Re: [Marxism] Doug Henwood, Anwar Shaikh, and financial crisis

[Ralph Johansen <mdriscollrj@xxxxxxxxxxx>]

Louis Proyect wrote:

Ralph wrote: I don't know yet what specifically the Shaikh/Henwood 
exchange covered, but in Meszaros's recent talk entitled 'The unfolding 
crisis and the relevance of Marx' cited on this list is this quote, 
citing figures seldom mentioned, from Shii Kazuo in Japan Press Weekly 
Oct. 2008, p. 20:

"How much speculative capital is moving around the world? According to a 
Mitsubishi UFJ Securities analysis, the size of the global 'real 
economy', in which goods and services are produced and traded, is 
estimated at $48.1 trillion... On the other hand, the size of the global 
'financial economy', the total amount of stocks, securities and 
deposits, adds up to $151.8 trillion. The financial economy thus has 
swollen to more than three times the size of the real economy, growing 
especially rapidly during the past two decades. The gap is as large as 
$100 trillion. An analyst involved in this estimation said that about 
half the amount, $50 trillion is scarcely necessary for the real 
economy. Fifty trillion dollars are well worth over 5,000 trillion yen, 
too big a number for me to comprehend."

Doug asked to forward his comments on Ralph's post:

If it's fictitious capital, why would its destruction matter to the 
"real" economy? That's a serious question. I'd really like to hear how 
you think the fictitious and real are related? And, if you've got some 
time, could you also explain how a "real" economy, which is based on the 
pursuit of profit in money form, is really all that fundamentally 
different from a "fictitious" one?

I've spent half a lifetime thinking about this stuff, and I can't say I 
really have good answers to these questions. But you seem to, so I'm all 
ears.

Doug

-----------------------------------------

Doug, maybe this exchange would  be better continued on your list or 
Michael's. I looked again for the information on which that assumption 
of relation between the fictitious and real economies rests. First of 
all, since capital is the product of surplus labor, and since fictitious 
capital is to my mind derivative only of that real capital, that to me 
establishes the relationship in the first instance. Just off hand, 
unmulled but as a place maybe to begin, I found this:

"It is clear that there is a shortage of means of payment during a 
period of crisis. The convertibility of bills of exchange replaces the 
metamorphosis of commodities themselves, and so much more so exactly at 
such times the more a portion of the firms operates on pure credit. 
Ignorant and mistaken bank legislation, such as that of 1844-45, can 
intensify this money crisis. But no kind of bank legislation can 
eliminate a crisis.

"In a system of production, where the entire continuity of the 
reproduction process rests upon credit, a crisis must obviously occur - 
a tremendous rush for means of payment - when credit suddenly ceases and 
only cash payments have validity. At first glance, therefore, the whole 
crisis seems to be merely a credit and money crisis. And in fact it is 
only a question of the convertibility of bills of exchange into money. 
But the majority of these bills represent actual sales and purchases, 
whose extension far beyond the needs of society is, after all, the basis 
of the whole crisis. At the same time, an enormous quantity of these 
bills of exchange represents plain swindle, which now reaches the light 
of day and collapses; furthermore, unsuccessful speculation with the 
capital of other people; finally, commodity-capital which has 
depreciated or is completely unsaleable, or returns that can never more 
be realized again. The entire artificial system of forced expansion of 
the reproduction process cannot, of course, be remedied by having some 
bank, like the Bank of England, give to all the swindlers the deficient 
capital by means of its paper and having it buy up all the depreciated 
commodities at their old nominal values. Incidentally, everything here 
appears distorted, since in this paper world, the real price and its 
real basis appear nowhere, but only bullion, metal coin, notes, bills of 
exchange, securities. Particularly in centres where the entire money 
business of the country is concentrated, like London, does this 
distortion become apparent; the entire process becomes incomprehensible; 
it is less so in centres of production." (Capital, Volume 3, Chapter 30, 
Money-Capital and Real Capital, I. pp. 478-9

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