Prof.Robert Pollin, Economics Professor at the University of Massachusetts, Amherst reviews Prof. Prabhat Patnaik's latest book, "Value of Money". The review is attached along with this post.
The problem Mr. Patnaik essentially deals with is deflation(a decrease in money supply--I know this ain't the mainstream definition of the term). I, of course, don't agree a dime with Mr. Patnaik's theories. Unlike what is implied in the book, deflation does not precede crises in Capitalist economies. It's the side-effect of depressions that causes a sudden drop in money supply(caused by people hoarding money, banks contracting credit, clearing out of mailinvestments etc.) causing the deflationary spiral. So let there be a rethink of actual facts. In fact there were decades of deflation in the US in the 19th century, without any resultant depression. There was the crises of 1836, but deflation then was the result of contraction of bank credit caused by the crises. That is, the crises preceded deflation, not the other way round.
Anyways, what is really so bad about hoarding? Suppose 50% of the money in the economy is hoarded, and lets roughly assume it causes a price level drop of 50%. Yes, businesses will find their selling costs crash, leading them to losses. What next? Are we gonna remain in the crash forever? No. Businesses are gonna sell their excess inventories at cheap costs, and start doing business again. Now with decreased levels of money in the economy, the raw materials will be bid at lower prices to adjust to the new set of lower selling costs. There will be changes in the pattern of ownership as well.
I do not by any chance claim that this process will happen really quick, but lesser the intervention by governments, quicker will the process be.
what point you are making , absolutely make no sense of what value of money wants to bring. Essentially it is saying that money as a form of wealth in a capitalist set up lead to crisis and for this we need a pre capitalist sector to tackle this scenario.... of course he did not consider government as a main purchaser of capitalist output, mainly to show that capitalist sector itself in not stable, it need something to provide cushion apart from government to find its stability. He does criticize monetarist and talk about marx-kalecki-keynes as a better solution to understand the problem of system. Something inherent in a system you can,t consider it as a problem, which is what you found in economic theorizing....rather than criticizing we must consider it as a contribution with several gap that is left for the reader to fulfill, ofcourse here is no place for layman, political and social scientist and audience for this must be a historian and philosopher in economics theorizing to consider it as a better contribution to our knowledge.
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