Jim: > in my 1983 article on the Great Depression (in the REVIEW OF RADICAL > POLITICAL ECONOMICS), I differentiated between Minsky's "financial > fragility" and what I called something like "real-economy fragility."
But, what if there is no "real-economy" left in the US? Of course, this is an exaggeration, but much of the "real-economy" in the US in these days consists of production of services, not consumption goods. The production of much of the consumption, and to a large extent capital, goods has been outsourced and the US imports them. But, what is more important is the exponential growth of debt in the US since the 1970s. I am not talking about just the government debt. It is the non-government debt that I am more concerned with. The total US debt as of 2006 was $44 trillion and only about $6 trillion was government debt (Federal, State and Local). Of this $44 trillion, $14 trillion belonged to the financial sector in 2006, which does not produce anything. Another important change is the disconnect between inflation (as measure by the CPI) and the money supply. In these days in the US, there are no reserve requirements for banks for non-transaction accounts (for accounts other than checking, basically). So, banks can create money indefinitely, in these days. And so they did. "Money" grew exponentially over the past decade, yet the CPI did not. Instead, we had "asset price" inflation, that is, bubbles of various sorts, which do not show in the CPI. How is this connected to the "real-economy" fragility? By the way, since the on-set of this crisis, the money supply is contracting bad, so I expect that the on-going "asset price" deflation will start hitting the consumption goods prices, too. I believe that the ongoing oil price deflation is associated with that. It is funny! I had no interest in such things a decade ago and knew nothing about them. I was quite happily flying in my Banach Spaces. Best, Sabri _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
