Re: [OPE] Dr Smaghi on debt (especially for Paul Cockshott)

From: Paul <>
Date: Fri Oct 01 2010 - 04:44:16 EDT

Jurriaan, nobody doubts that individuals can make money in all sorts of
ways, including in the casinos at Las Vegas. The questions are
1) whether some of these ways of gaining personal enrichment should be
counted as net capital accumulation when doing national accounts.
2) what should be included in the capital stock figures for a nation?
My position is that you should not include transfer payments in calculations
of accumulation, nor should you include information structures which
represent claims on income as part of the capital stock. I take the view
that the capital stock of a country is stored up human labour, and as such
can only consist of the products of labour not information structures,
referring by increasingly indirect means, to products of labour.
Remember :

-----Original Message-----
From: []
On Behalf Of Jurriaan Bendien
Sent: 01 October 2010 07:40
To: Outline on Political Economy mailing list
Subject: [OPE] Dr Smaghi on debt (especially for Paul Cockshott)

Intervention by Lorenzo Bini Smaghi, Member of the Executive Board of the
ECB, at the ECON Committee Hearing on "Improving the economic governance and

stability framework of the Union, in particular in the euro area", Brussels,

15 September 2010:

"Euro area countries cannot use the monetary instrument to inflate away
debt, so the deterioration of public finances has brought to the surface a
series of issues which were not fully considered at the start of EMU. The
first is that countries may have problems servicing their debt. This was not
thought relevant because the SGP was supposed to prevent it occurring. The
second issue is that financial markets may rapidly change their assessment
of a country's solvency, and actually trigger such an event. The fact that
money can be gained from the bankruptcy of a company, or even a country,
without ever investing in it, raises issues related to the functioning of
financial markets which unfortunately have not been tackled - it seems to
me - in recent reforms. [1] The third problem is that a sovereign default
can have systemic consequences in a monetary union as a result of the
financial interconnections. This explains why the risks affecting a
relatively small part of the euro area in the course of last spring have had
such significant effects on the euro."

There you have it. The ECB, no less, acknowledges that you can make money
(accumulate capital) from the bankruptcy of a country. In the case of
Ireland, the real GDP growth rate for 2010 could be -6% or -7% or
thereabouts. From 2008, the official unemployment rate in Ireland has
increased every month until now (it is at 13.7%). Out of a total labour
force of 2.1 million, circa 300,000 are unemployed. However, another 100,000

or more dropped out of the labour force altogether from the start of 2008,
so in reality, it's more like one in five Irish workers is without paid
employment, the "real" unemployment rate being now around 20%. If in
addition you consider that the Irish population 15 years and over increased
by about 50,000 across the same interval (mainly kids born during the 1990s
boom) the real unemployment rate must be even higher - youth unemployment in

particular must now be at at its highest in a very long time.


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