From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Thu Jun 21 2007 - 15:39:30 EDT
I wish that, rather than raise doomsday scenarios based on flimsy evidence, somebody would interview some international bankers who can talk meaningfully and in a level-headed way about the quantitative proportions of the structure of the global credit market. My hunch is that, if there is a downturn coming - and every boom is followed by a bust - it will happen gradually. It doesn't necessarily have any specific consequence with regard to the radicalisation of people. In general, the most you can say that competition intensifies in that case, and that more people are willing to do things they didn't do before, to survive. The world is awash with cash and speculative capital (excess liquidity), as many analysts show, and if that cash suddenly becomes worth a lot less, it's bad for the people who own it, but point is the vast majority of people don't own it anyway, they simply don't have the collateral to borrow that much. The meltdown theory assumes that once the butter is melting in the pan, you cannot take the pan off the stove, so that the butter must inexorably continue to melt and burn. But where is the proof of that? I burnt my steak tonight - I was not paying sufficient attention - but I think we will need more than a kitchen theory of economics here. Another way of looking at it is to examine the overall effects of previous "crashes" and what impact they had. Sure, a few trillion dollars of finance capital can be wiped out in a very short time, but as a matter of fact it typically doesn't have a very big and durable effect on real economic growth these days, except in fairly marginal or peripheral economies, where the average person lacks significant assets of any sort, insofar as it intensifies problems there which they're already experiencing. As I pointed out before, real GDP growth can quite well go together with rising structural unemployment and impoverishment of a segment of the population. I think the Left makes itself ridiculous by constantly raising doomsday scenarios, overlooking in so doing - as Mike Davis often pictures - the doom already being experienced by hundreds of millions of people anyway in the present. The debt business is a very old business and a very big one, but the thing about credit is, that it enables one to constantly displace or renegotiate temporally and spatially the consequences of actions taken in the present. That game can therefore continue a long time, all it really boils down to is that the growing wealth of some is conditional on the relative or absolute impoverishment of others, and that the world economy reorients to the priorities of those who have the income to claim the additional wealth being generated. But increasing socio-economic inequality doesn't necessarily mean an absolute drop in aggregate demand, it means only that, more and more, a select group of people generates a larger slice of that demand. You can have growing aggregate demand, and growing socio-economic inequality at the same time (the Keynesian definition of "aggregate demand" isn't very helpful, because it fails to identify, and differentiate appropriately, between the different kinds of investment and consumption expenditure of the different social classes). Jurriaan
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