One reason that Keynesian and Neo-Keynesian economists linked rising wages to rising inflation, is precisely because, in practice, as labour shortages led to such rising wages, central banks did increase liquidity – in addition such conditions are produced by rising economic activity that also leads to increased commercial credit, increasing liquidity – so that firms could pass on higher wage costs in higher prices. But, it is not the higher wages that cause the higher inflation, but this central bank accommodation. Martin describes the position of Alain Lipietz. “Lipietz built on this thoug ..read more

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Marx then deals with those occasions where the currency is debased and yet where the corresponding rise in prices does not occur. The reason for this is quite simple, as described earlier. If the currency is devalued by 50%, but the amount of currency put into circulation does not double, then prices, themselves, will not double, because the value of the currency/money tokens is a function of their quantity in circulation. In other words, if the standard of prices is based on silver rather than gold, a £ is devalued to 1/15 its previous amount, and 15 times as many £'s would be required in cir ..read more

In condition of an overproduction of commodities, it is not more money that is required, i.e. more liquidity. As set out, that could only reduce the value of each token, causing prices to rise, so that a condition of stagflation arises. Either the value of existing commodities must fall, so that they can be sold profitably, at a lower price, so that demand for them rises, removing the overproduction, or else incomes must rise, relative to those values, so that demand rises. But, how is that to happen? If wages rise, enabling workers to buy more, then profits will fall. Workers may buy more, bu ..read more

With paper notes, it is no longer a question of, periodically, minting coins with less gold content, but simply of an increased quantity of notes, each, thereby representing a reduced quantity of gold/universal labour. The only thing that, really, stood behind such tokens, was always, then, the authority of the state, and the state always had the power to determine, by diktat, the value of the standard of prices, by either varying the metal content of precious metal coins, or by changing the quantity of paper notes put in circulation, and the amount of gold each was redeemable for. This was n ..read more

As Marx points out, a money/financial crisis, of the kind of 1847, 1857 or 2008, is completely different to a crisis of overproduction of commodities or capital. “The monetary crisis referred to in the text, being a phase of every crisis, must be clearly distinguished from that particular form of crisis, which also is called a monetary crisis, but which may be produced by itself as an independent phenomenon in such a way as to react only indirectly on industry and commerce. The pivot of these crises is to be found in moneyed capital, and their sphere of direct action is therefore the sphere o ..read more

For years, Japan has had near zero or even below zero increases in its consumer prices. Like every other country in the world, ever since lockdowns were lifted, during 2021, that has changed, and prices have risen significantly. Now, even Japan has consumer prices rising by 4%, year on year, according to the latest figures.  Japan is a good example of the phenomenon I described several years ago, whereby, QE, promoted as a means of raising inflation, actually results in a disinflation of consumer prices, as liquidity is drained from the real economy, and diverted into the purchase of ass ..read more

As Marx points out, Ricardo had only ever seen this kind of financial crisis, the first crisis of overproduction only appearing in 1825. Its why he he was led into accepting Mill's Law of Markets/Say's Law that it is impossible for there to be a general overproduction of commodities. In a crisis of overproduction of commodities, its second form does appear as a payments crisis, as sellers cannot sell, and, thereby, obtain currency, and without such currency cannot pay suppliers bills or wages, which, in turn, leads to a sharp fall in aggregate demand, not to mention the bankruptcy of all those ..read more

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