2008/10
So, this was the situation as far as the prices of commodities and asset prices, in the 25 years up to 2008. The financial crisis of that year should have been a watershed, but, instead, states intervened on an even more massive scale to reflate asset prices by printing even more money tokens, whilst simultaneously acting to depress the real economy via austerity, so as to prevent interest rates and wages rising. In the same way that the representatives of shareholders were prepared to undermine companies, in order to line the pockets of shareholders, so their equivalents in the state were prepared to do the same with the economy as a whole.
But, the actions of states, after 2008, and 2010 (Eurozone Crisis) has simply deferred the inevitable, and, as I wrote in my book “Marx and Engels' Theories of Crisis: Understanding the Coming Storm”, has, thereby, simply accentuated the contradiction, making an even more violent resolution of it inevitable. The lock down imposed by governments, and the economic crisis it has engendered, now means that the conditions that ruled for the last thirty years are about to be violently reversed. Its been claimed that money printing did not cause inflation, but it did, it created a hyperinflation of asset prices. Its been claimed that money printing lowered interest rates, but it didn't, and it can't. By causing asset prices, including bonds, to rise it correspondingly caused yields on those bonds to fall. So long as large corporations, like Apple, only issued bonds to raise money to buy back shares, or put back into financial markets in other forms, or to pay out to shareholders, who used the money for further such speculation, this did not lead to rising commodity prices, because the money remained in the sphere of purchase and sale of financial assets. Had all the bond issuance gone to finance real capital accumulation, the matter would have been completely different.
Then, all of the liquidity pumped into circulation would have gone first to buying these bonds, but then, the company would have used that money to buy additional machines, materials and labour-power. As this greater quantity of devalued currency went in search of these commodities, then their prices would have risen, just as the demand for financial assets stimulated by this money printing caused the hyperinflation of their prices. As all of this liquidity went into the purchase of these commodities, so it would have spread out into general circulation, causing a general rise in commodity price inflation. Instead of asset prices being hyperinflated, commodity prices would have been inflated in proportion to the excess liquidity, but, as these commodity prices rose, so the company would require proportionally more borrowing, because the prices of the machines, materials and labour-power it needed to buy, would now have been inflated. All that the extra liquidity would have done would be to change the unit of measurement on either side of the equation for the demand for and supply of capital, leaving the interest rate the same.
And, a look at the position of the mass of capital, comprised of millions of small and medium sized businesses illustrates that. They can't issue bonds, and need money to finance their businesses not to buy back shares or line the pockets of shareholders. But, these companies have found they cannot borrow. Banks have essentially refused to lend to them. They have to resort to borrowing from peer to peer lenders, charging around 10% p.a. rates of interest, or, for smaller businesses they have to mortgage their homes, or borrow on credit cards. For individuals, its even worse, they can only borrow on credit cards, overdrafts, and for the desperate from pay day lenders charging up to 4000% p.a.
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