Michael Roberts Fundamental Errors, VI – Inflation and Roberts' Confusion of Money With Money Tokens, and New Value With Total Value - Part 7 of 7

As I have set out elsewhere, and Mandel also details in “The Second Slump”, in the post war, long wave uptrend, state intervention, and use of additional liquidity to finance it, did cut short a series of recessions, but that was during a period of long wave uptrend. When that uptrend ceased in the 1970's, the use of the same state intervention, funded by additional liquidity, simply led to stagflation. I have also set out, elsewhere, why, if the aim is really to curtail inflation, the use of central bank interest rate hikes is the wrong tool. To reduce inflation, what is required is not higher interest rates, but a reduction in excess liquidity, i.e. in place of the QE that continually increased that liquidity, a period of QT. QE does not reduce real interest rates, because it does not increase the amount of money or money capital in the economy. It simply puts more money tokens into circulation, and so results in inflation. By inflating the prices of the commodities that comprise constant and variable-capital, it correspondingly increases the amount of money-capital demanded.

As Marx puts it,

“Massie laid down more categorically than did Hume, that interest is merely a part of profit. Hume is mainly concerned to show that the value of money makes no difference to the rate of interest, since, given the proportion between interest and money-capital—6 per cent for example, that is, £6, rises or falls in value at the same time as the value of the £100 (and. therefore, of one pound sterling) rises or falls, but the proportion 6 is not affected by this.”

(Theories of Surplus Value, Part I, Addenda)

It also, means that lenders seek higher nominal rates of interest, particularly on their longer-term loans, in order to compensate for the depreciation of their capital, resulting from inflation.

Roberts, theory failed to anticipate the large rise in inflation arising from the huge increase in liquidity pumped into households, during the period of lockdowns, just as his theory led him to predict a “Post-Covid Slump”, as against the huge rise in economic activity that actually occurred. He continues to see economic policy as being undertaken on the basis of a technical operation for the more efficient running of the economy, which he sees as being to promote growth, whereas the reality is, understood by Marxists, that economic policy is undertaken to ensure the interests of the ruling-class, which, at any time, may or may not involve the promotion of economic growth.

In the period since the 1980's, the interests of the ruling class have increasingly involved the protection of their form of property – fictitious-capital – from asset price crashes. The use of monetary policy, in particular QE, was one element of that, driving liquidity out of the real economy, and into these paper and property assets, and their derivatives, inflating their prices. The other element of it, since 2010, has been the use of fiscal austerity, to slow economic growth, and so reduce the upward pressure on interest rates, so as to prevent further crashes in those asset prices.

As I have set out in numerous places, those attempts will ultimately fail, as the underlying dynamic of the long wave cycle, and the laws of capital impose themselves.

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