SA: This is a deep misunderstanding of the nature of the financial sector. (It's interesting, BTW, that Brenner calls the post-1973 period "the long downturn" while Fitch calls the post-1983 era "the long boom." Not sure what that means.) The misunderstanding can be seen in crucial point #2 - the magical moment when the crisis supposedly originating in the real economy suddenly sublimates itself into a financial problem. According to Fitch, a decline in profitable investment outlets generates "Formation of surplus capital hoards. Unable to return 'home' for productive re-investment, the surplus seeks to preserve itself by moving into financial channels."
In Fitch's version, the problem lies in the use of the phrase "surplus capital hoards." What does he mean by "capital"? Obviously he does not mean fixed capital - plant, equipment, software, inventory. That type of capital can't be "moved into financial channels." (You can't buy a mortgage-backed security with a stamping press.) He's talking about *money*. It was money that "sought to preserve itself by moving into financial channels." But moving money into financial channels does *not* prevent money from being moved into real productive investment. A surge of money into "financial channels" in no way entails that money is being diverted away from productive investment. _That is because money is not a scarce commodity._ It is not a "rivalrous good." Money used for one purpose does not prevent money from being used for another purpose. Money can be created costlessly by banks, including central banks. Its supply can zoom upward. And even if the money
supply doesn't increase, greater financial transaction volumes can be accommodated simply by increasing the velocity of the existing money supply
^^^^^
CB: I believe the reason the money capital doesn't return 'home' for productive re-investment (in the real sector) is that there is a point at which it can no longer be invested at a high enough rate of profit, or there is as Fitch says:
"1 )a fall in the rate of accumulation, or at
least a fall in the
> rate of acceleration actual profit rates may even rise just before
> the collapse; but the high rates are sustained
by a slowing down of
> accumulation rates."
Fitch's #2 occurs because of his #1.
NOT BECAUSE FITCH CLAIMS THAT MONEY IS SCARCE. The problem is not that money is scarce, but , famously, because a point is reached where investment in the real sector is not as profitable as investment in the ficticious/financial sector. It's not that the money is scarce , but that the owners of the money can make a higher rate of profit by investing it in the financial sector than investing it in the real sector Maybe ?
Also, Fitch says the ultimate cause of the crisis was
"the implosion of the greatest and longest global expansion in the history of capitalism going back to the first industrial revolution (1760-1830). The rapid transformation, particularly of the Chinese and Indian economies, produced a super boom that blew away all norms for economic expansion.16"
CB:overproduction, no ? Capitalists wont put money back "home" where the rate of return is falling.
and
"And what drove the boom?"
the high rate of exploitation of Indian and Chinese workers
"Notwithstanding the core claim of the
sensible center that the nature of the period was defined by the rise of post-industrialism and the fall of the
blue collar worker who would go the way of the peasant, the boom was shaped by record rates of manufacturing growth and even higher rates of growth in manufacturing trade. The increase in manufacturing itself was fed by a world-reshaping, mass migration of manufacturing capital from the more developed to the less developed countries. Capital was attracted by appalling, but ultimately ravishingly high rates of labor exploitation -- to India, which was emerging as the world's back office, but above all to China,
which became the world's workshop, employing 109 million manufacturing workers"
and
"For the economists, the financial markets determine the markets for commodities. Any nation could have a giant trade surplus; it's ultimately just a policy choice about savings behavior. The country with the giant surplus just happened to be China. Utterly ignored is the fact that trade surplus/ capital glut could never have formed without staggeringly high rates of labor exploitation in the strict Marxian sense: the ratio of value added by labor divided by wages.32 As far as what drove the boom and what caused the bust, it's the rate of exploitation that's the dog. The savings rate is the tail."
So, the ultimate cause of the crisis is the exploitation of workers, which impoverishes and restricts the consumption of the masses
As Marx says,
"The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their outer limit " (Capital vol. III, Moscow, 1959, pp. 472-73) ;
^^^^^