> People store value in
> financial assets that are not money - bonds, shares, etc.. So Fitch's
> concept of 'surplus capital hoards' is not meaningless. It is
> possible for
> savings to flow into financial assets (with only temporary stops as
> 'money')
> and inflate their value without necessarily having an equal impact
> on the
> market for real investment goods.
"Saving" is the difference between the total value of output and the value of that part of it that's consumed, i.e it's necessarily (it's an accounting identity) equal to the value of output that isn't consumed.
So it's not possible to have part of "saving" diverted into financial "hoards", i.e. it's not possible to have "saving" equal that part of the value of output that's not consumed plus the change in these "hoards".
Keynes encountered the mistaken idea that "saving" could be diverted into 'hoarding" in his attempt to explain the role of "the propensity to hoard" - "liquidity preference" - in financial crises. He also found it proved immune to rational critique.
To explain this immunity he invoked the same psychoanalytic psychology he had used to explain the motivation behind "saving" and "the propensity to hoard" themselves. This pointed to what he called "a deep-seated obsession associating idle balances, not with the action of the banks in fixing the supply of cash or with the attitude of the public towards the comparative attractions of cash and other assets, but with some aspect of current savings." (Keynes, Collected Writings, XIV, p. 214)
The prevalence of this error in so-called "Post Keynesian" theories (most obviously in the "circuitist" version dominant among French Post Keynesians) confirms this explanation.
This is similar to the fate of the role Marx gives to the "passions" in general, and to "money" in the specifically capitalist "passions", among "Marxists".
Thus Brenner ignores the role Marx gives to a change these "passions" in his explanation of the transition from feudalism to capitalism and to the role he gives to a sudden change in their capitalist form in generating a "monetary crisis". The ignoring of the latter repeats the error Marx had pointed to in "classical" political economy, the ignoring of the role played by "money" in capitalist motivation.
As I recently pointed out, it was the explicit recognition of this role in the earlier political economy of the "monetary" and "mercantile" "systems" that Marx credited with embodying a truth about capitalist motivation ignored by classical political economy, a truth relevant to understanding "monetary crises".
Marx's long run falling rate of profit argument is one mistaken aspect of the, in this and other ways, badly flawed explanation of how the capitalist labour process would work to create wage labourers with the degree of developed "virtuosity" required to initiate the "revolutionary praxis" which would then further develop this "virtuosity" to the degree required to enable them to "appropriate" the productive forces developed within capitalism and use them to build the penultimate social form from which all barriers to full human development have been eliminated.
That the long run falling rate of profit argument is part of an argument attempting to explain how the labour process in capitalism works to develop an "individuality" with the developed capacity and will required to transform capitalism into the penultimate "stage in the development of the human mind" has also largely disappeared from "Marxism".
Among other things, Marx's long run falling rate of profit argument forgets the implications of "internal relations"- "dialectics" - for axiomatic deductive reasoning in general and mathematical reasoning in particular. (Keynes made this point in criticism of Joan Robinson's attempt to construct a theory of long run profits.)
Keynes invoked the same psychopathology he used to explain the immunity of money crank theories to rational critique to explain the mistaken identification of "reason" with axiomatic deductive reasoning in general and mathematical reasoning in particular.
This explanation is confirmed by the misidentification of the falling long run rate of profit argument with the essence of Marx's theory of capitalist "crisis" and by the mistaken use of inapplicable mathematical and statistical methods in a never ending attempt to "prove" it.
Keynes's psychoanalytic psychological explanation of this and other "obsessions" associated with "the money-loving and money-making instincts" is one of the ways his treatment of the capitalist "passions" is more insightful than Marx's.
It points to an obstacle in the way of actualizing "the ideal social republic" that Marx's argument ignores.
Ted