In response to Fred's and Jerry's thoughts:
That would be my "guess:" that the increasing level of endebtedness (which
I believe took place) over the 80s and 90s (a long process indeed) would
explain the transfer of funds to the financial sector (and, a whole range
of other activities might be identified as relevant here) even if interest
rates did not increase. The mechanism for the redistribution of surplus
value [a subsumed class payment] here might have taken an institutional,
rather than market, form. The best work that suggests such a change
remains, to my knowledge, Henwood's Wall Street, even if his history stops
in the early 90s.
What effects this will have on the "crisis" (whether it will be deep or
not), therefore, will, PARTIALLY, depend on whether there are blockages
(objective or not) to the flow of funds from the non-productive segment of
FIRE to the productive sector of the economy. In other words, there may be
a profit squeeze, but not necessarily a "capital" squeeze.
Just some speculation!
Antonio
>Re Fred's [6104]:
>
>> I went back to check the data
>* (what data, Fred?)
>> and
>> discovered that about half of the decline in nonfinancial sector net
>> profit that I discussed in my previous post was indeed due to increased
>> interest payments as a percentage of gross profit (net profit +
>> interest). The ratio of net profit to gross profit declined from 0.77 in
>> 1997 to 0.64 in the second quarter of 2001. <snip, JL>
>> This result surprises me, because interest rates did not increase that
>> much from 1997 to 2000 and have of course decreased in 2001. So it would
>> be interesting to look into this result further. Anybody have any further
>> explanations?
>
>It might be interesting to disaggregate this data to see whether there
>are significant sectoral inequalities regarding indebtedness. E.g. it would
>be interesting to inquire about the indebtedness of so-called 'high tech'
>firms offering stocks on the NASDAQ and compare that to the level
>of indebtedness of the rest of the non-financial corporate sector to
>determine whether there is a correlation of firm indebtedness to the
>so-called 'Internet bubble'.
>
>In solidarity, Jerry
Antonio Callari
E-MAIL: A_CALLARI@ACAD.FANDM.EDU
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Franklin and Marshall College
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