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.

Iran War Notes

Netanyahu, the leader of Israel, sounds reasonable in his speech and his answers to the press questions, he has a nice voice, and is always composed. This is 19/03/2026 during the war on Iran by the US and Israel. The war was started by these powers without warning during negotiations with Iran. The justification has varied for the US and Trump, flipping between the apparent nuclear threat, to the killing of protesters by the Iranian authorities, to regime change.  Now, as Netanyahu speaks, he refers to Iran’s conventional weapons that it has developed, describing them as a way for Iran to develop and protect nuclear weapons. So now, also, Iran may not even develop conventional weapons, as far as these powers are concerned. In effect this means that Iran may not have a state, be a state, an authority with power.

The argument that these allied powers were encouraging an uprising by the Iranian people rings hollow, now, because the bombing, such as of needed infrastructure and the oil storage facilities around Tehran, which affects Iranians badly, does not engender sympathy even from the rebels.

On a news programme, Trump expressed surprise that Iran closed the Strait of Hormuz as part of its retaliation. The strait is a narrow point in the vital global trade route for shipping, especially of fossil fuels. This in itself is surprising, both that he did not expect it, and that he would admit to not expecting it. But Trump is hard to pin down, he sows confusion and appears to operate on whims. The attack on the giant gas field shared between Iran and Quatar. Was this known by Trump or not? Who knows. Trump seems to deny knowing it, perhaps because it would not be liked too much by Quatar, a supposed ally.

It seems incredible that the leaders of Iran especially, after all this time, do not seem to realize that the US and Israel work together, they are a ‘double act’ so to speak. Or maybe they just go along with the illusion. Israel manages to assassinate Iran’s leaders almost at will, but still Iran seems to be capable of defending itself with its missiles and drones.

The question is, does Israel and the US really want to degrade Iran to the extent that it represents no threat? Do they not need a good excuse for war every now and then? And what do they really expect from regime change if it were to happen? Not a progressive revolution of course, they do not want a competing progressive democracy or socialism in this fossil fuel rich location, they would prefer the return of the Shah type of aristocracy, it is easier for them to make deals with and exploit.

None of the ‘analysts’ of this war drawn on by the western media bring into the account of this conflict the role of class. The US military bases strewn throughout the region exist because the regional royalty, their ruling classes want them, because they help them control their own working classes. Iran is the different one, the exception, it had a revolution but went one step forwards and two steps backwards, it ejected western interests and deposed the Shah but installed the clerics and absolute religious authority. But it does not have the US bases and is unfriendly to US regional influence, and Israel. It is therefore not entirely untrue that Iran does not represent a threat to the world if it develops nuclear weapons.

But it is also true that we are always threatened by the nuclear weapons in the hands of people like Trump and Netanyahu, and Hitlerism grew out of a democracy, so what is different about Iran? Iran must not have nuclear weapons according to the western powers for a hidden reason, because it is near all the oil and the main trade route for it. For this reason, the Middle East in general must be kept virtually medieval, and it must be reduced into this condition periodically by the imperial powers. It must be made and kept barbaric. This is simple capitalist imperialist competition at work.

What, in any case, is the specific difference with Iran having nuclear weapons to other countries that have them? Aside from the argument that they are crazy, Netanyahu claimed in his speech that if they had nuclear weapons, they would blackmail the world. Is this true? Apart from trying to know what is in the psychology of the future Iranian regime if it had nuclear weapons, what would be their actual, material, advantage? After all, they would only be in the same position as every other nuclear power. If they were to use the bomb, there would be mutually assured destruction, and no winners. Clearly the only real difference would be that other nuclear powers would not be able to sway them with threats so easily, the nuclear powers would lose influence in this region, which in the end is to lose profits.

Regarding the accusation of craziness, Iran has Islam as a state religion, unlike for instance Judaism in the state of Israel. The west implies that this state religion is especially unhinged. History does not prove this, yet every religion has its extreme evangelists who can become state terrorists. At this moment it is the democratic west led by Trump and Netanyahu that is being terrorist, but on a grand crusading imperialist scale that makes the label seem weak and inappropriate. Religion is dangerous because it is faith, and faith knows no bounds.

Coming back to earth, by missing out class in their analysis, the leaders of the west also miss out the thorny issue of their own workers not being able to afford to buy fuel for their cars to get to work and the cost of living is rising again. These are ostensibly at least democracies, which have public opinion, which in the US is opposed to this war. In the Middle East what the working classes think and feel is a mystery to them, at least as far as they let us see. Iran attacks the neighbouring Middle Eastern countries that host US military bases from which they are being attacked, as they obviously would. These attacks must affect the class relations in these countries, causing some wobbles. Thus, it is not only Iran that could develop regime change given this war and its unsettling conditions.

Generally western leaders, in an amazing show of brazen hypocrisy, denounce Iran for attacking these countries (i.e. defending itself) and remain quiet about the unlawful surprise attack by Israel and the US on Iran, which started this war. Brazen hypocrisy is clearly the name of the game these days, it is presumably a rather strange way to try to hang onto a vestige of moral high ground, but they cannot refer to international law anymore, which died with Gaza. This might be seen as the law of the jungle, but in the jungle it is simpler, there is less connivance, subterfuge, espionage, backstabbing, etc., all the hallmarks of human economic contradictions and struggle.

And all this fighting is over fossil fuels, all this extra pollution, at a time when we least need it, when the planet is warming alarmingly due to the burning of these fuels. Truly the global bourgeois classes seem to want to cement their reputation as totally unfit to rule.

 

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.