I don't have much trouble with what Jim says: > Lower interest rates don't automatically increase (fixed) investment. > Anyway, a glut of saving could hurt national income (as I said), which > (all else equal) would hurt fixed investment.
Absolutely. But it should under the assumptions of conventionl economics. Then Jim says: > Contrary to what I said in the quote, excess saving could hurt > profits. This would happen by reducing their _realization_ by > depressing national income. Thus, the realized profit rate could be > depressed, even though excess savings have no direct effect on the > ability of the system to _produce_ profits (which is what I was > thinking of in the quote). Yes, but an important part of the realization problem is the transfer of income to the speculative class. > The profit rate could be hurt by over-investment, as Michael suggests, > but it could also be hurt by inadequate realization of profit. As > noted above, this might result from excessive saving (insufficient > consumer demand). > > In the current "weak labor" era, the two abstract kinds of crises I > see as possible are: > > (1) over-investment relative to consumer demand; the accumulation > process becomes increasingly unstable, prone to recession. Something > like this happened, IMHO, in the late 1920s and maybe in the late > 1990s. The late housing boom had some elements of this kind of > over-accumulation. Yes, exactly what I was saying. We are on the same page. > > (2) the underconsumption trap, which occurs once accumulation is > blocked by unused capacity, excessive corporate debt, and/or > pessimistic expectations of future profits. (At least two out of three > seem needed. At most, I see only one at present.) Something like this > happened in the early 1930s, I believe, while it's possible that > Bernanke and Greenspan were concerned about something like this > possibility in the early 2000s. (They likely don't think the same way > I do!_ > > The specific manifestation of these kinds of crisis tendencies depends > crucially on the specifics of the era. We should never expect history > to repeat itself. In the current era, constraints on the supplies of > raw materials (specifically oil but maybe also water) could stop an > over-investment surge of type (1), sending the economy into a downward > spiral of type (2). Of course, the specific manifestation of crisis > tendencies currently involves much more international factors (e.g., > accumulation in China, India) than in previous decades. > > Michael also says: > > Also, lower interest would cut into a major a source of profit. > > Lower interest rates don't hurt the ability of the system to produce > profits. I am thinking in more conventional terms, not in terms of surplus, of the interest payments made by ordinary people, not business. >For a given profit rate, they redistribute surplus-value from > interest (and from financial capitalists) to industrial profit (and to > industrial capitalists). The upper limit on the profit rate is > determined in production, while the realized rate of profit is > determined by demand. Interest rates mostly affect the distribution of > surplus-value. They are the "source of profits" for financial > capitalists, but those profits are a redistribution from industrial > capital. > > (Some interest income is received from wage-earners. But all else > constant, that raises the cost of labor-power to industrial > capitalists (though not very much). Low interest rates (due to a > savings glut) would make labor-power cheaper, but not very much.) > -- > Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your > own way and let people talk.) -- Karl, paraphrasing Dante. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com
