Capitalism's Burning House: Interview with John Bellamy Foster by WIN Magazine
WIN: According to a quotation by Jim Reid that you and Fred Magdoff included in your article entitled "Financial Implosion and Stagnation" (Monthly Review, December 2008), the U.S. financial sector has made around 1.2 Trillion ($1,200) of "excess" profits in the last decade relative to nominal GDP. How has the structure of the capital economy contributed to the ease with which such excess profits were obtained by the banks and lending institutions?
JBF: Jim Reid in London is the Deutsche Bank's chief credit strategist. He made the observation you refer to in July 2008 when the financial implosion was already a year old, but a couple of months before the serious bank crisis that followed the failure of Lehman Brothers in mid-September, leading to a deepening of the financial crisis. In the piece by Reid that Fred Magdoff and I referred to in our article, he provided a chart showing that financial profits and profits in general had been skyrocketing on top of a sluggish U.S. economy. Based on the notion of a "mean reversion" whereby growth of profits would have to revert to the average growth rate of GDP, he concluded that there were $1.2 trillion in excess profits over the last decade, suggesting that a massive devalorizaton of capital, much more than had occurred by then, was due. This was similar to arguments that we had been making for some time in Monthly Review.
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