Abstract
In this article, I will discuss the reasons why the US economic crisis of 2008-2009 ended in the Great Recession from a Marxist perspective. First, I will discuss a Marxist financial crisis theory. My conclusion is the formation of fictitious capital plays a crucial role in accelerating the economic growth process, creates economic over-sensitiveness and eventually leads to a crisis. Second, I will present a historical process of the Great Depression in the United States from a perspective of financial crisis. In those days, the gold reserves of Federal Reserve Banks should not be less than 40% against note liabilities. However, the government set up the Reconstruction Finance Corporation in 1932 and took an aggressive monetary policy under the gold standard. Therefore the United States was finally compelled to abandon the gold standard in 1933. Third, I will discuss the financial crisis of 2008-2009 and show its difference from the Great Depression in the 1930s. And finally, I will try to critically compare the Great Depression with the Great Recession from a Marxist financial crisis theory.
Highlights
Formation of Fictitious Capital What is the basic characteristic of financial crisis for understanding from a Marxist perspective? A rapid change-over from the credit system to the monetary system is a central theme for understanding the financial crisis in the laws of motion of capitalism
As I outlined in the Marxist financial crisis theory in part 1, the formation of fictitious capital plays a crucial role in the crisis
Injection of public money in the Great Depression eventually led to a serious financial crisis, because of the gold standard
Summary
A rapid change-over from the credit system to the monetary system is a central theme for understanding the financial crisis in the laws of motion of capitalism. Marx describes this change-over as follows: Credit, being a social form of wealth, displaces money and usurps its position. When agent A sells his or her commodity to agent B on credit, the former becomes creditor and the latter debtor. In this process, A receives a bill of exchange from B instead of money. Because the value of paper money is not based on hard currency like gold and silver, in which the social nature of wealth is embodied, and if this credit money is loaned out as capital, it becomes fictitious capital (Harvey 1982, 267)
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