Date: Sun, 25 Jan 2015 16:52:37 -0800 Eugene Coyle <[email protected]> wrote:
“I believe Wassily Leontief's views on inflation make more sense than Milton Friedman's. Friedman contended something like this: "Inflation always and everywhere a monetary phenomenon." I never believed that, for my own reasons, although I separately never believed anything Friedman said. Leontief thought that inflation was the result of the struggle between management and labor. Makes a lot of sense to me. And we don't have inflation in the US or Europe (or Japan, for that matter) because there is, and can not be, a struggle between management and labor. Workers have no power to struggle for anything just now. Gene” Dear Gene: I do agree that Milton Friedman cited the money supply as the ‘problem”. Of course by this time of Thatcherism, the money supply had several monikers from Mo thru to M3 – depending on how clouted; and stemming from the proliferation of monetary insturments since the days of Marx. However - Marx as I understand it - had also implicated the money supply more generally as the source of inflation. In fact he was quite sharp (I believe it fair to say) to distinguish it from workers wages the cause of inflation. Although I cannot find a pithy quote from “Values prices and profit”, the sense there arises that he was distinctly defending workers pay from accusations that too high was raising prices. The later proliferation of instruments of money (as seen in Friedmanite eras) was anticipated in my view, by Marx, as his chapter on Fictitious Capital illustrates. (Capital Vol. III Part V Division of Profit into Interest and Profit of Enterprise. Interest-Bearing Capital Chapter 25. Credit and Fictitious Capital – at https://www.marxists.org/archive/marx/works/1894-c3/ch25.htm. In addition I think there are several passages in Marx that appear to show his view that money supply is tied intimately to inflation: “Thus, when the industrial cycle is in the phase of crisis, a general fall in the price of commodities is expressed as a rise in the value of money, and, in the phase of prosperity, a general rise in the price of commodities, as a fall in the value of money. The so-called currency school concludes from this that with high prices too much, with low prices too little [8] money is in circulation.” Karl Marx. Capital Volume One; Chapter Twenty-Five: The General Law of Capitalist Accumulation; Section 3. Progressive Production of a Relative surplus population or Industrial Reserve Army; At: https://www.marxists.org/archive/marx/works/1867-c1/ch25.htm In addition these quotes seem to convey a similar viewpoint implicating the money supply: “Incidentally in connection with the superabundance of industrial capital which appears during crises the following should be noted: commodity-capital is in itself simultaneously money-capital, that is, a definite amount of value expressed in the price of the commodities. As use-value it is a definite quantum of objects of utility, and there is a surplus of these available in times of crises. But as money-capital as such, as potential money-capital, it is subject to continual expansion and contraction. On the eve of a crisis, and during it, commodity-capital in its capacity as potential money-capital is contracted. It represents less money-capital for its owner and his creditors (as well as security for bills of exchange and loans) than it did at the time when it was bought and when the discounts and mortgages based on it were transacted. If this is the meaning of the contention that the money-capital of a country is reduced in times of stringency, this is identical with saying that the prices of commodities have fallen. Such a collapse in prices merely balances out their earlier inflation. The incomes of the unproductive classes and of those who live on fixed incomes remain in the main stationary during the inflation of prices which goes hand in hand with over-production and over-speculation. Hence their consuming capacity diminishes relatively, and with it their ability to replace that portion of the total reproduction which would normally enter into their consumption. Even when their demand remains nominally the same, it decreases in reality. It should be noted in regard to imports and exports, that, one after another, all countries become involved in a crisis and that it then becomes evident that all of them, with few exceptions, have exported and imported too much, so that they all have an unfavourable balance of payments. The trouble, therefore, does not actually lie with the balance of payments. For example, England suffers from a drain of gold. It has imported too much. But at the same time all other countries are over-supplied with English goods. They have thus also imported too much, or have been made to import too much. (There is, indeed, a difference between a country which exports on credit and those which export little or nothing on credit. But the latter then import on credit; and this is only then not the case when commodities are sent to them on consignment.) The crisis may first break out in England, the country which advances most of the credit and takes the least, because the balance of payments, the balance of payments due, which must be settled immediately, is unfavourable, even though the general balance of trade is favourable. This is explained partly as a result of the credit which it has granted, and partly as a result of the huge quantity of capital loaned to foreign countries, so that a large quantity of returns flow back to it in commodities, in addition to the actual trade returns. (However, the crisis has at times first broken out in America, which takes most of the commercial and capital credit from England.) The crash in England, initiated and accompanied by a gold drain, settles England’s balance of payments, partly by a bankruptcy of its importers (about which more below), partly by disposing of a portion of its commodity-capital at low prices abroad, and partly by the sale of foreign securities, the purchase of English securities, etc. Now comes the turn of some other country. The balance of payments was momentarily in its favour; but now the time lapse normally existing between the balance of payments and balance of trade has been eliminated or at least reduced by the crisis: all payments are now suddenly supposed to be made at once. The same thing is now repeated here. England now has a return flow of gold, the other country a gold drain. What appears in one country as excessive imports, appears in the other as excessive exports, and vice versa. But over-imports and over-exports have taken place in all countries (we are not speaking here about crop failures, etc., but about a general crisis); that is over-production promoted by credit and the general inflation of prices that goes with it.” Capital Vol. III Part V Division of Profit into Interest and Profit of Enterprise. Interest-Bearing Capital Chapter 30. Money-Capital and Real Capital. I. https://www.marxists.org/archive/marx/works/1894-c3/ch30.htm “That only particular commodities, and not all kinds of commodities, can form “a glut in the market” and that therefore over-production can always only be partial, is a poor way out. In the first place, if we consider only the nature of the commodity, there is nothing to prevent all commodities from being superabundant on the market, and therefore all falling below their price. We are here only concerned with the factor of crisis. That is all commodities, apart from money [may be superabundant]. [The proposition] the commodity must be converted into money, only means that: all commodities must do so. And just as the difficulty of undergoing this metamorphosis exists for an individual commodity, so it can exist for all commodities. The general nature of the metamorphosis of commodities—which includes the separation of purchase and sale just as it does their unity—instead of excluding the possibility of a general glut, on the contrary, contains the possibility of a general glut. Ricardo’s and similar types of reasoning are moreover based not only on the relation of purchase and sale, but also on that of demand and supply, which we have to examine only when considering the competition of capitals. As Mill says purchase is sale etc., therefore demand is supply and supply demand. But they also fall apart and can become independent of each other. At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value. If the relation of demand and supply is taken in a wider and more concrete sense, then it comprises the relation of production and consumption as well. Here again, the unity of these two phases, which does exist and which forcibly asserts itself during the crisis, must be seen as opposed to the separation and antagonism of these two phases, separation and antagonism which exist just as much, and are moreover typical of bourgeois production. With regard to the contradiction between partial and universal over-production, in so far as the existence of the former is affirmed in order to evade the latter, the following observation may be made: Firstly: Crises are usually preceded by a general inflation in prices of all articles of capitalist production. All of them therefore participate in the subsequent crash and at their former prices they cause a glut in the market. The market can absorb a larger volume of commodities at falling prices, at prices which have fallen below their cost-prices, than it could absorb at their former prices. The excess of commodities is always relative; in other words it is an excess at particular prices. The prices at which the commodities are then absorbed are ruinous for the producer or merchant.” [Chapter XVII] Ricardo’s Theory of Accumulation and a Critique of it. (The Very Nature of Capital Leads to Crises) [1. Adam Smith’s and Ricardo’s Error in Failing to Take into Consideration Constant Capital. Reproduction of the Different Parts of Constant Capital https://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch17.htm _--------------------------------------END---------------------------------------------------- _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
