Adopting the subjectivist standpoint of bourgeois economics and ideology, Martin writes,
“Inflationary impulses were being soaked up by those savings, even though poorer people were reducing their savings (spending more on credit, and in the process further swelling the revenues of high finance).”
That implies that inflation is some kind of psychological phenomenon, driven by these “impulses”, rather than what it actually is, as described by Marx, a monetary phenomenon driven by the devaluation of money tokens caused by excess liquidity. Its certainly true that savings were being soaked up in this speculation, not only in the purchase of shares and bonds, in pension schemes, mutual funds, and individual speculation, as well as in property speculation, by a new breed of buy-to-let landlords, and simply individuals seeking to buy houses for their own use, in the hope either of avoiding a future higher price, or in the hope of themselves making a capital gain, as house prices rose significantly year on year. But, that simply meant that the inflation was manifest in those asset prices, whilst the excess liquidity did not flow into the real economy, and so did not cause an inflation of commodity prices.
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| Speculation, and near guaranteed capital gains kept liquidity flying around the green zone of assets, acting like a firestorm, such the oxygen of liquidity out of the real economy, and providing the additional fuel to keep asset prices rising. |
On the contrary, as I set out some years ago, the very fact of the asset price inflation – particularly when combined with deliberate austerity imposed by governments – acted to actually drain liquidity from the real economy, thereby having a disinflationary, or even deflationary, effect on commodity prices. What we have seen in the last year or so, is the reverse of this, as money tokens were printed, and then pumped directly into the real economy as income replacement schemes, and, although households then built up savings, it is now flowing out into the real economy, causing commodity prices to rise, whilst asset prices are falling as a consequence of rising interest rates, and that creates an incentive for liquidity to flow from assets into the real economy, irrespective of subjectively determined “impulses” or “expectations”. Indeed, the expectations are largely a function of current behaviour being extrapolated into future behaviour.
This bourgeois subjectivist approach is continued in this further comment on the mindset of business managers.
“Market demand grew relatively slowly, while the underlying workplace and labour-time determinants allowed for higher rates of profit; so employers felt less pressure from labour costs, less pressure to increase mark-up, and less confidence that they could sustain sales if they did increase mark-up.”
It was precisely the weakness of labour, and rise in the rate of surplus value that enabled firms to “increase mark-up”, and is manifest in raised profit margins as well as the rise in the annual average rate of profit. The vast expansion of commercial capital, from the 1980's, and particularly 1990's, as former industrial sites became converted to ever more, ever larger, cathedrals of consumerism, gives no indication whatsoever that any of these capitals felt “less confidence that they could sustain sales if they did increase mark-up.” This was the era of “shop until you drop”, and the idiotic “retail therapy”. The increased mark-up, however, came from the fact that, increasingly, commercial capitals, in developed economies, appropriated their share of the industrial profit created by workers in China and elsewhere, where costs of production were being slashed, and large amounts of cheap, unskilled labour was being exploited, backed by huge amounts of fixed capital.
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