> Date: Fri, 26 Oct 2001 15:38:26 -0400 > From: antonio callari <a_callari@email.fandm.edu> > Subject: Re: [OPE-L:6090] falling profits > Dear Fred, or anyone else who might know: > > Is there a way of knowing (or speculating about) "Why" this fall in profits > occurred? > I am wondering, specifically, whether this fall in profit is part of a fall > in surplus-value in general, or the result of an increased flow of > surplus-value to non-profit forms and/or to the FIRE sector (including > profit to financial institutions). > > I am thinking that the answer to this question might be useful for how we > think about the causes and the possible ways out-of/into the crisis. > > Thanks > > Antonio > > >On Thu, 25 Oct 2001, Paul Zarembka wrote: > > > >> Falling profits CAUSE U.S. crisis or are SYMPTOMS of crisis? > > > >Profits started falling in 1997 and investment started falling in 2000 and > >the recession started in 2001. This suggests to me that falling profits > >was the cause of falling investment and thus of the recession. To be > >sure, profits will decline further as an effect of the recession. So > >falling profits is both cause and effect of the recession. But the prior > >significant decline in profits suggests that falling profits is a > >cause. I would say the most important cause. > > > > > >> Whose CRISIS? If the 1930s was a CRISIS, is using the big word today > >> suggesting we are in 1929? Was using the word in 1973 suggesting then > >> that we then were in 1929? Was it correct to have so described? In sum, > >> I am questioning when to use CRISIS (certainly not when it subjectively > >> moves us). > > > >I am not saying that today is like 1929. But I am saying that I think we > >are closer to 1929 today than at any other time in the postwar period - > >closer than in the recessions of 1974-75 and 1980-82. What is different > >and much worse this time is the very high debt levels of businesses (and > >of households). It is the combination of low profit and high debt that > >makes the current situation similar to 1929. I am not predicting that > >things will get that bad. But I am saying that the chances that things > >could get that bad are higher today than they anytime since the Great > >Depression. > > > > > >> BEA made a revision. Why should we jump on THIS revision? > > > >The BEA's revision was not based on a change of definitions or of > >estimating procedures, which sometimes happens, and which would be more > >suspicious. Rather, the significant downward revision of profits from > >1998 to 2001 was the result simply of taking into account more data. It > >would certainly be interesting to know more about why the revision was so > >large this time, and I hope to pursue this question. But it is generally > >thought that such revisions based on more data are better than the old > >estimates. > > > > > >Paul, thanks for your comments. > > > >Comradely, > >Fred > > > Antonio Callari > E-MAIL: A_CALLARI@ACAD.FANDM.EDU > POST MAIL: Department of Economics > Franklin and Marshall College > Lancaster PA 17604-3003 > PHONE: 717/291-3947 > FAX: 717/291-4369
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