In my post yesterday, footnote 3 in the McMurtry quote references the William Hixson book noted in the title of this post.
At Amazon:
A Matter of Interest: Reexamining Money, Debt, and Real Economic Growth
by William F. Hixson; publication date August 30, 1991 (for $111.75).
The blurb is a good one:
Hixson describes how the largely laissez-faire economy prior to 1929 was so structured to make a crisis of illiquidity and overindebtedness inevitable, and how the mixed economy that has prevailed since World War II is structured to result in a similar crisis.
And the reviews are good. There's a flattering one from Kenneth Boulding and this, attributed to "Choice":
... this businessman turned author focuses on the performance of the US economy since WW I vis-a-vis the size and growth of the money supply, the expansion of private and public debt, and the interest burden that debt generates. The soaring ratio of interest to total income is said to be the single most significant economic indicator in recent decades; depressions like that of 1929-32 arise because the economy, in order to grow, becomes increasingly indebted, illiquid, and interest burdened. Indeed, 1987 was more illiquid than 1929, though no panic had yet developed in the absence of public disillusionment that must eventually emerge.
Hixson departs from mainstream economics in many surprising ways, e.g., his belief that moderation of money growth and high-interest rates promotes inflation and his approach to counting interest only as cost and not income.
Wow! I also focus on the size and growth of the money supply, the expansion of private and public debt, and the interest burden that debt generates. I too think that the soaring ratio of interest to total income is the single most significant economic problem in recent decades. And I, like Hixson, hold that depressions like that of 1929-32 (and close calls like 2008-2010) arise because the economy becomes increasingly indebted and interest burdened.
Talk about suppression of non-mainstream economics, Hixson doesn't even have a Wikipedia page.
3 comments:
OK I know laissez-faire is a poverty factory, but the mixed economy created in the 20th century is also structured to replicate the same debt crisis? What does that leave? A secret, third thing?
Lorraine,
I don't know about secrets. I don't know about theories of economic systems. I study things like the size and growth of the money supply, the expansion of private and public debt, and the interest burden that debt generates.
I have discovered things like Excessive income never hinders a transaction, but excessive cost always does.
Here is a simple definition, one that has been gradually made false by financial innovation since the 1970s, but I define two types of money: the money that circulates, and the money in savings. Perhaps this definition will be useful.
Money in savings gathers interest. Circulating money does not. Money that gathers interest creates a cost for the people who must pay the interest. The greater the accumulation of savings relative to circulating money, the greater the total cost of interest relative to the money available for paying the interest.
Again: Other things equal, as savings increases relative to the quantity of circulating money, the total cost of interest rises relative to the quantity of circulating money. Roughly, this means that the cost of interest increases relative to the wages of workers. (The cost of interest becomes part of the income of capitalists.) (The "other thing" I'm holding unchanged is the rate of interest.)
According to old data from the Bicentennial Edition of the Historical Statistics:
• Savings increased relative to circulating money from 1915 to 1930. The increasing cost of interest made life hard for many people, and was a cause of the Great Depression.
• Savings decreased relative to circulating money from 1930 to 1943, reducing the problem created by the cost of interest.
• Savings increased relative to circulating money from 1943 to end-of-data in 1970.
According to newer data, from FRED:
• Savings increased relative to circulating money from start-of-data (1959) to 1984. Along the way, the rising cost of interest reduced uncommitted income, undermined the demand for output, and slowed economic growth.
• Since 1984 savings-relative-to-circulating-money has varied, always at a high level. And the accumulation of debt is so vast that total interest cost remains high even when interest rates are as low as they can go.
The years are approximate: I'm making these "old data / newer data" notes by inspecting one of my old graphs. See Graph #4 at this 2016 post:
https://newarthurianeconomics.blogspot.com/2016/02/savings.html
If you visit that post, I recommend skipping directly down to graph #4.
I repeat here my remarks from below that graph:
By the old data, savings were never greater than circulating money. By the new data, savings are never less than circulating money.
Policy hint: The economy was good between 1947 and 1966.
//
If such things are secrets, it is not my doing.
Hixson's books at archive.org:
A Matter of Interest (1991)
https://archive.org/details/matterofinterest0000hixs
Triumph of the Bankers (1993)
https://archive.org/details/triumphofbankers0000hixs
//
The full title of the 1993 book is
Triumph of the Bankers: Money and Banking in the Eighteenth and Nineteenth Centuries
From the Introduction:
This book and A Matter of Interest taken together provide a three-century history of money, banking, and money-creation in the United States. They show in detail why our financial system is indeed "preposterous" and suggest a number of things that might be done to improve it.
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