Yanis Varoufakis's Blog, page 6

Donald Trump’s economic masterplan – UNHERD

Faced with President Trump’s economic moves, his centrist critics oscillate between desperation and a touching faith that his tariff frenzy will fizzle out. They assume that Trump will huff and puff until reality exposes the emptiness of his economic rationale. They have not been paying attention: Trump’s tariff fixation is part of a global economic plan that is solid — albeit inherently risky.Their thinking is hard-wired onto a misconception of how capital, trade and money move around the globe. Like the brewer who gets drunk on his own ale, centrists ended up believing their own propaganda: that we live in a world of competitive markets where money is neutral and prices adjust to balance the demand and the supply of everything. The unsophisticated Trump is, in fact, far more sophisticated than them in that he understands how raw economic power, not marginal productivity, decides who does what to whom — both domestically and internationally.Though we risk the abyss staring back when we attempt to gaze into Trump’s mind, we do need a grasp of his thinking on three fundamental questions: why does he believe that America is exploited by the rest of the world? What is his vision for a new international order in which America can be “great” again? How does he plan to bring it about? Only then can we produce a sensible critique of Trump’s economic masterplan.So why does the President believe America has been dealt a bad deal? His chief complaint is that dollar supremacy may confer huge powers on America’s government and ruling class, but, ultimately, foreigners are using it in ways that guarantee US decline. So what most consider to be America’s exorbitant privilege, he sees as its exorbitant burden.Trump has been lamenting the decline of US manufacturing for decades: “if you don’t have steel, you don’t have a country.” But why blame this on the dollar’s global role? Because, Trump answers, foreign central banks do not let the dollar adjust downwards to the “right” level — at which US exports recover and imports are restrained. It is not that foreign central bankers are conspiring against America. It is just that the dollar is the only safe international reserve they can get their hands on. It is only natural for European and Asian central banks to hoard the dollars that flow to Europe and Asia when Americans import things. By not swapping their stash of dollars for their own currencies, the European Central Bank, the Bank of Japan, the People’s Bank of China and the Bank of England suppress the demand for (and thus the value of) their currencies. This helps their own exporters boost their sales to America and earn even more dollars. In a never-ending circle, these fresh dollars accumulate in the coffers of the foreign central bankers who, to gain interest safely, use them to buy US government debt.And there’s the rub. According to Trump, America imports too much because it is a good global citizen which feels obliged to provide foreigners with the reserve dollar assets they need. In short, US manufacturing has been in decline because America is a good Samaritan: its workers and middle class suffer so that the rest of the world can grow at its expense.But the dollar’s hegemonic status also underpins American exceptionalism, as Trump knows and appreciates. Foreign central banks’ purchases of US Treasuries enable the US government to run deficits and pay for an oversized military that would bankrupt any other country. And by being the linchpin of international payments, the hegemonic dollar enables the President to exercise the modern-day equivalent of gunboat diplomacy: to sanction at will any person or government.This is not enough, in Trump’s eyes, to offset the suffering of American producers who are undercut by foreigners whose central bankers exploit a service (dollar reserves) America provides them for free to keep the dollar overvalued. For Trump, America is undermining itself for the glory of geopolitical power and the opportunity to accumulate other people’s profits. These imported riches benefit Wall Street and realtors but only at the expense of the people who elected him twice: Americans in the heartlands who produce the “manly” goods such as steel and automobiles that a nation needs to remain viable.And that’s not the worst of Trump’s concerns. His nightmare is that this hegemony will be fleeting. Back in 1988, while promoting his Art of the Deal on Larry King and Oprah Winfrey, he bemoaned: “We are a debtor nation. Something’s going to happen over the next number of years in this country, because you can’t keep on losing $200 billion a year.” Since then, he has become increasingly convinced that a terrible tipping point is approaching: as America’s output diminishes in relative terms, the global demand for the dollar rises faster than US incomes. The dollar then has to appreciate even faster to keep up with the reserve needs of the rest of the world. This can’t go on forever.For when US deficits exceed some threshold, foreigners will panic. They will sell their dollar-denominated assets and find some other currency to hoard. Americans will be left amid international chaos with a wrecked manufacturing sector, derelict financial markets and an insolvent government. This nightmare scenario has convinced Trump that he is on a mission to save America: that he has a duty to usher in a new international order. And that’s the gist of his plan: to effect in 2025 a decisive anti-Nixon Shock — a global shock that cancels out the work of his predecessor by terminating the Bretton Woods system in 1971 which spearheaded the era of financialisation.Central to this new global order would be a cheaper dollar that remains the world’s reserve currency — this would lower US long-term borrowing rates even more. Can Trump have his cake (a hegemonic dollar and low-yielding US Treasuries) and eat it (a depreciated dollar)? He knows that the markets will never deliver this of their own accord. Only foreign central banks can do this for him. But to agree to do this, they need to be shocked into action first. And that’s where his tariffs come in.This is what his critics do not understand. They mistakenly think that he thinks that his tariffs will reduce America’s trade deficit on their own. He knows they will not. Their utility comes from their capacity to shock foreign central bankers into reducing domestic interest rates. Consequently, the euro, the yen and the renminbi will soften relative to the dollar. This will cancel out the price hikes of goods imported into the US, and leave the prices American consumers pay unaffected. The tariffed countries will be in effect paying for Trump’s tariffs.But tariffs are only the first phase of his masterplan. With high tariffs as the new default, and with foreign money accumulating in the Treasury, Trump can bide his time as friends and foes in Europe and Asia clamour to talk. That’s when the second phase of Trump’s plan kicks in: the grand negotiation.Unlike his predecessors, from Carter to Biden, Trump disdains multilateral meetings and crowded negotiations. He is a one-on-one man. His ideal world is a hub and spokes model, like a bicycle wheel, in which none of the individual spokes makes much of a difference to the functioning of the wheel. In this view of the world, Trump feels confident that he can deal with each spoke sequentially. With tariffs on the one hand and the threat of removing America’s security shield (or deploying it against them) on the other, he feels he can get most countries to acquiesce.Acquiesce to what? To appreciating their currency substantially without liquidating their long-term dollar holding. He will not only expect each spoke to cut domestic interest rates, but will demand different things from different interlocutors. From Asian countries that currently hoard the most dollars, he will demand they sell a portion of their short-term dollar assets in exchange for their own (thus appreciating) currency. From a relatively dollar-poor eurozone riddled with internal divisions that increase his negotiating power, Trump may demand three things: that they agree to swap their long-term bonds for ultra-long-term or possibly even perpetual ones; that they allow German manufacturing to migrate to America; and, naturally, that they buy a lot more US-made weapons.Can you picture Trump’s smirk at the thought of this second phase of his masterplan? When a foreign government acquiesces to his demands, he will have chalked up another victory. And when some recalcitrant government holds out, the tariffs stay put, yielding his Treasury a steady stream of dollars which he can dispense with any way he deems fit (since Congress controls only tax revenues). Once this second phase of his plan is complete, the world will have been divided into two camps: one camp shielded by American security at the cost of an appreciated currency, the loss of manufacturing plants, and forced purchases of US exports including weapons. The other camp will be strategically closer perhaps to China and Russia, but still connected to the US through reduced trade which still gives the US regular tariff income.Trump’s vision of a desirable international economic order may be violently different from mine, but that gives none of us a licence to underestimate its solidity and purpose — as most centrists do. Like all well-laid plans, this may, of course, go awry. The depreciation of the dollar may not be sufficient to cancel out the effect of tariffs on prices US consumers pay. Or the sale of dollars may be too great to keep long-term US debt yields low enough. But besides these manageable risks, the masterplan will be tested on two political fronts.The first political threat to his masterplan is domestic. If the trade deficit begins to shrink as planned, foreign private money will stop flooding Wall Street. Suddenly Trump will have to betray either his own tribe of outraged financiers and realtors or the working class that elected him. Meanwhile, a second front will be opening. Regarding all countries as spokes to his hub, Trump may soon discover that he has manufactured dissent abroad. Beijing may throw caution to the wind and turn the BRICS into a New Bretton Woods system in which the yuan plays the anchoring role that the dollar played in the original Bretton Woods. Perhaps this would be the most astonishing legacy, and comeuppance, of Trump’s otherwise impressive masterplan.

For the UNHERD site, where this op-ed was originally published, click here.

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Η αυτοπροδοσία της Ευρώπης: Πόλεμος, Λιτότητα, Παλαιστίνη κι ο Αγώνας για Ειρήνη – Ομιλία στο Μόναχο, 15-2-2025

Φίλες και φίλοι, πολίτες απ’ όλο τον κόσμο, συνοδοιπόροι. Είχαμε, κάποτε, ένα όνειρο. Ήταν το όνειρο του τι θα μπορούσε να είναι η Ευρώπη. Δεν ονειρευτήκαμε την ενιαία αγορά, τον κοινοτικό προϋπολογισμό, το κοινό νόμισμα. Όχι, ονειρευτήκαμε την Ευρώπη ως ένα Πρότζεκτ Ειρήνης με Δικαιοσύνη. Εκείνο το όνειρο χάθηκε, εξατμίστηκε, διαλύθηκε υπό το κρύο και σκληρό φως που μας ξύπνησε.

Πριν από δεκαπέντε χρόνια μια τραπεζική κρίση επέφερε λιτότητα για τους πολλούς και μανιώδες τύπωμα χρήματος υπέρ των πολύ λίγων.  Ήταν το Τέλος της Δικαιοσύνης και η αρχή του ατέλειωτου χειμώνα της Ευρώπης, του απάνθρωπου χειμώνα της Ελλάδας, του βαρύτατου χειμώνα της Γερμανίας – της αποβιομηχάνισης, της στασιμότητας, του βάναυσου ταξικού πολέμου που διεξάγεται από πολύ λίγους υπερπλούσιους εναντίον των μαζών σε κάθε χώρα της ηπείρου μας. Πριν το καταλάβουμε καν, το φάντασμα του φασισμού και το φάσμα του πολέμου άρχισαν να πλανώνται ξανά.

Για να φιμώσουν τα θύματα της λιτότητάς τους, η άρχουσα τάξη σας τρομοκρατεί. Ακούσατε τον Χερ Πιστόριους, τον υπουργό Άμυνας της Γερμανίας, να λέει ότι ο Πούτιν είναι ο νέος Χίτλερ και ότι εμείς, οι ακτιβιστές της ειρήνης, είμαστε οι κατευναστές του Πούτιν – οι χρήσιμοι ηλίθιοι του. Ρωτάω τον κ. Πιστόριους, την κ. φον ντερ Λάιεν, τον κ. Μερτζ:

«Αν πραγματικά πιστεύετε ότι ο Πούτιν δεν διαφέρει σε τίποτα από τον Χίτλερ, τότε γιατί δεν στέλνετε αμέσως συμμαχικά στρατεύματα να καταλάβουν τη Μόσχα ώστε να τον σύρουν σε μια νέα Νυρεμβέργη ή τουλάχιστον να τον εξαναγκάσουν να αυτοκτονήσει σε κάποιο καταφύγιο της Μόσχας; Συνειδητοποιείτε πόσο δειλοί είστε στέλνοντας όπλα στην Ουκρανία αναθέτοντας στους εξαντλημένους Ουκρανούς να καταλάβουν τη Μόσχα ή έστω την Κριμαία;»

Η αλήθεια βέβαια είναι ότι οι κυβερνώντες μας ποτέ δεν πίστεψαν ότι ο Πούτιν είναι ο νέος Χίτλερ. Άλλωστε, όσο εμείς διαδηλώναμε εναντίον του Πούτιν για τα εγκλήματά του στην Τσετσενία, το μακρινό 2001, εκείνοι τον είχαν μη στάξει και μη βρέξει επιδιδόμενοι για δεκαετίες σε εξαιρετικές μπίζνες μαζί του. Όχι. Το μόνο που τους ενδιαφέρει είναι ένας ατελείωτος, κερδοφόρος – για αυτούς – πόλεμος. Αυτό θέλουν.

Έχοντας αποτύχει να επενδύσουν στις τεχνολογίες του μέλλοντος, στις κοινωνικές μας υποδομές, η άρχουσα τάξη της Ευρώπης ποντάρει στα όπλα και τις βόμβες, στα ντρόουνς και στους σιδερένιους θόλους. Και θέλουν τα χρήματά σας να πάνε σε αυτά. Και αν αυτό απαιτεί θανατικό-δίχως-τέλος στα πεδία των μαχών της Ουκρανίας, καρφάκι δεν τους καίγεται.

Φίλοι, Γερμανοί, διαδηλωτές από παντού, σύντροφοι. Από πέρσι που ήμασταν ξανά σε αυτή την πλατεία διαδηλώνοντας για την Ειρήνη και την Παλαιστίνη, δύο ήταν οι σημαντικές εξελίξεις της χρονιάς: Το Διεθνές Ποινικό Δικαστήριο αναγνώρισε τη γενοκτονία των Παλαιστινίων και εξέδωσε εντάλματα σύλληψης για τον Ισραηλινό πρωθυπουργό και τον πρώην υπουργό Άμυνας του. Και ο Ντόναλντ Τραμπ επέστρεψε στον Λευκό Οίκο υποστηρίζοντας ανοιχτά την ολοκλήρωση της γενοκτονίας των Παλαιστινίων.

Γιατί μιλάω πάλι για την Παλαιστίνη εδώ στο Μόναχο; Γιατί αυτή η εμμονή με την Παλαιστίνη; Πρώτον, επειδή αν βρισκόμασταν στο 1938, την επόμενη μέρα μετά τη Νύχτα των Κρυστάλλων, θα είχαμε μόνο ένα καθήκον: να υπερασπιστούμε τον εβραϊκό λαό από τα ναζιστικά πογκρόμ. Σήμερα έχουμε ένα παρόμοιο καθήκον: να υπερασπιστούμε τον παλαιστινιακό λαό από τη γενοκτονία. Υπάρχει όμως κι ένας ακόμα λόγος:

Αυτό που ξεκίνησε στη Γάζα δεν θα μείνει στη Γάζα! Τέτοια κτηνωδία δεν μπορεί να περιοριστεί στη Γάζα, ειδικά όταν οι ηγέτες μας έδωσαν στους σωβινιστές εποίκους το πράσινο φως να διαπράξουν γενοκτονία με ευρωπαϊκές βόμβες. Με τη σημαία τους να προβάλλεται στα κοινοβούλιά μας, η ιδεολογία του ακραίου σωβινισμού ενισχύεται εδώ στη Γερμανία, στην Ολλανδία, στην Ελλάδα, στην Ισπανία, στην Ιταλία. Το βλέπουμε αυτό σε κάθε δημοσκόπηση και φοβάμαι ότι θα το δούμε σύντομα το βράδυ των εκλογών της επόμενης Κυριακής εδώ στη Γερμανία.

Ογδόντα χρόνια μετά την ήττα των Ναζί…
Ογδόντα χρόνια από τότε που οι αντιπρόσωποι των λαών συγκεντρώθηκαν στα Ηνωμένα Έθνη για να διακηρύξουν ΠΟΤΕ ΞΑΝΑ,…

συμβαίνει ΞΑΝΑ! Με τις ευλογίες των κυβερνήσεών μας…

Αφήνοντας το Διεθνές Δίκαιο να πεθάνει στην Παλαιστίνη, σκότωσαν το Διεθνές Δίκαιο παντού, ιδίως εδώ, στη Γερμανία. Γιατί το Διεθνές Δίκαιο είτε ισχύει για όλους είτε δεν ισχύει για κανέναν. Γι’ αυτό βρισκόμαστε σήμερα εδώ στο Μόναχο. Για να πούμε για άλλη μια φορά: ΠΟΤΈ ΞΑΝΑ! ΠΟΥΘΕΝΑ!

Βρισκόμαστε σήμερα εδώ, στο Μόναχο, για να πούμε στους ανόητους κυβερνώντες

– οι οποίοι συμπεριφέρονται σαν τα φριχτά εγκλήματα του Ολοκαυτώματος να μπορούν να ξεπλυθούν με ποτάμια Παλαιστινιακού αίματος, και
– που νομίζουν ότι ο αυταρχισμός του Πούτιν θα αναχαιτιστεί με σωρούς από τα πτώματα όλο και περισσότερων Ουκρανών…

ότι είμαστε εδώ για να τους σταματήσουμε – ότι είμαστε εδώ, σήμερα, για να αδράξουμε τη μέρα ώστε, αύριο, να μπορέσουμε να ονειρευτούμε ένα νέο όνειρο Ειρήνης με Δικαιοσύνη.

Carpe DiEM!

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Europe’s Self-Betrayal: War, Austerity, Palestine and the Struggle for Peace – Munich Speech, 15-2-2025

Friends, Germans, citizens from all over, sisters and brothers. We once had a dream. It was the dream of what Europe could have been: Not a single market, a single currency or a common budget. No, we dreamt of Europe as a Peace with Justice Project. That dream has gone, it evaporated in the cold hard light that woke us up.Fifteen years ago, a bankers’ crisis led to austerity for the majority across Europe and massive money printing for the few. It was the End of Justice and the beginning of Europe’s long winter, of Germany’s long winter – the winter of deindustrialisation, stagnation, of a vicious class war waged against the majority in every country. And before we knew it fascism and war were in the air – again.To stop the victims of their austerity from questioning them, the ruling class terrorise you. You heard Herr Pistorius, Germany’s defence minister, say that Putin is the new Hitler an we, peace activists, are Putin’s appeasers – his useful idiots. I ask Mr Pistorius, Mrs von der Leyen, Mr Mertz:“If you truly think that Putin is no different to Hitler, then why are you not sending allied soldiers immediately to take Moscow and drag Putin through a New Nuremberg Trial or at least force him to commit suicide in a Moscow bunker? Do you not see how cowardly it is to send weapons to Ukraine and to expect exhausted Ukrainians to take Moscow, or even the Crimea?”The truth is that our rulers do not really think Putin is the new Hitler. After all they did excellent business with him for decades. No, they are in the business of a never-ending, extremely profitable – for them – war. That’s what they want.Having failed to invest in the technologies of the future, in our social infrastructure, Europe’s ruling class is banking on guns and bombs, on drones and iron domes. And they want to spend your money on them. And if this means endless deaths in the killing fields of Ukraine, they don’t give a damn.Friends, Germans, demonstrators from all over, comrades. Since we were here last year, there have been two major developments: The International Criminal Court has acknowldged the genocide of Palestinians and issued arrest warrants for the Israeli PM and his former Defence Minister. And Donald Trump has returned to the White House openly advocating the completion of the Palestinians’ genocide.Why am I talking about Palestine again here in Munich? Why this fixation with Palestine? First, because if this were 1938 and it was the morning after Kristallnacht, we would have only one duty: to defend the Jewish people from Nazi pogroms. Today we have a similar duty: to defend the Palestinian people from genocide. But there is also another reason:What started in Gaza does not stay in Gaza! Such brutality cannot be contained, especially when our leaders gave the supremacist settlers the green light to commit genocide with our weapons. With their flag projected on our Parliaments, the ideology of supremacism was reinforced here in Germany, in the Netherlands, in Greece, in Spain, in Italy. You can see this in the polls and I fear you will see it on election night soon.Eighty years after defeating the Nazis…Eighty years since the peoples’ representatives gathered in the United Nations to proclaim NEVER AGAIN,…it is happening AGAIN! With our governments’ blessing…By allowing international law to die in Palestine, they killed international law everywhere, including here in Germany. For international law either applies to everyone or it applies to no one. This is why we are here in Munich today. To say once more: NEVER AGAIN! ANYWHERE!To tell the fools in governmentwho behave as if the despicable crimes of the Holocaust can be washed clean in rivers of Palestinian blood, andwho think that the authoritarianism of Putin will be stemmed by piles of the dead bodies of more and more Ukrainians,that we are here to stop them – that we are here to seize the day, today, so that, tomorrow, we can dream a new dream of Peace with Justice.Carpe DiEM!

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The Argentinian President’s crypto scam exploited the dangerous illusion of apolitical money

On Friday 14th February, President Milei of Argentina tweeted about the $LIBRA coin, encouraging his followers to buy it on the grounds that it would “help fund small businesses and start-ups”. As if that weren’t enough, he shared a link for people to buy it online. Naturally, within a few hours, $LIBRA’s price shot up. Many more people, trying to escape the poverty that Millei’s policies have subjected them to, rushed in to buy. Alas, soon after the price of $LIBRA crashed and they lost their money.This is a standard tactic by crypto scammers. It is known as a ‘rug pull’: draw in naïve buyers only to stop trading and run with their money. But when the President of the country does it, it is more than a scam. It is a political crime.More broadly, this incident confirms how dangerous the illusion of apolitical, non-state, money is. Money can never be anything other than state based. That we need to democratise our public money is, of course, crucial. But any attempt to privatise money is an oligarchic, criminal act. End of story.

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What to expect from Sunday’s German election – video

On Sunday, Germany goes to the polls. The least significant result is that we shall have a new Chancellor: Mr Friedrich Mertz, the leader of the Christian Democrats, who will most likely receive double the votes of the unpopular incumbent social democratic Chancellor Mr Olaf Scholz, a politician destined either to return to a new coalition government as a much diminished figure or to retire. Nevertheless Mertz will be forced to form a coalition with Scholz’s social democrats perhaps with the Greens as well – since it is the only way of keeping out of government the AfD, the ascending neofascist party, the darlings of Elon Musk and Donald Trump.The precise composition of the coalition government will depend on which of three parties tittering on the cutoff of 5% (the minimum necessary to win any seats in parliament) manage to enter Parliament: the Free Democrats (who wax lyrical about free markets but back to the hilt the oligopolists), Die Linke (my former comrades who are on the ascendancy despite having disgraced themselves over Palestine, not to mention their incapacity to string a decent program together) or the party of Sahra Wagenknecht (who started life as a leftwinger but is now positioning herself as an anti-immigration zealot, and losing out to the more enthusiastic bigots of the AfD). Mr Mertz would prefer that none of these three parties make the 5% mark. For the more of them succeed in entering Parliament the more dependent he will be on the social democrats and the greens for an absolute majority in Parliament.What are the real changes that we should expect to see from this reconfiguration of the governing coalition? Not many, regardless of the precise election outcome. Recall that the christian and the social democrats ruled together under the christian democrat Angela Merkel, for a decade . During that decade, the current policies were set in stone. It was the decade that cemented the austerity for the many and the money printing for the few – the combination that crushed investment and led to today’s inexorable deindustrialisation drive (as well as the flight of German capital to the US).Will they do better this time around? No chance. They will be more cruel toward migrants and probably relax their idiotic debt rules that have starved the state of investment funding – but only in order to pay for more weaponry, as part of the pointless drive to beef up a military that is not needed (and which is driven by scaremongering based on the ludicrous notion that a bankrupted, exhausted Russian army is about to roll into the green and pleasant lands of Germania).What should we expect viz. China from this change in government? If Kamala Harris had won in the US, Germany would have fallen in line with America’s priorities, including the demand that Berlin ‘decouples’ from China, agrees with the EU’s ridiculous tariffs on Chinese EVs, solar panels and so on. But, with Trump blowing up the transatlantic alliance, there is a slight chance that a Mertz government will not be happy to cut of German industry’s lifeline to China just because Washington says so. Then again, our European leaders have proven their cowardice again and again.While still on Germany, let me give you the bleak news: Germany has already become a totalitarian police state – they did not have to wait for the ultra-right AfD to win power! On Tuesday 18th February our movement, DiEM25, had organised (together with the Jewish Voice for a Just Peace in the Middle East & Amnesty International) an event to discuss Palestine, featuring a keynote speech by the UN Special Rapporteur on Palestine, the incredible Francesca Albanese. The police informed the organisers that policemen will be in the audience monitoring every word. Then, before the event started, the police barricaded DiEM25’s venue. Our organisers found another venue and called upon. attendees to make their way to it. The police tried to intimidate us in the new venue too. But we persevered so that Jews, Palestinians, Germans and others could offer Berlin an example of what Germany could have been.Sadly, Germany is slipping inexorably into a totalitarian abyss. Without even the ‘help’ of the ultra-rightist AfD. Sadly, the next election will do nothing to change that.

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Technofeudalism Is War’s Handmaiden – Project Syndicate

War is in the air more than peace these days. This reflects not only the salience of well-known strategic traps, but also the rapid emergence of cloud capital, which is in steering the world into these traps in four distinct ways.ATHENS – The West is on a war footing. The German government is working on an app that helps people locate their nearest bunker. A 32-page pamphlet entitled If Crisis or War Comes was published in Sweden, and a similar one was downloaded countless times in Finland. Venerable newspapers publish wargame scenarios where Russia, with China’s backing, invades Norway’s arctic islands.In the European Union, top officials argue that the key to unlocking Europe’s chronically low level of investment is its arms industry. US President Donald Trump casually talks about taking over Greenland and the Panama Canal. To top it all off, a storm is gathering over Taiwan, the Philippines, and the South China Sea.Trump and his political opponents disagree on almost everything. But one thing they do agree on is that America is caught in what Harvard University’s Graham Allison calls the Thucydides Trap – the fate of a hegemon confronted by a rising power, China. Meanwhile, the West is running the risk of falling into the Oedipus trap: exacerbating a crisis with actions intended to prevent it – just as Oedipus ended up killing Laius, his father, only because Laius took harsh measures aimed at thwarting the Delphic prophecy that he would be killed by his son. Either of these traps could trigger a catastrophic war.Meanwhile, we are increasingly dominated by cloud capital – a new form of capital consisting of networked machines running algorithms that we train to know us well enough to alter what we want and then sell it to us outside any actual market. Unlike diesel engines and industrial robots, which are manufactured means of production, cloud capital produces an exorbitant capacity to modify our behavior, bestowing unprecedented power on its owners – our technofeudal masters. This reinforces the Thucydides and Oedipus traps in four distinct ways.First, especially when augmented with artificial-intelligence capabilities, cloud capital lowers the threshold for deploying weapons of mass, albeit targeted, destruction. It is far cheaper to send a swarm of micro-drones, equipped with AI facial recognition, into urban areas to take out prespecified targets autonomously than it is to deploy heavy bombers. It is also easier for presidents and prime ministers to muster the moral conviction to give the order. That is why the capitalization of a cloud capital-intensive company like Palantir has surpassed that of a legacy behemoth like Lockheed Martin.Second, to deliver maximum revenues, the cloud capital powering our social media is optimized to maximize engagement, a goal most easily achieved by getting us heated, angry, and abusive toward one another. The poisoning of public debates that results from this business model erodes the democratic institutions which hitherto had some capacity to restrain our more bellicose politicians and generals.Third, cloud capital has weakened Europe to the point where it can no longer play the moderating role that it once played during the Cold War. This is because most cloud capital is concentrated in the United States and China. As high concentrations of cloud capital have become a prerequisite for substantial economic and political power, Europe has slid into relative irrelevance.Fourth, in China, cloud capital has created a real challenger to America’s near-monopoly of the international payments system, which historically has given US governments the leeway to sanction any country or person they choose. This is far more significant than any animosity within the US caused by the emergence of DeepSeek, the Chinese AI firm whose most recent offering led to losses of $1 trillion in US stock markets.China’s chief challenge stems from a deep asymmetry vis-à-vis the US that has nothing to do with technology: Wall Street treats Silicon Valley as a potential usurper of its financial revenues, a tussle in which it can count on the support of the Federal Reserve. In contrast, China’s financial sector, central bank, and largest tech firms are working in unison, resulting in a seamless, free-to-use, private-public digital payments system that the West cannot match.Although it currently resembles a pristine multilane freeway that few outside the country use, the Chinese payments system poses a serious long-term threat to the global monopoly of the dollar-denominated payments system and gives the Chinese government and its allies options that alleviate the fear of US sanctions. In a never-ending cycle of negative reinforcement, that newfound confidence fuels America’s eagerness to “get tough” on China.War is in the air more than peace these days. This reflects not only the salience of well-known strategic traps, but also the rise of technofeudal power, which is driving us into them.

For the Project Syndicate site, click here.

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Technofeudalism: What Killed Capitalism | On The Chris Hedges Report

Yanis Varoufakis joins host Chris Hedges on this episode of The Chris Hedges Report to explain how capitalism is dead and a new form of capital, the title of his new book, “Technofeudalism,” has arisen and holds power akin to the feudal lords of medieval times.

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Novara Media’ Michael Walker and Yanis Varoufakis on Gaza, Trump’s Trade Wars, and DeepSeek

Michael and I chatted about Trump’s tariffs, emphasising the need to see them as political tools that standard neoliberal economics can never fathom. On the ongoing genocide in Gaza, we discussed Trump’s ‘final real estate solution’ envisaging a Palestine without Palestinians – the Zionist’s wet dream. Finally, I explained why DeepSeek was a major blow to digital capitalism but not a blow to technofeudalism.

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On Channel 4: Is Donald Trump’s tariff war about to backfire?

Will Trump’s tariff wars backfire? And how should other world leaders, including Keir Starmer, react? In this episode of the Fourcast, Krishnan Guru-Murthy is joined by Greece’s former finance minister Yanis Varoufakis and Erica York of the Tax Foundation think tank.

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Justice for Palestinians will also emancipate Israelis and Europeans – My remarks at the Hague Group’s inaugural meeting reception

Nine governments just signed the new Hague Group’s Declaration. Hailing from Africa, Asia and Latin America, they represent the collective voice of the Global South but also a majority of the peoples of the Global North whose governments have been so shamelessly complicit in our generation’s ongoing genocide of the Palestinian people. We salute these nine pioneering governments and encourage others to join them.It is of particular significance that these are governments representing people who know from experience what it means to be victims of white supremacist colonisation. The people of the Global South understand better than anyone the real reason why the Palestinians in the Occupied Territories are a people Israel placed, collectively, on death row. They know in their bones why the demand of the colonised for equality and justice spreads panic in the hearts of the colonisers.In their heads, the occupiers translate demands for justice for the descendants or their victims as a challenge to the legitimacy of their property rights over stolen land they occupy. Knowing full well that they stole the indigenous people’s land after declaring it terra nullius (‘a land without a people’), the occupiers and their descendants live life steeped in insecurity. Dread grows daily in their soul and one thought keeps them up at night, causing them to support the continuation of occupation, apartheid, ethnic cleansing, even genocide: “If this is what we have done to them, offering them respite will empower them eventually to do the same to us!”It is in this sense that the Hague Group’s Declaration is not merely a powerful act of solidarity with Palestinians but, also, it serves the purpose of liberating Israelis from a permanent insecurity that poisons their soul and makes a well-lived life impossible to erect on the ruins of another people’s civilisation.The Hague Group’s Declaration is also of particular significance for us in Europe and North America. Look around this country, the Netherlands. Look around this continent, Europe. We are caught up in stagnation, deindustrialisation, perpetual austerity for the many who cannot make ends meet while living in the midst of extraordinary riches and spectacular demonstrations of wealth. And who reaps this harvest of discontent? The racist ultra-right is the major beneficiary. Other beneficiaries, who never miss a chance to exploit inhumanity, are the arms dealers and the warmongers whose power and bank accounts swell as they put us all, as they put Europe, on a war footing – in Eastern Europe, in the Middle East, against China, not to mention their portrayal of wretched refugees crossing the Mediterranean as ‘invading armies’.It is in this sense that the campaign for a just peace in the Middle East, which is the aim of the Hague Group, is not only a campaign to liberate Palestinians but also an opportunity to liberate Israelis from fear and the rest of us in the West from a precipitous descent into authoritarianism, stagnation and war. A Free Palestine is a prerequisite for a free Europe, a free West, a world that begins to make sense again.

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