The modern executive branch of the US government is designed to work in the general interests, not only of the entire class of US capitalists, but also for the general welfare of the US economy and, as a result, manages the interests of the entire petty bourgeois and labor-aristocratic classes. But what does this mean? There are three classes that directly benefit from the US empire’s stability and economic success: 1) the big imperialist bourgeoisie, the finance capitalists invested in US firms like Bill Gates, the Kochs, etc.; 2) the petty bourgeoisie, those who own their own capital but also have to work; and 3) the labor aristocrats, roughly defined here as those proletarians who receive more than the global average pay for their labor-time.² It is the political expectation that the executive branch will look out for the interests of these three classes. Affordable college and healthcare and access to purchasing land (usually in the form of housing) is part of that understanding. Most division between the Republicans and the Democrats actually comes down to which section of these classes to favor the most.

The Fed has generally played a neutral role in these feuds, leaning toward the Democratic camp of stability to benefit the petty bourgeoisie and labor aristocrats. The reserve system regulates the country’s money supply, which has a direct impact on the velocity of exchange (how quickly money or credit changes hands; in other words, how many transactions occur in any given time), on the total price of all commodities produced in the US market, and on the total number of those commodities produced. These figures are interdependent and related to one another on a push-pull basis, and they trend toward an equilibrium. That equilibrium can be expressed through the following equation:

(p * q) / v = m

Where p = the price of all commodities produced in the economic unit (the US market), q = the total number of commodities in that unit, v = the velocity of money, and m = the total money supply.³ Changes in any of these variables will cause subsequent changes in the others as they move toward the above equilibrium.

Inflation is reflected in the variable (p). For instance, all things remaining equal, if (m), the money supply, increases, either (p) or (q) must increase, or (v) must decrease. The regulation of this process is central to the purpose of the reserve system to prevent, on the one hand, runaway hyperinflation, and on the other, the velocity of money trending toward zero, either of which would cause a catastrophic collapse in the US economy, freezing transactions and halting production. For more details on the role of the Fed, see “The Inevitable Capitalist Crisis Looms” in the Red Clarion.

The thing now under dispute is the Fed’s overnight bank funding rate,⁴ the rate of interest which other banks must pay to one another or to the Fed if their own money supply is below the reserve amount required by the Securities and Exchange Commission (SEC) for large broker-dealers to ensure the bank can cover its loans at the end of any given day. This rate determines the interest rate for all lending in the US economy. All other lending rates are set somewhere higher than this Federal rate. The lower the lending rates, the more speculative investments will become as money can be loaned with less risk to the lender and thus the borrower. The reason this number is the source of conflict among the ruling class is because it embodies a contradiction in the interests of the major classes invested in the performance of the US economy.

For the big bourgeoisie, it is objectively better for their capacity to invest and make profits if the interest rates are zero. Although the Fed had historically always maintained some interest rate, in the wake of the 2008 crash the Fed set the interest rates to 0%. The US economy had been on this “life support” rate from 2008 until the 2020 economic crisis triggered by COVID-19. An interest rate of zero, however, will not remove excess money from the economy. At the beginning of 2020, the money supply was at 4,000 thousand billion USD. Today, the money supply is at 19,000 billion USD, reflecting a nearly five-fold increase.⁵ It also tends to make banks more unstable (as they will lend far more than they can safely cover), and increase the velocity of money by encouraging increased lending and investment. As a consequence, either the total number of commodities in US markets must fall (and why would they? There has been no change in production) or the price of commodities must rise. This rise is inflation.

The rise in the price of articles of consumption – consumer commodities – has a negligible effect on the big bourgeoisie. They can afford any increase, however large, because personal consumption is a marginal amount of their overall money. Even the rise in the price of means of production – raw materials, machines, factories, land, etc. – would lag significantly behind the gains made as a result of zero-percent lending at the federal level. Indeed, even if the banks should fail and the economy collapse, history has proven that the big bourgeoisie are shielded from the worst effects of that crash and would be able to buy up the resources of those smaller bourgeoisie and petty bourgeoisie that are driven into bankruptcy, default, or foreclosure for pennies on the dollar, further concentrating their stranglehold on the country’s economic resources.

Conversely, the labor aristocrats cannot weather such a storm and consumer inflation, particularly of necessary staples like food and healthcare. It can drive labor aristocrats into the ranks of the working proletariat and cost them their comfortable class-basis – their homes, their long-term investments, etc. It is in their interests to keep interest rates high, reduce or slow the rate of inflation, and ensure that the banks remain stable.

The petty bourgeoisie, possessing economic relations that are both bourgeois and proletarian, tend to be more like the labor aristocracy when it comes to this question than the big bourgeoisie. Inflation in the costs of the means of production will inevitably drive a significant portion of the petty bourgeoisie out of their class and down into the proletariat as the continued running of their businesses becomes financially untenable. The upper ranks of the petty bourgeoisie – those able to draw on reserves of credit or who are becoming regionally powerful and are on the cusp of entering the lower ranks of the big bourgeoisie – tend to prefer the lowering of the interest rates so they can attempt to grow their money-capital and progress out of their class and enter the big bourgeoisie.

What, then, does this grand jury indictment mean? The Fed has consistently kept the interest rates higher than they had been since 2008 for the past several years. President Trump, acting as the hammer of the big bourgeoisie, has made repeated demands that the Fed lower those interest rates.

On Sunday, January 11, the chair of the Federal Reserve, Jerome Powell, released a video statement in which he said that the subpoenas are an attempt to force him to capitulate to the White House’s political demands. That, in essence, Trump will force him out unless he does not agree to lower the federal interest rate. This matters for three reasons. First, it is an unprecedented breaking of ranks and airing of internal political differences between the Fed and the White House. Second, it suggests a continued feud within the ruling class over how to distribute the spoils of empire. Third, if the Fed does lower the interest rate and if, as a result, inflation explodes more than it already has done, this will result in the proletarianization of large numbers of labor aristocrats and petty bourgeoisie, the closure of many routes available to students and young people intent on entering those classes, and an overall increase in the size of the revolutionary mass base.

For us, the first issue means we have an opportunity to expose the machinery of the state and how it functions. We must also be aware of the concurrent risk here; the left-liberals, the Democrats mostly, will use the extraordinary nature of this rupture to bang their anti-Trump drum and try to recuperate their ramshackle coalition. This risk is real and requires our active intervention to minimize the number of petty bourgeoisie and labor aristocrats who are ideologically drawn back into their orbit.

As to the second reason, we must be extremely wary of declaring that the imperialist bargain between the big bourgeoisie and the upper ranks of the working class is breaking down.⁶ However, we do have the benefit of the bourgeoisie’s own mouthpieces such as the Wall Street Journal and the Financial Times to help understand their perspective. Although both sources have been moderate in their reporting of the Powell investigation, both have taken soft pro-Powell and anti-Trump stances.⁷ We can also look to the stock market, which has registered constrained disapproval as investments were moved from stocks into gold.⁸

If there is a fracture between elements of the big bourgeoisie, that group supporting Trump’s nationalist position (as opposed to the old neoliberal internationalism of capital) is growing and the neoliberal position is dwindling.⁹

Therefore, we must begin to prepare for our third conclusion. Trump has rarely allowed himself to be stymied by decorum or procedural niceties. He now holds the US Supreme Court by a wide margin should any of his actions be enjoined by a federal judge. We should first prepare immediate agitation, not demanding that Trump step back and allow Powell to continue as chair, but exposing the manner in which the Federal Reserve serves to stabilize an inherently unjust and exploitative world order. We must do our utmost to ensure the masses correctly understand that any complaints from the Democrats about Trump’s behavior aren’t on their “behalf,” but rather are intended to secure the supply of anesthesia with which they have been dulling the class struggle for a century; that the Democrats are attempting to lull US workers and petty bourgeoisie back to sleep so the empire can continue to burn, loot, and rape the world in their name.

In the intermediate term, we should prepare for a potential economic crash that may result in the unleashing of the contradictions contained by the Fed and its policies since 2020: a collapse in the real estate market and a subsequent depression triggered by numerous bank failures.

Careful attention must be paid in the coming weeks to the way in which this mini-crisis is handled by the state and by the political actors. We must continue to weigh evidence of one kind or another, and determine where the chips will fall so we can formulate a concrete plan of action. As of today, it seems that Trump is routing the supporters of neoliberal stabilization and preparing to enter a new phase of class warfare. This aligns with the White House strategy on increasing friction with ICE and the kidnapping of President Maduro: a global assault on behalf of the big bourgeoisie and the upper ranks of the petty bourgeoisie to repudiate the imperialist power-sharing that had been achieved during the last century.¹⁰ Washington has exploded the “rules-based order” it went through pains to establish over the last hundred years by acting unilaterally, in defiance of international law, and stating the geopolitical-economic interests which it is pursuing, rather than hiding its maneuvers behind high rhetoric of “democracy.”

1. The US central banking system. 
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2. Here we are using the term labor aristocracy, as elsewhere in pieces published by Clarion staff, to mean anyone who is paid more for each hour of labor than the global average. For more, see Lauesen, Torkil. Unequal Exchange: Past, Present, and Future (Iskra Books, 2025). ︎
3. See Marx, Karl. Capital, Chapter 3. This is consonant with Adam Smith’s understanding of the velocity of money.
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4. Also called the “Federal Funds Rate.”
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5. The M1 money supply over ten years, as reported by the Federal Reserve Bank of St. Louis. Accessed at https://fred.stlouisfed.org/series/M1SL.
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6. See, for instance, H.W. Edwards’ groundbreaking work Labor Aristocracy, Mass Base of Social Democracy. ︎
7. The Economist, which represents British capital, has much more firmly presented an anti-Trump position on Powell as well as on the ICE killing of Renee Good. The re-emergence of national (as opposed to international) capitalist planning in the US empire has rattled many cages in Europe. See, for instance: Financial Times, “Justice department’s probe into Jay Powell galvanizes Fed leaders to repel Donald Trump’s attacks,” Jan 12; Wall Street Journal’s, “The Fed Fights Back,” Jan. 13.
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8. On the following Monday, the day after Powell’s video, trading was muted and the DOW opened down 500 points. The transfer of money out of the stock market and into commodities represents a fear that the value of the stock market may fall.
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9. Hatred of the Federal Reserve’s regulatory power has been poured into the Libertarian movement and thus embodies a certain kind of right-liberal settlerism. This has been the preserve of an alliance of right-leaning big capitalists and upper ranks of the petty bourgeoisie since at least the early 2000s. It seems this logic is now winning over more and more of the big capitalists themselves.
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10. The neo-liberal position on immigration has always been the Democratic party line: “We need immigrants to do the jobs no one wants to do, that are too difficult, grueling, intense, or low-paying for real Americans!” The ICE sweeps represent a new ideology that flatly denies this rather grotesque logic and embodies instead the naked nationalist nativism in Washington.
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Less than 48 hours after the second largest bank collapse in U.S. history, a consortium of central bankers, regulators, and presidential appointees decided that the risk of another institution going the same way as SVB was so likely, and brought a risk to the entire financial system that was so severe, that—for the sake of the economy—they needed to cause the third largest bank collapse in U.S. history. Along with the news that they would be shuttering Signature Bank, they also announced that all deposits in the failed banks, even those that were uninsured, would be accessible to depositors, and that the FED would begin overvaluing collateral for loans in order to make cash more freely available to banks. These actions are only possible if the Treasury Secretary, FED, and FDIC all unanimously agree that there will be serious adverse effects on the economy or financial stability if they are not taken.

The original story that SVB’s collapse gave no cause to think the problem could spread was already disbelieved by many, and the dissolution of Signature Bank confirmed the doubts of those still on the fence. Unable to deny the problem completely, the political party in power began to play the blame game. Biden and congressional Democrats, now forced to admit that there is major risk to our banking system, tell us that it is entirely the fault of the Republicans, specifically the previous administration. As evidence, they point to a 2018 bill that rolled back bank regulations and set the reserve requirement to 0%.

Like every effective lie, this one contains elements of truth. It is true that in 2018 a law was passed that permitted banks to operate with no cash available for depositors to withdraw. It is true that this is a major liability for the financial system. It is true that the bill was passed by a majority-Republican congress and signed by a Republican president. What is also true is that the bill would never have made it to then-President Trump’s desk  without the sixteen Senate Democrats who voted to support it! The reporting at the time described the bill as a “rare bipartisan accomplishment” and an “unusual moment of political unity.” The Democrats who are currently in power would like you to forget this. Don’t worry! You’re in safe hands! But we remember the truth: this reckless deregulation was bipartisan. When it comes to putting workers’ livelihoods at risk for the sake of abundant loans and easy profits for the owning class, the owning class will always find bipartisan support in the state.

They repeated another message in every corner of the media that was covering the regulator’s responses to these bank collapses: taxpayers would not foot the bill for these “solutions.” Another sleight of hand by the economists who make a living with their forked tongues. As previously mentioned, one of these so-called “solutions” is to make cash even cheaper for banks by overvaluing the assets they offer as collateral. At a time of record inflation, the “regulators” charged with delaying this upcoming collapse have decided to make our money worth even less. Now to be clear, in a system doomed to periodic crises and showing us the first fits of its next, there are no good options that can prevent what is coming. But who can be surprised that they chose one that cheapens the dollar in your pocket so these empty banks can limp on just a little longer?

Someone always has to pay. As the capitalists are so fond of saying, there’s no such thing as a free lunch. We know that. We’ve seen it. The question isn’t whether lunch will be free, but whether we’ll all bear our fair share of the cost. There is nothing fair in putting the cost of reckless deregulation and risky lending on people who had no say in either.

“This will not spread.” Days later, another bank falls.

The banking system is “safe and well capitalized.” Even as these words leave their mouths, they authorize unprecedented actions—actions that are only legal in a time of a major systemic risk.

They tell us “it was those guys not us” and think we are too ignorant to remember the bill they point to as evidence was heralded as a wondrous bipartisan achievement.

They tell us “the taxpayer won’t foot the bill” as they print even more money during the worst inflationary crisis we’ve seen in decades, devaluing taxpayer savings and income.

As they skip and jump from trick to deception to lie, the message they really would like us to hear is: “Don’t worry. Everything is fine. Keep placing your faith in us, and please, we beg of you, do not begin questioning whether things really are as fragile as they seem.” And on this point, they actually provide a shred of hushed honesty. While never their loudest message, here and there they have made it known that the drastic actions they are taking are primarily meant to “reassure depositors” and to lower the chance of people making runs on other empty banks. Biden even goes so far as to try to speak it into existence, as if by magic incantation, saying “Americans can have confidence that the banking system is safe.” They care about what we think of all this. They care what we think because our trust in these lies is the last thread holding it all together.

The U.S. economy is bleeding, it’s hurt. It’s stumbling along on stilted steps, and the Federal Reserve needs to keep up the faith. That’s how all this works, right? Faith that the slip of paper, or the mark on the computer, means you have money somewhere that will be honored when you try to take it out.

Well, the working people are out of faith, and the capitalists are proving yet again that they never deserved it anyway.

The capitalist world was rocked last week with the failure of an important venture capitalist banking firm, Silicon Valley Bank (SVB), which puts the topic of capitalist crisis once again on the forefront of everyone’s minds. What exactly is credit, and how did the bank collapse so swiftly? Where did all that money go? The answers to these questions seem like mysteries, particularly when you listen to the babbling of capitalist economists. They talk a lot about confidence and contagion, but they fundamentally leave you feeling like money itself isn’t real. That’s because they don’t understand it.

What is the Federal Reserve?

The U.S. central banking system was created in 1913 after two centuries of fighting between Yankee merchants and Dixie planters. The Civil War and Reconstruction had finally settled the fight between slave and industrial capital and, with the economic death of the slave-based planter class, the slavers’ objections to banks gave way to the need for a rationalized banking system to support the industrializing U.S. east.

After experimenting with many small private banks and no organizing authority at the end of the 19th century (this was, after all, the period of “free market” capitalism), the many monetary crises and bank failures that resulted convinced the wealthy U.S. capitalists that they needed a system to ensure monetary stability. Enter, the Federal Reserve Act of 1913. Today, the Fed (as it’s known) prints all paper bills, monitors and controls the money supply, and (loosely) controls the credit system. Because it “impinges” on the old unfettered right of capitalists to engage in certain kinds of speculative theft, extreme fiscal reactionaries are always screaming about abolishing it so they can more nakedly swindle the working masses. In reality, the Federal Reserve is one of the most important tools in the U.S. capitalist arsenal to maintain stability and delay the periodic crises of overproduction that cause depressions and recessions.

The Fed is a system of 12 chartered, state banks, funded by an excise on the private banks in the U.S. that operate as the country’s monetary authority. It operates through the tacit agreement of the capitalist class. Above all else, it serves the monopoly capitalists by giving structure and stability to finance capital. As a “neutral” arbiter, the Fed stands above the individual whims of the thieving capitalists and works to coordinate the overall economy. It manipulates U.S. credit and currency, punishes the capitalists that step too far out of line or try to cheat other capitalists too brazenly or completely, and works diligently to shift the result of every  capitalist misstep from the shoulders of the capitalists themselves so their costs are borne by the working classes.

The Fed controls the money supply. That’s the amount of circulating currency (and credit) in the U.S. economy. It controls real physical bills because it is the issuer of all new currency and it destroys old currency to maintain a desired number of bills in circulation. Credit is a more complicated creature, but rest-assured that the Fed has a wide variety of tools for controlling the credit system, all of which will be addressed below. Finally, the Federal Reserve is the so-called lender of last resort.

Raising Money

When the federal government of the U.S. empire needs to spend money to act – for instance, to pay off a segment of its bourgeois capitalist class so it can buy the shiniest and deadliest new weapons for the U.S. armed forces – it can’t turn to taxes. The federal government has been engaged in “deficit spending” – spending more than it raises in taxes – since 2001.

To get new money to spend on programs to buy off the working classes, to pay the salaries of flunkies and lackeys, to manufacture deadly missiles or fund invasions, the Federal Reserve sells securities. These are debt-instruments, basically government I.O.U.s. They’re known as treasury bills, notes, and bonds. You may see savvy capitalists referring to these as T-bills, T-notes, and T-bonds.

Treasury bills are a promise to pay at a future date – a kind of credit. Treasury bills have a face value, generally $1,000 although bills in excess of $5m have been sold. They have a maturity date which can be 4, 8, 13, 26 or 52 weeks. Treasury bills are sold at a discount, meaning the Fed promises to pay $1,000 for some amount less than $1,000 at the time of purchase. The Fed auctions off treasury bills in exchange for currency. The currency thus acquired is used to pay current government debts.

Treasury notes are essentially the same as treasury bills, however they have a maturity date between 2 and 10 years and they pay interest rather than maturing to face value.

Treasury bonds are exactly the same as treasury notes, except they have maturity dates between 10 and 30 years.

When these state debt instruments are sold, they are exchanged for currency, which can either be used to fund government spending, or taken out of circulation if the Fed is attempting to shrink the money supply.

They are also sold in secondary markets – that is, traded between people who own them. Their exchange value in the secondary market is a function of the interest rate that was set at the time of the bill’s issuance (which is usually related to the Federal Funds Rate, more on that below), maturity date, and demand. When the Fed increases the Federal Funds Rate to control inflation (as it is doing now), older T-bills are worth less because all newly issued T-bills will tend to match the higher Federal Funds Rate – and why buy a bill with an interest rate of 2% when you can buy one with a rate of 5%?

Quantitative Easing

This is the actual mechanism by which the Federal Reserve increases the money supply. Quantitative easing is performed by the Federal Reserve printing new money or creating new demand accounts or other forms of currency, and then using that sudden increase to buy back outstanding T-bills, notes, or bonds. Redemption auctions are how the money enters circulation. Money that did not exist before is thus exchanged for outstanding federal debt.

If this sounds to you like circular logic of the capitalists paying themselves for the benefit of buying their own debt and money, you aren’t far off. For instance, let’s say Northrop Grumman wants to sell its new, unreleased, B-21 for $700 million to the U.S. air force. The Fed issues 700,000 $1,000 T-bills and the money for the B-21 comes pouring in from the other corporations. The government turns around and buys the bomber using the money it’s taken in through these auctions. Then, let’s say there’s a credit crunch and the economy is “in danger” – that is, a number of banks fail and suddenly firms all over the U.S. are in danger of folding. The Fed can turn around and buy back that very same $700 million in T-bills using newly created money.

The logic behind this is to grant further liquidity to the economy – that is, to make it possible to circulate more money on investments, to stimulate spending and borrowing, and to keep capital turning over. In practice, this means devaluing the already-issued currency that’s out there. Because production hasn’t increased, because there are no new products on the market, the only thing that can change to handle the increased currency amount is an effective reduction in value; that is, inflation.

The Fed helps capitalist firms trade values like this, and every time anything goes wrong, it uses quantitative easing to make sure the capitalists have enough money to keep operating… and, because the new money is always issued to capitalist firms, the real, material effect of this is to shift the burden to those who can’t afford or don’t know to participate in these auctions: the working classes. By engaging in this practice, the Fed changes the overall distribution of currency, increasing its concentration in the hands of capitalists and reducing the purchasing power of the money in the hands of the working classes. It is the most sophisticated scheme of defrauding the public that has ever been devised.

The Reserve Requirement

The Fed, as a response to the market crash of 1929 which began the Great Depression, took regulatory steps to try to prevent bank runs from occuring in the future. A bank run occurs when a bank has lent more than it actually has (borrowing on credit and leveraging debt as described above) and enough account holders attempt to simultaneously withdraw their money that the bank can’t cover all the withdrawals.

The Fed has historically required banks to maintain a certain amount of currency so they can cover their debts. This requirement is flexible and generally set by the Federal Reserve Board. This rate each bank is required to keep is calculated by using the current reserve ratio. This is calculated as Bank Deposits x Reserve Ratio. For instance, if the Board sets the reserve ratio at 10% and a bank has deposits of $1 billion, the bank is required to keep at least $100 million of currency so it can cover a bank run of up to that amount.

Currently, the Reserve Ratio is 0%. This means banks are not required to keep any currency on-hand. The Fed changed this rule during the pandemic as part of the federal government’s program to force people back to work without crashing the capitalist economy. This is, of course, instead of a planned economy in which we would have been quarantined and taken care of – all of us – until the danger from the pandemic passed. Instead, Washington declared open season for speculation by telling the banks they could literally spend all of their money, and the Fed would make sure everyone’s deposits were covered.

Interest Rates, the Discount Rate, the Federal Funds Rate, and the Prime Rate

Interest rates are how much future production is owed for presently-issued credit. That is, if a loan is taken out and currency is given, a certain amount of currency will be due back at a future date, calculated at a percentage rate based on the loan agreement. This percentage-rate-over-time is the interest rate of the loan.The Federal Reserve controls interest rates by controlling the federal funds rate, which in turn is used by banks to set the prime lending rate, and all other rates for progressively less “credit-worthy” loans are calculated using the prime lending rate as a starting point.

Discount Rate and Federal Funds Rate

The federal funds rate is the rate that the Federal Reserve banks charge other banks to borrow excess cash reserves. What does this mean? If a bank is going to close its business day with less than the federally mandated reserve requirement on hand, it is required to borrow the difference from its local branch of the Federal Reserve bank, and to repay it with an interest rate set by the Federal Reserve. This is called the discount rate.

Banks could also choose to borrow from other banks to cover the reserve amount on the overnight loan. This is usually cheaper than borrowing from the Federal Reserve by 50 basis points (1/100th of 1%) and is called the federal funds rate. The federal funds rate is also set by the Fed. It is currently 0.25 as a result of the pandemic. The rate was 1.5 prior to the pandemic.

Prime Lending Rate

The prime rate is the interest rate offered by banks to their most creditworthy corporate customers. All other loan interest rates are calculated using the prime rate as reference. Prime rates are different at every bank, and calculations are done as to how much they should charge customers who have very little chance of defaulting, but almost all of these calculations use the federal funds rate as a benchmark. Thus, by changing the federal funds rate and the discount rate, the Fed can influence the rates of all loans and all credit throughout the entire U.S. imperial monetary system.

Lender of Last Resort

The Fed is the U.S. “lender of last resort” – which means that, should a major bank or other institution fail to secure funds to remain solvent, the Fed will lend the required amount out to that bank to prevent its collapse. This is accomplished using the tools listed above, and is the Fed’s primary purpose: as a backstop to secure the entire U.S. economy.

The Current Crisis

The collapse of SVB and the threats now facing the economy are the direct result of this atmosphere of deregulation. It’s tempting to frame this as a return to the “bad old days” of the early 20th century, before regulations were adopted as the result of the Great Depression, but the fact of the matter is that this situation is actually worse. This isn’t a case where there is a kind of lawless frontier where there are no regulations – instead, the Fed has been actively encouraging wild speculation by promising cheap (actually, essentially free) and easy money.

That means loans have been given out like candy. The atmosphere of excessive speculation on bad investments started in 2008 with the general reduction in regulation to try to pull the economy back from the brink of the huge crisis that struck it that year; ever since, speculative investments (investments on things that promise huge returns but likely won’t pan out) have been spreading. Why not, if the Fed is going to give you zero-interest money to try things out with? As the rate of profit sinks, speculation becomes more attractive.

With COVID, things kicked into overdrive. The bourgeoisie, always half-grifter to begin with, has seen an explosion of companies that do absolutely nothing and promise the moon. Because firms, particularly tech firms, can take many years to pan out into profitability, every investor is looking for the next Apple- or Microsoft-to-be. Some of these tech companies, like Uber and DoorDash, model their entire business on keeping themselves alive through venture-capital infusions until they manage to take over the whole market, driving out the already-existing firms, and creating a tech-based monopoly. To get from plucky startup to tech supergiant, these firms need constant infusions of “venture capital,” or investment cash, because they don’t turn a profit. With money as loose and liquid as it has been, the number of hucksters and snake-oil salesmen has ballooned. Firms that never had any intention of producing anything resembling a profit sprang up overnight. Their “plucky” CEOs filled their pockets with investment cash and have every intention of declaring bankruptcy, shuttering the non-producing firm, and doing a runner with the money.

SVB was one of the chief repositories of investment cash for this kind of non-firm. As the Fed tried to reign in the inflation it had caused by creating and injecting twice the already-existing currency into the system (you read that right, the Fed increased the money so much during the pandemic that 2/3rds of all U.S. dollars currently in circulation have been created just since 2020) it put SVB and other speculator’s banks in danger. In order to fight inflation, the Fed raised the interest rates. When the interest rates go up, the value of Treasury bills goes down. 

SVB, already under-capitalized and exposed to a potential catastrophe, held a lot of Treasury bills. The bank also “owned” a lot of intellectual property – the valuation of which is completely subjective. Intellectual property can’t be liquidated at a moment’s notice either; the only way to transform it into hard currency is either to sell it or to use it to produce profit.

As the price of its assets plummeted and its owners realized it wouldn’t be able to cover withdrawals from its major clients, it started emergency procedures to get more money… which tipped off its clients that it was in trouble, who then all simultaneously tried to withdraw their funds – causing a run on the bank.

Now the Fed has come in to save the day and repay all the depositors. Where will they get the money to do that? You guessed it, by selling Treasury bills! In fact, they announced they would sponsor a special loan program where they overvalue collateral. You can already see how this is kicking the can down the street for the next big crash, which is just around the corner. They’re trying to shore up a leaking ship. And the thing is, they’re shoring it up by punishing the working classes, none of whom receive any of this benefit.

Every day, a dollar in your hand is worth less than the day before. Every day, food costs more, fuel costs more, heat and cooling cost more. Every day, your paycheck shrinks. Why? Blame the thieves of thieves at SVB. Blame the flunkies and lackeys at the Fed. Blame your senator, who probably had dinner with a huge SVB investor last night – a man that asked them to make sure they were protected. But most of all, blame the monopoly capitalist – the speculator, who gets to walk away from the speculation, purse intact.