Debt crisis? Maths Question!

[TremulousTetra]

but Chris Harman does say the "success of Keynesianism" in the post-war period was not as a result of increasing the consumptive power of the working-class, but that the increased taxes, to fund Cold War armaments, acted as a siphon away from overinvestment. Now either you have misrepresented views callinicos , or he has completely contradicted Harman. I know for fact that both people believe/argue that overproduction is the cause of crisis.
Now overproduction, and under consumption, are part of the tautology. You can only have overproduction, over investment in the means of production, in so far as society is not able to profitably consume all that is produced, under consumption. You can only have overproduction, because the working classes etc do not have the financial means to buy what they need, under consumption. You cannot simply replace under consumption by the working classes etc, by increased consumption by the ruling class

This certainly reduces the value of working class "demand", but increases the value of the "demand" available to bankers, the rich etc. by the same amount. Hence as working class demand reduces, rich demand increases - but the total demand remains the same.

Workers only have demand to consume what is produced. The capitalists demand is not for consumption, but for investment. Their capital seeks investment in the productive process so Labour can add value to their investment, so they can accumulate. As Marx said the capacity for the feudal lord to stimulate production was limited by the girth of his belt, by the amounts he could consume, the capacity of the capitalist to stimulate production is endless, because he only stimulates investment in production, to make profits to reinvest in production, to make profits to reinvest in production. He accumulates accumulates, that is his raison d’etre.

the working-class demand for food clothing etc, does not play the same role in the economy as the capitalist demand for investment, on this Keynes and the under consumptionists was right.

 

[Prince Rhyus]

Good suggestion, Rhyus. However, both you and I know the chances of that happening are between 0 and zero. The political will isn't there.

But Rhyus, there might be scope for the EU to get its act together to deal with stuff like this. After all, it's something that goes beyond the competency of nation states.

 

[Prince Rhyus]

But Rhyus, there might be scope for the EU to get its act together to deal with stuff like this. After all, it's something that goes beyond the competency of nation states.

The problem is that it would have to take an almighty catastrophy that affected everyone to get that level of joined up thinking and working. The problem at the same time is that instinctively everyone thinks of themselves rather than for the common good.

 

[TAE]

I think Prince Rhyus is talking to himself again.

 

[TAE]

I think Prince Rhyus is talking to himself again.

Yes, I think you are right.

 

[durruti02]

interesting comments from slaar and all

i understand that not having debt does not work either - but surely we had just as extensive capitalist expansion in periods when there was more money saved ( and also used for investment that way) as when now we have consumers directly funding investment thru buying and spending.

technically i guess debt can be rolled over and over - indeed there is talk of 50 /100 year mortages being passed thru families - and therefore is NOT a complication - what is interesting is the vast expansion in the last few years -

 

[durruti02]

is it possible to calculate the affect on GNP/GDP growth whatever IF we took out the loans/debt injected into the sytem over the years?

i think we see that before our eyes now! a significant %

 

[nino_savatte]

GDP is an exceptionally narrow method of calculating a given nation's economic performance. It ignores factors like unemployment, the black economy and the waste that is produced as a result of over-production.

 

[nino_savatte]

Eh? You think the recent collapsing hedge funds, liable for vast amounts of debt, support this thesis?

Ah, hedge funds...now there's another one.

 

[fanciful]

I've been trying to work out what proportion of disposable income (wages less taxes) are paid in interest payments and in the USA it comes to around $981bn a year, up from $166bn in 1980, pretty mind boggling.

 

[A Dashing Blade]

. . . and corporations, which have hugely reduced their endebtedness over the same period.

<guffaw>
Hence the massive increase in bond issuance over the last 10 years non?
</guffaw>

 

[audiotech]

The mechanism is that banks create the money supply by creating credit.

In a recession the process goes into reverse, because banks are then writing off the credit they're creating, as bad debt affecting the money supply.

If, as in happened the thirties, firms go out of business because of this credit crunch, taking their own debt with them, then the money supply contracts still further.

The problem is that recession, like a boom, feeds on itself.

 

[brasicritique]

Debt Crisis? Maths Question! Sounds like a question for Blagsta wonder why he has not posted on this thread....

 

[durruti02]

so where were we??

 

[Steve Booth]

Where is the benefit?

That's not a maths question, it's an economics question.

Since a great deal of investment depends on debt, I suspect that we'd still be circa 15th century if debt had somehow always been illegal. But what we have now has been built up from simple promises to pay somebody something in the future in exchange for support now, so there's an extent to which a process of increasing debt is inevitable within capitalism, short of regulation to restrict people's ability to make contracts with each other.

Do you suppose that 'growth' based on credit might not actually be growth at all? How do we really pay for the production of goods without the money? - this idea that giving credit is "a licence to print money" - does this not lead to the observation that the gap is felt in inflation, the money being worth less over time?

Might the present "crunch" be due to low interest rates?

 

[durruti02]

and it goes on and on

 

[dennisr]

Good modern examples of underconsumptionists are the Socialist Party see recent editorial

So you are arguing that saying “restricting the market for capitalism and increasing the tendency towards crisis“ equates to "attribut[ing] crisis to falling wages."

ie "increasing the tendency towards" equates to "the cause of"

Are you sure that is the same thing or is it you doing the 'attributing'?

Previously we were 'catastrophists' now 'underconsumptionists'

 

[Barking_Mad]

Do you suppose that 'growth' based on credit might not actually be growth at all? How do we really pay for the production of goods without the money? - this idea that giving credit is "a licence to print money" - does this not lead to the observation that the gap is felt in inflation, the money being worth less over time?

Might the present "crunch" be due to low interest rates?

Isn't All Growth Built on Debt?

 

[durruti02]

whta really interests me is HOW much ' money' has to be 'unwound' .. i.e how much money that never really existed has tyo be written off and hence how many jobs will be wruitten off and how far down will hosue prices go

when you look the graphs of house price inflation, stock values etc etc it is possible to say that these could go right back down to the levels there were at 20 years ago ..