From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sun Dec 30 2007 - 10:41:22 EST
Patrick, If you are interested in graphical presentations, you can find many online, for the longterm trend in the real rate of interest, for all OECD countries. In fact the trendline of both the real and nominal interest rates for the period after 1980 was down in most OECD countries (halved, or more than halved), and so was price inflation. M3 then expanded strongly, and you could borrow more money, more cheaply around the globe. If you had sufficient collateral, you could e.g. borrow a chunk of Yen in Japan and stick it in the bank in New Zealand or Australia, and you'd be making money, without having to do much else then watch the currency exchange rates. Deflationary policy may initially require high interest rates to mop up funds, but then the economy deflates, and after it has deflated, then interest rates are usually lowered again. The salient point is that the capacity to get competitive interest rates has a lot to do with the amount of capital you have. The more capital you own, the more you can borrow, and the more you can borrow at a better interest rate. The largest chunk of credit in the world is owned or owed by a select group of people and entities, which is tiny compared to the whole world population or total business entities. Corporations both borrow money and lend money, and for many of the bigger ones, it is a separate line of business even. In principle, the aggregate net interest generated by producing enterprises is a quantity of surplus-value. But there's different ways to look at it. Interest payments must normally be paid out of current gross revenues from the corporation's business activity, so you could regard the total interest paid out as surplus value. The net interest (interest receipts less interest payments) may be positive or negative for different corporations as well. In the US, IRS data in fact show all active corporations together paid out about $939 billion in taxable interest, and received about $1346 billion in interest in 2004, yield a net positive interest income of about $407 billion. http://www.irs.gov/pub/irs-soi/04co27ccr.xls This makes the debt business a big business. I have not studied Dumenil & Levy's latest publications yet at this stage. In national accounts, not all interest payments and receipts of enterprises are included in the product account, insofar as some are considered not to be related to production, and hence excluded from gross and net output, along with many rent receipts and payments. You have to look at the flow-of-funds data and tax data, to get a better overall picture in this respect. Essentially, I think generic interest and rent income have become a bigger and growing fraction of the total mass of surplus value realised. That is the essence of "financialization", in my opinion. Credit card debt is only a small component of total household debt, but I agree the amounts per person are considerable e.g. in the US. In the US, the size of the total "consumer debt" nominally grew nearly five times in size from 1980 to 2001. Total US consumer debt in 2007 is about $2.5 trillion. The average US household in 2007 supposedly carried nearly $8,500 in credit card debt. For the year ending June 2006, there were about 1.5 million consumer bankruptcy filings. I think the average industrial profit rate hasn't shown a sustained upturn, except in some "emerging markets" with a high labour-exploitation rate. But since, in rich countries, the total stock of physical and financial assets not invested in production is much larger than the stock of production capital, Marx's TRPF is only one aspect impacting on the total process of capital accumulation. Production however remains important, because in the last analysis, it takes net new income from productive activities to repay debt. National accounts were originally not really designed for a "rentier capitalism" as Bob Pollin calls it, and therefore the macroeconomic data reported, often distort or mask important socio-economic realities. We mostly lack integrated household accounts showing what they really own qua assets, what types of income they are getting, and what types of payments they are making, and we lack comprehensive data on the financial dealings of enterprises. You have to put together many different sources and measures, to get a halfway objective view of things. I don't concern myself with crisis and collapse rhetorics, I leave that to the Marxists. I don't even like the slogan "credit crunch". The real credit crunch is, when you cannot repay a loan at all. As long as this is not absolutely the case, things have not reached a crunch yet. Best, Jurriaan
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