Bitcoin, Billionaires, and Trump

Donald Trump is assembling a government of the ultra-rich whose collective wealth is estimated at $344.4 billion, nearly 3,000 times greater than that of Joe Biden’s cabinet.  So how did an incoming administration go from populism to hyper-oligarchy in the blink of an eye?

The reasons are many.  One is the poverty of American political debate while another is a two-party system that forces voters to choose between awful and even worse.  Deep anger over inflation is a third, while the fact that Dems were beholden to Silicon Valley mega-donors is a fourth since it prevented them from criticizing Trump’s ties to the super-elite.  

But yet another factor is at work: a financial boom that’s growing more manic by the week.  Not only is the frenzy boosting the US economy relative to all other bourgeois nations, but it’s boosting Trump relative to all other bourgeois politicians.  The result is a combined national, political, and financial upsurge unprecedented since the Republican heyday of the 1920s.

It was not always thus.  As recently as the 1980s, the United States accounted for just 30 percent of the leading global stock index according to Financial Times columnist Ruchir Sharma, while the US share of world markets lagged behind that of Japan in the mid-90s and behind China for much of the aughts.  But “quantitative easing” in the wake of the 2007-08 financial meltdown altered the relationship by injecting vast quantities of central-bank capital in an effort to stabilize markets.  QE critics cite it as a classic example of the “Cantillon effect” – so called for a pioneering eighteenth-century Irish-French economist named Richard Cantillon – in which financiers closest to the source are the ones who benefit most. 

Richard Cantillon

Since the US Federal Reserve was among most aggressive in pushing QE, American banks and corporations therefore pulled out ahead.  The US bourgeoisie benefited from the boom and then benefited from the bailout as well. 

The results have been dramatic.  Financial markets are now soaring, economic polarization is shooting through the roof, while the US share of total stock-market capitalization has risen by nearly 30 percent over the last decade according to Bloomberg columnist John Authers.  With $1 trillion in foreign capital pouring into the US per year, Sharma notes, “the term ‘American exceptionalism’ is hotter than ever” among international investors.

But American exceptionalism has grown hotter still since Election Day, with the Dow, S&P 500, and Nasdaq – up 4.9, 5.9, and 9.6 percent respectively – outpacing almost all other major international indices, which have either been flat or down over the same period.

And then there’s bitcoin, up a stunning 46 percent beginning on Nov. 5.  Back in 2021, Trump called bitcoin “a scam,” but now he’s filling his administration with crypto enthusiasts.  Elon Musk, who will be in charge of slashing the federal workforce, is a major backer of Dogecoin, a crypto currency or “memecoin” created in 2013 as a joke but which has rocketed up 267 percent since Election Day.  Vivek Ramaswamy, his partner in staff reduction, is peddling bitcoins via a wealth management business he’s starting called Strive.  Scott Bessent, Trump’s choice for treasury secretary, is an outspoken crypto advocate, while Howard Lutnick, who is being tagged as secretary of commerce, is a major backer of a crypto firm called Tether.  Other crypto boosters include Paul Atkins, Trump’s choice to head the Securities and Exchange Commission; David Sacks, a venture capitalist whom he has just named AI-crypto czar, and Steve Witkoff, a real-estate magnate who has been appointed as a special Middle East envoy.  Indeed, Witkoff is teaming up with Trump’s no-less-enthusiastic sons Eric and Don Jr. to launch a crypto platform called World Liberty Financial. 

“I think America will be the crypto capital of the world,” Eric recently told CNBC.  “I fully support it.  My father fully supports it.”  With bitcoin recently surging past $100,000 before pulling back slightly, he said at a crypto conference in Abu Dhabi that he is “confident” it “is going to hit $1 million.” *

When rhetoric reaches such heights, it’s a sure sign that markets are overheating, and trouble is on the way.  With the crypto and Artificial Intelligence bubbles intersecting and interacting in new and unexpected ways, the financial scene is outdoing the feverish run-up to the 2008 meltdown when traders bought and sold mortgage-backed securities that turned out to be worthless.

 

If so, three things seem clear.  One is that with bitcoin far outpacing stocks and bonds, it’s plain that the growing stream of capital entering the United States is heading straight for the boom’s frothiest sector.  After all, crypto is the ultimate in fictitious capital, a pseudo-currency that is useless as an instrument of exchange other than on black markets and whose only function is financial speculation.  Created in August 2008 at the height of the financial crisis, it has already seen one crash, a dizzying 74-percent plunge from November 2021 to December 2022, and will undoubtedly see another.

 

A second thing that’s clear is that Eric Trump’s prediction that bitcoin will hit $1 million may be a self-fulfilling prophecy since his father’s backing will likely send it even higher.  A third is that the magic is rubbing off on Trump himself. 

 

The last is essential to any understanding of the Trump phenomenon.  The president-elect has not backed down from his threats to round up 11 million immigrants, to use the Justice Department to go after political enemies, or to pardon more than 1,200 “J6’ers” who have either pled guilty to or been convicted of crimes stemming from the January 2021 Capitol Hill insurrection.  If anything, he’s doubling down, telling “Meet the Press” on Sunday that members of a congressional committee that investigated the uprising “should go to jail” on the ludicrous grounds that they “deleted and destroyed” evidence pointing to Nancy Pelosi as the real culprit.  Among the questions that the Trump transition team is now asking high-level defense and intelligence appointees, according to the New York Times, whether they agree that the 2020 election was stolen and that the January 6 insurrection was justified.  If they say no to either, the clear implication is that they’re out.

 

This is a dictatorship in the making.  Yet the financial boom amounts to a capitalist roar of approval.  Jamie Dimon, CEO of JPMorgan Chase, the country’s largest bank, says that bankers are “dancing in the street” because Trump is promising to lower interest rates.  Authers agrees: 

 

“The return of Donald Trump to the White House ... has underpinned the recent surge in US assets.  Deregulation and tax cuts, coupled with a miserable dose of protectionism to hit everyone else, are ample reason to expect another US triumph.”

 

So capitalists like what they see in the new administration and are driving up US financial markets in response.  But the phenomenon is built on sand.  As the Marxist economist Michael Roberts points out, real GDP growth in the US is lagging in historical terms, slipping from an average of four percent per year during the “golden age” of the 1950s and 60s to three percent during the early 2000s and less than two percent since 2008.  With US corporate bankruptcies in 2024 surpassing 2020 pandemic levels, he says, “the US economy is doing worse than in the 2010s and worse again compared to the 2000s.”  His conclusion: “The story of US exceptionalism is really a story of Europe’s collapse.”

The Trump boom is likewise a story of Washington’s collapse.  After a generation of gridlock, Trump looks good because he is now bullying Congress into submission.  The higher markets go, the more he looms over Capitol Hill and the more Republicans fall into line.  Like an insect caught in a spider’s web, a decrepit legislative branch is yielding to the powers of hyper-presidentialism without a fight.  Indeed, Trump’s most odd-ball cabinet nominees – Christian warrior Pete Hegseth for secretary of defense, anti-vaxxer Robert F. Kennedy Jr. for health and human services, GOP hitman Kash Patel for director of the FBI, etc. – are advancing so smartly at this point that he may not have to follow through on threats to forcibly adjourn the Senate in order to ram through appointments on his own.

But what happens once markets crash, as they inevitably will?  No one knows although the damage is certain to be extreme.  But where lesser men would slink away in embarrassment, Trump is made of sterner stuff.  Instead, he’s far likelier to use the crisis to ram through rightwing measures that will be even harsher and more extreme.  For the proletariat, the message is clear.  The bourgeoisie will do its best to foist the costs on the working class rather than on the capitalists who caused the crisis in the first place.  It’s the old story of privatizing benefits and socializing costs.  The more capitalism destabilizes, the more dangerous Trump will grow.

 *As of the time of publication of this essay, midnight Dec, 16, 2024, bitcoin was valued at $104,525.60