What are Bonds? And What do they mean in the current Crisis?

Bonds are also called gilts in the UK and treasuries in the US, it is a financial security which is considered less volatile and safer than stocks for instance, and they are thought to offer a more reliable income stream. They are when an investor loans money, normally to a government, for its safe keeping and return when it ‘matures’. During its stay it can earn the lender a rate of return in interest, fixed or variable, which is known as a coupon. The coupon is for a fixed time, long, medium, or short term, with different benefits attached. After the term, the original loan returns to the lender. The government can use the loan for various social projects.

Bonds produce what is called a yield, the total return on capital. The yield is the coupon rate plus the secondary market rate for the bond. When bond prices go up the yields go down in financial value, they have an inverse relationship. If the interest rates in the market go up, any new bonds that are issued have correspondingly higher coupon rates. So, to attract buyers of bonds, existing bonds with the lower coupon rates need to drop their price, which pushes up their yield to the market level. Thus, the reverse is also true. If bond prices increase on the market, the yields go down relatively. A buyer of a bond on the market can pay less for a bond than it originally was bought for, meaning they obtain a higher current yield given they get the same income flow. Investors can therefore buy bonds at a premium or at a discount, and whichever they buy will determine the yield they receive in income.

What determines the overall performances of the bonds is the wider market and the way it treats the risks of lending to the institutions and governments. Bond ratings are a way that credit rating agencies can assess the credit quality and risk level of bonds.

At the moment there is a global government bond sell-off on the capitalist market, probably due to inflation, the huge government deficits, and the war between the US/Israel and Iran, although the inflation as such is a legacy not of this war specifically, but of the past giant global financial crises which led to bail outs and vast money printing (so called quantitative easing), and which devalued the existing circulating currency, created ‘cheap money’ surplus, and later causing this ‘correction’ as inflation, and this inflation was indeed itself a factor that led to wars, such as also the Ukraine Russia war.

The current global sell off increases the borrowing costs for governments (yields rise) who have to offer higher coupon rates to investor buyers of their bonds. Countries that would like to spend to combat recessions caused partly by inflation are therefore being restricted in their financial movements because of the bond markets, which are also themselves reacting to the inflation and fears of further rises in the inflation rate and other crises. The standard response of governments is tax increases and spending cuts, but of course with already high inflation and following on from previous years of austerity this would be very painful for people.

The US administration also recently, July 31, 2026, intervened in global financial markets (a fairly rare move) to help Japan prop up the value of their currency, which was at a forty-year low, by selling dollars and euros to buy yen. Japan is the largest foreign holder of US government debt. This intervention was at least partly designed to protect the functioning of the US bond market: the US was concerned that Japan’s efforts to raise the value of its currency would affect the US economy by making US government borrowing more expensive in the bond market, because to free up money to buy yen, the Japanese government had been selling US government treasuries, or bonds. As we now know, selling the US bonds in large quantities raises the yield the US government must pay to the bondholders. So, the US thought to remove this necessity of Japan by buying yen.

Trump sees a weak yen as an unfair trade advantage making its goods more attractive on the global market. Interest rates in Japan are below US rates and have not kept pace with inflation, a fact which the US leaders do not like, and the intervention is seen by analysts as a move to force the Japanese to raise its interest rates. However, Japan relies on energy imports from the Middle East, the war raised the prices of this oil and so added to inflation. Japan tried to sweeten this for its consumers by spending billions subsidising fuel costs, but also the Japanese cost of living is high, and the government had to subsidise food. It has an aging population. Japan’s total public debt now stands at more than 200% of its GDP.

Did this intervention work? In the short term it may have worked, but in the longer term it has been less obviously beneficial, and the effect was short lived. The selling of euros by the US for yen was for the Europeans an unwelcome surprise, while other US policies tend to strengthen the dollar making the intervention redundant and contradictory.

The western Bourgeois classes flummoxed by Trump’s Imperialism

 So Trump, the US president, jealous at Putin’s imperialism, starts his own adventure in his own ‘back yard’ (as the press call it) in South America, as US armed forces kidnap president Maduro of socialist Venezuela, strangely meeting little resistance, according to reports. After this, we again find the US president threatening to take over Greenland, possibly even forcibly. This now has a new significance for other western leaders. They were generally quiet or supportive on Trump’s illegal action in Venezuela, but the Greenland threat got them worked up a bit more. Greenland, belonging to Denmark, a Nato member. Nato, a military alliance, has a pledge to defend any member against external threats, but now the threat is the biggest member of Nato, its de facto ruler. What would they say now?

Well, at least a few half-hearted comments about Greenland meant they did not have to remark all that much about Venezuela. But now of course Putin in Ukraine is not so morally different to Trump in South America. Clearly the liberal western press was having an awkward moment finding its ethical high ground. Still, the bottom line, the standard frame, was to support the US, the leader of the Free World. They look for excuses for the leader of the Free World to be so obviously outright authoritarian and imperialist.

Putin in fact has more and better excuses for imperialism in Ukraine, given what happened in WWII and the millions of Russians who were killed by the German Nazis, the invasions of Russia usually being via Ukraine with assistance from some Ukrainians. So, we see that what interests the bourgeois classes and its western media is not really some special democratically based morality, but the interests of its bourgeois class owned corporations who are helped to global success by the force of the US military. In a sense what this means is a return to the capitalist normality of imperial competition, which was only interrupted a little bit by the post world war consensus that such wars should never happen again.

And so, what does this mean? It means we are heading towards another world war; this is always where imperialism ends up, as we should know by now. However, knowing this and doing something real about it are two different things. Our politicians act as if they are living on a different astral plane, their morality and arguments are from an earlier time, outdated as soon as they utter their well-worn phrases, and otherwise quite bizarre, they do not face up to what is happening. But they cannot, not because they do not have this knowledge, but because they are embedded in a system where they depend on the corporations and the military who are pushers of imperialist conquest. They are not in fact our elected representatives, even though of course they act out this role, they are really members of the media state apparatus of the bourgeois class, their job is to perform for this class, to play the role of democratic freedom, a kind of covering up of imperialism with a sugar coating.

 

Trump on Gaza, OMG

It may have come to your attention that recently President Trump of the USA met with PM Netanyahu of Israel at the White House, and the outcome was some statements to the press that seemed to surprise and shock many commentators. He said, in short, that Gaza should be run and owned by the US. He suggested Gaza had potentially some good real estate and it could be a nice place if so, a kind of new Riviera. But the Palestinian indigenous residents should leave and go to other countries, Egypt and Jordan were mentioned.

This mooted war crime of ethnic cleansing was softened a little by his apparent concern that Gaza was now a pile of rubble (no mention of the extensive bombing by Israel which caused this or the bombs being from the US, and no mention of the thousands killed, with many bodies still under this rubble) in which people unfortunately could not have a nice time and it needed to be flattened and building start afresh, which the US could do.

Later ‘interpretations’ of what Trump meant said his idea was temporary displacement of Palestinians. Most of Trump’s comments fulfilled Netanyahu’s every dream and he could not help smiling throughout the meeting, that is, except when Trump said the bit about the US and not Israel running Gaza. This must have irked him. Should he not be wondering whether the war was actually supported so enthusiastically by the US just to allow the US to fulfil certain imperialist ambitions in the Middle East?  Was Irael only being used as a tool in this respect? Who knows, but that little moment was perhaps revealing.

The problem that lies at the heart of all this conflict and strife is the founding of Israel not as such, but as an exclusively Jewish state in a land that had a mixed religious population. The reason for this was the US support for the project of the religious extremist Zionists to get a western orientated foothold in the Middle East near to the oil fields and the Suez Canal. This new state could function as a police and security presence for its interests in the region.

To have this work, and for its presence to be able to expand, it was necessary for there to be some friction inbuilt to the state that would cause continual strife, terror, and wars in which the US, which was after all a country a long way away, could interfere profitably. Fundamentalist Islamists obliged, countering one fascism with another from a different religion.

All these shenanigans were just continuing the old imperialism of the earlier European powers, but now the US was the main superpower.

Trump’s comments were therefore not really a surprise in their content and meaning, but only in that the aims were said so openly and brazenly, not shrouded and cushioned by pseudo humanist caring waffle as the earlier president Biden often did.

As the media digested and reported Trump’s remarks, they tried various framing tactics, and the one the liberal ‘progressive’ bourgeois press settled on was to report them in a matter-of-factual manner as if they were quite normal, like the Guardian:

“…Donald Trump’s controversial idea, which has sparked anger around the Middle East, comes as Israel and militant group Hamas are expected to begin talks on the second round of a fragile ceasefire plan to end almost 16 months of fighting in Gaza….” *

These remarks did not just spark anger in the Middle East, this is misinformation, they sparked condemnation around the world, and calling them merely controversial ideas was just trolling the Left on behalf of the leader of the free world, just as they and other members of the ‘free press’ had done while looking on at the genocidal bombing campaign in Israel’s retaliation for Hamas’s 7 October massacre of Israelis, an escapade by Hamas of adventurist terrorism that could not have been better designed to achieve this exact response. Who suffers? - Ordinary working class people on both sides, and also in the US, whose vast amounts of wealth which are being spent on weapons for foreign regimes are not being spent on them, they will have to deal with another rise in their cost of living.

*From <https://www.theguardian.com/world/live/2025/feb/06/middle-east-crisis-live-white-house-walks-back-trumps-gaza-takeover-comments-in-face-of-widespread-international-anger>

 

  

What are Trump's Tariffs?

Tariffs have been put forward as an economic balm for the US by President Trump. It is not so clear what exactly he means by tariffs, or whether he will stick to this policy, but we can make a stab at an explanation.

Most economists regard tariffs as a bad thing, but they are usually short on explanations why.

Tariffs seem to be understood by the new US administration as a way to bring in money, to, in a sense, punish foreign producers who undercut US prices, and to encourage the manufacture and purchase of US made goods and services.

But tariffs are usually placed upon the importer of the foreign goods, not the exporter, and this means in this case the US side, because the exporter is a foreign market, and their prices cannot normally be set by the importing country (the US here). Tariffs are therefore imposed at the point of the local importer. This has consequences: it usually leads to a rise in prices for the imported goods, because the importer now needs to make more money to cover costs.

It is possible that this could encourage more local production and help the local competition for this market, but there are usually good reasons for the foreign produced product being cheaper which may not be able to be repeated locally, it of course depends on many factors, but in any case this is unlikely to happen quickly. So, the immediate result of tariffs would be the inflation of prices in the US.

US citizens are already complaining about high inflation and the cost of living, and this is likely to make things worse.

Tariffs can be understood as a part of economic protectionism, and so perhaps of socialism, but in the capitalist economy it cannot really be socialist unless you also subsidise the local industries that you want to support with help from the government (or go the full route and nationalize them). However, this is obviously not the policy in the current US, where the federal government is under attack for being wastefully ‘too socialist’ or ‘woke’. Trump supports the free market inside the US apparently but is not a free marketeer globally.

The hope of this government is that tariffs will help boost local US productivity, somehow left unexplained, in the context of simultaneously stimulating other aspects of the market. The big idea, not a very new one, is to give tax cuts to the rich, who are described here as the ‘wealth creators’ (not oligarchs), and hope that these invest and employ people. Mere hope is not a great policy.

Unfortunately, this is what already failed to happen, by and large, in the last economic crisis when money was printed and interest rates were held very low, and which has led us to this crisis. Investors, of course, may not invest, instead they might squirrel away their wealth, which they are likely to do if they sense a crisis and if there is market uncertainty and volatility.

Meanwhile in the US there is also a parallel attack on illegal or undocumented immigrants, the cheaper labour that the US enjoys. This attack seems to be the partner with tariffs as a mooted solution to the economic crisis. Immigrants and refugees are said by the administration to be stealing US jobs and bringing in harmful drugs and criminality. The wall of tariffs mimics Trump’s border wall supposedly keeping out the immigrants.

However, it is the ruling class that benefits from employing this cheaper and easier to manipulate labour force. And now they also benefit from deflecting any possible blame for the crisis onto these vulnerable people and the ‘weaknesses’ of those on the left who are supposed to have ‘let them in’. It is quite despicable for the rich and powerful to target these unlucky people in this way, but they do it with the help of their media.

The rich class must feel that they have especially lost out on capital since the last crises and the pandemic and wish to claw back this apparently missing wealth and are seeking someone and something to blame for the problem other than themselves and the economic system. This is also an extension of the laying of the blame for the high cost of living on other countries and other persons, old allies and old enemies alike.

The last president, Democrat Joe Biden, did not remove most of Trump’s earlier tariffs, so this policy is not only that of this administration, but of the US bourgeoisie as a whole.

Tariffs are unlikely to stay isolated to one country. Other affected countries will have to respond in some way, the most likely being with their own tariffs, leading to a freezing up of the global capitalist market. The US is the world’s biggest economy though, so perhaps the US administration sees this fact as a buffer in the sense that it is likely to hurt others more than them.

But this can mean a trade war will result. A trade war can lead to greater friction between nations politically, and even eventually to actual war. One can already notice a more aggressive US policy towards foreign parties.

 

 

European Leaders are Gobsmacked on Greenland

European leaders are gobsmacked, today apparently, by Trump’s threat to take over Greenland, which is ‘owned’ by Denmark, a member of the European Union. The European Commission president, Ursula von der Leyen, and the European Council president Antionio Costa, said nothing on the subject, despite many opportunities to mention this earth-shattering matter in public.

We are clearly living in interesting times (a Chinese curse), where all of our dear western leaders sacred human values are being shown up by circumstances in which they are forced to blatantly contradict them.

First there is the attempted genocide in Gaza, fuelled by support and weaponry from the US, carried out under the leadership of President Joe Biden while complaining about the lesser Russian atrocities in Ukraine. Then, the greatest western democracy, the USA, gives us the spectacle of a ‘choice’ between two fascists, one a self-confessed Christian Zionist fascist, Biden, whose mental faculties appeared to be fading (was this a ruse by which future US politicians could excuse these war crimes?), and the other, well, called Donald Trump.

As we know, Trump won, because at least he was not currently a genocidal maniac. Now we are in a period of the reverberations that this result causes. Apart from the richest man in the world, Elon Musk, giving a Hitler salute in celebration, twice, just to be sure the neo-Nazis get it, miraculously there is a ceasefire in the Israel/Gaza conflict. But USAid has suddenly been halted everywhere by Trump decree, including Ukraine, which is in the middle of a war that the US and NATO helped instigate. On top of this, UNRWA is to be shut down in Israel by Israel’s government. Millions of people rely on this aid simply to stay alive.

And then there is Greenland.

New US President Donald Trump wants Greenland. Seriously. He is not joking. Denmark, its colonial power, is a member of NATO as well as the European Union. You may recall that an attack on one NATO country is to be treated as an attack on all, but the USA leads this military alliance, and it would seem totally weird if NATO were to even talk about defending Denmark against the US, this is clearly not what is meant to happen. So, there is silence on the matter.

Clearly NATO is not really meant to support ALL sovereign borders, especially not those desired by the US. And this follows close on the heels of the general rejection by the US and western elites of all those other great global humanist institutions, such as the International Criminal Court and the International Court of Justice, in the wake of Gaza war crimes.

How did US democracy, so controlled and channelled, lead to this strange result, Trump, the EU politicians must be wondering. Well, the US class struggle has certain internal social needs that do not always coincide neatly with its outward imperialist tendencies. So Ukraine is now in another crisis, there is some doubt over the willingness of the EU to even in a small way conflict with Trump’s hands-off attitude towards this war, despite their recent rhetoric of continued support for Ukraine against Russia’s invasion.

Ukraine is not a member of NATO. Russia does not want it to become a member of this military alliance. Why? Because this has been the traditional route for invading fascist forces into Russia, and in the last world war they lost over 22 million people. And many of the Ukrainian elite are fascists. Whilst this fact does not make it sensible for Russia to make Ukraine or any other nation an unwilling satellite of Russia, or justify it, whether Russia is capitalist or socialist, it helps explain the conflict.

But the EU is deliberately deaf to this argument, capitalism west, east, and south is currently suffering inflation, and this is dangerous for it because it plainly shows the flaws in its beloved economic system. So, the western ruling class media has it that the cause of this severe economic malady is the war, and what caused this unfortunate outcome is evil people like Putin. This neatly turns reality on its head – because capitalist inflation, imperialist expansion, and economic crisis is generating these conflicts. This must of course be kept hidden lest people start to blame the ruling classes.

We have been here before, in the late 1930s. On this history, however, there is now a battle going on for how to remember it, as there would be. The effort of the far right, aided and abetted by the neo-liberals and capitalist globalists, is to use their media to describe communists as the perpetrators of the Holocaust, the German Nazi’s as the unsung heroes of the war, defeated unjustly, and liberals as the unwitting idiots who made the mistake of appeasing socialism. As the far right becomes more acceptable by the media state apparatuses, this, seemingly ridiculous, interpretation of history, becomes ever more the norm.

 

NEWS: The Debate Debacle: Trump v Biden

By now most of you who are interested will have seen this TV debate. In it, US President Joe Biden displayed that he was, basically, too old and frail to compete on this stage. He repeatedly failed to end his sentences, he lost his train of thought, he ended some sentences with bizarre out of place comments that even seemed to go directly against the principles of his own Democratic party, or they fizzled out in incomprehensible drivel. He seemed to stare into mid-space slack-jawed and dull eyed in the silences. And so on and so forth. It was what we should have expected, in fact, because he has been like this for a while now. In some ways it seems cruel that he was put through this torture, in front of millions, appearing to be senile. But afterwards the verdict of the Democrat commentariat was, surprise!!  - At this surprise, are we not entitled to be surprised?  What did they expect from him? Why wait until now to be alerted to these facts?

The whole show was a disaster, not just for the catastrophic performance of Biden for the Democrats, but for US politics and democracy. The only positive that you could take from it was that Trump did not use Biden’s obvious discomfort to his advantage, which was sensible but also remarkably honourable from the convicted felon. Trump lied repeatedly, as was expected, and CNN did not fact check him at all. It was like a display of the worst possible aspects of US democracy distilled. The last part of it, where both exchanged little grumpy digs about their golfing prowess summed it all up. Two privileged men too old and out of touch with too much power.

https://youtu.be/cV8ULfwTneE?si=1YbPTaOBxM0oPEAv