File spoon-archives/marxism-thaxis.archive/marxism-thaxis_1997/97-04-23.123, message 42


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




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