schumpeter help

wesley david cecil wcecil at
Fri Aug 26 10:09:07 MDT 1994

On Fri, 26 Aug 1994 marxism at wrote:
> 1) If an emphasis on speculative investment leads to under-investment in
> real capital goods, the source of surplus value will be starved, and the
> physical, social, and economic reproduction of society will be threatened.

I agree with the general point here, the problem is how do we know what
counts as "under-investment" and what counts as capital investment stocks
vs. purely speculative stocks?  Are we in a state of excessive
speculation, is all speculation excessive -- bring back those sumptuory
laws.  I would be interested if you have any ideas of how to figure this
one out.

> 3) The management of those shocks by the central bank and state (low
> interest rates, easy money, the Resolution Trust Corp.) "validates
> threatened financial practices" (in Hyman Minsky's phrase), thereby
> encouraging future irresponsibility even as it saves the system in the
> short term.

Again I agree with this, eventually it would seem this house of cards is
going to collapse, but how long is that eventuality. It seems without
some sense of key thresholds we end up in a Christian Milleniarist ethic
where any day now God's gonna be here(and boy is he pissed).

> 4) The first wave of program trading restrictions does kick in at 50 Dow
> points, but it works both ways, not just on the downside.

Thanks for the clarification, they really do love stability don't they.

> 5) Markets did collapse before program trading. There's no reason why
> program trading restrictions should prevent an old-fashioned selling (or
> buying) panic.

My impression is that current trading volumes, running around 200 million
shares a day, are so great that without computer trading it is difficult
for floor trading to seriously threaten the market, they just can't
process the trades fast enough to cause harm.

> 6) Despite all the institutional and technical changes of recent years,
> stock market volatility is not all that different from 10, 20, or 60
> years ago.
Again my impression was that as a percentagge of total market value the
Market is much more stable now with few days posting more than a 1% or 2%
change in value.  I would appreciate clarification on this and any
other points, thanks for the in depth response.


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