Re: [Pen-l] For Many, a Boom That Wasn't

[John Vertegaal <vertegaa@xxxxxxxxx>]

Sandwichman wrote:
> There's one prior step that needs to be mentioned -- the origin of big
> finance in sovereign loans to governments to finance wars and war
> making. These are unique because governments aren't constrained by the
> indeterminacy of demand and price you emphasize. They tax to pay the
> interest on the debt, roll over the principal, borrow some more and
> tax some more to pay the higher interest. The demand for the
> commodity, war, is whatever the 800-pound gorilla says it is.

If by demand you mean the output of governmental activity; then, to the 
extent it doesn't depreciate and needs periodical upkeep, it locates 
itself outside the economy. In this respect it is the same as bought and 
paid for retail output, ready for (extra-economic) consumption.
In my analysis of economically acquired debt and its feasible resolution 
over time, governments (at least in non-inflationary terms) are yet 
constrained by the indeterminacy of demand and price, within an all 
encompassing income circuit. If one accepts that ultimately, all such 
borrowing is constrained by the ability to tax, and all taxes regardless 
of how they are charged are being paid out of income; then all taxes are 
assumed by retailers as costs of doing business, to be resolved by the 
final recipients of governmental expenditures through the purchase of 
retail output. There is no other way of resolving governmental debt in 
real terms. The outlet for war profiteering lies in asset inflation, 
subject to implosion whenever the real economy fails to supply returns.


> Does
> Sismondi go into this? It's one of the aspects of Dilke's analysis I
> particularly appreciate and that IMHO surpasses Marx's.

He doesn't in the (almost) three of the seven "books" of his magnum opus 
Nouveaux Principes... (2nd ed. 1827) that I translated and is available 
in annotated form on my website. I was most intrigued by the fact that 
even though he invented the use of aggregate income equations in 1802, 
he immediately disavowed their usefulness; as a vital attribute of the 
real economy [its indeterminacy] was uncapturable. So I concentrated on 
that aspect of his work, which is habitually overlooked (even in the 
recent Hyse translation) and I never even bothered to read "On Taxation" 
(the sixth of the seven), wherein he may have broached the subject.

Note to Jim: Sorry for the delay, I'm not as smart as most of you guys, 
and it takes me a lot of time to come up with what I believe to be a 
fitting answer. It's in the works though. In the mean time I'm glad my 
main website was discovered, as there is an awful lot of background info 
there.
John V
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