M-TH: Credit

[Doug Henwood]

boddhisatva wrote:

>	Interest rates assign a definite present value against which the
>potential of an investment can be judged, whereas stock purchases or
>assignments of resources within a command economy do not.

Most large U.S. busineses weigh investment projects against their "cost of
capital," which is a function of both interest rates and their stock
prices, generally in a weighted average reflecting their balance sheets.

>The need for
>growing the money supply is, of course, much written on by the monetarists
>who, while not great Marxist thinkers, certainly, are at least good
>economic thinkers.

Well if you're calling Ricardo a monetarist, yeah, he's a pretty good
economic thinker, but the modern doctrine is silly. Marx himself and most
left Keynesians were/are believers in the endogeneity of money - that is,
the amount of money in circulation is determined by the level of economic
activity, as opposed to being determined from outside the system, by a
central bank (exogenous money).

>Interest debt puts a use-value derived price on
>production plans - a feedback system to the consumer goods market - which
>is definite and rational.

Interest debt doesn't put a use-value derived price on production plans;
the rate of profit and the rate of interest are determined separately, even
if potential profit is weighed against cost of capital.

The word "rational" reminds me of Marx's comment in K vol 3: "Where, as
here [with interest rate setting], it is competition as such that decides,
the determination is inherently accidental, purely empirical, and only
pedantry or fantasy can seek to prsent this accident as something
necessary." It's a pure market price, untouched by the law of value. Or as
Keynes said, the rate of interest is a highly psychological phenomenon.

>This is needed to balance the greater public
>spending which is inevitable in any form of socialism.  In fact, I would
>argue that public spending under socialism has to be largely in
>interest-bearing loans, rationalized with an autonomous credit market, if
>that influx of liquidity is to be well tolerated in the economy.

Apparently we have different definitions of "socialism." I'm all for
abolishing interest-bearing forms of capital, and along with it
interest-rate mentality (and while we're at it, Benthamite rank ordering of
the sort Keynes hated).

>	Overall, the point is that our present credit institutions, which
>seem to many Marxists mere bloodsuckers, will have to find an analog
>within a socialist system to avoid instability and deformity of the
>economy.

There's a difference between the social coordination of investment and the
present capitalist hyperstructure of credit. Rentiers are bloodsuckers, and
don't you forget it.

Doug

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Doug Henwood
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