Commentary on Political Economy

Thursday 28 July 2011

A Summary of the Situation

It is truly astounding to see so many pundits fumble and grope in total darkness in the most stupefied incomprehension while we witness the most astounding, significant "crisis" in the history of capitalism since the 1930s. And remember: "crisis" means "trans-formation", it means "innovation" - that is what Schumpeter taught us - and not just State "intervention" (Keynes).

The "debt crisis" that we are witnessing is only a "development" of the "great financial crisis" whereby Western governments, or "collective capitalists", were forced to take over the "bad loans" and investments made by "private capitalists" so as "to guarantee" the "profitability" of those investments - even though, with so little profits available, it is government bonds (treasuries and gilts) that are at least ensuring the return "of" capital to investors rather than any "real" retutn "on" capital.

The problem is that with States (collective capitalists) so indebted now, their "guarantee" of the capital that they hold and that they "force" banks to hold as "security" for their loans, there is a lot of "fictitious capital" washed around so that it becomes impossible to tell who is a "genuine" capitalist and who is not, what is a "profitable" investment and what is not.

Even at high levels of unemployment, the "availability" of workers to work at "reasonable wages" in the West is waning. And even China, for twenty years the source of cheap labour, can no longer supply human fodder for exploitation.

The result is that States are forced into "financial repression" - that is, forcing "private capitalists" to holf government debt at very low rates and actually "negative real" rates of return, so that inflation will eat up their capital and reduce the government debt until it can be repaid at a huge discount. Yet all the while the "weight" of the State in the economy grows because governments need to ensure a politically tolerable level of unemployment - with the result that soon it is projected that the US government will have a debt equal to 100% of GDP! In other words, you can forget about the "private capitalist economy": it is an entirely "public" one!

But this does not stop the huge corporations that are virtual monopolies in their branches of investment from further "concentration" so that essentially they become "systemically risky" for the entire reproduction of our society - and "too big to fail" in the process! So these corporations (especially the "financial" ones) have got some governments by the throat and are able to blackmail the body politic!

How long can this go on? Something must give. And that is why we have all these "debt ceiling" arguments between and among members of the bourgeoisie and between and among capitalist nation-states that cannot agree on who and how is going to bear the burden of this "crisis". The US Administration, for its part, is sick and tired of absorbing the exports of all other bourgeoisies - especially the "dictatorships" in China and Germany and Japan and Korea and Taiwan. Its policy of "malign neglect" is now to export inflation to the rest of the world by simply printing greenbacks. And far from "weakening" the dollar - which in any case is beneficial to US employment and exports - every time there is even the remote "chance" of renewed "crisis", the dollar and treasuries actually strengthen!

This should not surprise, except idiots such as FT commentators and Bill Gross, who simply cannot see the "logic" in all this! But we can. And you can find it in the analyses (some of them more "academic") that we have published here. Cheers.

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