[PEN-L:1142] Re: Re: Re: Re: Re: This list has some great kidders

[boddhisatva <kbevans@xxxxxxxxx>]

		C. Rob,

	Inflation is bad for bond-holders, but that does not necessarily
mean it's good for bond-issuers, especially if they must, as governments
must, continually re-finance their operations.  It is a theoretical plus
to be a bond issuer in an inflationary market, but inflation means that
governments will simply be paying out more interest in the future since
they have to keep interest rates above inflation rates if they don't want
inflation to skyrocket.  I think the people that inflation really works
for are those looking to recover a one-time bond issuance by entering a
goods market where they need to preserve pricing power.  I think the
French strategy of issuing bonds and then (essentially) devaluing currency
was a bad one, but maybe Doug Henwood has an opinion.

	I think the reason Wall Street is not the same as stuffing money
in a mattress is that securities really have no definite value.  They are
*promises* of future cash.  The cash that actually accumulates from
commerce goes back out into the economy and only a small percentage of it
is actually used by capitalists for consumption at any given time.  This
is especially true of the stock market since a share of stock is not
really even a promise of cash (Yes, there are dividends, but they are
really a paltry percentage of the overall return of a stock.  Many
companies nowadays don't even distribute dividends, they just buy back
stock to raise the price.)  While there are still yo-yo's who go and buy
gold, they are fewer and fewer.  Modern treasure is a promisory note of
uncertain future value.

	The fact that capitalists are willing to abandon their cash in
return for these notes means that the cash can be re-invested (albeit by
what are often circuitous processes).  That cash then pays workers to
create capitals and goods that also have uncertain value (because they
haven't produced goods yet or sold yet, respectively). Clearly credit
invested must generate more value than interest, if the system is to
survive.  In fact, I think that's why the system can survive.  Otherwise,
the crisis brought on by accumulation would be rapid and fatal.
Fortunately for capitalists, workers have been plugging away, making a
more technologically advanced world with higher and higher total product.

	The problem with Keynesian investment is exactly what makes it
seem so conservative and sensible.  It is a simple cash for value deal. It
does not encourage capitalists to put their cash into these investments of
uncertain value nor does it encourage an active market where this cash can
go from investor/speculator to investor/speculator more and more quickly.
That process of that cash portion (that "real" portion that represents
actual value derived from past commerce) moving from industry to industry
is fungibility.  Software developer X takes his millions from the IPO by
selling the stock and starts a new venture with it.  That's the simple
version, but there are other paths by which the cash comes back into the
economy.  The real trick is keeping all those capitalists from demanding
their cash back at once (or even a large percentage of them from doing
it).  Once that happens the economy goes bust and we're all back to
barter.


	My explanation of why this monetarist world has worked is that
when investment bankers control the whole system - from industry to
central banks - there is simply a greater comfort level among capitalists.
There is broader understanding, more transparency, and shared customs
among speculators.  That makes it much easier for the capitalist to let
that cash out of his greasy fingers and put it into something that
provides fungibility.  It also means, of course, that the interests of
working people are simply overwhelmed in the process.  Ultimately it's
simple: the problem with capitalism is that if all those little
capitalists decide to pick up their marbles and go home, the game ends.
The more you can get capitalists to let others play with their marbles,
the better the game you have.  Keynesianism has tried to have the
government provide substitute marbles and it just hasn't worked.


	There, I think a metaphor for capitalists that equates them with
selfish children is entirely satisfactory.




	peace