In your OPE-L 353, referring to my OPE-L 352 you wrote:
I think that John is making the common sense of Fred's note too complex.
John writes:
I take Fred's common sense note seriously. Perhaps, a bit too
seriously? But, I do think Fred's approach to explaining the
current situation is related to his theoretical outlook.
Michael wrote:
I guess that I have been pushing the idea of slaughtering capital values
for some time. The idea seems rather simple, yet complex.
John writes:
I'm sure you have been thinking about the issue for some time and
would agree that the "slaughtering capital values" is no easy
concept.
Michael wrote:
For me, capital values evolve in time. Historical values soon become
irrelevant. Slaughtering capital values means that the basis of
valuation falls, raising the calculation of profit rates. If I buy a
bankrupt company for half of its previous value, I might be able to earn a
decent profit.
John writes:
Granted with the destruction of capital value, profit rates increase.
But what are we talking about? That is, how are we to understand that
"capital values evolve in time" and that "historical values soon
become irrelevant"?
Within the framework of simultaneous valuation, historical values
are always irrelevant. Moreover, the values of the outputs of one
period of production are unrelated to the values of the inputs of
next. The question remains -- when and how can devaluation take
place if valuation is simultaneous?
Given falling prices of outputs, the idea that inputs and outputs
are to be simultaneously priced seems especially ludicrous. The
input and output prices merely adjust so that the unit prices of
inputs are equal to those of the outputs. Again, the how's and
why's of devaluation disappear.
Michael wrote:
The complexity comes from the difficulty of getting from here to there.
The paroxysism of a deflation unsettle all existing relationships and can
destabilize society.
John writes:
To get from here to there we have to travel in time. That is my basic
point. We have to have a theory that allows us to view capital's valuation
and devaluation in time.
Much of the rejection of the TSS approach stems from an unconscious
abstraction from deflation and from devaluation. To be sure, for
most of our lives in the West we have rarely experienced either.
Indeed, the usual manner of calculating the rate of profit is
carried out as though neither inflation nor deflation exist. With
inflation, this type of calculation seems necessary lest one
include inflationary profits within the overall calculation. With
deflation, this manner of proceeding seems surreal. That is,
given deflation the usual Marxist approach simply skips over the
monetary losses of capitalists. We might as well tell capitalists
that there is no problem with deflation and devaluation as their
rates of profit are increasing from period to period. Thus,
the folk that disagree with your statement that
"The paroxysism of a deflation unsettle all existing relationships
and can destabilize society."
are those wedded to an approach that abstracts from deflation while
making adjustments for inflation. More practical capitalists like
Rubin and Greenspan know better.
John