[P2P-F] [gang8] The debt overhead: capital accumulation or an autonomous dynamic?

Mon May 30 18:12:00 CEST 2011

ps: my current feeling / hypothesis, without backing it up with references
and arguments for now,

is that the current financial system, as information system, seems to be
fine tuned to facilitate transfer of property / concentration of property.

Perhaps some of you have some interesting references on this topic to
suggest ?

Hence, my interest in understanding how to facilitate economics and
financial systems, as information systems, which are *not based / guaranteed
by contracts related to property*.

On Mon, May 30, 2011 at 5:59 PM, Dante-Gabryell Monson <
dante.monson at gmail.com> wrote:

> excerpted from message below :
>
> " to get economists and many economic reformers to see that the financial
> system is decoupled from the production-and-consumption economy. It is
> autonomous. "
>
> may be an interesting starting point to overlap with
>
> " Michel points out that “With the bursting of the internet bubble there
> was Big crisis. No more money. But instead of stopping innovation
> accelerates. Now why?”
>
> http://p2pfoundation.net/Gordon_Cook_Interviews_Michel_Bauwens
>
>
> *///////////////////////*
>
> further excerpts from message below :
>
> " Most Third World debt represents accrued interest – not necessarily
> unpaid interest, but new bank loans to enable debtors to pay the interest.
> This is what Hyman Minsky called the Ponzi stage of the financial cycle. "
>
> " The ECB demands that governments (“taxpayers”) in Ireland, Greece, Spain
> and Portugal take full responsibility for making good on the bad loans and
> reckless speculation of banks, so that wealthy and institutional investors
> who placed their credit and fortunes behind such schemes would be saved from
> having to take any loss. In such cases it is preferable to drive even
> national economies into bankruptcy. Mass poverty appears merely as an
> “externality” to financial fortune hunting at the top of the economic
> pyramid. "
>
> ---------- Forwarded message ----------
> From: Michael Hudson <michael.hudson at earthlink.net>
> Date: Mon, May 30, 2011 at 4:28 PM
> Subject: [gang8] The debt overhead: capital accumulation or an autonomous
> dynamic?
> To: GANG8 <gang8 at yahoogroups.com>,
>
>
>
>
> Dear Gang,
>     It seems almost impossible for me to convince Marxists and Georgists
> that the debt burden is NOT an accumulation of capital representing high
> profits (causing under-consumption) or land rent, but that debts can accrue
> — becoming creditor “savings” -- without any surplus at all.
>     How to make this clear?
>     Here’s my attempt so far.
>
>             When the Merchant of Venice Antonio owed Shylock a pound of
> flesh, he had a debt, but there was no surplus – no substance – out of which
> to pay. His ship failed to come in.
>
>             And it even was a zero-interest loan. (Friends did not charge
> interest in polite aristocratic ages.) There was a debt, and it was owed to
> Shylock – who made his surplus by lending money to merchants, who made it by
> trade. (There was little wage labor as yet, and not much mortgage lending.)
> Other creditors made loans to government – against taxes that were levied on
> basic commodities, or the land, or charged as user fees for public
> monopolies (transportation), or achieved in war by looting to pay off the
> creditors. That is how the first Crusade was organized, after all: The Doge
> of Venice advanced funds to the Crusaders, in exchange for a quarter of the
> loot. This was not a surplus. One could argue tautologically that loot had
> to be produced as a surplus before. But the volume of loot was independent
> from the volume of debt that came to be erected.
>
>             If all debt reflected an existing surplus, then somehow it
> could be paid. But the problem is that many debts can’t be paid – except by
> eating into the bone, NOT the surplus. The Greeks rioted because the
> Socialist government was threatening to take away their livelihood to pay
> the bankers – as Brown’s Labour Government sought to do to Iceland, and as
> Spain’s Socialist Government was trying to do.
>
>             Yet it is hard to get economists and many economic reformers to
> see that the financial system is decoupled from the
> production-and-consumption economy. It is autonomous.
>
>              Many Marxists imagine that the financial crisis represents an
> “accumulation of capital” in excess of investment opportunities because of
> profit that employers squeeze out of wage labor. This is over-accumulation,
> or under-consumption – a failure of Say’s Law and the circular flow, as
> Keynesians and classical economists alike would say. There is
> over-accumulation of capital in the production sphere,” as one Marxist
> friend of mine puts it. All finance capital – and its interest revenue – is
> squeezed ultimately out of wage labor.
>
>              Marx went to great lengths to speak of M-M' avoiding the basic
> M-C-M'. Suppose that labor were indeed paid “its entire product.” Then it
> would have an economic surplus. It might use this to buy the first criterion
> of status in today’s world: a home in a nice neighborhood with good
> schooling. It then would buy trophies, cars – on credit, at interest.
>
>             I hear much the same kind of argument from followers of Henry
> George. They believe that “all interest comes from land rent.” The economic
> surplus is attributed to land rent – or as some admit, to other forms of
> economic rent, most notably monopoly rent, e.g. of the radio broadcasting
> and communications spectrum, phone systems, patented seeds and technology,
> etc. Yet what is left out is the unique banking and financial monopoly –
> that of credit creation.
>
>             The great majority of debt that is owed does NOT imply a
> primary surplus produced by the “real” production-and-consumption economy on
> which most economists focus – and even most Marxists, Georgists and others.
> Today’s financial system is autonomous from the “real” economy. Marxists say
> But now, debt is created freely on computer keyboards. And once there is
> debt, it accrues interest.
>
>             There have been times in history when creditors have helped
> economies organize a surplus out of which to pay interest. The papacy in the
> 13th century enabled Britain to pay Peter’s Pence and other tribute by
> creating a market for wool in the Low Countries (Belgium and Holland), which
> wove it into textiles and tapestries to sell to Romans. So the Roman economy
> paid the Netherlands for handicrafts, and they paid the British farmers who
> paid the government to pay Rome. That was the 13th-century circular flow.
>
>             The World Bank and IMF wee supposed to help Latin America,
> Africa and Asia create viable economies to pay back World Bank loans and
> those of its global commercial bank clients. But the “development policy”
> was too shortsighted, too geared to financing foreign dependency on U.S.
> farm exports, and northern hemisphere industrial products.
>
>             The EU’s relationship to its indebted member countries has made
> almost no contribution to the economic surplus at all. Its behavior has been
> purely predatory on the part of German, Dutch and French bankers, acting as
> their collection agent. “Bailing out” Greece and Ireland is simply a means
> of making these bankers whole for loans that have gone bad. The loans have
> been created largely on computer keyboards – or were pure gambles, in the
> case of derivatives.
>             A gamble on a horse race, on the direction of interest rates,
> on the national lottery, or on foreign currency exchange rates does not
> require a surplus. Horse betters may have their kneecaps broken if they
> don’t pay, but it would be tautological to call their kneecap a form of
> surplus (although it was produced by eating food, which was produced on the
> land – and sold by stores employing wage labor, and so forth).
>
>             This occurs regardless of a surplus. An unpaid bill becomes a
> debt. A mortgage that goes unpaid accrues interest, late fees, penalties and
> related charges – mostly pseudo-charges for foreclosure and other “services”
> provided by bank subsidiaries in today’s vertically integrated financial
> world. Most Third World debt represents accrued interest – not necessarily
> unpaid interest, but new bank loans to enable debtors to pay the interest.
> This is what Hyman Minsky called the Ponzi stage of the financial cycle.
>
>
>              The ECB demands that governments (“taxpayers”) in Ireland,
> Greece, Spain and Portugal take full responsibility for making good on the
> bad loans and reckless speculation of banks, so that wealthy and
> institutional investors who placed their credit and fortunes behind such
> schemes would be saved from having to take any loss. In such cases it is
> preferable to drive even national economies is into bankruptcy. Mass poverty
> appears merely as an “externality” to financial fortune hunting at the top
> of the economic pyramid.
>   __._,_.___
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