In capitalist booms, credit is easy. No-one wants to hold onto cash. The wealthy plough their cash into business, or lend it out on easy terms.
In slump or depression, the opposite happens. Everyone is nervous about lending or agreeing to deferred payments. Businesses want hard cash.
This cycle is working itself through in a new capitalist world where there is no hard cash, only different forms of soft cash. Hence the way that crisis-management methods are constantly unable to find firm ground.
Marx started Capital volume 1 with the statement: “The wealth of those societies in which the capitalist mode of production prevails presents itself as an immense accumulation of commodities...” Marx knew that was partial and incomplete, and indeed the statement can well be read as sarcastic : in capitalist societies they think that all this stuff for sale is real wealth!
In any case, if read literally it is way out of date. The total wealth of households in Britain — just households, let alone wealth owned by banks and businesses — was about £9,000 billion at the last official count. The total stock of durable physical wealth — houses, business buildings, machinery, etc. — owned by households, businesses, and government combined was much less: about £3,000 billion.
Most wealth in today’s capitalist societies presents itself as an immense accumulation of bits of paper. Those bits of paper are various forms of ticket to portions of future production, or specifically to portions of future surplus-value.
Since the money issued by governments became unlinked from gold and silver, it too is essentially a sort of ticket. A pound coin is a ticket or token for an aliquot part of the future labour-time of capitalist production in Britain. A dollar bill is a ticket or token for an aliquot part of the future labour-time of capitalist production in the USA.
These are “surer” tickets, directly and immediately exchangeable for actual goods and services unless the issuing government is in collapse, but tokens for commodities rather than commodities themselves.
Long ago Marx wrote that “the entire history of modern industry shows that metal [i.e. precious metal, gold and silver coins, etc.] would be required only to settle international trade... if production at home were organised... [In fact] even now no metal money is needed at home”.
For decades, the US dollar, not gold, has been the world money. The labour-time of capitalist production in the USA is sufficiently reliable, and sufficiently rich and varied in its produce, that tokens for it are accepted as the world standard for labour-time as represented by goods and services.
After the Iraq debacle and the 2008 crash, and with the rapid technological growth of centres like China, the USA’s economic hegemony has declined. On 6 August a ratings agency officially rated US Treasury Bonds (not dollar bills, but the next surest thing: IOUs from the US Federal Reserve Bank) as no longer triple-A (rock-solid).
Yet financiers are still buying Treasury bonds. Avidly. Whatever the ratings agencies say, they think that those tickets to dollars plus a guaranteed rate of interest are about as hard and solid a stash of wealth as they can find.
The recent fashion among some financiers for buying gold instead has been knocked by a sudden 15% drop in its relative value.
A Financial Times columnist recently stressed the point :
“A generation or two ago, ‘money’ was something that most people visualised, if not experienced, in tangible form: coins in a jar, cheques in the post, notes in a wallet...
“[Now it is like] an object in a room of mirrors, that keeps refracting into numerous new forms, so dizzying that our brains are simply not equipped to understand.
“[This] makes it surprisingly hard even for financiers — let alone anyone else — to keep track of where those zeros are going, or if anything tangible lies behind them”.
As Dick Bryan put it recently in Solidarity : “The music never stops. Financiers will never get out of the market. They have got to keep playing and trying to beat the market, because there is nowhere safe to hide...
“[Thus] the ongoing massive growth of more and more sorts of financial products, more and more ways of holding wealth in a liquid (tradable) form. If financial market trading is everything, more and more diversity of things to trade will become the order of the day...”
The fluidity of the markets brings more rigidity from the governments. Governments, more and more, aim economically at establishing their countries as good sites for quick-moving global capital, not as relatively-autonomous, relatively-integrated economic complexes.
Keeping their currency as a valid, tradable token in global markets, and retaining their own creditworthiness as borrowers on those markets, are their first principles.
Thus the strange rush by governments, only a brief time after the big “Keynesian moment” of 2008, to write balanced-budget laws into their constitutions. Thus the fact that Hungary and Latvia, which have suffered the worst slumps in Europe — worse than Greece — did not use their financial autonomy to let their currencies slip in value against the euro, but made their populations absorb all the pressure.
The world has become like a giant complex of PFI schemes. The future income from everything has already been sold to some financier, avid for a good profit.
He may already have sold the “ticket” to that future income on to someone else. It is now part of a dizzying multiple-refraction of financial operations.
Capital presses to secure the future income, by as much pressure as it takes on forcing down wages, speeding up work, and cutting social overheads, to keep the whirligig going round.
Despite the huge discrediting of neo-liberalism in the 2008 crash, governments have become more, not less, aggressively neo-liberal in the years since then.
Greece’s budget problems are tiny relative to the European Union economy, in real terms . A modest transfer from richer EU countries, or an agreement by central EU institutions (not just an ad hoc European Financial Stability Fund) to open lines of credit for Greece, would remove the pressure for the destructive cuts.
So, of course, would a seizure of the 600 billion euros held in Swiss banks by wealthy Greeks.
But the neo-liberal political pressure, and nationalist kickbacks in many EU countries, are making both options unworkable. So Greece staggers from crisis to crisis, the only certainty being that the working people of Greece pay the cost.