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Posts Tagged ‘overproduction’

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.

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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.

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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.

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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.

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Capitalism without Crises?

February 6, 2012 Leave a comment

At the end of his paper, Fred Moseley makes several statements that are important to parse. (PDF: )

This conclusion suggests that the debate over whether or not gold still plays a role in the function of measure of value in today’s economy is less important for Marx’s theory than previously thought. Whether or not gold still plays such a monetary role, i.e. whether it is assumed that credit money represents SNLT directly by itself, or indirectly through gold, it does not make any difference to the quantitative determination of the MELT in Marx’s theory. In both cases, the MELT is equal to the ratio Mp V / L, as in equation (7). Therefore, it also does not make any difference to the determination of the aggregate price level, nor of the total surplus-value produced.

Moseley argues Marx’s theory of money can be dispensed with, since it plays no role in determination of value, prices, and surplus value. As a practical matter, Moseley appears to be right on this: even in the absence of commodity money, labor produces value and surplus value. And, commodity money plays only a symbolic or token role in prices. Finally, if I interpret Marx correctly, money and the circulation of commodities occupy antagonistic poles not only in circulation itself, but between circulation, on the one hand, and a hoard of gold, on the other. Which is to say, between capital (as wealth in circulation, as self-expanding value) and money (as wealth at rest.).

If capital was not prone to crises arising from the mode of production itself, money in Marx’s sense of that term would be unnecessary. This is the side of the equation that Moseley grasps onto as if it is the whole of Marx’s theory of money. Mosley’s argument requires a capitalism without overaccumulation (overproduction) of capital, without crises and stoppages of industry. Once all these elements of capitalism are reintroduced into his argument, that argument collapses and must collapse. Now, the circulation of commodities is no longer smooth and unvarying, but subject to interruptions, imbalances, even periodic collapses. During these periods of crises what serves as money is of acute importance — it cannot be symbolic or token money, but must be actual gold.

During crises, the nominal value of token money, bills of exchange, derivatives, bonds, etc. vanish — as is happening right now in Europe. This devaluation of token money and credit money is expressed as the sudden appreciation of gold “prices” against all symbolic monies.

What remains to be shown is that even if we assume no overaccumulation, crises or industrial stoppages, Moseley never shows in his paper that symbolic or token money can not only serve as measure of the value of commodities, but actually materialize this value in its own form — these two are not the same thing.

To understand the difference consider the difference between labor power employed to produce an automobile or a manicure, and that employed to clear an occupation, or a village in Afghanistan. In the first case labor power is employed to produce a thing having value — even if this employment itself produces no material object. In the second case labor power is not employed to produce anything but broken bones and corpses. In either case tokens can be used to purchase the labor power employed, but only in the first case does the labor power replace its value.

If we consider the capitalist mode of production as the continuous circulation of value through the process of self-expansion the result is obvious: in the first case we get not only the replacement of the value of the labor power, but an additional surplus value; while, in the second case, we get neither replacement of the value of the labor power, nor any
surplus value — just piles of dead bodies.

The quantity of value in circulation has undergone a contraction in the second case of unproductive employment of labor power. Yet, there is no alteration of the quantity of symbols of money in circulation. While it is true these symbols of money now expressed the diminished quantity of values in circulation just as readily as they did the larger quantity previously, it is also clear that they express it the same way a bucket expresses the quantity of water it contains. There is, in fact, no way to tell how much water there is in the bucket merely by examining its outside. Is the bucket full? Half full? Or, empty? Does the bucket contain only water, or does it also contain oil or some other contaminant? If the bucket contains both water and oil, in what proportion are the two liquids present in the bucket.

The fact is, according to Marx’s theory of money, with debased tokens of money it is impossible to separate the socially necessary expenditures of labor time, from labor time that is wasted and unproductive. Without the ability to distinguish between the productive expenditure of labor time and unproductive expenditure of labor time we are led into the fallacy of neoclassical economic theorists who propose the prices of commodities are identical with their values. And, that the total sum of prices of commodities in circulation is identical with the total sum of values of those commodities.

When Andrew Kliman admitted that MELT is not a diagnostic tool, he was admitting that MELT was unable to distinguish socially necessary labor time of society, from labor time that is totally wasted and unproductive. But, the entire point of the social revolution is predicated on just this material differentiation. The whole of the struggle between the two great classes of capitalist society is a fight over what is socially necessary labor time. This takes the immediate form of the fight over the division of the social labor day between wages and profits, i.e., between value and surplus value. But, in the final analysis, it is a fight over labor time that is socially necessary in both these categories, and labor time that is superfluous to either category.