On Jan 26, 2015, at 9:38 AM, Hinrich Kuhls wrote: > > yes, I agree with you on the point that Flassbeck and Lapavitsas are > wrong on > inflation...
>> "With open eyes and without ideologi- cal barriers the ECB would have >> found early on that unit labour costs, not the money supply, are the >> main de- terminant of inflation for the union as a whole, as well as >> for its national entities. >>> From p.16 : In: >> Flassbeck, Heiner; Lapavitsas, Costas (2013): The Systemic Crisis >> of the Euro Whatever the political merits two years ago of advocating withdrawal from the euro they were not wrong about inflation, neither in general nor in regard to the euro. In general, the money supply (in Marx and in reality) accommodates itself to the quantity of transactions to be financed (price x quantity) rather than the opposite. Inflation is a condition in which wage-earners have recently experienced increases in their earnings and expect further increases, while sellers of commodities have experienced recent increases in their prices and production-costs and expect further increases. Since the main cost is wages and the main demand-factor is working-class income, the process is self-generated (which is why indexation drives inflation). Political repression of the money supply (as Volker 1979-1982), by drastic increases in the cost of credit, can break an upward inflationary cycle. But there is no symmetry at all--in a declining cycle no amount of central-bank money creation can by iytslef persuade commodity-producers to hire at unprofitable wages or invest at a negative return (ECB-FRB since 2008), which is what is meant by the old cliché "pushing on a string." That is why overcoming a deflationary situation requires direct demand-creating public spending, which of course may either be for useful (proletarian) or destructive (capitalist) purposes. >> >> >> My question to you and all on the list may be viewed as naive - >> nonetheless: >> I had always understood that it was indeed the money supply driving >> inflation. Indeed as I recall it in prior writings that Marx had also >> believed that. >> What am I missing? Is the view expressed by F & L - in fact correct? Shane Mage "All things are an equal exchange for fire and fire for all things, as goods are for gold and gold for goods." Herakleitos of Ephesos, fr, 90 _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
