commissioner.org
| Source | Charles Brown |
| Date | 11/11/03/16:58 |
| >From Michael Hudson:
>From Marx to Goldman Sachs: The Fictions of Fictitious Capital Conclusion FINANCE CAPITALISM HAS become a network of exponentially growing interest-bearing claims wrapped around the production economy. The internal contradiction is that its dynamic leads to debt deflation and asset stripping. The economy is turned into a Ponzi scheme by recycling debt service to make new loans to inflate property prices by enough to justify yet new lending. But a limit is imposed by the shrinking ability of surplus income to cover the debt service falling due. That is what the mathematics of compound interest are all about. Borrowing to make speculative gains from asset-price inflation does not involve tangible investment in the means of production. It is based simply on M-M’, not M-C-M’. The debt overhead grows exponentially as banks and other creditors recycle their receipt of debt service into new (and riskier) loans, not productive credit. Half a century of IMF austerity programs has demonstrated how destructive this usurious policy is, by limiting the economy’s ability to create a surplus. Yet economies throughout the world now base their pension planning, medical insurance, state and local finances on a faith in compound interest, without seeing the inner contradiction that debt deflation shrinks the domestic market and blocks economies from developing. |
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