On Jun 17, 2009, at 1:59 PM, SA wrote:
> Well, although I'm not for "mere manipulations" of money, I disagree
> here. A monetary policy that produces 3% unemployment instead of 7%
> unemployment will definitely change productive relations and social
> structure. Hence the Kaleckian argument about the politics of full
> employment.
Monetary policy can easily raise unemployment. But the reverse isn't always true - stimulative policies don't always lower unemployment.
> But if you had tried that argument out on Marx, he probably would
> have thought it was pure monetary crankery. It's not his fault - he
> lived at a time when all leading bourgeois economists believed in
> the neutrality of money. He never read Keynes.
Well, no. That's not really what Marx thought. E.g.:
<http://www.marxists.org/archive/marx/works/1894-c3/ch33.htm>
But it is a serious event in business life nevertheless when, in time of stringency, the Bank of England puts on the screw, as the saying goes, that is, when it raises still higher the interest rate which is already above average.
"As soon as the Bank puts on the screw, all purchases for foreign exportation immediately cease ... the exporters wait until prices have reached the lowest point of depression; and then, and not till then, they make their purchases. But when this point has arrived, the exchanges have been rectified — gold ceases to be exported before the lowest point of depression has arrived. Purchases of goods for exportation may have the effect of bringing back some of the gold which has been sent abroad, but they come too late to prevent the drain." (J. W. Gilbart, An Inquiry into the Causes of the Pressure on the Money-Market, London, 1840, p. 35.) "Another effect of regulating the currency by the foreign exchanges is that it leads in seasons of pressure to an enormous rate of interest." (Loc. cit., p. 40.) "The cost of rectifying the exchanges falls upon the productive industry of the country, while during the process the profits of the Bank of England are actually augmented in consequence of carrying on her business with a less amount of treasure." (Loc. cit., p. 52.)
But, says friend Samuel Gurney,
"The great fluctuations in the rate of interest are advantageous to bankers and dealers in money — all fluctuations in trade are advantageous to the knowing man."
And even though the Gurneys skim off the cream by ruthlessly exploiting the precarious state of business, whereas the Bank of England cannot do so with the same liberty, nevertheless it also makes a very pretty profit — not to mention the personal profits falling into the laps of its directors, as a result of their exceptional opportunity for ascertaining the general state of business....
Talk about centralisation! The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives to this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner — and this gang knows nothing about production and has nothing to do with it. The Acts of 1844 and 1845 are proof of the growing power of these bandits, who are augmented by financiers and stock-jobbers.