Date: Sat, 19 Apr 1997 11:40:42 -0800 From: djones-AT-uclink.berkeley.edu (rakesh bhandari) Subject: Re: M-TH: Credit Comrade boddhisatva Thanks for the reflections on the role of credit. As usual, I am over my head. Yesterday I read an article by Robert Pollin in the recent issue of Challenge (a popular American economics journal) discussing the contributions of Hyman Minsky, whom Pollin praises for his innovative analyses of transformations in the financial structure of capitalism. What seems to me most interesting is the post World War II development of *institutions* by which protracted and spiralling debt deflations have been prevented. Pollin discussed the development of both government institutions and financial innovations by which restrictive central bank policies have been partially circumvented. (One of Minsky's interesting ideas seems to be that market economies only tend towards full employment when credit is being over-extended; I think Schumpeter makes such a point somewhere in Business Cycles as well.) I have two immediate questions: 1)What are debt deflations? 2)Why are they both disrputive and restorative of capital accumulation? This is a very complicated topic (Tobin's q index in relation to asset prices and "marked up" market prices; the development of various forms of federal insurance; the theory of the endogenity of money; the various forms of banking and the erosion of their institutional boundaries; the rise of the small investor and mutual funds; and the bloodletting of third world debt). Jerry Levy has recommended Robert Guttmann's How Credit Money Shapes the Economy:THe United States in the Global Economy (ME Sharpe Press, 1995). In The World Economic Crisis and Japanese Capitalism, Makatoh Itoh presents a brilliantly lucid analysis of the role of credit in the accumulation process and the business cycle. And then there is Alain Lipietz's work. As I said, I am in over my head at present. Also, from what I understand, Hayek put the credit system at the center of his explanation of the overproduction of capital and resultant economic crises. What is interesting here is the idea that such overextension of credit may at the same time be necessary for market economies to approach full employment; I think Hayek even grants as much. Right, Chris S? Rakesh --- from list marxism-thaxis-AT-lists.village.virginia.edu ---
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