Re: [OPE] capital's roads to recovery?[MESSAGE NOT SCANNED]

From: Paul Cockshott <>
Date: Fri Jan 23 2009 - 04:41:13 EST

Dave Zachariah wrote:
> Paul Cockshott wrote:
>> These are not ways of lowering the debt burden but ways of
>> transfering it
>> to the taxpayer whilst protecting the interests of those to whom the
>> banks
>> owe money.
> You are right. I was not advocating this, only looking at ways in
> which capital could recover. However, I advocate what many on the Left
> has suggested: turning the financial sector into a public utility that
> supplies loans to the working-class and for productive investments.
I agree with that, but just taking it over whilst leaving current
creditors of the banks unaffected leaves money disproportionately in the
hands of the bourgeoisie
>> I would advocate cancelling the debts either overtly or covertly.
>> Overtly one could simply legislate that debts to the banks were
>> cancelled and
>> liabilities of the banks to depositors went no further than their
>> holdings
>> of cash in hand or deposits with the state bank.
> Canceling debts would certainly be a progressive measure. But what
> would be the effect on the financial sector? A total collapse? In that
> case a public credit system would be imperative.
Not totally. If an emergency law were passed to the effect that debts
incurred prior to that date were no longer enforcable, many financial
institutions would fail, the ones which would
survive would be those that had significant non-debt assets. The banks
do hold cash reserves, which are much smaller than their holdings of
debt, but if all debts to the banks were
cancelled one would also have to limit the liabilities of the banks to
their customers to $x per customer, where x= Cash reserves in $/ N
where N is the number of customers.
This would effectively wipe out most of the money held by the
bourgouisie since $x would be a comparatively modest sum of the order
probably of $10,000. The aim would be to ensure
that employees had sufficient cash in hand to be able to continue their
normal expenditure. If the amount of the banks liablility was limited to
somewhat over $x say $2x then the banks
would be insolvent and the state might have to step in and provide a
modest amount of additional capital, taking them over in the process.

The resulting state owned banks would have cleared all the bad debt
overhang, would have wiped out the cash of the bourgeoisie, and would at
the same time be highly liquid, and
in a far better position to extend credit than they now are.
> //Dave Z
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Received on Fri Jan 23 04:42:56 2009

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