Creditary Economics and Macro-analysis

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Partial answers to the questions:

 

What is Creditary Economics?

 

What is it good for?

 

are reflected in the following Gang8 exchange of today's date.

 

Gunnar

 

*******

 

Re. the following:

> Marx's analysis demonstrates that the financial system, while essential
> for capitalist development, encourages processes that continually
> exacerbate the inherent instability of a capitalist economy.

Comment:

In the contemporary world, the "inherent instability of a capitalist
economy" is rooted in the interplay between Finance Capital (Paper Wealth)
and Real Capital (Factor Services) in the context of a production process
operated by, or on behalf of, profit-seeking Finance Capital.

At the level of individual production units, managers view reduced cost of
Real Capital as a means of increasing profit on Finance Capital.

In the aggregate, however, Cost of Real Capital = Nominal Purchasing Power
of Suppliers of Factor Services - hence, Reduced Cost of Real Capital =
Reduced Nominal Purchasing Power whose translation into Effective Demand
determines Final Sales Proceeds.

Thus, any attempt to increase Aggregate Profit on Finance Capital through
Cost-cutting on Real Capital is a boot-strap operation that is doomed to
fail.

This is THE reason why Final Demand Inflation through New Credit Creation -
a.k.a. Aggregate Demand Management - has been essential for papering over
"the inherent instability" of the capitalist world economy in recent
decades.

Alas, the associated incessant increase in World Debt is ALSO a source of
"inherent instability" - as and when the superstructure of Debt Outstanding
and Interest Cost thereon attains some (unknown) threshhold level relative
to Real World Output, the whole shebang will come crashing down.

Gunnar