![]() Today, there is no optimal interest rate that will restore the balance between money demand and money supply that does not trigger a massive wave of private and public bankruptcy. Back then, labor was organized enough to demand wage increases that averted a cost-of-living crisis, and neither states nor private corporations relied on free money to keep going. This time around, it threatens labor, capital, and governments in ways that it could not 50 years ago. Inflation today is not the same beast the West faced in the 1970s and early 1980s. ![]() ![]() After more than a decade of addiction to poisoned money, no obvious detoxification method presents itself. But inflation is not driving the poison out of the West’s money system. Some commentators now hope that Western money is being purified in the flames of inflation and interest-rate hikes. But when central banks begin to treat money like car manufacturers treat spent sulfuric acid, or nuclear power station their radioactive wastewater, one knows that something is rotten in the kingdom of financialized capitalism. When a factory wants to remove toxic waste, it charges a negative price for it: its managers pay someone to get rid of it. Negative prices make sense for bads, not goods. I won’t invest even if they give me free money!” Even after central bankers cut money’s official price sharply, investment failed to recover – and the price of money kept falling, until it reached negative territory. Instead of rejoicing that they can now borrow more cheaply, investors think: “The central bank must think things are grim to let interest rates drop so much. But here is the crucial difference: Whereas a rapidly falling potato price cures quickly any over-supply problem, the opposite happens when the price of money falls fast. Like stockpiles of potatoes that no one wants to buy at the prevailing price, the price of money – the interest rate – drops when demand for it lingers below the quantity available to be lent. This is why the price of money tanked after 2008: demand for it dried up, as Big Business responded to austerity’s calamitous effect on demand by canceling investments, even as the supply of money (to Big Business) burgeoned. Under capitalism, only Big Business has the capacity to borrow significant amounts of the money that lenders, mostly rich people with large savings, are willing to lend. Austerity reduced public expenditure precisely when private expenditure was falling like a brick, accelerating the decline of the sum of private and public expenditure – which is, by definition, national income. The poison they administered was the post-2008 policy, in Europe and the United States, of harsh austerity for most to finance socialism for the few. Politicians and central bankers had inadvertently poisoned “humanity’s alienated ability” (Karl Marx’s poetic definition of money). After the 2008 financial crash, and especially during the pandemic, a strange thing happened: money held its exchange value (which inflation diminishes), but its price tanked, turning negative on many occasions. But, under capitalism, and once Christianity accepted the idea of charging for loans, money also acquired a market price: the interest rate, or the price of leasing a pile of cash for a given period. The exchange value of money always reflected people’s readiness to hand over valuable things for given sums of cash. ATHENS – Capitalism conquered the world by commodifying almost everything that had a value but not a price, thus driving a sharp wedge between values and prices.
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