RE: Interest Rates, Inflation, Exchange Rates and Credit inBull A nd Bear Markets

[Clifford Poirot <cpoirot@xxxxxxxxxxx>]

You missed the argument. Marx's distinction between mercantilism and
capitalism is an historical one. Perhaps it is a valid critique of Marx (and
some Marxists) that there is an assumption that no value is created in
trade.

Nonetheless, the distinction between the buying up and putting out period
and that of organizing production in factories is a quite valid one.

The best and clearest explication of this and its full implications (AFAIK)
is not dealt with in any satisfactory fashion by any economist. Rather, I
would suggest Eric Wolf's "Europe and the People Without History" (Wolf is
an anthropologist) and Eugene and Elizabeth Fox-Genovese "The Fruits of
Merchant Capital" (as I am sure most know, the Genovese's are historians).

As I have argued in an article on the Russian Financial Crisis that is
forthcoming in the hopefully not too distant future in the JPK, the
historical development of the institutions surrounding the creation,
granting and distribution of liquid capital is necessary for the development
of capitalist production with relative high levels of fixed capital. I think
Marx, as well as many others, grasped the central point that "capitalism" or
"modernity" or the "market economy" (or the SRM as Polanyi called it) was
something new and unprecedented. I think Schumpeter understood as well.

-----Original Message-----
From: William B. Ryan [mailto:william_b_ryan@xxxxxxxxx]
Sent: Monday, December 04, 2000 5:15 PM
To: pkt@xxxxxxxxxxxxxxxx
Subject: RE: Interest Rates, Inflation, Exchange Rates and Credit inBull
And Bear Markets


1.  [Poirot]
"...M-C-M' describes the mercantile circuit of exchange--not the
capitalist sphere of exchange..."

I don't dispute your assertion that Marx differentiated between
mercantile exchange and capitalist exchange in that M-C-M' in Marx's
taxonomy pertained to mercantile exchange only.  It is, however, news
to me and probably news to a lot of Marxists.  Some citation back to
Marx would be helpful here.

In any case the differentiation is artificial.

[Poirot]
"...The merchant buys C from the home producer and sells it in a
market for more than the merchant paid the home producer..."

The retail sector is in fact a stage of production where value is
added to the product and service ultimately selected by the final
consumer.  The typical merchant buys on net 30, 60, 90, 120 and even
180 day invoicing from his suppliers.  He is frequently "floor
planned" by third party suppliers of credit.  He is paying off a
mortgage or paying rent to a landlord who is paying off a mortgage.
He is paying off a note for funds that were advanced to purchase
capital equipment such a fixtures.  It is simply not correct as a
general statement that "the merchant buys C from the home producer and
sells it in a market for more than the merchant paid the home
producer" with emphasis on the word "paid."  It is not correct today
nor was it correct in Marx's day.

2. [Plinge] http://www.geocities.com/socialcredit/plinge-12-2-00.html

"...1) Money is about trade; without trade money would never have come
into existence. 2) The fundamental and natural way of trade is barter.
3) Money is a human invention to 'simplify' barter. 4) No form of
money will ever duplicate barter entirely, but the form which most
closely represents barter will work most accurately and fairly...The
IOU is a substitute for indirect barter.  Smith sells his wheat to
Jones. But Jones has no commodity Smith wants, and he has no indirect
commodity that Smith wants, so Smith accepts the IOU as a
substitute..."
-----//

This is an extremely naive narration.  Mass production for the masses
is not conveyed from A to B to C, etc. with money functioning as a
"medium of exchange," but from the manufacturing sector--which of
course includes retailers--to final consumers where purchasing power
placed into the hands of consumers performs as generalized tickets
allowing consumers to draw upon the manufacturing sector's productive
capacity.

The correct modern view was expressed eloquently by C. H. Douglas in
his 1935 address to the King of Norway, et al. archived in full-text
at http://www.geocities.com/socialcredit/king-of-norway.pdf from which
I excerpt:

"The classical economics works on the assumption that the nature of
money is that it is a medium of exchange.  The idea proceeds from a
state of affairs which was, at any rate broadly speaking, true perhaps
200 years ago.  It was the assumption that in some sense or other,
from the highest to the lowest, everybody worked, and that they
exchanged or bartered the fruits of their work with each other through
the medium of money, so far as it was used.  The idea was that you had
a constant exchange of goods and services between, let us say, A, B
and C; and the whole of classical economics is based upon the idea,
that we are all of us producers and consumers in the economic sense,
and the function of money is to exchange between ourselves the goods
and services which each of us produces.

"Whatever may at one time have been the truth of this, it is, of
course, patently not true now.  The modern production system is not a
system of individual production and the exchange of production between
individuals.  It is more and more the synthetic assembly, in a central
pool, of wealth consisting of goods and services which are
preponderatingly due to the use of power, to modern scientific
processes of all sorts of organisations and other constituent
contributions of each one of us which will occur to you.  The problem
is not to exchange the constituent contributions of each one of us to
that central pool, because in fact our contribution to that central
pool, in the ordinary sense of tangible things, is becoming smaller
and smaller.

"The correct picture - the incontestably exact picture of the modern
production system - is, to my mind, based upon a kind of typewriter
with a decreasing number of operators who are tapping keys, and, by
tapping these keys, fewer and fewer operators can produce all that we
require.  Through the power of the sun (oil power, steam power and so
forth consisting of what is generalised as solar energy) the so-called
curse of Adam is being transferred from the backs of men to machines,
so that a small number of persons operating on this machine of
industrial 'production' can produce all that is required for the use
of the population; and the problem is not to *exchange between* the
number of the population, who are less and less required to push these
keys, but it is to *draw from* this central pool of wealth by means of
what can be visualised as a ticket system.  And the modern money
system is in fact losing almost daily its aspect, however much that
may at one time have been true, of a medium of exchange, and is
becoming more and more a ticket system by which people, who are not
exchanging their production, can draw from the central pool of wealth.
That is I believe at bottom to be the fundamental cleavage between,
let us say, my own view and those who think with me, and the school of
the classical economists..."

william_b_ryan@xxxxxxxxxxx
--

On Mon, 4 Dec 2000 11:48:14
 Clifford Poirot wrote:
>You do not need to resort or even for a purely physical surplus of goods in
>order to generate M'>M. Incidentally, M-C-M' describes the mercantile
>circuit of exchange-not the capitalist sphere of exchange. The merchant
buys
>C from the home producer and sells it in a market for more than the
merchant
>paid the home producer. There is no transformation of the product.
>
>In capitalism, we start with M and go to C, and then to C'. C' is a "new"
>thing. Marx gives it a little Hegelian twist: C' aufgeheben (transforms,
>overcomes, passes through to a new level of being) C. This happens due to
>the nature of capitalist production where the production process is
>continually revolutionized and Capital (in its liquid form) enters into
>production (as opposed to mercantile exchange where capital in a liquid
form
>is not necessary for production. Hence, we do not need to make any
>assumptions about whether nor not value comes from labor, about the rate of
>surplus value-we only need a new product that can be sold for a profit in
>the capitalist market. This new profit is in money form (M') and is liquid
>and is reinvested in production.
>
>While I am sharply critical of Marx on many other points, this is an area
>where Marx comes very close to a modern Post-Keynesian view of money and
>capital ( or rather, let me say, the non-horizontalist PK version). I know
>that Steve Shaklian has done some work on this.



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