Why does capitalism need 3% growth?

[littlebabyjesus]

Yes, representing the same value it would be inflation.

But are GDP figures not adjusted for inflation.

So 3% growth, is in "real" terms.

Yes, which is my question – cannot the system function without growth, merely with inflation? Butchers said no, but I've not properly grasped why.

 

[weltweit]

Yes, which is my question – cannot the system function without growth, merely with inflation? Butchers said no, but I've not properly grasped why.

I think the system can function without growth. It likes growth, but no more than that.

After all, it does, we have just had a period of no growth or negative growth and capitalism did not crash burning to the ground, it ploughed onwards..

 

[Backatcha Bandit]

I still don't quite see how this whole thing could not operate simply with inflation, not growth.

Let us assume that we have a static system in which there is a fixed amount of energy, resources and work available, and everyone does the same thing the same way. So there is no growth in the real economy at all – every year, there is the same amount produced by the same number of people. This static system is mediated by money that is created through fractional reserve lending at interest.

As Falcon says, the interest due on loans necessitates the constant increase in the money supply through the creation of more and more debt. But does that not simply mean that there will be more and more money chasing after the same amount of goods, so prices will simply go up to compensate? Could that not be a stable system? It would mean that overall the real value of 'investments' would not go up, but it would also mean that there would still be an incentive to invest as the real value of uninvested money would go down over time.

In those terms, I'd say that you are quite right.

Think of the 'money' as an arbitrary indicator, like 'Monopoly' money.

The object of the game, though, is not merely to collect worthless paper tokens, but to collect real wealth - property, fruits of production, etc.

The supply of paper tokens can increase infinitely, with the parasitic debt interest growing accordingly. It means nothing in physical terms. With an exponentially inflating supply, the capital + interest could be repaid indefinitely.

The problem* occurs if we stop inflating, or limit the supply of fresh tokens flowing into the system. Suddenly, there are not enough paper tokens in the system to meet the capital + interest amount.

Those left standing when the music stops have no option but to forfeit real wealth to the creditor.

In a depression, real wealth isn't destroyed, it's merely transferred. Concentrated into fewer hands.

Real wealth is permitted to *grow* so there is something there to *steal*, otherwise the game's pointless!

This is why I have argued that 'money' is a powerful political tool for expropriating wealth, as opposed to a mere 'neutral medium of exchange', as is commonly believed.


* Note: Not seen as a 'problem' by some... pip pip!

Here's a bit of historical background to how the real playaz roll...

 

[love detective]

I've assumed for the sake of argument that production is constant and that there is no room for growth. If lending money at interest inevitably increases the money supply as more and more money is borrowed to pay the interest, why cannot that system exist on top of the static system of production, with an ever-larger pot of money representing the same absolute value? That would just produce inflation.

in the abstract world of simple reproduction you talk off (and it can only really be an abstract one) - the same amount of value is reproduced & distributed each period (this value may represent a higher or lower amount of use-values but that's irrelevant here).

therefore the same amount/velocity of money is required to circulate that value/commodity production around the system - from initial money capital through productive capital through commodity capital and then back again to money

there's no reason for the money supply to increase when there is no need for it to increase (i.e. in a case of simple reproduction) - why do you assume that more money is borrowed to pay the interest - in the schema you describe (simple reproduction) the interest would be paid back out of value produced. This can be demonstrated using a fairly simplistic abstract model, and standard marxian categories/approaches

In a period, if say 500 units of value are invested in means of production and 400 in labour giving a total investment of 900 and the rate of exploitation of labour is 25%, giving 100 of surplus value - then the total value of commodity production in that period will be 1,000. In your static system you assume the same amount is produced each year, which in turn assumes everything that is produced is sold and therefore realises it's total value (otherwise it wouldn't be produced) - meaning capital in total realises 1,000 units of value through the sale of commodities produced. If we're assuming simple reproduction,which you are, then out of that 1,000 value realised, to be able to repeat the same thing in the next period, 500 will have to be reinvested in means of production to replace that used up in the last period, 400 will be spent on means of consumption (by the working class) to reproduce the labour used up, leaving the 100 profit which would be spent on consumption/luxury by capitalist class (which of course, like the means of production and means of consumption, would have been produced in the necessary proportions, to ensure their realisation, as part of the 1,000 value of commodities produced)

Assuming these same proportions each time, then 100 profit in total is made by the entire capitalist class each year. If part of the initial 900 invested is financed by debt, then the overall 100 made at the end will be distributed between industrial capital and interest bearing capital in a particular ratio (i.e. industrial capital initially 'earns' the 100 of surplus value, but pays, say, 10 of it to interest bearing capital to service its loan) - but regardless of what that ratio is - there is still 100 units of value in the system that capital in general has appropriated (albeit 90 is in the hands of industrial capital and 10 in the hands of interest bearing capital), and in turn must spend on consumption (and not throw back into the system seeking further accumulation - as that would involve growth/more production which is ruled out by your schema).

So 1,000 units of value produced each year, 1,000 units realised, and 1,000 units of value spent/invested, never any more, never any less. Whatever the level of debt involved in circulating this cycle doesn't require more money coming into the system to circulate it - it's already in the system and it just moves around between different types of capital - from industrial capital to interest bearing capital and back again - in the form of interest from industrial capital to interest-bearing capital and then back in the form of purchases of means of consumption/luxury items from interest bearing capital to industrial capital (i.e. the interest appropriated by interest bearing capital can't be thrown back into circulation through additional lending to try and capture a bigger share of surplus value produced, nor can the remaining surplus value retained by industrial capital be thrown back into circulation as investment to expand surplus value production as your schema of simple reproduction doesn't allow it - there's no where for it to go as expanded reproduction is ruled out through abstraction). So whether none of the 900 investment each year is funded by debt or all of it is, the end result is the same - 100 is appropriated by capital in total and is consumed away.

If for whatever reason the money supply was increased in the above system it would have nowhere to go, because it's restricted from doing anything by the terms of the schema you set down yourself, i.e. simple reproduction - 'same amount produced by the same number of people' - the only thing that could happen to it would be that it doesn't actually do anything and therefore has no impact on inflation (a bit like what happened under quantative easying, money was pumped into the system, but it didn't circulate as no one wanted to lend it and no one wanted (or weren't able) to borrow it - it's impact on inflation was nothing/minimal)

Anyway, the point above while relevant in the abstracted world of simple reproduction and for the purposes of making the point, is fairly irrelevant in the real world as simple reproduction doesn't and cannot exist on its own under capitalism (and i struggle to see how it could exist under any mode of production - far too many variables that would have to be ruthlessly controlled to achieve it). Technological progress, increased productivity and the resultant accumulation of capital and overproduction is inherent in the very concept of capital, it's rooted in the capital-labour relation.

Marx's schemas of reproduction at the end of Volume II of capital are fairly relevant to all this - in which he makes the following point about simple reproduction

Simple reproduction, reproduction on the same scale, appears as an abstraction, inasmuch as on the one hand the absence of all accumulation or reproduction on an extended scale is a strange assumption in capitalist conditions, and on the other hand conditions of production do not remain exactly the same in different years

 

[Backatcha Bandit]

Thanks, LD. Can we explore this further?

Lets say we were to model this system in the physical realm.

I'll play the part of the bank, you can run the factory.

We can use marbles to signify units of value. I have the sole right to issue this currency.

How many marbles would you like to borrow (to pay staff and purchase raw materials), and on what terms (% per period) do you think would be fair?

-

A bit of light (amusing) Sunday afternoon reading: The Great Money Trick - from The Ragged Trousered Philanthropists by Robert Tressell

‘Money is the cause of poverty because it is the device by which those who are too lazy to work are enabled to rob the workers of the fruits of their labour.’

‘Prove it,’ said Crass.

Owen slowly folded up the piece of newspaper he had been reading and put it into his pocket.

‘All right,’ he replied. ‘I’ll show you how the Great Money Trick is worked.’

worth the time to read if you haven't

-

On a lighter note, still... Here's a short animation from 1939 , which claims to describe the capitalist model: http://www.archive.org/details/Roundand1939

 

[littlebabyjesus]

So whether none of the 900 investment each year is funded by debt or all of it is, the end result is the same - 100 is appropriated by capital in total and is consumed away.

Let us say that I have inherited a factory from my late father. One in, one out, as this closed system requires. But I have inherited no capital from him at all. Or, better, we are switching to a new form of finance, moving away from barter to a system of money, where certain banks are entitled to issue that money. Everything that last year I achieved through barter, including my own personal needs for consumption, must now be bought using this money.

Ok, so I start the thing off by borrowing 900 groats on terms that say that I will pay the bank 990 after one year. I invest as you say, 500 in materials, 400 in labour, and I sell for 1000 groats. But let us say that the thing my workers are making takes a year to make. So during that year, I also need to borrow extra money in order to consume myself this year. This consumption on credit is funded by an extra loan of 10 groats. At the end of the year, I must pay back 11 groats. (During the barter period, it was my custom to take one tenth of the value of production for my own personal consumption, but I decide to cut back on my consumption this year to get the business kick-started, which leaves 90 groats' worth of unconsumed value somewhere this year, which will have to be carried over into next year – which ought to be allowed, I would have thought: while production may be constant, consumption may vary year by year if the produce is assumed to have a shelf-life.)

So at the end of the year, I must pay the bank 1001 groats, but I only have 1000. I also need to refinance for the next year, which I do by taking out another loan. But this time, instead of borrowing 910 groats for the following year, I have to borrow 911 to pay for the interest on my consumption during the first year. The bank lends me the 911 groats on the same terms as before and is left with the 90 groats to spend on consumption itself. It then consumes a year later than me, but taking its consumption from that year's production.

So the bank's consumption is delayed by a year. But my consumption is happening now. I am always consuming using the money created by the loan. I pay for that consumption retrospectively, and because of that I pay interest. And as a result, I must borrow more money each year in order to keep up. It is the interest on this consumption-on-credit that must be created somewhere, and as a result, the money supply goes up each year as the total amount of debt keeps going up.

As you say, this extra money would appear to have nowhere to go. But it must go somewhere, surely? Does it not mean that the assets start to rise in nominal value? The reason I was able to borrow money in the first place was because my factory was deemed to be worth 1000 groats. As the amount I need to borrow in order to keep up rises each year, and the bank will only lend to the factory's value, the value of the factory must nominally go up, despite the fact that it is still only producing 1000 groats' worth of value. If someone else wants to buy my factory from me, they will have to pay this increased price, otherwise I have no way to cover my debts through the sale. And the only way to make this viable for the potential buyer is to put prices up the following year. The extra money created by the interest is fed back into the system through increased prices, ie inflation. In fact, eventually, the factory owner will start putting prices up himself, will he not, in order to cover the ever-increasing loan he has to take out each year, and he will do this on the back of the 'fact' that his factory is worth more than it was.

So inflation in such a system starts with an asset bubble. Either the bubble crashes – the bank has to repossess the factory and write off the lost interest – or prices of goods go up to reflect the new increased value of the assets.

 

[love detective]

Firstly - one thing to point out - the schema I described above represents the aggregate production of a closed system society - the 900 investment, 100 profit, and 1,000 of commodity production represents not the activities of an individual company/capital, but the total social product, which would obviously be split across many individual capitals - for the purposes of reproduction schema marx broke this done into two branches of production. Dept I which produced means of production and Dept II which produced means of consumption.

Ok, so I start the thing off by borrowing 900 groats on terms that say that I will pay the bank 990 after one year. I invest as you say, 500 in materials, 400 in labour, and I sell for 1000 groats. But let us say that the thing my workers are making takes a year to make. So during that year, I also need to borrow extra money in order to consume myself this year.

the premise that the total 1,000 of output takes a year to make is not realistic within the terms of the schema - remember the 1,000 is the total social product - which includes 500 of means of consumption (400 which is ultimately consumed by labour and 100 consumed by capitalists for luxury/consumption). If it took a whole year to finish the production of this means of consumption the working class (and owners of capital) would be extinct as they would be unable to re-produce themselves, and even simple reproduction would not be achieved. So we have to assume that at least the means of consumption are produced evenly throughout the period - to enable the working class (and capitalists) to reproduce itself and be able to continue to work/appropriate.

So with this in mind, we can go back to your capitalist who needs to consume during the year -

i) our capitalist may be an owner of capital in Dept I which produces means of production - he has enough money at the start of the year for his share of the total 900 investment - however not all of this will be spent upfront - labour is always paid in arrears, not in advance - so he will have a fund of money, earmarked for paying labour for the whole year that is not all used up at once. If he needs to consume, there's no logical reason for him to borrow money to do this as he is already has a money fund available. Say he dips into this to buy his own means of consumption during the year. As he casts that money into circulation to buy means of consumption from capitalists in Dept II - this money will eventually return back to him when capitalists in Dept II have to renew the means of productions used up in their production process, as they have to buy this from capitalists in Dept I (and as we have already established that the means of consumption are produced regularly throughout the year, the capitalists in Dept II who produce this will regularly have to buy new means of production from Dept I to achieve this) - so the money initially cast into circulation by Dept I capital, continually returns to them in this way - no new money is required. This is a key thing that marx noted within a system of reproduction like this (and which is relevant here), that money cast into circulation always returns to its point of origin

ii) our capitalist may be an owner of capital in Dept II which produces means of consumption - as above, he has enough money at the start of the year for his share of the total 900 investment - and as above, not all of this money will be used up front, so he has a pot of money that can be used to fund consumption during the year. Again, there is no logical/rational reason for him to borrow money to fund consumption, when he is already sitting on a fund of money that is available to be used. Additionally, if we assume there are only two capitalists in total, Dept I and Dept II, then the output of production controlled by the capitalist in Dept II is means of consumption in the first place - so abstractly, he doesn't need money to mediate the commodity exchange required for his consumption, he just takes part of his share of appropriated surplus value directly as product - and as mentioned above, it's not possible for this output to not be available until the end of the year as means of consumption must be produced on a regular enough basis to reproduce labour power used up in production. Furthermore as the capitalist in Dept II is the one selling means of consumption to workers, which are paid say weekly/monthly, and must spend most of their income on means of consumption - the money that capitalist in Dept II throws into circulation through paying wages, returns to them within a short time as the working class consume - so again there is no need, at a total social level, for capital to borrow to fund its own consumption

So the rest of your schema doesn't really make too much sense based on what I pointed out above - however i'll respond to it anyway to the extent that its possible

This consumption on credit is funded by an extra loan of 10 groats. At the end of the year, I must pay back 11 groats.

OK, so for the sake of argument say you have to borrow to consume and borrow 10 with 1 interest.

During the barter period, it was my custom to take one tenth of the value of production for my own personal consumption, but I decide to cut back on my consumption this year to get the business kick-started, which leaves 90 groats' worth of unconsumed value somewhere this year, which will have to be carried over into next year – which ought to be allowed, I would have thought: while production may be constant, consumption may vary year by year if the produce is assumed to have a shelf-life.)

I'm not sure I understand this - our simple reproduction schema consists of an ongoing core investment of 900 each year to 'produce the same thing by the same amount of people', and as production (and productivity) is constant that means 100 surplus value is produced each year - giving a total of 1,000 value that can be realised/reinvested by capital. Only 900 of this can be reinvested if we are assuming simple reproduction/no growth, so the remaining 100 has to be consumed by capital in means of consumption/luxury items (which of course are produced by Dept II as part of it's overall commodity output) - this could of course be consumed over a period of more than one year, if that's what you are meaning

So at the end of the year, I must pay the bank 1001 groats, but I only have 1000.

As i stated above, there would be no rational/logical reason for capital to borrow the 10 required for consumption as they would already be sitting on money which could be used to fund this which would return to him before the end of the period anyway (via the back and forward interchange between Dept I and Dept II). Even if we assumed for some bizarre reason capitalists in both Depts didn't use their own money fund (which would be deposited at a bank or hoarded until needed) and instead borrowed the money, they would in fact be borrowing money from each other (or indeed borrowing from themselves) and lending it to each other at the same time which in terms of money required to do this would just negate itself out - i.e. if capitalist in Dept I wanted to borrow, the money to fund that loan wouldn't need to be created/additional money, instead the money that Dept II had on deposit would be used (by the banking system) to do this, and vice versa between Dept II and Dept I. So no new money needs to be created to do this, and the interest that each capitalist had to pay would be offset by the interest they have earned by lending out their surplus money through the banking system (obviously there would be interest margins involved here, but give it's highly unlikely someone with money available would borrow in the first place we can ignore them for the purposes of showing that no increase in the money supply is required even if they did go down this highly unlikely route - edit: in fact the interest margins would probably negate themselves out anyway as capital in Dept I and Dept II would be both borrowing & lending)

I also need to refinance for the next year, which I do by taking out another loan. But this time, instead of borrowing 910 groats for the following year, I have to borrow 911 to pay for the interest on my consumption during the first year.

society needs 900 in total to recommence production at the same level - any consumption by capitalists throughout the year will follow that which I set out above - i.e. it does not need additional borrowing of 10, let alone additional borrowing of 1 being the interest on the 10. And ultimately all capitalists consumption is funded, in value terms, from the surplus value it appropriated during/throughout/at the end of the year - so in total only 900 is required for the next period

(need to split rest of reply over another post as exceeded character limit)

 

[love detective]

The bank lends me the 911 groats on the same terms as before and is left with the 90 groats to spend on consumption itself. It then consumes a year later than me, but taking its consumption from that year's production.

So the bank's consumption is delayed by a year. But my consumption is happening now. I am always consuming using the money created by the loan. I pay for that consumption retrospectively, and because of that I pay interest. And as a result, I must borrow more money each year in order to keep up. It is the interest on this consumption-on-credit that must be created somewhere, and as a result, the money supply goes up each year as the total amount of debt keeps going up.

As you say, this extra money would appear to have nowhere to go. But it must go somewhere, surely? Does it not mean that the assets start to rise in nominal value? The reason I was able to borrow money in the first place was because my factory was deemed to be worth 1000 groats. As the amount I need to borrow in order to keep up rises each year, and the bank will only lend to the factory's value, the value of the factory must nominally go up, despite the fact that it is still only producing 1000 groats' worth of value. If someone else wants to buy my factory from me, they will have to pay this increased price, otherwise I have no way to cover my debts through the sale. And the only way to make this viable for the potential buyer is to put prices up the following year. The extra money created by the interest is fed back into the system through increased prices, ie inflation. In fact, eventually, the factory owner will start putting prices up himself, will he not, in order to cover the ever-increasing loan he has to take out each year, and he will do this on the back of the 'fact' that his factory is worth more than it was.

So inflation in such a system starts with an asset bubble. Either the bubble crashes – the bank has to repossess the factory and write off the lost interest – or prices of goods go up to reflect the new increased value of the assets.

I've skipped responding to the remaining bit as it's all predicated on additional money constantly being created to circulate a static amount of value/commodity production which I don't see as valid within the terms of the simple reproduction schema you initially posited.

Id recommend a reading of the reproduction schema at the end of volume II of capital if you want to explore this thing further - it was never properly completed in relation to expanded reproduction and is somewhat un-inspiring as a result, but the section on simple reproduction, while being an exercise purely in the abstract (as marx didn't see it as being possible under capitalist social relations), is worth reading

 

[littlebabyjesus]

Thanks for that, ld. I suppose the bit I glossed over was where the authority for the original bank to lend came from. You've outlined a situation whereby capitalists are lending to each other, in which case, I agree that you have a system that cancels itself out. I was outlining a situation whereby the bank is simply creating the money out of nothing with no capital basis behind it.

How unrealistic was it of me to do that? After all, as long as nobody questions its authority to act in that way, there's no reason it can't. Surely the gold standard was just an abstract way of symbolising confidence that had no real value?

 

[love detective]

You've outlined a situation whereby capitalists are lending to each other, in which case, I agree that you have a system that cancels itself out. I was outlining a situation whereby the bank is simply creating the money out of nothing with no capital basis behind it.

capitalists lend/borrow from each other via the credit system/banks - this mops up money that for whatever reasons is not required by individual capitals at a particular point in time in their own circuit of capital - ideally money should always be moving through the circuit of capital but there are legitimate times, for an individual capital, where this is not possible (for example money held to pay wages that are not due yet, money obtained through the sale of commodities where part of that money goes towards replacing fixed capital MOP that does not require replacement yet, money that is awaiting reinvestment in new means of production etc.. - plus various other things which marx goes into in length in vol II, and shows how value traversing around the circuit in this stop and start way forms the foundational base of the credit system. So when no use can be found for money from an individual capital's circuit it gets swept up by the credit system and deployed elsewhere where it's needed)

In our example above - the credit system would have access to this money 'at rest' (from the perspective on the individual capital who doesn't need it) via the things we discussed above - so when another capitalist needed money but doesn't have it (say to fund their own consumption), the credit system/bank/central bank doesn't need to create new money to lend as it's already there. so on that basis it's irrelevant as to the form of the lending (i.e. capitalists lending/borrowing directly from each other or via the credit system/banks) as the substance of it is exactly the same, i.e. it's rooted in sweeping up money that's traversing the circuits and not required by an individual capital at any one time and dishing out to others who do need it.

The independent variable here is value production and the dependent one is money/circulation of money - as value production expands then more money/circulation is required - but in our example of simple reproduction where value creation is static, there is no need for the money supply to expand to circulate that forever static value - there would be no need, nor basis, for a central bank to create new money in that situation (and only central banks can create new money, other banks can increase the circulation/velocity of that money through fractional reserve lending, but this can't be done out of thin air - and in turn is dependent on value production/realisation creating the activity that drives fractional reserve lending). this ties in a bit with the view amongst many proponents of QE in that they think all that is required to get value production going is to get money circulating/create more money - while this may be necessary (and have 'useful' by-products such as creating an artificial demand for government debt) , it's certainly not sufficient and it reflects the erroneous view that money/circulation of money is the independent variable and value production is the dependent one. So i don't see how money could be created out of nothing with no 'capital base' behind it - if money is being created to circulate expanded value production then the idea/hope is that the created money eventually finds a counterpart in real value, once it's produced - but there is no foundational basis for money to be created in our abstract world of simple reproduction. And as i said earlier, if it was created it would have nothing to do and therefore no impact (again a bit like the UK's QE)

How unrealistic was it of me to do that? After all, as long as nobody questions its authority to act in that way, there's no reason it can't. Surely the gold standard was just an abstract way of symbolising confidence that had no real value?

hopefully the above has already shown how unrealistic that would be. likewise just because there's no reason it can't, it doesn't mean the money created would do anything as value production/circulation/realisation wouldn't have a need for it - the money could be created but no one would want it as there would be enough in the closed system already, so it would just sit there like it didn't exist

Don't quite understand you last sentence/question - when gold was used as the money-commodity it had just as much 'real' value as any other commodity produced under capitalism (i.e. nothing has real value in it, but the abstract labour/value contained 'within' (poor choice of word) a unit of gold was just the same as that contained 'within' any other commodity of equivalent value - if you transported either the gold or the other commodity to robinson cruso then the value 'in' both of them vanishes as the social relations which created/supported it vanish - although obviously the use-values of the respective things may or may not continue to exist, depending on what they were and where they now where - although not sure if this is what your question was about)

 

[Backatcha Bandit]

LBJ, you noted on another thread:

It is my experience that a good idea can always be expressed using simple language. If you are resorting to complex language and inaccessible writing, what you are saying probably isn't worth saying.

Which, if I'm honest (and with absolutely no disrespect intended towards LD), is a fairly good description of how I feel about Marx.

While I admit that he offers a useful analysis of the functions of capitalist economy, that usefulness is limited by his failure to include the very nature of the medium of circulation (money). This is why Keynes describes Marx as 'A poor thinker'.

Why I think this matters is that by excluding such considerations from the scope of his enquiry, he renders his analysis 'toothless'. In short, by failing to spot the 'trick', he lets them get away with it.

So I ask again: @LD - if you're not going to borrow marbles from me, where the hell are you going to get them?

If you try making you own, you be joining LBJ in a prison cell on a charge of counterfeiting!!! 'Groats', indeed!

 

[Blagsta]

I suggest you re-read Marx, if you think he "fail[ed] to include the very nature of the medium of circulation"

 

[littlebabyjesus]

To go back to the gold standard, was it not simply a symbolic device? You can have confidence in the money I am issuing because there's a store of gold somewhere that I keep under lock and key. But the gold doesn't do anything. It just sits there. It's just a convention, isn't it, to give confidence that money means something?

 

[Blagsta]

The price of gold itself is subject to fluctuations, depending on conditions in countries that mine it etc. People who bang on about the gold standard are missing the point.

 

[littlebabyjesus]

I'm not banging on about anything. I'm trying to establish whether or not lending is, or has always been, done on the basis of a real value to a capital held in reserve, or whether it is, or has been, done on the basis of a simple act of faith that the money means something.

If the latter, I think that negates ld's main thrust, which is that money is always lent from one capitalist to another.

 

[Blagsta]

I wasn't referring to you as someone who bangs on about the gold standard. I'm referring to Jazzz and his ilk.

 

[love detective]

I'm not banging on about anything. I'm trying to establish whether or not lending is, or has always been, done on the basis of a real value to a capital held in reserve, or whether it is, or has been, done on the basis of a simple act of faith that the money means something.

If the latter, I think that negates ld's main thrust, which is that money is always lent from one capitalist to another.

your conflating two completely different things - one is the abstract example of simple reproduction of which has been the basis of our discussion (i.e. starting from your assertion that inflation is possible in a system where production of value is static and that inflation is due to the increase in money supply required by additional debt/borrowing) - and given the conditions you yourself set down, i've argued that there is simply no need for the money supply to be increased to faciltiate that simple reproduction - in the context of that, my 'thrust' has been that the money already in the system is sufficient to circulate the value/commodities produced, so therefore there is no need to introduce more money into the system to circulate an ever constant amount of value

I'm not arguing that this is (or is not) the case in the actual real world of expanded reproduction, as our discussion has squarely been rooted in your thought experiment world of simple reproduction - a world which to achieve such a thing as purely simple reproduction so many variables would have to be artificially held constant, but as it's a thought experiment that can be done to see what happens (and is pretty much how marx approaches simple reproduction in his reproduction schema in vol II)

as to the real world - as i've said on a previous post - money can be created/circulated to facilitiate expected expanded future value (re)production - whether that money finds an actual counterpart in real value at some point in the future is contingent on the conditions of value production itself, it may or it may not - but there's nothing (theoretically) to suggest that increased debt within the system automatically becomes unstable/based on faith aone - as long as value production keeps up then the two things can remain in some kind of sustainable balance (obviously in the real world, this usually isn't the case, due to capital's contradictions etc.. etc..) and therefore money/debt creation is not necessarily based on faith but underlying value production (obviously in the wider context value itself is based on faith to a large extent - but it's a pretty strong faith that we create/feed and in turn stands over us)

bakatcha bandit, if you've a point to make then please make it - i'm not really interested in your marbles (although i can help you look for them if you want)

 

[Diamond]

Don't see why not. It's supposed to be a zero-sum game after all, so when the rich can't get much richer all they need to do is start killing some competition. Just like they do now.

What's supposed to be a zero-sum game?

 

[Backatcha Bandit]

I suggest you re-read Marx, if you think he "fail[ed] to include the very nature of the medium of circulation"

What again???

I happy to admit I might have missed something, along with Keynes, Gesell and even Sohn-Rethel.

I'd be slightly more convinced if you could point it out for me. I'd probably struggle to point out where it isn't, given the character limit on posts.

 

[Backatcha Bandit]

People who bang on about the gold standard are missing the point.

No disagreement here.

 

[Blagsta]

What again???

I happy to admit I might have missed something, along with Keynes, Gesell and even Sohn-Rethel.

I'd be slightly more convinced if you could point it out for me. I'd probably struggle to point out where it isn't, given the character limit on posts.

Have you actually read all 3 volumes? I have to admit that I haven't, but I am familiar with the arguments. Marx goes into a lot of depth about money. Merely reading some out of context quotes won't cut it.

Marx talks about money being many things, in different contexts. From the medium of circulation, to a store of value, to a measure of value.

I'm not an expert though, by any means. Maybe love detective or butchersapron can elucidate further.

 

[Backatcha Bandit]

bakatcha bandit, if you've a point to make then please make it - i'm not really interested in your marbles (although i can help you look for them if you want)

The point I'm struggling to make is that since the 'unit of exchange' is born of debt, there is a built in systemic driver for 'growth'.

I gather that you're 'not really interested' in borrowing my marbles, but that doesn't help explain how the marbles/groats/whatever get into the closed system under discussion in the first place.

 

[Blagsta]

It's not "born of debt".

 

[littlebabyjesus]

New money enters the UK economy through debt.

 

[Blagsta]

I think that misses the point though. Value is created in production.

 

[littlebabyjesus]

Yes, it is. I'm still struggling with my own particular conundrum, though, which is whether or not a capitalist system can function without growth but with inflation, and whether this inflation would be caused by the interest due on money borrowed for consumption. I still haven't quite been convinced that this isn't the case. Capitalism may have inherent drivers towards growth, as surplus capital is reinvested, but that isn't quite the same as saying that capitalism needs growth.

 

[love detective]

I'm still struggling with my own particular conundrum, though, which is whether or not a capitalist system can function without growth but with inflation, and whether this inflation would be caused by the interest due on money borrowed for consumption. I still haven't quite been convinced that this isn't the case.

i've argued the case against this fairly solidly in a number of fairly lengthy, detailed, and thought through posts - i thought you had actually accepted this was the case earlier

for you to convince me otherwise you need to prove how (and why) new money (continually, each year) enters the closed system of simple reproduction/zero growth/static value production, and circulates within that system causing inflation - it's fine saying in isolation that new money circulating would create inflation, but so far i haven't seen anything to explain why that new money would come in to this closed system of simple reproduction - you suggested earlier it was through the consumption of the capitalist, but i've shown a number of ways how capitalists wouldn't need to borrow to mediate the commodity exchange required to get those use-values

anyway, regardless of all that, as i've suggested earlier, pondering that particular question (in isolation and in opposition to expanded reproduction) is of no real value in understanding the political economy of capital/capitalism, as it's pontificating about a hypothetical equilibrium system that doesn't and cannot exist other than in our thought experiments - it's useful in setting the basis/foundations/starting point for expanded reproduction but in isolation it's nothing but an abstraction.

value production is the ultimate regulator of real money supply/velocity/circulation - not the other way round - a constant set amount of value production each year has no use for new money to come into that system - if new money does come into the system and is employed in any useful way (i.e. to valorise itself) then this requires growth/new value production, so the original premise of no growth no longer holds and the system then becomes one of expanded reproduction.

 

[Blagsta]

i've argued the case against this fairly solidly in a number of fairly lengthy, detailed, and thought through posts - i thought you had actually accepted this was the case earlier

for you to convince me otherwise you need to prove how (and why) new money (continually, each year) enters the closed system of simple reproduction/zero growth/static value production, and circulates within that system causing inflation - it's fine saying in isolation that new money circulating would create inflation, but so far i haven't seen anything to explain why that new money would come in to this closed system of simple reproduction - you suggested earlier it was through the consumption of the capitalist, but i've shown a number of ways how capitalists wouldn't need to borrow to mediate the commodity exchange required to get those use-values

anyway, regardless of all that, as i've suggested earlier, pondering that particular question (in isolation and in opposition to expanded reproduction) is of no real value in understanding the political economy of capital/capitalism, as it's pontificating about a hypothetical equilibrium system that doesn't and cannot exist other than in our thought experiments - it's useful in setting the basis/foundations/starting point for expanded reproduction but in isolation it's nothing but an abstraction.

value production is the ultimate regulator of real money supply/velocity/circulation - not the other way round - a constant set amount of value production each year has no use for new money to come into that system - if new money does come into the system and is employed in any useful way (i.e. to valorise itself) then this requires growth/new value production, so the original premise of no growth no longer holds and the system then becomes one of expanded reproduction.

This is a vital point I think. Money as debt people have got the tail wagging the dog afaict.

 

[love detective]

yep - as i said in a previous post, the continual issue of new money/debt is not a problem in itself if it is backed up by increased (actual) value production at the societal level (something that clearly can't happen in the abstracted world of simple reproduction) - problem is in the anarchic/archaic world of markets/capitalism (along with the inherent contradictions of capital itself in relation to the means and ends of capital) it's near on impossible for these relations to stay at a sustainable level in the short/medium term, but ultimately the law of value will, and always does, assert itself and like crisis will irrationally rationalise an irrational system, so the whole thing can start again

anyway, i'm out of here - not much desire to spend too much time on message boards at the moment, so i'll leave the rest of you to it

 

[Backatcha Bandit]