Internationalist Perspective 'As We See it'

78 posts / 0 new
Last post
mac intosh
Offline
Joined: 1-02-16
Feb 3 2016 23:39

Sartesian, could one, for example, discuss how less than fifty years ago the FIAT Mirafiori plant in Torino employed tens of thousands of workers in a state of the art plant to produce fewer cars than a few hundred workers produce today? Or how a steel mill in Pittsburgh fifty years ago employed thousands to produce a fraction of the of the steel that a modern plant, whether in India, Germany or even the US produces now? Neither the statistics nor the case studies are hard to come by (industrial sociologists have provided them), but it's Marx's Fragment on Machines, and his whole analysis of the value-form and its trajectory that makes it possible to see the socio-political consequences, and the theoretical and political challenge that those changes produced.

S. Artesian
Offline
Joined: 5-02-09
Feb 4 2016 01:22
mac intosh wrote:
Sartesian, could one, for example, discuss how less than fifty years ago the FIAT Mirafiori plant in Torino employed tens of thousands of workers in a state of the art plant to produce fewer cars than a few hundred workers produce today? Or how a steel mill in Pittsburgh fifty years ago employed thousands to produce a fraction of the of the steel that a modern plant, whether in India, Germany or even the US produces now? Neither the statistics nor the case studies are hard to come by (industrial sociologists have provided them), but it's Marx's Fragment on Machines, and his whole analysis of the value-form and its trajectory that makes it possible to see the socio-political consequences, and the theoretical and political challenge that those changes produced.

You can discuss anything you want, anytime. I just asked a question about an assertion IP made in its position paper and it seems the partisans of IP will go to great lengths to avoid providing a direct answer.

You claim you don't want to be diverted from discussing the value form, so Ocelot separates my questions into another thread, but then you continue the so-called diversion right here. Bizarre, no?

Here's a news flash: Many of us have been following this massive animation of fixed assets by a continually reduced labor component for years. Many of us have even analyzed and developed the statistics on this direction of capital, and examined its social consequences for some time.

You call it value-form, like that's some new untapped stream in Marx's critique. It's not. Those of us who dismissed "decadence theory" as inadequate, inaccurate, and atrophied have been on this for some time now. Those of us who, at or around the same time, demonstrated how "fictitious capital" was a non-explanation are clear on just what makes up the real content of the value form.

That's just my opinion, you understand.

Spikymike
Offline
Joined: 6-01-07
Feb 4 2016 11:32

I think mac-intosh might be forgiven for dropping back into this discussion and missing the split thread. I will make this one point here, even though I find myself more in agreement with IP's critics on the choices facing and chosen by slaves in the context of the American Civil War and it's significance at that time, as this does not diminish the importance of critically re-evaluating the deterministic and stage-ist elements in some of Marx's early theories and more particularly their continuance in much of Marxism since. We must be aware that such 'stage-ist' approaches influencing Marx's political practice in his time is often used to justify support up to the present day for all manner of anti working class movements and regimes on the ground of developing the prior material conditions necessary for the emergence of an independent communist movement. In effect projecting forward strategies from a past era into the the very different conditions of modern global capitalism. IP might perhaps be guilty in the same way of over-egging their case by projecting backwards a justifiable strategy for to-days conditions that were not so clear cut in Marx's time, which is not to say that Marx and his contemporaries always got it right in supporting one side or the other in such wars (they often disagreed with each other).

S. Artesian
Offline
Joined: 5-02-09
Feb 4 2016 13:54

That's all fine Spikeymike, but the very least he could do is answer the questions based on IP's own assertions.

mac intosh
Offline
Joined: 1-02-16
Feb 5 2016 18:58

Sartesian, I thought that I had answered your question: in 1861 I would have joined the Union army. I would not have advocated revolutionary defeatism. And in 1789 you might have been a Jacobin, and several years later I might have been with Babeuf. Is that the level upon which we want to discuss history? Robespierre looks different today than he did in 1789, just as Lenin looks different today than he did in October 1917. And, yes the actual outcome of the American civil war, and the subsequent century of a legalized caste system in America, changes the way one looks at the war itself.
So, to get back to what I take to be the point of this thread, the understanding of the value-form, and its consequences for both theory and practice has been enriched by the access we now have to all of Marx's drafts for his critique of political economy, including, but not just the "Grundrisse." We can no longer, for example, read volume III of "Capital," as we did just twenty years ago, because we can now have access to Marx's draft, and not just the text as Engels edited it. And more importantly, the actual trajectory of capital over the past century makes it clear, to take but one example, that the reified consciousness that Lukács insisted can be exploded by the proletariat is a far greater obstacle that he thought back in 1923, quite apart from the changes in proletarian labor itself. In short, we cannot rest with theories about capitalist crisis or class consciousness that ignore both the "new reading of Marx," and the actual structuration of capitalism today. It hasn't all been said already, and that's the point of departure for IP's new Reference Text, one effort to question certain old verities., and to open new debates.

Khawaga's picture
Khawaga
Offline
Joined: 7-08-06
Feb 5 2016 19:15

The new Marx reading was discussed extensively on this site a few years back. In any case, playing the value form as some sort of trump card (in the same manner as people.do with dialectics) goes over much against so-called value form analysis, which focuses more on form determination, state derivation and precisely moving away from working class movement centric readings of Capital.

S. Artesian
Offline
Joined: 5-02-09
Feb 5 2016 21:12
mac intosh wrote:
Sartesian, I thought that I had answered your question: in 1861 I would have joined the Union army. I would not have advocated revolutionary defeatism. And in 1789 you might have been a Jacobin, and several years later I might have been with Babeuf. Is that the level upon which we want to discuss history? Robespierre looks different today than he did in 1789, just as Lenin looks different today than he did in October 1917. And, yes the actual outcome of the American civil war, and the subsequent century of a legalized caste system in America, changes the way one looks at the war itself.
So, to get back to what I take to be the point of this thread, the understanding of the value-form, and its consequences for both theory and practice has been enriched by the access we now have to all of Marx's drafts for his critique of political economy, including, but not just the "Grundrisse." We can no longer, for example, read volume III of "Capital," as we did just twenty years ago, because we can now have access to Marx's draft, and not just the text as Engels edited it. And more importantly, the actual trajectory of capital over the past century makes it clear, to take but one example, that the reified consciousness that Lukács insisted can be exploded by the proletariat is a far greater obstacle that he thought back in 1923, quite apart from the changes in proletarian labor itself. In short, we cannot rest with theories about capitalist crisis or class consciousness that ignore both the "new reading of Marx," and the actual structuration of capitalism today. It hasn't all been said already, and that's the point of departure for IP's new Reference Text, one effort to question certain old verities., and to open new debates.

I don't believe I asked you to tell me if you would have entered the Union Army in 1861. I asked what is IP's justification for criticizing Marx for a "determinist mechanistic view of history" based on his support for the North in the US Civil War. To wit, (from my memory), your position paper criticizes Marx for offering congratulations to Lincoln at the very moment that the "first industrialized war" was slaughtering "500,000 proletarians."

So I asked what constitutes 500,000 proletarians? Where did you get that number. Did you, like the bankers at Anglo Irish when stumping for the euro 7 billion bailout, just "pull it out of your arse"? Or do you have some historical, materialist basis?

I asked how can IP make such a statement when the troops of the slaveholders' rebellion were not proletarians by any stretch of one's imagination or internationalist perspective; and the composition of the Union Army was only to some small degree, proletarian?

I am specifically NOT asking you to look back and with hindsight tell me who's side you would pick. I am challenging your interpretation of history; your designation of the US Civil War as Sander described it a "tragedy" a "horror" simply because it was a war.

But please feel free to tell us how IP's view of the US Civil War has changed,now that you've purged the mechanistic, deterministic elements of Marx's analysis from your methodology.

FWIW, I think Marx's congratulations to Lincoln (written during the same period that Marx is writing those Economic Manuscripts that call into question the "mechan-ism" you see in Marx's other writings) were spot on. It was an expression of solidarity in the struggle against the slaveholders' rebellion; it was an expression of congratulations for recognizing the need to abolish slavery; for issuing the Emancipation Proclamation; for pursuing the war with the intent of total, complete victory and overcoming the resistance within the Union military, and elsewhere, to that pursuit of victory.

That doesn't sound all that mechanistic, deterministic to me.

But as for your value-form theory; somehow your recognition of the significance, the materiality, of continued, and expanded value extraction, which after all is what capitalism is all about, does not translate into your explanation for the persistence of capital. Instead we get all the usual descriptions of the usual suspect-- namely fictitious capital.

I don't know how you read volume 3 20 years ago. I think my reading of volume 3 last year was different than my reading of it 3 years ago.

But tell us how IP's reading of volume 3 has changed-- and to do that, you need to show us how it is changed in its practical application; to IP's analysis of say a specific sector of capitalist accumulation then; and that analysis of a specific sector today.

So what's changed? Are the fall in the rate of profit and the increase in the mass of profits no longer expression of a single process? Do prices of production no longer distribute profit among capitals?

Lukacs is precisely not the issue; and never was. Accumulation always has been.

S. Artesian
Offline
Joined: 5-02-09
Feb 8 2016 16:40

Three days since the last posting by an IP associate. Thank god we got rid of the derail about IP's statements on the US Civil War, so they could plow ahead with the real issue, the value form.

mac intosh
Offline
Joined: 1-02-16
Feb 8 2016 21:03

I'm sorry that Lukács seems off-limits here (see post 68), inasmuch as I think that there's a direct connection between accumulation and its crises, and the prospects for the possibility of a development of revolutionary consciousness on the part of the proletariat. Not that Lukács has the answer, far from it, but that he clearly saw the issue. Inasmuch as this thread on accumulation has a long "history," though I only discovered it when it turned to IP's new reference text, I'll try to go back to the origins of the thread, and its whole course.

S. Artesian
Offline
Joined: 5-02-09
Feb 8 2016 21:12

Lukacs isn't "off-limits." I was expressing a personal evaluation. Funny, I don't remember reading anything about Lukacs in the IP document, but then again my memory might be faulty. Let me check.

PS What happened to Sander?

S. Artesian
Offline
Joined: 5-02-09
Feb 9 2016 19:39

Nope. Nothing about Lukacs in the IP position paper

S. Artesian
Offline
Joined: 5-02-09
Feb 16 2016 22:43

So what about it, Mac and/or Sander? Any chance of coming back to answer Ocelot's further questions, or my original ones about fictitious capital?

Sander
Offline
Joined: 28-05-08
Feb 17 2016 07:14

Yes I will come back to this in a few days. I've been very busy with other things.

ocelot's picture
ocelot
Offline
Joined: 15-11-09
Feb 17 2016 13:39

I also mean to come back on the money as commodity or mere "exchangeable entity" thing, and the general need to distinguish the different characteristics of land, labour power and money in contradistinction to commodities proper, etc. But workload is unfortunately cutting into my posting time at the moment.

Sander
Offline
Joined: 28-05-08
Mar 2 2016 06:06

Hello and apologies for the delay.

In this post, I want to adress 4 questions that have been raised in this discussion:

- what do we mean by “hoard”?
- what do we mean by “fictitious capital”?
- what was the purpose of “quantitative easing”?
- why did it not accelerate inflation?

1. The hoard

Capitalism stays alive, not only because of oppression and repression, not only because of the weight of its ideologies, not only because of engrained social practices that reproduce the value-form, but also because of an implicit social contract, based on the perception that value and social wealth are fused, that the growth of either is based on the growth of the other, that the reproduction of capital and the reproduction of human society are the same thing and cannot be separated.

This perception is based on the dual nature of the commodity, as a bearer of value, and a use-value. From the start, that split nature implied the possibility of the two sides of the commodity contradicting each other. But that inner conflict remained mostly latent until technological revolutions in the mode of production sent their growth rates on widely diverging curves. Tendentially, the two sides of the commodity become unhinged. Over time (and modified by other factors), the transformations value has to go through to accumulate, become choke-points:

C - C’: (the productive consumption of commodities resulting in commodities of greater value because surplus value is added) because the diminishing role of living labor in the production process causes a tendential decline of the rate of profit, resulting in insufficiency of profit to continue the cycle;

C’- M’: (the sale of the new commodities, realizing their value, freeing it to transform again) because the continuous rise of productivity comes into conflict with the inherent limits of the demand for commodities that are productively consumed – whose consumption results in the creation of surplus value. This is not solved by rising unproductive consumption.

M’ – C”: (the transformation of the realized value into commodities that are productively consumed)
Because money, faced with those obstacles, has the incentive to stay put , not to re-enter circulation, it over-accumulates.

Massive devalorization is how the conditions for accumulation are restored.

This framework, as well as the reality of the formation of the three choke-points, came under fire on this thread. For the response on the critique on the first (the TFRP) I referred to the text on this in [url= http://internationalist-perspective.org/IP/ip-archive/IP_60.pdf ]IP #60[/url] and on the second, capitalism’s inherent limits on productive demand, I replied to Ocelot’s and Khagawawa’s critiques in my previous post. But most of the critique was on the third point, M- C, on our view that the over-accumulation of financial capital is a part of the crisis mechanism that is a direct result of the conflict within the commodity, as it has historically developed.

In my previous post, I tried to show that, contrary to Ocelot’s claims, money is a commodity. It has to be a bearer of value and have a utility, to use Marx’s shortest definition of the commodity, in order to accomplish the exchange of equivalents.

Money takes two forms, fulfilling two functions. It circulates other commodities and it is withdrawn form circulation to serve as a reserve-fund, a treasury, a store of value, a hoard. It is different from other commodities in that its value is not based on its production costs and its utility is not based on its material substratum (if there is any). In circulation, it acquires its value from the commodities it represents and its use-value from the use-value of the commodities into which it can be exchanged. In the hoard, it is latent capital, representing surplus value that is not consumed (productively or unproductively). The origin of its value is clear, but what is its use-value, what keeps it a commodity exchangeable with all others? The function of the hoard, from the pov of the accumulation process, is to allow value to go in and out of the production process according to when and where profit beckons, to set in motion value creation over the long run, even when doing nothing in the present. So it needs at least to be perceived as having that utility in order to remain a commodity.

Together circulating money and latent money (the hoard) represent total value: the value of all the existing commodities but also the value that the existing commodities will produce in the future.

Ocelot asks us to clarify what we mean by "hoard".

Quote:
Whether that includes merely the liquid capital withdrawn from productive investment, or the totality of social capital, spread over financial capital assets, all existing means of production and "land" assets, etc.

The distinction between both is not clear cut. Real estate, for instance, may be a commodity whose value is the value of the abstract labor that was consumed in its production and whose use-value is to be a dwelling of a certain quality. But it may also be a commodity used to store value in. Like art. Likewise reserves of land, oil and other minerals are monetized parts of the hoard. What they have in common is that they are latent capital that retains its utility of universal exchangeability, that can be transformed in any other form of value, in any other commodity. Company shares express the value of the productive forces of that company. But split off as separate commodities, traded not just on the basis of the company’s actual value but on the basis of its future value as well, they too can be, in part, part of the hoard, reserve-fund as well as destination. Financial capital assets can represent both circulating and latent capital. But they may also represent fictitious capital.

2. Fictitious capital

The essence of money is that it represents the value of all other commodities. This includes the value which the existing productive forces (already in possession of capital) will produce in the future. Obviously capitalism couldn’t function without credit, without reserve-funds, without a hoard. The value of that hoard depends on future value because its value – and that of capital in general -- is not based on the value that went into it, but on the value it produces (in the short and the long term). Therefore its growth, and even its ability to maintain itself as value, depends on the growth of the surplus value producing economy. It must keep in sync with the latter, with its expansion potential. But since the value of the future is not a given, illusory value, fictitious capital, inevitably appears. It appears in the form of superfluous productive capacity, in the form of cities without inhabitants like in China today, in the form of technology that will be obsolete long before it has transferred its value into commodities. It appears in financial capital created on the basis of expectations of surplus value which will not materialize.

So money comes to represent something more than existing and potential value. The total of money = circulating value + the value of the hoard + fictitious value.

Of course, fictitious capital tends to lose its value quickly when its fictitious nature is revealed. That is obvious regarding productive capital, when for instance an airport is built that cannot be profitably operated. But the fast pace of technological change forces companies to include “moral depreciation” (the devaluation of their technology before it has transferred its value) into their normal operating costs. In the hoard the distinction between real and fictitious is, again, not clear cut. It’s all money, equal as means of payment transformable into other commodities, including each other. The proof of fictitious capital is in the pudding.

The creation of fictitious capital accelerated in the 1970’s, when insufficient profit, lack of productive demand and strong working class resistance against lowering wage costs confronted capitalism with a systemic crisis. The pedal of money creation was pushed to the floor in order to limit bankruptcies and support effective demand. The resulting ‘pudding’ included a sharp increase of debt, especially government debt, and accelerating inflation. The latter especially was a direct threat because it eroded money’s capacity to measure value and thereby discouraged the long term productive investments on which the value of the hoard depends. If unchecked, hyper-inflation would have led to a collapse of the hoard.

The 1980’s brought a change of course of capitalism, on many levels: political, social, economical, technological…but the creation of fictitious capital continued. However, its focus changed: it was sharply reduced in the general circulation process (bringing inflation under control, getting rid of excess productive capacity) while tax reforms steered a greater share of the purchasing power to the capitalist class. It was a redistribution of wealth in order to sustain the hoard, guaranteeing a sufficient level of demand for its expansion.

The creation of fictitious capital was/is an essential part of the mechanism that kept the US economy the motor of global effective demand. The special role of the dollar as global trade and reserve currency not only permitted, but also necessitated the US to run large permanent deficits in foreign trade ($ 5545 billion in 1982-2006). Dollars accumulated as trade surpluses by foreign countries are circulated back to the US mainly through purchases of US government securities which serve a double purpose: they
cover the government deficit as well as the current account (and trade) deficit. From surplus countries there has been an ever rising demand for US securities, and the money flooding into the US ($800 billion a year) has bid up government bond prices, lowered interest rates and led to a housing boom.

One reason why the flood of fictitious capital was not accelerating inflation was that the largest part of it did not transform into other commodities but went directly into the hoard. The demand for it was accompanied by the growth of “sovereign” debt and by an enormous expansion of financial commodities. As a result, the global amount of profit-seeking financial assets increased three times more than the worldwide gdp, from $ 12 000 billion in 1980 to $ 196 000 billion in 2007, which was four times larger than the world gdp in that year.

Competition between capitals tends to equalize the rate of profit throughout an economy, so that each capital, even those which do not command any surplus labor, obtains a profit proportional to its size. Yet the lack of incentive for M to accomplish M –C, and the high demand for money as a particular commodity pushing up the prices of financial commodities, counter-acted this tendency and created a redistribution of profits from the surplus value producing sectors to the financial sector. In the US, the financial sector’s share of total corporate profits doubled from an average of 18.3% in 1980-1990, to 36.2% in 2001-2006, reaching a peak of 40.8% in 2001-02. In the same period, manufacturing industry’s share of the gdp declined from 19.4% to 11.7%.

The shift in monetary and fiscal policies fostered the illusion that money can breed money, that the cycle of value accumulation can be reduced to M- M’, skipping that pesky production phase. In that regard, capitalism is indeed a Ponzi scheme, in which the ever expanding “value” of the hoard ultimately is a matter of belief -- the belief that its claims on future value will be met.

But Artesian is right when he writes that even a Ponzi scheme is not possible without “seed money” – real capital. Even the redistribution of profit from the productive to the financial sector would not deliver it, unless there was something that could be redistributed, unless there was a growth of surplus value extraction. That “seed money” mainly came from:

- a redistribution of incomes from wages to profits (in the US, the average real wage fell from $ 8.99 per hour in 1972 to $ 8.24 dollar in 2006, despite the growth of productivity in that period; in most other countries the decline was greater);
- ‘globalization’, sharply increasing developed capital’s exploitation of cheap labor power as well as expanding its markets;
- the penetration of capital into services and other parts of the economy that were until then not yet surplus value producing.

However, the same technological innovations that made these developments possible, over time also reduce living labor in production and build up productive overcapacity, so the seed money was bound to become scarcer.

And those technological changes, and the restructuring of production with them, did not lead to a return of the growth rates that preceded the crisis of the 1970s, while financial capital kept up its feverish pace, inventing all sort of new financial commodities to meet the demand. In the first place credit derivatives such as credit default swaps (CDSs), whose worldwide estimated amount rose from almost zero in 2000 to $ 58 200 billion by 2007, and collateralized debt obligations (cdos) whose issuance rose from $ 68 billion in 2000, to $ 520.6 billion in 2006.

Asterian writes:

Quote:
The origin of credit instruments is not as a substitute for production but in the different realization times of different capitals, "smoothing" these interruptions and differences so that production can be maintained while awaiting the completion of the different circulation times.

That is true. But it’s also true that the financial sector has grown far beyond the size and the functions needed to provide loans or insurances to the productive sector. Instead of financing investments in the real economy the financial sector has established its own circuits of capital making financial investments and realizing temporarily huge profits from them.

This was fueled by the growth of fictitious capital, of money that was neither the result of surplus value production nor being productively invested. From 2000 to 2013, the Federal Reserve expanded its balance sheet six fold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at 0.8 percent per year. So much for Artesian’s claim that the growth of fictitious capital (or does he mean financial capital) “accompanies periods of real value creation”.

After 2002 the financial sector’s share of total corporate profits began to decline from its peak of 40.8% to 33.1% in 2007. But the accumulation of finance capital continued unabated up to 2007. The volume of finance capital is not recorded in national accounts but there are clear indications of its growth, such as the enormous expansion of derivatives, from $ 127,560 billion in June 2002 to $ 683,800
billion (47 times the US GDP) in June 2008, corresponding to an increase of 32% per year. The declining profit-rate of the financial sector did not lead to a corrective outflow to the productive sector because of the strong incentive for M to stay M.

3. “Quantitative Easing”

The seed money of the Ponzi scheme was surplus value but its fuel in large part is debt : government debt , corporate debt, consumer debt (in the US, total household debt increased by 97% from 2000 to 2007, reaching $ 13800 billion or 133% of disposable income in 2007) and debt of the financial sector itself, which became even more leveraged than the rest of the economy (from 1990 to 2007,the debt of the US financial sector increased by an average of 11.3% per year, from $2600 billion to 16 000 billion or 116% of the GDP).

The deeper causes of the crisis are in the value-form itself, in the obstacles it created to accomplish C-C’ and C’-M’. But the temporary accomplishment of M – M’ despite these obstacles, made it take the form of a debt crisis that threatened to devalue the hoard.

Within the logic of value, a devaluation of the hoard, and of capital in general, is exactly what is needed. A cheapening of the productive forces, a destruction of claims of past value on the value of the future. And indeed, the crisis wiped trillions off the balance-sheets. But many trillions more were created to prevent the crisis of ‘doing its job’ of devaluing capital so devastatingly that a new floor for value accumulation would be reached.

Already in March 2009, Bloomberg News reported that that the US government and the Federal Reserve had used, lent out or pledged $ 12 800 billion, or 42 100 dollar per household. The measures taken to stem the crisis were not all the same (different focus US/China for instance) but they all were based on a steep increase of fictitious capital.

As a result, despite brutal austerity measures and attacks on the social wage, debt, the claims on future value, has increased at an historically unprecedented tempo, as illustrated in a McKinsey report published last week:

Some findings:

Global debt has increased from $142 trillion in 2007 to $199 trillion in 2014 (286% of the global GDP) –an increase of 57 trillion! The ratio debt/GDP of some key players: Japan 517%, China 282%, US 269%.
The Chinese debt has quadrupled since 2007. Global government debt increased with 25 trillion and is projected to keep rising.

A breakdown, in trillions of $:

2007 2014
---------------------------------------------------------
Corporate debt 26 tr 56 tr
Household debt 19 tr 40 tr
Government debt 22 tr 58 tr
Financial sector debt 20 tr 45 tr

In regard to the US, we argued that the primary goal of the increased deficit spending (projected at 15 to 20 trillion from 2009 to 2019) and of the stepped up money-creation by the Fed (at an average pace of $600 million an hour) through its “Quantitative Easing” program, was to defend the price of dollar assets, to prop up its hoard.The same is true, mutatis mutandis, for similar policies in Japan, the Eurozone and the UK.

Ocelot objected that

Quote:
the intent of QE is to starve financial capital held in this "risk-free" form in an attempt to force them out into the bond and equity markets. In other words the purpose of QE, as regards the flow of investment capital, is to squeeze it out of "safe haven" unproductive assets.

That may be true, but from what I wrote above it should be clear that the hoard which the Fed seeks to protect is far more than “risk-free” public debt. It contains equity and other financial assets as well, and, judging from the stock market’s rise during QE, it was quite successful in stimulating them. It may be more than a coincidence that, only a year after QE3 was ended (Oct. 2014) the steady rise of the Dow Jones and S&P began to falter. I wouldn’t be surprised if the Fed pretty soon launched a QE4.

Since QE meant a massive addition of money, it was more than a strategy to move a part of the hoard to another in the hope of stimulating productive investment. In regard to the latter, it failed: productive investment, see figures above, remained very low. That shows that equity is something more than a share of the actual profit producing capacity of a company: its growth does not just reflect a growth of its value in M –C –C’- M’ but also the growth of equity as hoarding capital, inflated with fictitious value, of M refusing to become C and seeking M –M’: a growth of claims on future value.

Rolling Stone ‘s financial reporter Matt Taibbi examined where the Fed’s money went to. He wrote (April 28, 2011):

“The Fed began buying up every distressed investment on Wall Street, even those that were in no danger of widespread defaults: commercial real estate loans, credit-card loans, auto loans, student loans, even loans backed by the Small Business Administration. What started off as a targeted effort to stop the bleeding in specific trouble spots became a gigantic feeding frenzy.”

For Taibbi, a Bernie Sanders supporter, this seemed nothing more than unrestrained greed, hogs serving themselves, but it was more than that. It was aimed at keeping the global demand for American capital assets strong by supporting their prices, to assure that the steady global stream of surplus value to the American hoard continued. This made it possible for the US to continue to run up high trade deficits and have a strong currency and low interest rates at the same time. This permitted a modest recovery of the American economy while most others stagnated or sunk deeper.

Which leads me to my last point.

4. Why has QE not caused a rise of inflation?

QE and other stimulus programs did cause a rise of inflation, but not in the US and other highly developed economies. But look at China, India, Russia, Brazil, Mexico, Venezuela and most other countries: inflation is indeed accelerating in a world that carries so much more money and debt in relation to its value production than even 5 years ago. It leads to currency devaluation and a flight of capital in search of a safe haven. And there, the policy of the Fed pays off. As does US capital’s investment in military superiority, despite the burden that it is. And all its other advantages, the scale of its domestic market and of its productive capacity, its historically grown role as custodian of the global currency, its stable and unified political structure contrasting with the disarray of the divided Eurozone, and the fact that American capital remains at the cutting edge of technological innovation, thereby reaping surplus profits through ‘technological rent’ and monopolistic market positions, inspiring confidence in its future value.

With real wages stagnating or falling, cuts in social expenditures, and productive investment remaining low, there is little danger that the economy would overheat. The high demand for hoarded value sucks excess money out of circulation. Furthermore, the low prices of commodities imported from low wage countries and the intensifying price competition between them for the American market, keep inflation low. It is not in the general circulation but in the swelling of the hoard that the growth of fictitious capital becomes visible in the US.

Inflation and deflation are often portrayed as mutually exclusive while in fact they occur at the same time. They do, because while the Ponzi scheme is kept going through the injection of fictitious capital, the obstacles for C –C’- M’ remain and indeed become larger, as automation keeps shedding variable capital, the source of surplus value, and tendentially reducing productive demand. No commodity can keep its value if it cannot transform into another. That M always can, is the belief on which the hoard is built. But for other commodities, it’s clear that they must be sold or loose their value, that they must transform soon, at any price. Hence, deflation. The deeper the crisis becomes, the more visible it will be. Deflation is its inherent tendency.

Both inflation and deflation will continue to rise, but with different manifestations in different places. But everywhere the pressure to squeeze more surplus value out of the working class and to cut the costs of maintaining the ‘superfluous’ will increase.

There will be runaway inflation in the weakest, least competitive parts of the global economy, and negative interest rates in places where the hoard is still inspiring confidence and the safe haven effect applies. The latter are aimed at steering capital to more risky ‘productive’ investment but they also express capital’s resistance against doing just that, its unwillingness to leave the ‘safety’ of the hoard, because of the deflationary pressure.

How long the Ponzi scheme can continue without another major breakdown is hard to say. But it’s even harder to explain how enough ‘seed money’ to keep it going will materialize.

S. Artesian
Offline
Joined: 5-02-09
Mar 3 2016 03:44
Sander wrote:
But since the value of the future is not a given, illusory value, fictitious capital, inevitably appears. It appears in the form of superfluous productive capacity, in the form of cities without inhabitants like in China today, in the form of technology that will be obsolete long before it has transferred its value into commodities. It appears in financial capital created on the basis of expectations of surplus value which will not materialize.

That's the whole point. It's not that there isn't fictitious capital, it's that all capital is fictitious when it cannot reproduce itself quickly and expansively enough.

Right now 7% of the maritime dry-bulk carrier fleet is in lay-up at anchorage, and estimates are that another 7% has to be taken out of service. So are those ships fictitious capital? Are they any different than the bonds that were used to finance their construction? If the ships are not fictitious capital, then the bonds issued to finance them are not fictitious capital-- as the notes represent but a momentary expression of value of the ship-capital, commodity capital, and are not fictitious values in themselves.

So the problem is not with "fictitious capital"-- but in capitalist reproduction and accumulation; in overproduction.

Unfortunately, the term "fictitious capital" is utilized often, too often, by many, too many, to counterpose it to to "productive capital." No such distinction exists except in the extreme circumstance of swindles, con games, Ponzi schemes-- even then, the "opposition" is more or less non-sensical.

If Marx is right and markets do not create value, cannot create value; if exchange is not the origin of value, then the fictitious exchanges do not create value and do not function as capital-- they serve, like all instruments of credit and debt do, to distribute the actual surplus value according to the laws of capitalism and thereby participate in the creation of an average rate of profit.

Sander wrote:
But it’s also true that the financial sector has grown far beyond the size and the functions needed to provide loans or insurances to the productive sector. Instead of financing investments in the real economy the financial sector has established its own circuits of capital making financial investments and realizing temporarily huge profits from them.

That's a, pardon the pun, "value judgment" and not a materialist analysis, based again on, first, deftly slipping in the word "financial" to replace "fictitious" thereby conflating the two in all instances and all quantities and second by providing no basis for determination of what constitutes a "reasonable," or "adequate" or "sufficient" level of financial capital which is the only basis for making a market driven, and market valuation determination that there is "too much" financial capital; that financial capital has outgrown in "reasonable," customary role.

You are attempting to use valuation quantities to refute the qualities inherent in valuation itself, which is kind of like, but not exactly the same, as talking about "too big to fail," "better regulation," firewalls, and all that other stuff.

The billions of dollars of debt used to finance shale oil extraction in the US? "Fictitious capital"? If so, "excessive" fictitious capital? Is there a right amount of "fictitious capital"? But of course not as that would imply abolition of the market from the getgo.

Quote:
QE and other stimulus programs did cause a rise of inflation, but not in the US and other highly developed economies. But look at China, India, Russia, Brazil, Mexico, Venezuela and most other countries: inflation is indeed accelerating in a world that carries so much more money and debt in relation to its value production than even 5 years ago.

No, not at all. US QE didn't cause a rise of inflation in emerging market countries. Certainly not in China, India, Russia, Brazil, and Venezuela. Back in the day of US QE, which ended when? 2 years ago?, QE led to an increase in valuation of the EM currencies in relation to the dollar. Inflation in China for example has little if anything to do with the US QE, and everything to do with the "excitation" of the Chinese economy through the financing of the SOE expansions, the use of special investment vehicles for channeling off-books local government purchases and sales, particularly in the real estate sector.

Brazil's current inflation is part of the economic downturn attributable not to US QE (anybody here remember how Brazil and the EM countries loudly complained about QE for cheapening the US dollar and making their exports more expensive?) but to the overproduction in Brazil and China and Australia and Indonesia in the resource, mineral, and ore sectors.

Now if you want to claim QE is fictitious capital and fictitious capital has not stimulated productive investment, then you can't claim QE has precipitated the inflation and/or overexpansion of the "real economies."

Short version: You're pissing up a rope in counter-posing fictitious capital to capital in explaining any moment of capitalist accumulation by referring to fictitious capital as a cause, an explanation, a determinant.

Zeronowhere
Offline
Joined: 5-03-09
Mar 8 2016 08:10
Quote:
That's a, pardon the pun, "value judgment" and not a materialist analysis, based again on

This is mostly accurate, as the financial sector is not primarily there to service the 'productive,' as of course capital separated off from labour is not there to support labour. That its detached form was also to act like it, was instead necessary for this form, and consistent with the nature of capital, such that capital itself could not oppose this detachment by itself. That said, at the least there is some vaguely expressed correctness to their value judgment, as a base advocacy of labour, which seems to be getting at something along the lines of the falling rate of profit as it was in capitalism as well, although in terms foreign to the main actors in that.

Quote:
Unfortunately, the term "fictitious capital" is utilized often, too often, by many, too many, to counterpose it to to "productive capital."

Valid, the term 'fictitious capital' does not necessarily hold any necessarily destabilising power. Generally speaking, while fictitious capital as usually referenced might identify an instability, it does not locate this in any necessary process that would have led to this instability being manifested. While capital appearing apart from the process of exploitation was a regular occurrence, but this was merely appearance, that a form of it do so primarily for the capitalists, presented as merely floating value to be indiscriminately thrown around, might seem bizarre. However, most criticisms seemed to assume that capital detaching itself from productive capital, tacitly identified with labour, and forming an independent realm was somehow a problem within capitalism, when in reality it was the nature of capital. It was then said that the issue with fictitious capital was that it could easily backfire. Obviously, though, any instability or tie to overproduction conceded inherent in fictitious capital is inherent in each transaction of such, and hence if it appears that it is merely a question of particular or chance transactions, rather than theoretical necessity, then this is misleading.