Quantitative Easing

July 2024 Forums General discussion Quantitative Easing

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  • #108871
    ALB
    Keymaster

    By coincidence Sweden has just adopted "quantitative easing" which the media are also calling a "bond-buying programme":http://www.wsj.com/articles/sweden-cuts-rate-announces-qe-1423731254

    #108872

    https://medium.com/@DuncanWeldon/making-qe-more-effective-2ce10fda040c#.plr3k2w64Interestign blog about the new round of QE.  One thing interesting, is ther market share of gilts the BOE owns now, 24%, which is making it difficult to find people to actually buy gilts off (!).

    #108873
    ALB
    Keymaster

    Maybe that's why the latest round allows the Bank of England to buy up corporate bonds as well?

    #108874
    Dave B
    Participant

    I think maybe the key to understanding the present in a Marxist sense is to examine the past. In the olden days of gold money commodity it was in limited supply as you couldn’t just switch or rapidly expand gold money production; or suddenly expand the 4th department of capital. (Karl foolishly only had two departments of capital ignoring the department of fixed capital by conflating it, if he really considered it all, with his second department of capital constant.) In times of economic uncertainty the capitalist tended to want to get out of productive capitalism and owning machines and factories etc and revert back to gold money hoards etc. This had two aspects; the first initially less important perhaps. The first; functioning productive capitalists would not reinvest their surplus value back into expanding productive capital-machines and factories (and thus mostly fixed). This might not actually affect the so called second department which theoretically just involves constant and raw material; if they just continue as before and just not building more and better factories and machines etc. The second being the money capitalists who had money loaned to the functioning capitalist wanted to have the money back rather than a potential income stream of surplus value from functioning capitalists. With concern about the functioning capitalists going belly up and non performing loans; a bit like with no job and no income subprime mortgage loans not being likely to deliver an income stream either. In the past when the money capitalists pulled out their gold money capital the functioning capitalist couldn’t function and some would have to fire sale sell up their hard fixed capital. That generally lowered the market value of such fixed capital and lowered the market value of fixed capital like machines etc. That fixed capital was generally regarded by the money capitalists as collateral and stuff the money capitalist could lay claim to from any distressed functioning capitalist. So that spooked the money capitalist more. Just as the market house price collapse (and collateral for a loans) spooked the subprime lenders. Then, in the 19th century, as it became a money renters market, the interest rate on gold money capital shot up as you could argue did the market value of the gold money itself. As in a case that Fred I think discussed in volume III; there is quite a bit of Fred only stuff in volume III. Money capitalists would demand a 15% interest on even a ‘safe as houses’ functioning capitalist that were still doing really well; because they could. I think what we are seeing superficially now is that the real capitalists both functioning and more importantly perhaps money capitalists want out. They want safe money rather than a right or ownership to income streams backed by collateral of uncertain future value. The ‘central banks’ are saying if that is what you want you can have it. And they are buying rights and ownership of productive capital with fresh paper money. It seems to be working in two ways which is just one really when one ignores the smoke and mirrors. The money capitalist are withdrawing or not ‘rolling over’ loans to the functioning capitalists and the central banks are replacing the withdrawn money of the money capitalist with fresh stuff. The central banks ‘balance sheets’ increase ie they have formal ownership of functioning capital and the money capitalists have their money. Ironically it is like creeping, central bank, state capitalism. I suppose when or if things settle down the central banks can take back the paper money in exchange of income stream right on productive capital and 'denationalise' it again. Which is why there is no obvious inflation.  Inflation happens when more money is being used to exchange of buy and sell goods of the same labour time value. Thus as Karl thought about it with his take on the velocity of money theory. Rosa’s argument about workers not being able to afford to buy back the surplus product as the capitalist had all the surplus value was quite a sensible deduction from Karl’s flawed two department theory. With 2 more departments the capitalist can exchange their surplus value from them to buy fixed capital and more of the gold money capital, as a hoard, if they so choose, or just capitalist bling.  In fact I think there should be 5. 1st making stuff for workers. 2nd making raw material or constant capital which was Karl’s; and a bit trivial in my opinion. 3rd making capitalist consumable bling including swimming pool attendents and general domestics. 4th producing more and better fixed capital. 5th producing value and effort embodied gold money commodity for circulation and hoards. In fact if you took an extra terrestrial Star trek view on capitalism and dropped the trivial 2nd for simplicity. You could have say 3 billion workers in the first department making stuff for 6 billlion workers; or for themselves and 3 billlion other workers who don’t make stuff for workers. 1 billion workers in the 3rd department making capitalist bling. 1 billion workers making more and better fixed capital robots and machines etc in the 4th 1 billion workers making the money commodity for a hoard or circulation in the 5th. The fact that the 3rd 4th and 5th also make surplus value is just a smoke and mirrors accounting trick disguising the fact that it is all predicated on the surplus value and surplus product created from the productive ‘productive’ labour of workers making more stuff than they need for themselves. Re thinking perhaps Rosa’s theory and why it was wrong. The 4th and the 5th department, using surplus value/product to ‘give back’ surplus value to workers by employing them is now perhaps ‘dysfunctional’?

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