Definición de términos básicos

For Marx, money mediates the exchange of commodities and accumulation allows hoards of money-capital to be established. The decisions not to spend and rather to hoard money mean that Say’s law, that supply creates its own demand, fails to hold in a monetary economy. Crises then ensue as commodities fail to sell in sufficient quantities and various capitals experience losses (Bottomore 1991).137 In such crises hoarding can represent an

136 _{Ferguson noted that if bills of exchange are made payable to bearer, this is possible (Ferguson 2008).} 137 _{A consequence of economic crises is the concentration of capitals as resources are reallocated towards}

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unwillingness of capitalists to advance further monies when faced with the prospect of shortfall of demand in markets, if the commodities were to be produced and enter circulation (Bottomore 1991). A further inhibitor to the advancement of monies as capital, from funds held in reserve, is the LTFRP (see 5.9). Capital can be tempted, as Potts notes, to migrate towards fictitious (non-value creating) capital in the finance markets, induced by the prospect of greater returns (Potts 2010).138 Since fictitious (Marx’s phrase) capital (e.g. share trading) is zero-sum (i.e. gains/losses net to zero) at the time transactions are made, exchanges are precarious for agents and constitute a redistribution of net wealth. Those that gain do so at the expense of others and no surplus value is created in the process. In time, securities trading may cease to be zero-sum since assets appreciate (or depreciate) in nominal value in financial markets. Market forces associated with this capital migration and/or financial sector credit expansion then may facilitate asset bubbles and the subsequent crises. Stable expectations of asset appreciation, as Kregel notes, can initially contribute to the formation of bubbles as agents seek to maximise profit. Rather than bubbles revealing irrational agent behaviour they (at least at first) exhibit the opposite (Kregel 2008). If greater profit is achieved in the real economy, circumstances would be different and instable speculation in the finance sector is less likely to occur. The evidence from Germany (see 9.4) appears to support this.

Marx argued that during an upturn in the trade cycle, there will be an expansion of credit and capital advanced from hoards, whilst reduced expectations of capitalists during a downturn would lead to contraction of credit and capital advanced (Marx [1894] 1981, chap. 30). A severe contraction of credit, potentially sparked by a collapse of fictitious capital bubbles, would inevitably lead to liquidity crisis. A credit squeeze then leads to the inevitability of default and unsold stocks. For Marx, the migration of capital towards fictitious capital is an indirect feature of the trade cycle and LTFRP. It is posited that these processes affect the transformation of the financial sector. Marx’s ideas, in conjunction with the EMT, are adopted in the thesis as explanatory tools to analyse the financial systems of FRWG/ Germany and the UK in the empirical work. As claimed in the thesis, Marx’s political economy and monetary theory are compatible with inconvertible modern credit-money. It is acknowledged that others have discussed credit money in Marxian analysis but that the EMT has not been specifically combined with the TSSI by anyone. Most recently (2011) Moseley,

138 _{It is important to note, that Andrew Kliman maintains the falling profit rate has an indirect impact (albeit}

deterministic in terms of underlying conditions) on financial sector activity. In this sense, the productive sector sets pre-conditions that affect the financial sector (Kliman 2012: 13).

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for example, has identified a fiat-money version of the MELT, denoted as MV/L where M = inconvertible fiat money (Rieu, 2012: 2) [see 5.4].139 _{He derived this notion of the MELT} from Marx’s treatment of fiat money that exists alongside commodity money (Marx, 1976: 225). Moseley then posits that this can be extended to the treatment of modern credit money, which he sees as partly exogenous and partly endogenously created (Moseley, 2011: 100).140 Whilst Moseley’s version was not predicated on the Marx notion of the economising nature of credit-monies, and used units of bank credit-money instead, it was not combined with a full discussion of the EMT (Marx [1894] 1981: 653). It is posited in the thesis that ex nihilo credit entities can be used in the normal reproduction schema of Marx in the TSSI tradition, since at least for the duration of the debt obligation(s), credit monies can serve the full functionality of money as defined in 2.2. Moseley’s concept of the MELT, in contrast, is theorised using simultaneous interpretation of Marx (see 5.7). This is rejected as a consequence of its internal inconsistency that also precludes the possibility of LTFRP, as Kliman has explained (Kliman 2007). The thesis claims that decline in state financial power and concurrent transformation of the financial sector can be adequately explained by the LTFRP. It is for this reason that the Moseley conception of the MELT has been rejected. It is recognised that the difficulty of reducing credit-money into units of social labour renders changes to commodity values expressed in monetary terms more complicated, and this may be the reason for their previous non-use by Marxian economists. It may have been problematic to model the credit system in general. Alternatively, it has been suggested in this chapter that, as Marx intimated, credit money theory may not be used, since it is only specie that has the sustained ability to transcend the boundaries of the nation-state (Marx [1867] 1976: 240). It is this synthesis of EMP credit-money, theorised as units of money, with Marx’s political economy as understood by the TSSI, that the thesis argues is acceptable/empirically relevant, since it reflects the monetary reality in capitalist nations. Just as the MELT allows us to express the produced and realised value of commodities in either labour-time or money, the MELT allows us to estimate the costs of circulation in labour-time or money. The costs of circulation, or the money unit costs of production in other words, will be a deduction of surplus value for the real economy and income for the financial sector.

139 _{Moseley recognizes that the term fiat money is sometimes used to refer to credit money as well as forms}

created by the state. He posits, following Lapavitsas, that fiat money is created by government, remains in circulation and is separate from credit-money (Moseley, 2011: 98).

140 _{The Moseley paper appeared in Review of Radical Economics at the same time as my paper (in appendix)}

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