God-ness this stuff gives me a headache.

Randy Steindorf grsteindorf at hotmail.com
Mon Jun 17 12:50:53 PDT 2002



>pms wrote:
>
>>So slower growth makes money tighter?
>
>No, tighter money makes growth slower. But the effect of a higher
>currency is very similar to that of higher interest rates - a
>financial factor dragging down the real sector.
>
>Doug

I read Marx as saying the opposite, especially in Volume III, where he discussed the rise and fall of rate of interest as being unrelated to the rise and fall in the rate of profit. If money is a commodity which acts as intermediary in the exchange of other commodities, the supply of money is roughly dependent on the supply of commodities needed to be exchanged. If the amount of commodities drops due to slower production caused by excess supply, then less money-commodity is needed, and interest rates rise to slow down growth in money supply. Slower growth forces the central bank to tighten money-supply to accommodate the fewer commodities being exchanged.

Similarly, inflation if not too much money chasing too few goods, but depreciation of money is faster then the fall in value of commodities, resulting in a rise of their prices, because more depreciated money-commodity is needed to purchase them.

The vulgar economists at the central banks have everything bass-akwards. They have no insight into the basics of their profession, because they don't understand the distinction between constant and variable capital and how surplus value of produced. But then it is their self-interest to remain blind to the real relations.

grs

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