 Government Employee Fair Treatment Act does not automatically guarantee wages to workers sent home or ordered to labor without compensation. The government that once promised fairness has now declared that those who serve it may be discarded. This is not confusion. It is control. Mark Paoletta, the administration’s top lawyer at the budget office, wrote that Congress must pass new legislation to authorize those payments. His reasoning is what one former Republican official called “clearly against its intent.” In other words, the government rewrote the law to justify punishing the very people who keep it running.

President Trump offered no compassion, only contempt. “It depends on who we’re talking about,” he said when asked if furloughed workers would receive back pay. “There are some people who really don’t deserve to be taken care of, and we’ll take care of them in a different way.” Those words echo not from a leader, but from a ruler measuring human worth as though it were a currency. Across the country, millions now live the consequences of those words. Families of federal workers stare at empty refrigerators–the most recent estimate revealed that more than 49,000 District residents, or 13 percent, are federally employed–and rent notices pile up. CNN reported that many workers will receive smaller paychecks this week, the last they may see until the shutdown ends. What kind of democracy weaponizes hunger against its own citizens?

The administration’s defiance also contradicts its own Office of Personnel Management, which stated that “employees who were furloughed as a result of the lapse will receive retroactive pay for those furlough periods” once the shutdown ends. But this White House does not deal in law; it deals in loyalty. It rewards obedience and punishes dissent. It governs by threat and humiliation. And as the government remains closed and official data suppressed, America’s workers–both public and private–are left to piece together their own picture of a country in economic and moral decline.

https://mronline.org/2025/10/13/private ... appearing/

(It'll take a lot more than Trump's departure from the scene to halt this country's moral decline. Only a revolution to topple capitalism can do that.)