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I want to make a further reply to Andrew T's 3203
Note that in one of Henryk Grossmann's models, capitalists only add to
constant capital by 5 rather than 10 percent. There are repercussions on
both the labor and money markets (as Howard and King put it in vol1). To
quote from Howard and King, this will force down real wages and increase
the rate of exploitation, thereby inducing a renewed rise in the rate of
accumulation. Moreover since the capitalist lend out their excess savings
as 'loan capital', the rate of interest on loans will fall, which agains
acts as a stimulus to accumulation. Meanwhile the rate of profit continues
to decline. Taken together with the increasing rate of accumulation, this
reduces the value of capitalists' net financial assets.
But the capitalists have a solution.
Restrictive monetary policy would be the key to preservation of capitalist
consumption in that not only is a 'healthy' rate of interest preserved
despite rising loan capital in order to prevent capital loss on
bondholdings (which is of course quite substantial due to the legacy of
Reagan and Milken), the rate of accumulation is sufficiently choked to
stymie fall in the rate of profit.
At any rate monetary policy has to be conducted as a solution to the
problem--the maximum increase in the value of the capitalists' net
financial assets. What tight monetary policy does in service of
preservation of bond values and maintainence of profitability by choked
accumulation must more than compensate for increased interest costs,
*which are tax deductible anyway*. So it seems overall that capital as a
whole will shift to tight monetary policy, and that Alan Greenspan is
really the guardian of the bourgeoisie.
What it seems that we get is a kind of permanent stagnation in that the
rate of accumulation is never allowed to pick up from what should be
declining interest rates as a result of a flood of loan capital from excess
savings. Less cyclical behavior, more drawn out long stagnation.
I think the kinds of things left Keynesians are interested in are fully
explainable from within Grossmann's model.
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