Re: [A-List] znet/weisbrot on deflation - critique?

["Anyutka" <annewilliamson@xxxxxxx>]

   Jim writes:
   ...............Further, there is
> a demonstrated tendency in capitalism that those capitalists who
> "malinvestments" get threatened or cleaned out with the high colonic
enemas
> of the troughs of the business cycle, typically resist and try to turn
their
> "malinvestments" into once-again-profitable investments through various
> deals with the state and attacks against the working class.

   I agree!  In fact, that is exactly what we are witnessing right now -
Greenscam's
years' long battle to hold off the inevitable on behalf of his corporate and
political
clients is only increasing the eventual debacle, while creating much misery
along the
way for those lower down on the food chain who will - of course - suffer all
the
more when the smoke and mirrors finally give way to economic reality.

This notion of "freeing capital for productive pursuits beneficial to all"
sounds like
> something out of a libertarian primer on the wonders of "free market"
> capitalism and rather curious for someone seeking a "critique of
capitalism"
> and not just central banking.

Well, it might sound like something "out of a libertarian primer on the
wonders of
'free market' capitalism" but the redirection of capital/resources/labor to
productive
pursuits is far preferable to maintaining malinvestments, which is what is
happening
now.  And I most definitely agree that 'free market economics' is a slogan,
not the
reality of the US economy.

Jim writes:

  ................general price reductions generally occur only in the most
> extreme circumstances and are generally thought to be the effect--and
> harbinger--of deeper systemic crises.

Yes, you are correct in that general price reductions generally occur only
in the most extreme circumstances for a host of reasons, some of which you
have listed already.  In a fiat system, price reductions do signal a deep,
systemic crisis based on excessive credit creation and monetary emissions.
In an asset money system, deflations are sudden, sharp, short and contained
by venue and are therefore not systemic.  Debts are allowed to clear, the
quicker the better.

Regarding real estate, the mistake in most people's thinking is that housing
is
an investment, while in fact it is a consumption item.  What is particularly
worrisome now is that banks have lent money to homeowners on their
unrealized "gains", bundled them up and sold those mortgage bundles on as
securities.  By the time the smoke clears, this illussionary piggy-bank real
estate
phenomenon will have robbed large numbers of any equity claim in the
properties
they inhabit.  Essentially, the Fed is slowly nationalizing the nation's
residential
stock through Fannie and Freddie.

I didn't understand your last paragraph despite having read it through
several times - so I can't really respond.  I'll try again when I have a
better grip on your meaning, and will respond to your first point later when
I have the time to properly lay out the theory of the natural rate of
interest which
addresses many of the points you made from a different angle.

Anne

----- Original Message -----
From: "Craven, Jim" <jcraven@xxxxxxxxx>
To: <a-list@xxxxxxxxxxxxxxxxxxx>
Cc: <marxism@xxxxxxxxxxxxxxx>
Sent: Sunday, July 13, 2003 6:06 PM
Subject: [A-List] znet/weisbrot on deflation - critique?


> Anyutka wrote:
>
> Sorry, Jim, but your analysis is based not on a critique of capitalism,
but
> on one of central banking.
>
> My analysis, rushed by my own admission, was not a critique of central
> banking per se. For openers, as I noted in my own words, it was to show
how,
> even in bourgeois theory, unexpected and sustained deflation could produce
> some severe dislocations in the macro economy which, when coupled with
> morphogenetic as well as the traditional morphostatic or purported
> self-equilibrating, negative-feedback effects of neoclassicism and
> increasing interdependence globally and domestically, could produce some
> widespread waves of further dislocations.
>
> Specifically:
>
> I could go on, and notice I am looking only from the standpoint of
> contradictions in bourgeois economic theory, when we bring in a
> full-blown Marxist analysis, departing from the linear and unidirectional
> "chains of causality" and ultimate "independent/dependent"
> variables of bullshit neoclassicism, it gets even worse--or better from
> the standpoint of destabilizing the whole system.
>
> Got to run, more later, this is just for openers.
>
>  Jim C.
>