Excess of Monetary Capital
ikita at st.rim.or.jp
Thu Aug 24 22:07:28 MDT 1995
Dear 'marxism' participants,
I am a very newbie here since 10 days. But I found here very interesting
threads about contemporary capitalist economy. I think there are several
points for dicussion. I would like to pick up one of them.
One of the keys to understand growing instability of contemporary
capitalist economy is 'the excess of monetary capital', I believe.
In long-term, average profit rate (profit/outstanding of capital)
has been falling down. This proves Marx's argument that profit rate
falls due to increase in organic composition of capital _if_ surplus
value rate is constant. I believe this law is still alive.
In the age of 'imperialism' written, solution of the problem was
mainly export of capital that caused military frictions among
imperialist countries. But that was limited.
However, capitalists learned from the great depression era how to
manage this problem. Employing agressive fiscal policy, they represented
high growing economy in major capitalist countries for 15-25 years
in the post war period. However, this was also limited. In general,
surplus value rate was almost constant due to the labour-capital
relationship in that period. There was also seen an increase in organic
composition of capital caused by introduction of automation.
So the law of decline of profit rate appeared. On surface, such essential
factor appeared as widening of international trade inbalance. It led to
the collapse of the currency system named Brettonwoods regime.
The present difficulties for capitalists come from here.
Though decline of profit rate has been the essential problem, capitalists
manage the difficulties by expanding public debt and workers debt as long
as efforts of up-lifting surplus value rate by rationalization.
Expanding public debt and workers debt (=consumer credit and mortgage loan
for housing) added final demands to economy. Thus capitalists represented
growth of production.
At the same time, it means creating excess of monetary capital. I believe
this is important. I employ the term 'excess of monetary capital' as
the monetary capital that doesn't form accumulation of productive
capital. In practical sense, increase in public debt and workers debt is to
be an amount of excess of monetary capital. Of course we can't distinguish
which financial asset is excessive. Only in macro, we can say that excess
of monetary capital exists.
To my thought, bubble affairs are not subjective matters of capitalists.
We saw decline of risk premium relative to interst rates in the equity
markets worldwide in '80s. The relative decline of risk premium was the
most factor of surge of equity prices in '80s. After the Black Monday,
the relative decline of risk premium ended but the _level_ of risk premium
has been staying at the very low level. What's the reason of decline of
risk premium? If the increase in monetary capital fits to the increase in
productive capital, risk premium would stay constant relative to interest
rate. So the excess of monetary capital must have been the reason.
Similar thing happend also in the real estate market.
Comparing the level of production and the oustanding of assets markets,
I can't deny the growing influence from asset price volatility onto
real economy. The positive feed back effect exists. Thus instability of
contemporary capitalism is growing.
I'm expecting any kind of critics on my argument above.
P.S. A positive feed back effect through a non-linear function may create
'Chaos', I guess. Am I wrong?
a member of theoritical study group
Socialist Association (Japan)
E-mail : ikita at st.rim.or.jp
personal web: http://www.st.rim.or.jp/~ikita/
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