In his book, “Debt: The First 5000 Years”, David Graeber levels the accusation against the Left, that it lacks imagination to see beyond present society. I think Graeber’s accusation is accurate and can be seen in his own antistatist (i.e., anti-political and anti-economic) argument. Contrary to Graeber’s argument that money has no essence, it is precisely because money has an essence that fascist state issued debt monies (treasuries) represent a world historical money-form: this debt-money implies money itself has become obsolete.
Based on what I have described of Bernanke’s policy failure so far, is it possible to predict anything about the future results of an open ended purchase of financial assets under QE3? I think so, and I share why in this last part of this series.
I stopped my examination of Bernanke’s approach to this crisis and the problem of deflation after looking at his 1991 paper and his speech in 2002. I now want to return to that series, examining two of his speeches this to discuss the problems confronting bourgeois monetary policy in the crisis that began in 2007-8.
The world market had been shaken by a series of financial crises, and the economy of Japan had fallen into a persistent deflationary state, When Ben Bernanke gave his 2002 speech before the National Economists Club, “Deflation: Making Sure “It” Doesn’t Happen Here”. Bernanke was going to explain to his audience filled with some of the most important economists in the nation why, despite the empirical data to the contrary, the US was not going to end up like Japan.
So I am spending a week or so trying to understand Ben Bernanke’s approach to this crisis based on three sources from his works.
In this part, the source is an essay published in 1991: “The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison”. In this 1991 paper, Bernanke tries to explain the causes of the Great Depression employing the “quantity theory of money” fallacy. So we get a chance to see this argument in an historical perspective and compare it with a real time application of Marx’s argument on the causes of capitalist crisis as understood by Henryk Grossman in his work, The Law of Accumulation and Breakdown.
In the second part, the source is Bernanke’s 2002 speech before the National Economists Club: “Deflation: Making Sure “It” Doesn’t Happen Here”. In this 2002 speech, Bernanke is directly addressing the real time threat of deflation produced by the 2001 onset of the present depression. So we get to compare it with the argument made by Robert Kurz in his 1995 essay, “The Apotheosis of Money”.
In part three, the source will be Bernanke’s recent speech before the International Monetary Fund meeting in Tokyo, Japan earlier this month, “U.S. Monetary Policy and International Implications”, in which Bernanke looks back on several years of managing global capitalism through the period beginning with the financial crisis, and tries to explain his results.
To provide historical context for my examination, I am assuming Bernanke’s discussion generally coincides with the period beginning with capitalist breakdown in the 1930s until its final collapse (hopefully) in the not too distant future. We are, therefore, looking at the period of capitalism decline and collapse through the ideas of an academic. Which is to say we get the chance to see how deflation appears in the eyes of someone who sees capitalist relations of production, “in a purely economic way — i.e., from the bourgeois point of view, within the limitations of capitalist understanding, from the standpoint of capitalist production itself…”
This perspective is necessary, because the analysis Bernanke brings to this discussion exhibits all the signs of fundamental misapprehension of the way capitalism works — a quite astonishing conclusion given that he is tasked presently with managing the monetary policy of a global empire.
5. The recovery of capitalism is no longer possible
Kurz’s overall analysis of the crisis that emerged full blown in 2008 consists of four fundamental bullet points:
First, in the course of capitalist development Marx’s theory states there is a rising composition of constant capital to variable capital; this rising composition of capital compels an increasing dependence of productive capital on interest yielding capital, i.e., on debt.
Second, this rising composition of capital is also a declining ratio of variable capital to constant capital that compels the total capital to find new outlets. This dependence can, at first, be satisfied through outward expansion into new markets, but ultimately can only be met by the growth of an unproductive service (or tertiary) sector.
Third, based on the above two developments, there is an increasingly paradoxical (self-contradictory) dependence of productive capital on profits derived from debt of the non-productive sector that consists entirely of a dependence of productive capital on fictitious claims to its own future profits.
Fourth, this third paradoxical, self contradictory, dependence can only be resolved ultimately through the dependence of this entire increasingly fragile structure of accumulation on the consumption and debt of the fascist state.
In the first instance, the increasing dependence of the total social capital on the state is made necessary by the fact that the state becomes essential to the expansion of the total social capital into new markets through the means of imperialist wars and predations. But, this dependence really only comes into its own when the state becomes the consumer and debtor of last resort. In the final analysis the growth of a non-productive sector must be dependent on the growth of the fascist state as consumer of last resort. And this latter, if it is to maintain existing commodity production relations, must be dependent on expansion of the public debt. This is true because only the state can decide what serves as money within its territory and what means are used to pay its debts. It can, therefore, pay its debts with “money” it creates out of nothing, simultaneously “satisfying” this debt and evaporating its value.
4. The Necessary Parasitism of Fascist State
In a recent interview, Saint Paul Krugman gave us this gem of bourgeois economic theory:
SPIEGEL: More stimulus also means more debt. Many European nations, as well as the US, are already drowning in debt.
Krugman: I’m not saying that I don’t ever care about debt, but not now. If you slash spending, you just depress the economy further. And, given the low interest rates and what we now know about long-run effects of high unemployment, you almost certainly actually even make your fiscal position worse. Give me a strong-enough economic recovery that the Fed is starting to want to raise interest rates to head off inflation — then I become a deficit hawk.
Saint Paul tells us in a depression such as the one we are now experiencing it is impossible to pursue the sort of austerity currently being visited upon the EU without rushing headlong into calamity. Better, he says, we should expand the debt of the already bloated public sector still further and worry about the consequences later. It never occurred to the interviewer from Spiegel to ask Saint Paul why the growth of capitalist economies is now chained to the debt of the public sector.
Robert Kurz had a few ideas on that subject.