RE: [OPE] capital's roads to recovery?

David wrote:I think (1) can be addressed in several ways: Lowering the debt burdenof the agents in the economy; full or partial nationalizations of banksand large firms saddled with debt; public borrowing and spending inthrough social transfers and public works.Paul C wrote:These are not ways of lowering the debt burden but ways of transfering itto the taxpayer whilst protecting the interests of those to whom the banksowe money.
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Hi Dave and Paul:
 
There is also the question whether these would actually raise aggregate
demand.
 
If nationalization means acquiring the liabilities of banks, then those to
whom debts are owed might experience a gain but the costs for running the
banks would then be paid (at least, initially) out of tax revenues or state
borrowing. Whether aggregate demand goes up depends in part on whether
and to what extent taxation goes up, interest payments go up, and whether
this has the consequence of a general rise in prices.
 
More broadly, when Dave advocates the above isn't he implicitly assuming
some form of multiplier effect? How could the multiplier be explained in
Marxian (as distinct from Keynesian) theory?
> I would advocate cancelling the debts either overtly or covertly.
 
Before we advocate cancelling debts, we have to ask whose debts are to
be cancelled. It's one thing, for instance, to advocate cancelling credit card debt
which is largely owed by working-class households; it's another thing to
advocate cancelling the debt of oligopolies and transnational corporations.> Covertly one could do the same in part by issueing large quantities of new> banknotes and so depreciating all existing debts.
 
Yes, but that would be inflationary. I think it's highly likely that as a
consequence of state policies, there will be a new round of inflation
rather than deflation. So, instead of having either a depression with
deflation or stagflation, this could result in 'depressflation'.
In solidarity, Jerry

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Received on Thu Jan 22 09:17:15 2009