Archive

Posts Tagged ‘money’

How Did Antistatism Get Here?: A critique of David Graeber’s “Debt”

November 23, 2012 4 comments

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.

Read more…

CLUELESS: QE to Infinity, or How national currencies die

November 16, 2012 Leave a comment

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.

Read more…

CLUELESS: Bernanke’s desperate gambit

November 14, 2012 2 comments

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.

Read more…

CLUELESS: “Deflation is bad. M’kay?”

October 21, 2012 Leave a comment

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.

Read more…

CLUELESS: How Ben Bernanke is managing the demise of capitalism

October 17, 2012 Leave a comment

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.

Read more…

Robert Kurz: The Road to Devaluation Shock and the Collapse of Capitalism (Final)

September 2, 2012 Leave a comment

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.

Read more…

Robert Kurz: The Road to Devaluation Shock and the Collapse of Capitalism (4)

August 27, 2012 Leave a comment

 

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.

Read more…

Gold and Exchange Rates (Random thoughts)

February 5, 2012 Leave a comment

This is very geeky, sorry. I posting it because I intend to revisit it sometime in the near future in the context of a review of the Euro-zone crisis.

My post on Moseley’s MELT paper (pdf) argues the so-called “price of gold” is actually the standard of price for a currency. I argued in the paper that dollars do not buy gold, gold buys dollars. Dollars are “sort of” a commodity necessary to convert gold into capital. I said “sort of”, because I really cannot describe it, except along the line of Marx’s argument on loaned capital:

M ==> M ==> C.

Where the first M is the bank’s money to be loaned, and the second M is the actual conversion of this loaned money into industrial capital. We could think of the movement of gold similarly as:

Mg ===> Mc ===> C.

Where Mg is a quantity of gold, Mc is a quantity of a particular currency, and C is the commodity.

The owners of gold, however, have a choice of currencies whose bodily form their gold can assume: euros, dollars, yen, yuan, reals, pesos, etc. And, each of these currencies have their own standard of price, i.e., their own specific exchange rate with gold. Each of these standards of price is an expression of the quantity of a given currency in domestic circulation to the quantity of domestic socially necessary labor time. Since, in each country, the relation between the total currency in circulation and total socially necessary labor time is different, the standard of price for each country currency must necessarily be different.It would seem to follow from this that the relation between currencies, their relative exchange rates, should be determined by the above. For instance, if country A has a standard of price with gold of 10 currency A units per ounce of gold, while country B has a standard of price of 20 currency B units per ounce of gold, the relation between the two should be:

one unit of currency A = 2 units of currency B

However, just as different industries have different composition of capital, so different nations have different compositions. The composition of capital in the US is far higher than that of the People’s Republic of China, or Zimbabwe. The movement of gold between currencies, I think, is determined much like the movement of capital between industries. On the one hand, the standard of prices in various countries arise from the domestic quantitative relation between the currencies and socially necessary labor time. On the other hand, for the owners of gold, these currencies are no more than forms gold must take if it is to become capital — and capital is self-expanding value, the production of surplus value through the consumption of labor power.

This suggests that although the standard of price of a currency is determined solely by the relation between the mass of currency and the mass of socially necessary labor time; it is also being determined by the rate of surplus value within each country as determined by their varying compositions of capital.

I think we are again face to face with Marx’s transformation problem, where the law of value confronts the law of average rate of profit. One law suggests the standard of price of a currency is determined solely by the relation between the total quantity of currency in circulation domestically and the total quantity of socially necessary labor time; the other law suggest the relative exchange rates among all currencies is determined by the law of the average rate of profit. The latter law suggests currencies are exchanging in the world market above or below their actual domestically determined standard of prices.

What use might this argument have?

  1. This might just offer an idea how, without violating Marx’s labor theory of value, imperialist super-profits are obtained.
  2. It could offer a way of modeling the emergence of world market prices, and the dollar as world reserve currency.
  3. It could also explain the empirical data, which shows neoliberal free trade policies produced a US expansion in the 1980s and 1990s.
  4. Finally, it explains why China’s currency appears undervalued on the world market and the US dollar overvalued against what we would expect.

MONEYLESS: Deflation (Or, “too little money”)

December 29, 2011 9 comments

FOFOA’s argument against modern money theory can be summarized as follows:

A staggeringly massive hyperinflationary event is already latent in the global economy. The dollars currently in circulation only retain their purchasing power because of the function of money as medium for the circulation of commodities. Modern money theory, which proposes the fascist state faces no monetary constraint on spending in excess of its ability to tax or issue debt, is making an argument for monetary policies that will only exacerbate the latent hyperinflation already present in the economy. The problem posed by hyperinflation, “too little money”, is not mitigated when the state creates new currency out of nothing. Rather, the case is the reverse: emitting new dollars does not create additional purchasing power; it simply dilutes the purchasing power of the dollars already in circulation, adding to the implosive potential of the inevitable hyperinflationary event.

According to FOFOA, the hyperinflationary event has been held back so far by the self-interested action of Europe, Japan, and China; who have recycled their dollars back to the US to buy its debt over the past thirty years. This recycling of dollars into US debt has supported the purchasing power of the dollar, but it has reached its limit. The dollar is now suffering a credibility crisis among US creditors, that must lead to an effort by these creditors to exchange their dollars for real, not fictional, assets. With the US’s creditors losing faith in the stability of dollar purchasing power, and boycotting the purchase of US debt, the US is actually engaged in wholesale creation of dollars out of nothing to fund its operations, driving the dollar into actual hyperinflation.

This latter scenario, the impending and irreversible loss of dollar credibility, is where FOFOA badly stumbles in his argument against the advocates of modern money theory.

Read more…

MONEYLESS: FOFOA on Hyperinflation (or “too little money”)

December 7, 2011 Leave a comment

Toward the end of his case against the modern money school, FOFOA offers this insight into Wiemar Republic hyperinflation, and what he argues is the basis for the coming hyperinflation set to be unleashed in the dollar system:

As the German Mark fell, there was “not enough money” to pay the debt. And with a little inflation, there is “not enough money” to buy our necessities from abroad.

Hyperinflation, FOFOA argues, is commonly described as a rapid rise in the general price level — an incredibly sharp burst of inflation where the prices of commodities increase a hundred-fold, even a thousand-fold, as a result of a rapid depreciation of the purchasing power of the currency. But, hyperinflation can also be thought of as a sudden implosion — collapse — in the supply of money in relation to the prices of commodities. A situation emerges where there is “not enough money” to pay for commodities.

Read more…