By Michael Roberts (thenextrecession.wordpress.com)
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.