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I had written: It's important to remember that there are markets are at work here and that markets can work independently of the will of any individual or company. But there are lots of problems with markets even when individual manipulation and monopoly play no role. Charles writes: But I'd even go further and say a main flaw of Marxist economics is not being more specific and personal about who is the ruling class. Marxists take the class analysis domiance too far. The bourgeoisie , being into the individual, name names of Communist leaders more, learn individual personalities. An advantage of bourgeois economics and politics over marxist is making the political personal in this way. So you think that if an individual capitalist (e.g., Michael Eisner of Disney) resigned or decided to become an altruist, giving out money to the poor by the billions, the system would change? I don't think that person is very important, since he'd be replaced by another capitalist if he resigned. If he became an altruist, I am sure that he would do so in a way that reinforces rather than undermines the capitalist system. Or do you think that replacing one major bank that dominates an industry with another would change things? Anyway, I think it's good to get away from conspiracy theories that suggest that merely replacing one elite (the biggest capitalists, Trilaterals, the Bilderbergs) with another would fundamentally change the system. If you want to change the system, organization from below can win important reforms (like the janitors in L.A. and San Diego, it seems) and sets the stage for more fundamental change. CB: Yes, you all said this about 8 months ago when there were some signs fo deflation. Maybe there is another word for it, but there has to be a positive type of price reduction. Not just prices not going up, but prices going down , especially on basic consumer goods for the working class and poor. For example, sales tax is regressive because it hits working class disproportionately. We need deflation of basic consumer basket goods and services. Price controls from a People's Price Society. a positive type of price reduction or deflation would be slow and expected ahead of time and would not be associated with nominal wage cuts. It's true that cutting sales taxes would have the effect of lowering the effective prices that people pay in a progressive way. It's a good idea, but unfortunately the balance of political power is leaning the other way (slightly toward such things as imposing a national sales tax). Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
Re: Re: Re: Re: Current(heterodox)thinkingoninterestrates?
Jim Devine [EMAIL PROTECTED] 04/06/00 05:04PM CB: From whom do they [banks] borrow ? Aren't the biggest creditors, net creditors ? they borrow from all people who have bank accounts, though the most important are those who can afford to save most and also can afford to keep the largest amounts in the bank. _ CB: Is Chase Manhattan a net debtor to its bank account holders ? How many people is that ? How about Morgan Guaranty or progeny ? What is the money trail here ? __ CB: Stagflation seemed to be a pinnicle of monopoly price fixing currently, we're having the opposite of stagflation, i.e., low official unemployment rates and low inflation. _ CB: And we don't have deflation. Everything is just perfect. It is like the manufacturing monopolists ( oligopolists) got the prices so high, they are getting their pound of flesh, and the finacial monopolists prefer not to have inflation as it cuts their profits; and finance dominates in this era of finance capital anyway. There is never anymore deflation, lowering of prices as a general trend. This seems an evidence of institutionalization of a monopoly price fixing. CB
Re: Re: Re: Re: Re: Current (heterodox)thinkingoninterestrates?
CB: From whom do they [banks] borrow ? Aren't the biggest creditors, net creditors ? I wrote: they borrow from all people who have bank accounts, though the most important are those who can afford to save most and also can afford to keep the largest amounts in the bank. CB responds: CB: Is Chase Manhattan a net debtor to its bank account holders ? How many people is that ? How about Morgan Guaranty or progeny ? What is the money trail here ? I think it's a mistake to emphasize the role of specific companies or individuals so much. It's important to remember that there are markets are at work here and that markets can work independently of the will of any individual or company. But there are lots of problems with markets even when individual manipulation and monopoly play no role. CB: Stagflation seemed to be a pinnicle of monopoly price fixing I wrote: currently, we're having the opposite of stagflation, i.e., low official unemployment rates and low inflation. CB: And we don't have deflation. Everything is just perfect. no, it's just that issues of inflation and unemployment are far from the sum total of the measure of what can be wrong with this society (both domestically and internationally). In addition to the stuff I talk about in my "Three Bears" screed and stuff people on pen-l discuss every day, increased inequality seems an obvious issue that one misses if one focuses totally on issue of stagflation, etc. But I think that to really understand the current "disinflation" (falling inflation and unemployment), you have to look at the increase in inequality. The victory in the "war against inflation" is intimately tied to the capitalist victory against workers in the 1980s and the increases in inequality within the working class, which are linked to the increased insecurity of workers. ellipsis There is never anymore deflation, lowering of prices as a general trend. This seems an evidence of institutionalization of a monopoly price fixing. actually, it's _good_ that we don't have deflation, since it encourages mass bankruptcies among debtors (i.e., us). Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
Re: Re: Current (heterodox) thinkingoninterestrates?
Jim Devine [EMAIL PROTECTED] 04/06/00 02:29PM I wrote: In the cycle, interest rates are pro-cyclical, with the interest rate soaring to the stars in a financial crisis, and then falling as the demand for loans falls in a recession. CB asks: Would this mean bankers have a tendency to favor recession ? Instead of favoring recession, I'd say that bankers fear inflation (especially surprise inflation, which hurts them directly, by redistributing real wealth to the debtors, lowering the effective real interest rate). (( CB: Yes, I understand the logic of this. If a debtor pays a loan back with money that is less in real terms because of intervening inflation, the creditor gets less money in real terms. They try to avoid inflationary surprises by insisting on zero-inflation policies. In practice, this means that they don't see recessions as a big problem. However, the high interest rates of Volcker's early-1980s recessions actually drove some bankers to the brink, which led to Volcker relenting. CB: In general, I think of bankers wanting high interest rates for the obvious reason that it is the price of money ( which they "sell" in loans). I think they are this much "in your face" at one level, but I can see that this simple profitmaking would be contradicted by other factors effecting them in the context of recessions that high interest rates induce. ((( Would this be a motive for Greenspan, as the bankers' agent, to provoke recession, all the while increasing bank profits on the way there in the interest rate hikes themselves ? He's not the bankers' agent as much as he's their representative as a collective. I know that sounds the same, but in the latter case, he sometimes might go against bankers' stated preferences (as Volcker did for awhile in 1982). ((( CB: Yes, I can see that there the relationship would be contradictory. Sometimes the interest of the group starts to diverge from individual bankers. Interest rate hikes don't improve bank profits. Instead, it's the _spread_ between the rates at which bankers borrow (like the rate on savings deposits) and the rates at which they lend which improves bank profits. The spread rose steeply circa 1992, which helped the bankers recover from the Savings Loan mess and its spin-offs to other sectors of banking. (( CB: The Fed sets the rate at which it lends to the ??? What is the relationship between the Fed rate and the spread ? Also, aren't most of the banks' revenues not from their borrowing ? Recessions don't always help the spread, though a tight-money recession might do so as deposit rates lag behind loan rates. More importantly, they help avoid inflation, which bankers hate with a passion. (( CB: My contradiction on this is, don't monopolies foster inflationary pricing ? Is this a contradiction between big banks and other big companies ? CB
Re: Re: Re: Current (heterodox)thinkingoninterestrates?
Jim Devine [EMAIL PROTECTED] 04/06/00 04:06PM CB: In general, I think of bankers wanting high interest rates for the obvious reason that it is the price of money ( which they "sell" in loans). I think they are this much "in your face" at one level, but I can see that this simple profitmaking would be contradicted by other factors effecting them in the context of recessions that high interest rates induce. again, they also borrow money, so they care about the _spread_. (( CB: From whom do they borrow ? Aren't the biggest creditors, net creditors ? I shouldn't say " bankers". I mean the biggest net creditors in the whole system are Greenspan's bosses. (( CB: The Fed sets the rate at which it lends to the ??? What is the relationship between the Fed rate and the spread ? Also, aren't most of the banks' revenues not from their borrowing ? The Fed sets the discount rate, the rate at which it lends to banks. It has enough power over money markets to keep the "Fed Funds" rate on the target they choose. (That's the rate on loans between banks for very short periods.) The "spread" can refer to any gap between two interest rates. Here I'm talking about the gap between deposit rates (close to zero these days) and loan rates. The spread can and does change over time. It mostly changes due to supply demand, specifically due to changes in expectations of future inflation, risks, etc. Banks make profits from other things, like from running trust accounts, underwriting investments, etc. (( CB: When they underwrite, aren't they creditors ? Mortgages. ((( I don't know the percent of profits that comes from such "off-balance-sheet activities," but Mishkin says that the income coming from these has doubled as a percentage of assets since 1979. CB: My contradiction on this is, don't monopolies foster inflationary pricing ? Monopoly power encourages inflationary persistence, as when inflation continued in the face of the early 1970s recession (that's just the clearest case). However, the US economy has become much more competitive during the last 20 years. CB: Stagflation seemed to be a pinnicle of monopoly price fixing Is this a contradiction between big banks and other big companies ? This is a big question, so I'll avoid it. Regards. CB
Re: Re: Re: Re: Current (heterodox) thinkingoninterestrates?
CB: From whom do they [banks] borrow ? Aren't the biggest creditors, net creditors ? they borrow from all people who have bank accounts, though the most important are those who can afford to save most and also can afford to keep the largest amounts in the bank. CB: Stagflation seemed to be a pinnicle of monopoly price fixing currently, we're having the opposite of stagflation, i.e., low official unemployment rates and low inflation. Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
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Other problems with concentration ratios concern determining the appropriate market. Do we look at all of agriculture as a single market or do we just look at egg producers or pumpkin growers as the market? Jim Devine wrote: it depends on one's time frame. Compared to the "good old daze" of the 1950s 1960s, the US economy is currently less monopolistic, not only due to globalization but also deregulation of trucking, airplanes, etc., and anti-trust (ATT), along with some technical change. Banks have merged, electric companies are merging, gas companies have merged with each other and are merging with the electircs. Oil, cars, Pentagon favorites, etc. etc. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
