fwd: period of distress

[Rakesh Bhandari]

> > 
> >      The late Hyman Minsky invented the term "period of
> > distress" to describe a period after a bubble peaks but
> > before it really crashes seriously.  Such periods can last
> > for several months.  In his _Manias, Panics, and Crashes_,
> > Charles Kindleberger documents for historical bubbles over
> > the last several centuries the gaps between peaks and
> > crashes, and thus documents the widespread existence of
> > this phenomenon, a phenomenon predicted in the models of
> > DeLong, Shleifer, Summers, and Waldmann.
> >      The US stock market peaked on July 17 and has been
> > sliding since basically.  The Fed's cut was supposed to
> > prop it up.  It doesn't look like it's working.  Indeed, it
> > is October, the historical month of great crashes, and
> > panic finally seems to be seriously setting in.  Hold your
> > hats, folks.

Barkley, 

As Grossmann showed,  Marx attempted to develop and believed it possible
to develop  a formal crisis theory  without reference
to the "excess credit" at the basis of the Kindleberger/Minsky tradition.
Since means of payment crises derived their character from the
unsaleability of commodities and the non fufillment of a series of
payments to which this non-saleability gave rise, what needed to be
explained first is how purchase and sale became separated.  Indeed Marx
finds the recourse to "excess credit" or "means of payment"  the kind of
obvious theory which would be very attractive to economists. 

Marx writes:

"If the crisis appears, therefore,because purchase and sale become
separated, it becomes a *money* crisis, as soon as money has developed
as a means of payment, and this second form of crisis [non fufillment
of a whole series of payments which depend on the sale of particular
commodities within a particular time] follows as matter of course, when
the first occurs [commodities are not saleable at their worth in a certain
period of time].In investigating why the general possibility of crisis
turns into a real crisis, in investigating the conditions of crisis,
it is therefore quite superfluous to concern oneself with the forms of 
crisis which arise out of the development  of money as a means of
payment. This is precisely why economists like to
suggest that this *obvious* form is the *cause* of crises. (In so far as
the development of money as a means of payment is linked with the
development of credit and *excess credit* the causes of the latter have to
be examined, but this is not yet the place to do it.)" Theories of Surplus
Value, Part II, p. 514-515.

best,  rakesh