[OPE] What is the Crisis About? Fictitious Capital or the Destruction of Wealth?

What is the Crisis About? Fictitious Capital or the Destruction of Wealth?

This short essay briefly describes the financial side of my
interpretation that the crash reflected a disconnect between the
underlying investment in the economy and its financial representation --
what Marx called fictitious capital. The stock market people call this
realignment, "destruction of wealth," even though what is destroyed is
the illusion of wealth. The illusion may have been capable of
purchasing valuable things so long as other people accept that illusion.

Long ago people accepted the illusion as an illusion and went on with
their business. Here is what a former governor of Illinois wrote:

Ford, Thomas. 1854. History of Illinois (Chicago: S. C. Griggs and Co.).

227: "Our Whig friends contended that the continual and violent
opposition of the democrats to the banks destroyed confidence; which,
by-the-bye, could only exist when the bulk of the people were under a
delusion. According to their views, if the banks owed five times as
much as they were able to pay and yet if the whole people could be
persuaded to believe this incredible falsehood that all were able to
pay, this was 'confidence'."

Ordinary people understood what was happening. Here is an incident from
Chicago about the same time.

-- 
Michael Perelman
Economics Department
California State University
Chico, CA
95929
530 898 5321
fax 530 898 5901
http://michaelperelman.wordpress.com
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