ben bernanke – Page 2 – The Real Movement

How Larry Summers proved Marx was right about everything — (And why this is not necessarily good news)

In honor of Larry Summers’ likely failed attempt to be the first in line to sniff Ben Bernanke’s chairman’s seat at the Federal Reserve Bank, I am going to look at his paper on Gibson’s Paradox. If he is successful in replacing Bernanke as head counterfeiter at the Fed, the paper might hold some clues to his future policy actions. Or, at least that is my theory — we will see what develops.

1. Background

So what is Gibson’s paradox, and why was Larry Summers interested in it in the 1980s? According to Wiki:

“Gibson’s Paradox is the observation that the rate of interest and the general level of prices are positively correlated”

The alleged paradox at the heart of the positive correlation between prices and interest under a commodity money regime is simple, but has far reaching implications: Unlike the predictions of mainstream economics, the empirical evidence shows that as prices increase, so does the rate of interest; and as they decrease, so does the rate of interest. As Sam Williams explains in a blog post,

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There is likely no exit from Quantitative Easing

There is a lot of talk in policy circles and among speculators on Wall Street that the Federal Reserve will begin to ‘taper off’ its wholesale counterfeiting of fiat dollars before the end of the year. Whether or not this happens, I think any attempt to taper off counterfeiting dollars will have to be reversed in short order.

The reason why tapering will likely not happen is not to be explained by any lack of hyperinflationary risks associated with the insane counterfeiting of dollars Bernanke is engaged in — the risk of hyperinflation is actually quite high. But this risk of hyperinflation is dwarfed by the even greater risks associated with not insanely counterfeiting: outright deflation that threatens the very existence of the mode of production itself.

Christina and David Romer have declared that the argument from some policy quarters that Federal Reserve monetary policy doesn’t matter is “the most dangerous idea in Federal Reserve history”.

Let’s see why this might be true.

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The critical role of gold in labor theory analysis (part 3)

5. Marxism after the death of money?

Think of it this way: If Marx was wrong about money, he is just another dead guy whose significance is highly over-rated. Things continue much the same way as they did before. However, if Marx was right, the entire system of commodity production no longer exists and the fascist state is running the entire economy as if it were the floor of some factory.

When Nixon closed the gold window in 1971 and severed the dollar from a definite standard of prices, the consequences of this act were not as simple and straightforward as commonly assumed. It is true there is a danger of hyperinflation, financial crises and currency crises always lurking in the wings, but these minor, secondary, issues should not concern us at all, as they are mere symptoms of a much more profound crisis.

Nixon’s act did not simply sever the connection between the dollar and gold, but also severed the connection between prices — denominated in dollars — and values — expressed in some definite quantity of a commodity money. A number of consequences result immediately once currency is severed from a commodity that can serve as the measure of value and standard of prices — these consequences profoundly effect not just money itself, but every category Marx initially analyzed in Capital. Moreover, it is precisely the expansion of capital that undermines money and all the categories that serve as the premises of capital itself. I will turn to describing a few of these implications now.

Continue reading “The critical role of gold in labor theory analysis (part 3)”