Re: M-M'

[Doug Henwood <dhenwood@xxxxxxxxx>]

On Mon, 28 Feb 1994, David Brennan wrote:

> This is in response to Jim's questions concerning my earlier
> posting. He asks two questions concerning interest payments and SV.
> Specifically, he questions why consumer interest payments and Ponzi
> deal interest payments are not components of SV.
> Let me specify what I  mean by consumers here. I am assuming that
> consumers are only purchasing final goods for private consumption
> (ie no consumption of capital goods). Furthermore, the only source
> of income for these consumers is wages or for simplicity V. All
> borrowing is to increase consumption say at time (t). Therefore, at
> time (t) V(t)<V(t)+loan. Once the interest and principle are due
> say at time (t+1) we have V(t+1)-loan principle-interest available
> for consumption. Therefore, labor has decided to consumer more know
> than later. The repayment of the loan comes from future payments to
> labor power and not SV.

Do people really pay down their debt when that future arrives? Or do they
keep rolling it over and capitalizing the interest? While this is hard to
answer for individual consumers, on a macro level, consumer debt grew
steadily relative to income, and debt service as well, from the end of WW
II until about 2 years ago. And certainly the creditor class has made big
money from consumer interest, not to mention the industrialists who
enjoyed fattened demand for their products. Something is being transferred
here across class as well as time, no?

Doug

Doug Henwood [dhenwood@xxxxxxxxx]
Left Business Observer
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