Doug Henwood wrote:
> As part of my transitional strategy, I'd like to see the repression
> of the securities markets and their replacement with commercial bank
> finance. At this point, this is all dreaming, of course - cue Cde
> Cox on the sandbox right now. But the whole Anglo-American stock
> centered model is a problem in itself, if you think volatility and
> polarization are problems.
I take it then that your agreement with Leo and Sam doesn't include
agreement with their claim that:
> The development of securitized financial markets and the
> internationalization
> of American finance allowed for the hedging and spreading of the risks
> associated with the global integration of investment, production and
> trade.
> This provided risk insurance in a complex global economy without which
> capital accumulation would otherwise have been significantly
> restricted. At
> the same time, finance penetrated more and more deeply into society,
> integrating subordinate classes as debtors, savers, and even investors
> through private pensions, consumer credit and mortgages for private
> housing. This became especially important in facilitating the
> maintenance
> of consumer demand in a period of wage stagnation and growing
> inequality.
> In terms of directly fostering capital accumulation, finance was not
> only
> an important site of technological innovation in computerization and
> information systems, but also facilitated innovation more generally
> in high
> tech sectors through venture capital, especially in the US.
>
They, like Hayek, point to "a vast increase in the effective money supply" as the source of "financial bubbles".
> Global financial competition for higher yields led to institutional
> and
> market innovations that allowed greater leveraging and therefore more
> credit relative to the capital base. This in fact amounted to a vast
> increase in the effective money supply, but rather than yielding the
> price
> inflation that monetarists predicted, the defeat of labour and the
> increased corporate ability to fund investments with internal funds
> meant
> that increased liquidity translated into asset inflation. This asset
> inflation was uneven across sectors, producing financial bubbles
> from stock
> markets to real estate at various times, while the size of these
> bubbles
> was expanded by virtue of the material expansions in the real economy
> related to each of these areas.
Ted