Question by Roberto Alvarez: What’s the main purpose of john bellamy foster’s monopoly-finance capital article?
Capitalism?
Best answer:
Answer by BeachBum
You can find your answer from an interview with the author provided in the link.
Interview of John Bellamy Foster for Norwegian Daily, Klassekampen
Klassekampen: Is the credit crisis a symptom of overaccumulation of capital? It seems to me that investments worldwide, but especially in the United States, were funneled into the traditionally “safe” housing market following the bursting of the dotcom-bubble. This overinvestment in turn generated a new bubble, thus causing today’s havoc. Is this correct?
JBF: Yes, I agree that this is due to what might be called an overaccumulation of capital in a number of senses: an overbuilding of productive capacity (physical capital) in relation to a demand constrained by monopoly within what economists call the “real” (as opposed to financial) economy, an overamassing of profits and wealth at the top of society, and a hypertrophy of financial claims to wealth. In terms of the financial crisis itself, there has been a massive, highly leveraged expansion of money claims to wealth, creating a huge debt overhang, and forcing, at this moment, a massive devaluation of capital. All of this is related, however, to the breakdown of the capital formation process, accumulation proper, in an increasingly stagnant real economy. These are contradictions of what I have called the phase of “Monopoly-Finance Capital” (Monthly Review, December 2006).
The bursting of the dot.com or New Economy bubble in 2000 resulted in what has been dubbed “the great bubble transfer” whereby the bursting of the New Economy bubble compelled the Federal Reserve to lower the main interest rate it controls (the Federal Funds rate), leading to a new and more massive bubble based in home mortgages, the dangers of which were apparent early on (see “The Household Debt Bubble,” Monthly Review, May 2006). This involved an enormous expansion of consumer debt despite the fact that real wages had been stagnant in the United States since the 1970s creating an unstable situation. It also involved the need on the part of capital to book ever increasing profits from finance, achieved through securitization of every form of what had previously been individual debts — especially home mortgages. This in turn led to the extension of mortgage financing to riskier and riskier customers under the theory that new “risk management” techniques had devised the means (hailed — bizarrely — by some as the equivalent of the great technological advances in the real economy) with which to separate the weaker from the stronger debts within the new securities. These new debt securities were then “insured” against default by such means as credit-debt swaps, supposedly reducing risk still further. This was the ideology behind the housing bubble. (See “The Financialization of Capital and the Crisis,” Monthly Review, April 2008.)
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