Re: Re: Re: Re: Japanese Liquidity Trap

["Fred B. Moseley" <fmoseley@xxxxxxxxxxxxx>]

On Tue, 30 Oct 2001, Chris Burford wrote:

> The classic description by Engels of capitalist crises observes in 1877
> that the world was at that time going through its 6th crisis since 1825.
>
> In this he describes how the "markets are glutted" (as in present day
> Japan) but further "hard cash disappears, credit vanishes".
>
> I wonder whether we are looking at the same cyclical processes only
> cushioned rather than cured by the additional Keynesian interventionist
> attempts by central government at least to avoid a crisis of the
> circulation of finance capital.
>
> It just can do nothing about restoring the rate of profit. And with the
> newly coined(?) term 'liquidity trap' we see that even if such measures
> make the crisis less acute, they may make it worse.


Chris,

I think you are exactly right about this.  This is the answer to your
puzzle of several weeks ago - that Marx predicted high interest rates at
the peak of an expansion, but now we have low interest rates.  The answer,
as you say, is expansionary monetary policy, which was non-existent in
Marx's day, but is widely used today.  Expansionary monetary policy may
make the crisis less acute, not by reviving business investment (that
requires a revival of the rate of profit), but rather by lowering the
interest burden of existing debts.  But expansionary monetary policy
cannot solve the fundamental problem of insufficient profitability (too
low rate of profit).  That requires the "liquidation" of large amounts of
capital, through bankruptcies, write-offs, etc., as you have emphasized in
other recent posts.

At least according Marx's theory.  And Marx's theory seems very
much to be supported by what is going on in the world economy today.

Comradely,
Fred