Debt matters

Debt mattersDebt matters

By Michael Roberts (


The expansion of global liquidity in all its forms (bank loans, securitised debt,

shadow banking and derivatives) has been unprecedented in the last 30 years.

The Marxist view is that credit (debt) can help capitalist production take

advantage of prospective profit opportunities, but eventually speculation takes

over and financial capital becomes fictitious. It becomes fictitious because its

price loses connection with value and profitability in capitalist production. This

leads to a bursting of the credit bubble, intensifying any economic slump.

This paper emphasises the importance of capitalist sector debt over public

sector debt in understanding the causes and characteristics of the current

crisis. The paper attempts to measure profitability against all advanced capital

and relative to the expansion of credit to explain why this particular capitalist

slump has been so severe and why it will take a very long time to recover.

Indeed, debt levels will only be reduced sufficiently by defaults.

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