,*APT] #b 
,DEFLATION>Y ,9FLATION 

,PEOPLE 3 

,AU?OR 3 ,PAUL ,MATTICK 

,TEXT 3 

,IT IS POPUL> N[ADAYS TO DI/+UI% BETWE5 ! 9FLATION ( TIME PA/ & A NEW K9D ( 9FLATION1 :I* ACCORD+LY REQUIRES A NEW EXPLANATION1 AL?\< 9 ITS MONET>Y ASPECTS 9FLATION HAS ! SAME FEATURES N[ AS BE=E3 RIS+ PRICES OR ! DIM9I%+ BUY+ P[] ( MONEY4 ,:ILE ITS OPPOSITE1 DEFLATION1 WAS VIEW$ AS CONTRACT$ DEM& RESULT+ 9 FALL+ PRICES1 9FLATION WAS EXPLA9$ BY 9SUFFICI5T SUPPLY1 DRIV+ PRICES UP4 ,S9CE1 H[EV]1 9 ?IS VIEW IT IS ! COMMODITY M>KET ?AT DET]M9ES PRICE =MATION1 LITTLE ATT5TION WAS PAID TO MONET>Y POLICY4 ,MONEY WAS SE5 M]ELY AS A VEIL CONCEAL+ REAL PROCESSES1 OBFUSCAT+ !M1 BUT ALT]+ LITTLE 9 !IR ESS5TIAL NATURE4 

,?IS !ORY WAS ALSO ACCOMPANI$ BY ! ILLUSION1 /ILL L+]+ TODAY1 ?AT ! QUANTITY ( MONEY 9 CIRCULATION 9 ! ECONOMY HAS AN IMPORTANT 9FLU5CE ON COMMODITY PRICES & ?AT PRICE /ABILITY DEP5DS ON AN EQUILIBRIUM BETWE5 ! QUANTITY ( MONEY & ! TOTAL VOLUME ( GOODS4 ,! MOD]N ADVOCATES ( ! QUANTITY !ORY ( MONEY ALSO ATTRIBUTE DEFLATION & 9FLATION TO A TOO SL[ OR TOO RAPID GR[? 9 ! SUPPLY ( MONEY1 & AS A REM$Y TO !SE ANOMALIES !Y PROPOSE ! CREATION ( MONEY ADJU/$ PROPORTIONALLY TO ACTUAL ECONOMIC GR[?4 

,?US 9 MONEY !ORY ! ECONOMIC CYCLE IS REPRES5T$ AS AN EXPANSION & CONTRACTION ( ! MONEY SUPPLY & ( CR$IT NOT COMM5SURATE ) ! REAL SITUATION4 ,BUT IT WAS EXPECT$ ?AT ! EQUILIBRIUM ME*ANISM ( ! M>KET W\LD ULTIMATELY /E] ?+S BACK TO NORMAL4 ,! CRISIS ( ! ?IRTIES1 H[EV]1 :I* SEEM$ TO HAVE TAK5 HOLD = GOOD1 PUT AN 5D ONCE & = ALL TO ANY NOTIONS ( SU* AN AUTOMATIC SELF-E/ABLI%+ EQUILIBRIUM4 ,9 ,KEYNES'S VIEW1 :I* DOM9AT$ B\RGEOIS ECONOMIC !ORY 9 ! YE>S ?AT FOLL[$1 ! LAWS ( ! M>KET W]E NO LONG] CAPABLE ( BR++ AB\T ECONOMIC EQUILIBRIUM ) FULL EMPLOYM5T4 ,A DEVELOP$ CAPITALI/ ECONOMY1 CLAIM$ ,KEYNES1 MADE = A DECL9E 9 EFFECTIVE DEM& & ) IT A FALL-(F 9 9VE/M5TS & GR[+ UNEMPLOYM5T4 ,AL?\< ?IS !ORY WAS DESIGN$ SPECIFICALLY TO EXPLA9 ECONOMIC /AGNATION DUR+ ! P]IOD BETWE5 ! TWO WORLD W>S1 IT WAS QUICKLY GIV5 UNIV]SAL /ATUS & REG>D$ AS ! LA/ WORD 9 ! SCI5CE ( ECONOMICS2 TO AVOID ! DEFLATION>Y /ATE ( ! DEPRESSION & TO RE/ORE ECONOMIC EQUILIBRIUM ) FULL EMPLOYM5T1 /ATE MEASURES W]E NE$$ TO /IMULATE OV]ALL DEM&4 

,C5TRAL MANIPULATION ( ! AM\NT ( MONEY 9 CIRCULATION & ( ! AM\NT ( CR$IT WAS NOT SUFFICI5T = SU* PURPOSES1 CLAIM$ ,KEYNES4 ,9/EAD1 FISCAL MEANS1 E4G41 DEFICIT F9ANC+ ( PUBLIC SP5D+ & ADJU/M5TS 9 ! EX*ANGE RATES1 W]E NE$$4 ,! 9FLATION>Y MONET>Y & FISCAL POLICIES ?AT SU* MEASURES 5TAIL$ W\LD PROVE TO BE :AT WAS NE$$ TO BEAT ! CRISIS4 ,H[EV]1 AN 9FLATION>Y C\RSE MU/ NOT LEAD TO A DEM& ?AT EXCE$$ :AT ! PRODUCTION CAPACITY C\LD SUPPLY4 ,IT MU/ COME TO A HALT :5 FULL EMPLOYM5T WAS A*IEV$ 9 A NEW PRICE EQUILIBRIUM4 

,EV]Y CAPITALI/ CRISIS1 NO MATT] :AT ITS IMPUT$ CAUSES1 MANIFE/S ITSELF 9 A DECL9+ ACCUMULATION ( CAPITAL4 ,! %>E ( SOCIAL PRODUCTION E>M>K$ = EXPANSION IS CONSID]ABLY R$UC$ OR EV5 FULLY ELIM9AT$1 CURTAIL+ TOTAL SOCIAL PRODUCTION 9 ! PROCESS4 ,SE5 FROM ! RE/RICT$ VIEW ( ! M>KET1 H[EV]1 ?IS PROCESS APPE>S AS OV]PRODUCTION ( GOODS OR 9SUFFICI5T DEM&4 ,! DEPRESSION ?AT RESULT$ WAS A DEFLATION>Y PROCESS :I* AFFECT$ BO? PRICES & PRODUCTION1 BUT :I* AT ! SAME TIME BR\<T AB\T SUB/ANTIAL *ANGES 9 ! ECONOMIC /RUCTURE & PREP>$ ! WAY = A NEW ECONOMIC BOOM4 ,! DEPRESSION BECAME AN 9/RUM5T = OV]COM+ ECONOMIC CRISIS1 & AL?\< NOT DELIB]ATELY 5C\RAG$1 IT WAS PASSIVELY ALL[$ TO RUN ITS C\RSE4 

,9FLATION IMPLI$ ! CREATION ( MONEY BY ! /ATE1 :I* IMPAIR$ ! PRICE ME*ANISM4 ,?IS WAS SE5 AS A VIOLATION ( ! LAWS ( ! M>KET1 CAUS$ NOT BY FACTORS 9H]5T 9 ! ECONOMIC SY/EM BUT BY AN >BITR>Y MONET>Y POLICY4 ,9FLATION WAS RESORT$ TO 9 ORD] TO F9ANCE W>S BEYOND :AT WAS POSSIBLE ) TAX REV5UE ALONE OR 9 ORD] TO ELIM9ATE EXCESS /ATE DEBTS & H5CE 9DEBT$NESS 9 G5]AL4 ,H[EV]1 9 ECONOMIC CRISIS SITUATIONS !RE HAD BE5 A G5]AL RELIANCE ON ! RE/ORATIVE EFFECTS ( DEFLATION>Y DEPRESSION UNTIL ! TW5TIE? C5TURY4 

,AS CAPITAL GREW IT CREAT$ OB/ACLES TO ITS [N FUR!R EXPANSION4 ,ITS P]IODIC CRISES BECAME MORE & MORE OPPRESSIVE & P]SI/$ LONG 5\< TO CREATE A REAL DANG] ?AT ! DEFLATION>Y PROCESS W\LD LEAD TO SOCIAL UPHEAVAL RA!R ?AN TO A NEW BOOM4 ,TO PREV5T ?IS FROM HAPP5+1 /ATE ECONOMIC 9T]V5TIONS W]E 9 ORD] 9 ! GREAT CRISIS ?AT FOLL[$ ! #aibi CRA%2 !IR !ORETICAL JU/IFICATION CAME LAT]4 ,?IS 9T]V5TIONI/ POLICY S\<T TO A*IEVE BY 9FLATION>Y MEANS :AT SEEM$ NO LONG] ATTA9ABLE BY DEFLATION>Y ME?ODS4 

,FOLL[+ TRADITIONAL !ORY1 ,KEYNES ASSUM$ ?AT ! 9T]E/ RATE WAS DEP5D5T ON ! QUANTITY ( MONEY 9 CIRCULATION4 ,AN 9CREASE 9 ! MONEY SUPPLY W\LD DECREASE ! 9T]E/ RATE & SPUR NEW 9VE/M5TS1 :I* 9 TURN W\LD 9CREASE EMPLOYM5T & RAISE PRICES & PR(ITS4 ,S9CE ! /ATE HAD ! P[] TO CREATE MORE MONEY1 IT WAS A MATT] ( GOV]NM5T DECISION :E!R ! WAY TO ECONOMIC RECOV]Y W\LD BE ?R\< L[] 9T]E/ RATES4 ,H[EV]1 ! PR(ITABILITY ( CAPITAL HAD ALREADY FALL5 SO F> ?AT EV5 A R$UCTION 9 9T]E/ RATES W\LD NOT BE SUFFICI5T /IMULUS NEW 9VE/M5TS4 ,IT W\LD !RE=E BE NECESS>Y TO MAKE UP = ! DEFECTIVE PRIVATE DEM& BY CREAT+ MORE PUBLIC DEM&4 ,H[EV]1 S9CE AN 9CREASE 9 PUBLIC SP5D+ BY WAY ( TAXATION W\LD CUT EV5 MORE 9TO ! PR(ITS ( ! PRIVATE SECTOR1 IT W\LD HAVE TO BE F9ANC$ ?R\< /ATE DEFICITS4 

,DEFICIT F9ANC+ W\LD 9CREASE ! AM\NT ( MONEY 9 CIRCULATION )\T NECESS>ILY LEAD+ TO 9FLATION4 ,! TE*NIQUE1 ( C\RSE1 WAS NOT TO PR9T MORE MONEY1 :I* W\LD DEPRECIATE ! CURR5CY1 BUT M]ELY TO EXP& /ATE CR$IT :I* W\LD ABSORB IDLE PRIVATE CAPITAL & F9ANCE ! 9CREAS$ PUBLIC DEM&4 ,?IS ADD$ DEM& W\LD1 IT WAS EXPECT$1 /IMULATE ! ECONOMY AS A :OLE SUFFICI5TLY TO BR+ IT \T ( ! DEPRESSION & 9TO A BOOM1 :I* 9 TURN W\LD 5L>GE ! /ATE'S TAX REV5UE TO SU* A DEGREE ?AT IT W\LD BE ABLE TO PAY (F ITS DEPRESSION 9CURR$ DEBTS 9 A NEW P]IOD ( PROSP]ITY4 

,9 ! LI<T ( B\RGEOIS ECONOMIC !ORY1 & ESPECIALLY ITS !ORY ( MONEY1 IT SEEM$ QUITE PLAUSIBLE ?AT BY 9CREAS+ ! MONEY SUPPLY & PUBLIC DEM& SIMULTANE\SLY1 AN 9T]RUPT$ PROCESS ( ACCUMULATION MI<T BE SET 9TO MOTION AGA94 ,! CO-ORD9AT$ EMPLOYM5T ( MONET>Y & FISCAL POLICIES W\LD NOT ONLY C\NT]ACT ! DEFLATION>Y TR5D ( ! CRISIS1 !Y W\LD 9 ADDITION 9ITIATE A NEW P]IOD ( UPSW+1 :I* AL?\< CONTA9+ 9FLATION>Y T5D5CIES1 NE$ NOT DEG5]ATE 9TO A REAL 9FLATION AS LONG AS UNUS$ MONEY & REAL CAPITAL W]E /ILL AVAILABLE4 ,! SPECT] ( 9FLATION W\LD LOOM ONLY IF A NEW DISPROPORTIONALITY >OSE BETWE5 ! MEANS ( PAYM5T & COMMODITY PRODUCTION4 ,BUT ?IS WAS A REAL POSSIBILITY ONLY :5 FULL EMPLOYM5T WAS REA*$1 & !N IT C\LD BE COMBAT$ BY /ATE-9ITIAT$ DEFLATION>Y POLICIES4 ,9 %ORT1 IT WAS IMAG9$ ?AT A !ORY & PRACTICAL POLICY HAD F9ALLY BE5 F\ND :I* W\LD PLACE ! ECONOMIC CYCLE UND] CONSCI\S /ATE CONTROL4 

,B\RGEOIS ECONOMICS BEG9S & 5DS ) M>KET RELATIONS1 & H5CE IT CAN ONLY OBLIQUELY T\* ON ! PRODUCTION PROCESSES UND]LY+ M>KET EV5TS4 ,!SE PROCESSES IT SEES AS BE+ DET]M9$ BY DEM&4 ,9 ,KEYNES'S !ORY IT IS A RELATIVELY DECL9+ DEM& = CONSUM] GOODS ?AT BR+S AB\T A DECREAS+ DEM& = CAPITAL GOODS4 ,UND] SU* CONDITIONS FUR!R 9VE/M5TS CAN ONLY R$UCE PR(ITS1 & = ?AT REASON !Y >E NOT MADE4 ,! WAY BACK TO FULL EMPLOYM5T W\LD REQUIRE1 FIR/1 IMPROV+ ! PR(IT RATE ( PRIVATE CAPITAL1 & SECOND1 FILL+ A *RONIC LACK ( 9VE/M5TS BY /AT$-9DUC$ PRODUCTION4 ,9 ! LI<T ( ! EXP]I5CE ( ! GREAT ECONOMIC CRISIS1 ! SECOND ( !SE MEASURES SEEM$ TO BE A PRECONDITION = ! FIR/1 AL?\< IT WAS /ILL NOT CLE> :E!R /ATE-9DUC$ DEM& WAS A TEMPOR>Y OR P]MAN5T NECESSITY 9 A MOD]N M>KET ECONOMY4 ,KEYNES HIMSELF ?\<T ?AT ! FUTURE ( CAPITALI/ ECONOMY DEP5D$ ON 9CREAS+ /ATE CONTROL4 

,9 ! B\RGEOIS CONCEPTION ! ECONOMY APPE>S AS A CIRCUL> PROCESS 9 :I* TOTAL 9COME MU/ EQUAL TOTAL EXP5DITURES4 ,IT WAS !RE=E IMMAT]IAL :AT SPECIFICALLY W5T 9TO TOTAL 9COME & TOTAL EXP5DITURES4 ,! SOCIAL DI/RIBUTION ( 9COME IS PRESUM$ TO BE DET]M9$ BY ! V>I\S CONTRIBUTIONS ( ! DIFF]5T FACTORS ( PRODUCTION TO TOTAL PRODUCTION4 ,S9CE1 H[EV]1 NOT ALL 9COME IS CONSUM$1 ! CYCLE CAN ONLY REALLY BE COMPLET$ :5 ! SAV$ 9COME IS RE9VE/$4 ,! UP%OT IS ?AT /ATE-9DUC$ PRODUCTION1 REG>DLESS ( :AT 5DS IT MAY S]VE1 IS ABLE TO R$UCE OR ELIM9ATE COMPLETELY ANY DISCREPANCY ?AT MAY >ISE BETWE5 TOTAL 9COME & TOTAL EXP5DITURE4 ,BUT ?IS REQUIRES ?AT ! /ATE BE GIV5 ! P[] TO DISPOSE ( ! SAV$ - BUT NOT 9VE/$ - CAPITAL4 ,9 ITS H&S MONEY CAPITAL ?AT WAS NOT BE+ US$ TO EXP& REAL CAPITAL C\LD RE/ORE EQUILIBRIUM TO ECONOMIC CYCLE4 

,) ?IS CONCEPTION ! B\RGEOIS WORLD DEPRIVES ITSELF ( ANY REALI/IC 9SI<T 9TO ! ECONOMIC PROCESS 9 G5]AL & 9TO ! PROBLEM ( 9FLATION 9 P>TICUL>4 ,JU/ AS IT DOES NOT DI/+UI% BETWE5 SOCIAL PRODUCTION AS SU* & SPECIFIC CAPITALI/ PRODUCTION1 SO TOO IT DOES NOT DI/+UI% BETWE5 PRODUCTIVE & UNPRODUCTIVE CAPITALI/ PRODUCTION4 ,ANY K9D ( PRODUCTION = :I* !RE IS A DEM& ON ! M>KET 5JOYS EQUAL /ATUS AS F> AS IT IS CONC]N$1 & ANY K9D ( DEM& APPE>+ ON ! M>KET F9DS ITS MAT* 9 PRODUCTION4 ,IT DOES NOT DI/+UI%1 !RE=E1 BETWE5 DEM& CREAT$ BY CAPITALI/ PRODUCTION = PR(IT & DEM& CREAT$ BY PUBLIC SP5D+4 ,! LATT]1 TOO1 IS A DEM& ?AT PRIVATE CAPITAL CAN MEET ) AN ADEQUATE SUPPLY & REAP ! PR(ITS ACCRU+ !REFROM4 ,! GR[+ /ATE DEBT ASIDE1 ! ECONOMY IS REVIV$ BY ! 9CREAS$ PUBLIC DEM&1 :I* 9 TURN HAS A POSITIVE 9FLU5CE ON PRIVATE M>KET DEM&4 ,! GR[+ AM\NT ( MONEY 9 CIRCULATION & EXP&+ 9COME >E BALANC$ BY AN UNDIFF]5TIAT$ & EXP&+ PRODUCTION ON ! EXP5DITURE SIDE ( ! L$G]1 :I* C\LD P>TLY OR :OLLY ELIM9ATE UNEMPLOYM5T4 

,! ONLY VULN]ABLE PO9T 9 ?IS DESCRIPTION ( EV5TS WAS ! GR[+ PUBLIC DEBT2 = ?IS !RE IS NO EQUIVAL5T 9 ! PRODUCTION SPH]E1 S9CE ! ADDITIONAL GOV]NM5T DEM& CONSI/S ( GOODS & S]VICES ?AT 5T] PUBLIC CONSUMPTION & !RE) IMP$E ! EXPANSION ( REAL CAPITAL 9 PROPORTION TO !IR MAGNITUDE4 ,! M]E EXPANSION ( PRODUCTION )\T A PROPORTIONAL 9CREASE 9 PR(IT IS EQUIVAL5T TO A P>TIAL DE/RUCTION ( CAPITAL1 S9CE SOME ( ! CAPITAL US$ CEASES TO BE PRODUCTIVE1 I4E41 CEASES TO PRODUCE ADDITIONAL CAPITAL4 

,! 9ABILITY1 :E!R CONSCI\S OR UNCONSCI\S1 ( B\RGEOIS ECONOMIC !ORY TO UND]/& ?IS PO9T =CES IT TO 5T]TA9 ! UNGR\ND$ & EMPIRICALLY UNV]IFIABLE EXPECTATION ?AT ! ACCEL]ATION PR9CIPLE1 AS IT IS CALL$1 & ! MULTIPLI] EFFECT ( NEW 9VE/M5TS CAN BR+ AB\T ! DESIR$ ECONOMIC REVIVAL 9 :I* TOTAL PRODUCTION WILL GR[ MORE RAPIDLY RELATIVE TO /ATE-9DUC$ PRODUCTION1 SO AS ULTIMATELY TO BR+ /ATE-9DUC$ DEM& BACK D[N TO ITS NORMAL LEVEL4 ,9 ANY EV5T1 ! GR[+ PUBLIC DEBT 5TAIL$ NO RISKS AS LONG AS TOTAL PRODUCTION 9CREAS$ MORE RAPIDLY ?AN DID ! PUBLIC DEBT4 

,9 CONTRA/ TO ! AUTONOM\S EXPANSION ( CAPITAL1 H[EV]1 /ATE-9DUC$ EXPANSION ( TOTAL PRODUCTION IS *>ACT]IZ$ BY ! FACT ?AT A PORTION ( ! PR(ITS ON :I* IT IS BAS$ D]IVES FROM PUBLIC LOANS RA!R ?AN FROM 9CREAS$ PRODUCTION4 

,IF ?IS K9D ( ECONOMIC PUMP PRIM+ HAS BECOME A NECESSITY1 IT IS /ILL LIMIT$ BY ! LIMITATIONS ( /ATE CR$IT4 ,AS /ATE-9DUC$ PRODUCTION GOES 9TO PUBLIC CONSUMPTION1 IT CANNOT S]VE ACCUMULATION2 & AS ! PR(ITS ACCRU+ TO PRIVATE CAPITAL FROM /ATE LOANS >E NOT NEWLY CREAT$ BUT M]ELY REPRES5T ALREADY EXI/+ MONEY CAPITAL1 ONLY ! %>E ( TOTAL PR(ITS OBTA9$ 9 ! PRIVATE SECTOR IS AVAILABLE = CAPITAL ACCUMULATION4 ,NOT ONLY IS ! PR(IT ACCRU+ TO PRIVATE CAPITAL FROM /ATE-9DUC$ PRODUCTION A P>T ( TOTAL PRODUCTION1 BUT ! %>E ( TOTAL PRODUCTION ?AT APPE>S TO G5]ATE ?IS PR(IT IS ALSO LO/ TO CAPITALI/ ACCUMULATION BY BE+ ALLOCAT$ TO PUBLIC CONSUMPTION4 

,?US PUBLIC SP5D+ MEANS A GR[+ PUBLIC DEBT1 :I* ULTIMATELY CAN ONLY BE F9ANC$ & PAID (F BY PR(IT-CREAT+ CAPITAL4 ,! PR(ITS ( E>LI] PRODUCTION P]IODS1 :I* 9 ! /]ILE =M ( MONEY CAPITAL HAVE LO/ !IR FUNCTION AS CAPITAL1 >E EAT5 UP BY /ATE-9DUC$ PRODUCTION & APPE> TO ! 5TREPR5EURS & CR$ITORS 5GAG$ 9 /ATE-9DUC$ PRODUCTION AS PR(ITS & 9T]E/4 ,?IS PROCESS IS BO? REAL & ILLUSORY4 ,IT IS REAL = 9DIVIDUAL CAPITALS BUT ILLUSORY FROM ! /&PO9T ( ! SOCIAL CAPITAL1 S9CE ! PR(ITS ?AT FALL TO ! 9DIVIDUAL PRODUC] DO NOT [E !IR EXI/5CE TO PRODUCTION ITSELF BUT TO ! CONSUMPTION ( MONEY CAPITAL PLAC$ AT ! DISPOSAL ( ! /ATE4 ,?US 9 B\RGEOIS !ORY ! ELIM9ATION ( A /ATE BUDGET DEFICIT IS FEASIBLE ONLY ON ! EXPECTATION ( SOME FUTURE SURPLUS1 I4E41 A PROSP]ITY ?AT W\LD ALL[ ! /ATE DEBT TO BE PAID (F4 ,?IS W\LD REQUIRE FUTURE PR(ITS ?AT MU/ NOT ONLY BE ADEQUATE TO ! FUR!R DEM&S ( ACCUMULATION BUT1 9 ADDITION1 L>GE 5\< TO REPLACE ! MONEY CAPITAL US$ UP 9 PUBLIC CONSUMPTION4 ,IF ?IS CAPITAL IS NOT REPLAC$1 IT W\LD MEAN ?AT SOME CAPITAL HAD BE5 EXPROPRIAT$ BY ! /ATE = PUBLIC 5DS4 ,FROM ! /&PO9T ( CAPITAL AS A :OLE1 ?IS W\LD MEAN ?AT SOME EXI/+ CAPITAL HAD BE5 SWALL[$ UP BY ! CRISIS1 & /ATE DEFICIT F9ANC+ W\LD !RE=E HAVE A*IEV$ ! SAME RESULT AS CAPITAL DE/RUCTION A*IEV$ BY DEFLATION>Y DEPRESSIONS 9 ! PA/4 

,9 CONTRA/ TO DEFLATION>Y DEPRESSION1 H[EV]1 ?IS PROCESS APPE>S \TW>DLY AS EXP&+ PRODUCTION ,! MORE PRODUCTION EXP&S1 ! MORE MU/ ! PR(ITABILITY ( CAPITAL BE BACK$ UP BY /ATE DEFICITS1 I4E41 BY MORE LOANS4 ,BUT S9CE IDLE MONEY CAPITAL IS A GIV5 F9ITE MAGNITUDE1 ! PROCESS BREAKS D[N AT ! PO9T :]E ! /ATE MU/ BE REFUS$ FUR!R LOANS4 ,AT ?IS PO9T ! PROCESS C\LD BE CONT9U$ ONLY ?R\< AN >BITR>Y PROLIF]ATION ( PAP] MONEY1 UNTIL IT F9ALLY ]UPT$ 9TO OP5 9FLATION4 

,DEFICIT F9ANC+ IS ALSO AN 9FLATION>Y PROCESS1 AL?\< IT CAN BE HELD 9 *ECK BY ! LIMITATIONS IMPOS$ ON ! /ATE DEBT4 ,IT IS 9FLATION>Y BECAUSE ! SOCIAL PR(IT CORRESPONDS TO AN 9CREAS$ PRODUCTION ONLY APP>5TLY2 9 REALITY IT IS 9SUFFICI5T4 ,CAPITAL ?AT LIES IDLE BECAUSE ( 9SUFFICI5T PR(ITABILITY 5T]S CAPITAL CIRCULATION ?R\< ! MONET>Y EFFECTS ( ! PUBLIC DEBT1 :]E IT HELPS TO EXP& PRODUCTION1 BUT NOT PR(ITS1 PROPORTIONATELY4 ,9 RELATION TO ! TOTAL CAPITAL1 ( :I* MONEY CAPITAL IS A P>T1 ! 9CREAS$ AM\NT ( MONEY 9 CIRCULATION /&S 9 CONTRA/ TO A PR(IT MASS \T ( PROPORTION TO IT1 S9CE A PORTION ( ACCRU$ PR(ITS D]IVES NOT FROM PRODUCTION BUT FROM A TRANSF] ( ALREADY EXI/+ CAPITAL TO ! PR(ITS COLUMN4 

,S9CE1 H[EV]1 CAPITALI/ ECONOMY IS PRODUCTION = PR(IT1 :I* MU/ BE MEASUR$ 9 T]MS ( TOTAL CAPITAL & MU/ BE ADEQUATE TO ! NE$S ( CAPITAL ACCUMULATION1 = ! 9DIVIDUAL CAPITALS ! DISCREPANCY BETWE5 EXP&$ TOTAL PRODUCTION & ! TOTAL PR(ITS ACTUALLY PRODUC$ MANIFE/S ITSELF AS A FALL 9 ! RATE ( PR(IT1 :I*1 H[EV]1 CAN BE (FSET BY COMM5SURATE PRICE 9CREASES AS LONG AS PRODUCTION IS EXP&+ & COMPETITION IS H5CE NOT AS %>P4 ,:ILE NEI!R PR(IT NOR 9T]E/ ACCRUES FROM /ATE 9VE/M5TS1 AS A P>T ( TOTAL PRODUCTION1 ! 9DIVIDUAL CAPITALS1 P>TICIPAT+ 9 /ATE-9DUC$ PRODUCTION1 DO YIELD BO?2 ?IS CONTRADICTION RESOLVES ITSELF1 ON ! ONE H&1 ?R\< A DIFF]5T R$I/RIBUTION ( TOTAL PR(ITS AMONG 9DIVIDUAL CAPITALS1 & ON ! O!R H& - 9S(> AS ! COMPETITIVE AV]AG+ ( RATE ( PR(IT /ILL ASS]TS ITSELF - ?R\< A FALL 9 ! G5]AL RATE ( PR(IT1 :I* !N IS (FSET BY RIS+ PRICES4 ,! SOCIAL CO/S ( /ATE-9DUC$ PRODUCTION >E !N DI/RIBUT$ OV] ! POPULATION AT L>GE 9 ! =M ( PRICE 9FLATION4 

,! RISE 9 COMMODITY PRICES OCCURR+ H& 9 H& ) EXP&+ PRODUCTION IS ?US ! CAPITALI/ RESPONSE TO ! PRESSURE PUT ON ! G5]AL RATE ( PR(IT BY /ATE-9DUC$ DEM&4 ,/ATE 9T]V5TION IS1 ( C\RSE1 ITSELF A CRISIS PH5OM5ON & W\LD NOT OCCUR W]E CAPITAL CAPABLE ( EXP&+ ON ITS [N4 ,BUT LIKE ! CRISIS ITSELF1 ?IS 0CRISIS SOLUTION0 IS M>K$ BY ! R$UCTION ( PR(ITS1 AL?\< IT MANIFE/S ITSELF 9 RIS+1 NOT FALL+1 PRICES4 

,IF AN 0EXCESS0 ( CAPITAL UNABLE TO F9D PR(ITABLE EMPLOYM5T APPE>S AS A G5]AL %ORTAGE ( MONEY1 & H5CE AS DEFICI5T DEM&1 !N PR(ITS FALL ALONG ) COMMODITY PRICES4 ,! FALL 9 PRICES CAN BE >RE/$ & ITS C\RSE REV]S$ BY /ATE 9T]V5TIONS4 ,9 ! PA/ ! APPROA* WAS TO R$UCE SUPPLY1 I4E41 USE-VALUES W]E NOT PRODUC$ OR W]E SIMPLY DE/ROY$4 ,H[EV]1 S9CE IT IS NOT SUPPLY & DEM& :I*1 ALONG ) PRICES1 DET]M9ES ! LEVEL ( PR(ITS1 !SE MEASURES PROV$ 9EFFECTIVE4 ,! PROBLEM HAD TO BE TACKL$ FROM ! PR(IT SIDE4 

,AT ANY PRICE LEVEL 5T]PRISE PR(ITS REPRES5T ! DIFF]5CE BETWE5 CO/S & M>KET PRICES4 ,EV]Y FIRM SEEKS TO R$UCE CO/S TO MA9TA9 ITS PR(ITS4 ,! CO/S A FIRM CAN 9FLU5CE DIRECTLY >E ! CO/S ( WAGES3 IT MAY SIMPLY L[] !M1 OR IT MAY TRY TO IMPROVE ! PRODUCTIVITY ( LABOR4 ,! MAGNITUDE ( ! AV]AGE RATE ( PR(IT IS DET]M9$ BY ! TOTAL SURPLUS VALUE CREAT$ BY LABOR 9 RELATION TO TOTAL CAPITAL4 ,A CRISIS IMPLIES A DECL9E 9 ! G5]AL RATE ( PR(IT1 :I* = ! TIME BE+ R5D]S ! FUR!R GR[? ( TOTAL CAPITAL 9ADMISSIBLE4 ,UND] SU* CONDITIONS EV]Y 5T]PRISE 9T5SIFIES ITS EF=TS TO MA9TA91 & :]E POSSIBLE TO 9CREASE1 ITS PR(ITS BY R$UC+ CO/S4 ,?IS %>P5S COMPETITION1 :I* 9 TURN FUR!R OB/RUCTS RE/ORATION ( ! REQUIR$ LEVEL ( PR(ITABILITY & PROLONGS ! DEPRESSION & ! DE/RUCTION ( CAPITAL4 ,NONE!LESS1 EV5 AS CAPITAL AS A :OLE IS CONTRACT+1 ! /RIV+S ( 9DIVIDUAL CAPITAL 5TITIES BR+ AB\T AN EXPANSION1 IF AT A SL[] PACE1 ( TOTAL SURPLUS VALUE4 ,! L>G] MASS ( SURPLUS VALUE RELATIVE TO ! R$UC$ VALUE ( TOTAL CAPITAL RAISES ! RATE ( PR(IT1 & FUR!R ACCUMULATION BECOMES POSSIBLE4 ,FIRMS ?AT CANNOT 5L>GE !IR PR(ITS /& ON ! BR9K ( BANKRUPTCY4 ,ON ! O!R H&1 SURVIV+ CAPITAL 5TITIES HAVE A BROAD] FIELD OV] :I* TO RANGE4 ,?IS PROCESS EFFECTIVELY AM\NTS TO ! CONC5TRATION ( CAPITAL & IS ITSELF AN 9/RUM5T = EXP&+ PR(ITS4 

,!SE SO-CALL$ MICROECONOMIC *ANGES HAVE !IR REP]CUSSIONS AT ! MACROECONOMIC LEVEL1 & ?R\< ! 9/RUM5TALITY ( CRISIS !Y RE/ORE ! PR(IT RATES NE$$ = FUR!R CAPITAL ACCUMULATION4 ,IF ?IS W]E NOT SO1 ! CRISIS CYCLE W\LD BE 9COMPREH5SIBLE4 ,/ATE 9T]V5TIONS 9TO ! ECONOMY1 ON ! O!R H&1 >E APPLI$ DIRECTLY TO ! MACROECONOMIC LEVEL1 TO F9D A %ORTCUT TO ! SL[-PAC$ REGULATORY RESULTS ( ! MICRO-ECONOMIC PROCESS4 ,!IR AIM1 TOO1 IS TO 9CREASE PR(ITS1 BUT !Y HOPE TO A*IEVE ?IS ?R\< ! CIRCULATION PROCESS4 ,KEYNES HIMSELF SAW ?AT TO R$UCE WAGES BY 9FLATION>Y MEANS WAS NOT ONLY EASI]1 IT C\LD ALSO BE ACCOMPLI%$ MORE G5]ALLY ?AN IF ONE HAD TO RELY ON ! 9DEP5D5T ACTION ( NUMB]LESS 9DIVIDUAL FIRMS4 

,A G5]AL PRICE RISE1 ALONG ) A SL[] RISE 9 WAGES1 MU/ 9CREASE PR(ITS SO LONG AS AT ! SAME TIME ! G5]AL DEM& IS ALSO 9CREAS$ ?R\< DEFICIT F9ANC+ ( PUBLIC SP5D+4 ,)\T ?IS LA/ MEASURE1 DESIGN$ TO BLUNT ! $GE ( COMPETITION1 ! WAGE R$UCTIONS MI<T READILY PROVE TO BE UNSATISFACTORY & ! ECONOMIC P9* GR[ WORSE4 

,O!RWISE COMMODITIES 79CLUD+ LABOR P[]7 W\LD ONLY BE TAGG$ ) HI<] PRICES )\T ! PR(ITABILITY ( CAPITAL HAV+ BE5 *ANG$ 9 ! LEA/4 ,S9CE1 H[EV]1 NOT ALL COMMODITY PRICES RISE AT A UNI=M RATE1 & MOREOV]1 IT IS EXTREMELY DIFFICULT IF NOT IMPOSSIBLE = ! PRICE ( LABOR P[] TO KEEP PACE ) ! G5]AL PRICE RISES1 PRICE 9FLATION ULTIMATELY RESULTS 9 AN IMPROVEM5T 9 CAPITALI/ PR(ITABILITY4 

,?US BY MEANS ( AN 9FLATION>Y MONEY & PRIC+ POLICY1 BO? PRODUCTION & 9COME DI/RIBUTION >E MODIFI$1 BECAUSE ! RATIO ( WAGES TO PR(ITS %IFTS 9 FAVOR ( ! LATT]4 ,?IS IS CONTROLL$ 9FLATION :5 ! DET]M9ATION & LIMITATION ( ! AM\NT ( MONEY 9 CIRCULATION IS LEFT TO ! DISCRETION ( ! /ATE4 ,CONTROLL$ 9FLATION1 ORIG9ALLY CONCEIV$ AS A MEANS TO GET ?R\< A CRISIS1 SOON BECAME1 AT LEA/ = ECONOMI/S1 A PRECONDITION = ECONOMIC GR[? AS SU*4 ,EV5 IF A /EADY /ATE ( FULL EMPLOYM5T W]E A*IEV$1 DEM& C\LD BE FUR!R EXP&$1 !Y SAID1 BY A 0DAMP5$ 9FLATION10 ) ! EFFECT ?AT DEBTS W\LD SUFF] A /EADY DEVALUATION1 !REBY SPURR+ 9VE/M5T4 

,! ,5GLI% ECONOMI/ ,PHILLIPS UND]TOOK SOME /ATI/ICAL 9VE/IGATIONS 9 AN ATTEMPT TO DEMON/RATE ?AT A CLOSE EMPIRICAL CORRELATION EXI/$ BETWE5 ! EMPLOYM5T LEVEL & 9FLATION2 ! RESULT ( HIS EF=TS SUBSEQU5TLY BECAME ONE ( ! BULW>KS ( B\RGEOIS ECONOMIC !ORY UND] ! NAME ( ! ,PHILLIPS CURVE4.<#a.> ,?IS CURVE %[S ?AT A RIS+ LEVEL ( EMPLOYM5T WAS ALWAYS ACCOMPANI$ BY A RISE 9 PRICES1 :ILE GR[+ UNEMPLOYM5T WAS ACCOMPANI$ BY A PRICE DECL9E4 ,?US IT SEEM$ ?AT FULL EMPLOYM5T W5T H& 9 H& ) 9FLATION4 ,S9CE ! EMPLOYM5T LEVEL DEP5D$ ON DEM&1 IT W\LD FOLL[ ?AT 9FLATION WAS A CONSEQU5CE ( RIS+ DEM&1 :I* DRIVES PRICES1 ALONG ) WAGES1 UPW>D4 ,DEM&-9DUC$ OR WAGE 9FLATION W\LD RULE \T FULL EMPLOYM5T ) PRICE /ABILITY1 AL?\< IT %\LD ALL[ ! OPTION BETWE5 COMBAT+ 9FLATION BY MEANS ( UNEMPLOYM5T OR COMBAT+ UNEMPLOYM5T BY MEANS ( 9FLATION4 

,AL?\< ! SIGNIFICANCE ( !SE QUE/IONABLE /ATI/ICAL F9D+S1 = :I* NO !ORY WAS EV] (F]$ 9 EXPLANATION1 WAS DISPUT$1 !Y DID1 H[EV]1 (F] A DEMON/RATION1 IF A SOME:AT TR\BL$ ONE1 ( ! EFFICACY ( /ATE ECONOMIC CONTROLS4 ,! GOAL WAS NO LONG] ECONOMIC EQUILIBRIUM ) PRICE /ABILITY BUT ! RE/ORATION ( AN 09FLATION>Y EQUILIBRIUM0 9 :I* 9FLATION RODE ! BACK ( FULL EMPLOYM5T4 

,/ILL ECONOMI/S CONSID]$ ! SOCIAL CO/S !REBY 9CURR$ TO BE A SMALL PRICE TO PAY = A GR[+1 FULL-EMPLOYM5T ECONOMY1 ESPECIALLY IF 9FLATION C\LD BE KEPT )9 SOCIALLY OPTIMUM B\NDS BY SKILLFUL MANIPULATION ( ! LABOR M>KET4 ,IT C\LD NOT1 H[EV]1 BE DET]M9$ :E!R ! WAGE 9CREASES ?AT W]E SO EVID5T A P>T ( PROSP]ITY W]E MAT*$ BY PRICE RISES4 ,BUT NO /ATI/ICAL DEMON/RATION IS NE$$ TO %[ ?AT WAGES IMPROVE AS ! DEM& = LABOR 9CREASES4 ,WAGE 9CREASES1 H[EV]1 >E KEPT )9 LIMITS BY ! 9DU/RIAL RES]VE >MY1 :I* NEV] COMPLETELY DISAPPE>S1 & BY ! NE$ = ADEQUATE PR(ITABILITY - AN 9DISP5SABLE CONDITION = ACCUMULATION & H5CE = A RIS+ DEM& = LABOR4 ,! SIMPLE FACT ?AT CAPITAL ACCUMULATION WILL TAKE PLACE DUR+ A P]IOD ( PROSP]ITY IS PRO( 9 ITSELF ?AT CAPITAL HAS MA9TA9$ ITS PR(ITABILITY DESPITE RIS+ WAGES4 

,AN ECONOMIC BOOM NOT ONLY DRIVES PRICES UP1 IT ALSO IMPROVES ! PRODUCTIVITY ( LABOR1 :I* ACTUALLY %\LD L[] PRICES4 ,ACCORD+ TO B\RGEOIS !ORY1 UND] CONDITIONS ( G5]AL COMPETITION1 IF PRODUCTION CO/S >E R$UC$1 PRICES1 9CLUD+ ! PRICE ( LABOR1 %\LD FALL AS WELL1 )\T REAL WAGES NECESS>ILY BE+ DIM9I%$ 9 LIKE MEASURE4 ,MORE CONSUM] GOODS %\LD MEAN L[] PRICES1 SO ?AT1 AL?\< MONEY WAGES %\LD DECL9E1 BUY+ P[] W\LD REMA9 9TACT4 ,IF WAGES DID NOT DECL9E1 OR IF !Y DECL9$ MORE SL[LY ?AN ! G5]AL PRICE LEVEL1 ?IS W\LD BE AT ! EXP5SE ( O!R FACTORS ( PRODUCTION4 ,BUT !N ECONOMIC EQUILIBRIUM1 SUPPOS$LY SU/A9$ BY ! PRICE ME*ANISM1 W\LD BE UPSET1 & EI!R WAGES W\LD HAVE TO BE =C$ D[NW>D OR ! PRICES ( GOODS RAIS$ TO RE/ORE IT4 ,9 ?IS VIEW1 !RE=E1 PRICE 9FLATION IS ULTIMATELY ! RESULT ( A FAULTY WAGE POLICY4 

,BUT ! ILLUSION ( A PRIC+ ME*ANISM KEPT 9 EQUILIBRIUM BY G5]AL COMPETITION WAS SOON DISC>D$1 TO BE REPLAC$ 9 ! B\RGEOIS CAMP BY !ORIES ( MONOPOLY PRICE FIX+ & /ATE 9T]V5TION4 ,YET MONOPOLIES !MSELVES W]E HELD ONLY P>TLY TO BLAME = MONOPOLI/IC PRICE =MATION1 NAMELY1 :]E PRICE FIX+ EXCE$$ ! AV]AGE LEVEL ( PR(IT4 ,BUT BECAUSE MONOPOLIES W]E ABLE TO REAP EXCESS PR(ITS ?R\< PRICE FIX+1 !Y C\LD ALSO AF=D TO ACCEPT MONOPOLI/ICALLY FIX$ WAGES1 :I* 9CREAS$ CO/S4 ,9 ?IS WAY MONOPOLY CAPITAL & MONOPOLIZ$ LABOR WORK$ TOGE!R TO DRIVE PRICES UP4 ,ONCE ?IS DEM&1 WAGE1 OR CO/-9DUC$ 9FLATION HAD TAK5 ROOT1 IT W\LD ACCEL]ATE /EADILY UNLESS IT WAS >RE/$ BY /ATE 9T]V5TION4 ,! ANSW] TO 9FLATION WAS ?US A PRICE & WAGE POLICY ?AT W\LD RE/ORE /ABILITY4 

,/ATE CONTROL ( PRICES & WAGES C\LD1 AT LEA/ 9 !ORY1 CURB 9FLATION )\T !REBY RELIEV+ ! CONDITIONS ?AT HAD L$ TO 9FLATION4 ,= IF CAPITAL IS TO HAVE A FREE H& TO EXP& ITSELF1 IT MU/ HAVE SUFFICI5T PR(ITS4 ,9 A MONOPOLY-DOM9AT$ CAPITALI/ ECONOMY1 CAPITAL ACCUMULATION MU/ TAKE PLACE ?R\< ! MONOPOLIES4 ,MONOPOLY PR(ITS REFLECT ! NE$ = PR(ITS HI<] ?AN ?OSE OBTA9$ UND] CONDITIONS ( COMPETITION4 ,MONOPOLIES >E ! \TGR[? ( PROGRESSIVE CONC5TRATION & C5TRALIZATION ( CAPITAL ?R\< COMPETITION1 BUT NEI!R !Y NOR COMPETITION CAN ALT] ! GIV5 MASS ( PR(IT4 ,NEI!R =M ( COMPETITION1 MONOPOLY OR PURE1 DOES MORE ?AN DI/RIBUTE TOTAL SOCIAL PR(IT4 ,A PRICE & WAGE POLICY ?AT MADE MONOPOLI/IC PR(IT IMPOSSIBLE W\LD ALSO UND]M9E CAPITAL ACCUMULATION4 

,MONOPOLY PR(ITS COME FROM CIRCULATION1 NOT FROM PRODUCTION4 ,( C\RSE1 CAPITALI/ EXCESS PR(ITS COME FROM PROCESSES 9 PRODUCTION SPH]E AS WELL1 :5 !RE IS AN ABOVE-AV]AGE RISE 9 LABOR PRODUCTIVITY2 ! R$UC$ CO/S !N 5ABLE FIRMS TO E>N HI<] ?AN AV]AGE PR(ITS ON !IR PRODUCTS4 ,BUT ?IS =M ( EXCESS PR(ITS IS ONLY TEMPOR>Y & DISAPPE>S AGA9 :5 ! IMPROV$ PRODUCTION ME?ODS BECOME MORE G5]AL4 ,MONOPOLY PR(IT DIFF]S FROM ?IS =M ( CONT9UALLY VANI%+ & REAPPE>+ EXCESS PR(IT 9 ?AT UND] MONOPOLY1 COMPETITION HAS BE5 L>GELY ABOLI%$4 ,A MONOPOLY PR(IT RATE IS A*IEV$ ?R\< CONTROL ( PRICES4 ,9 ORD]1 H[EV]1 = PR(ITS TO MULTIPLY ( !MSELVES1 ! PRODUCTION RELATIONS BETWE5 VALUES & SURPLUS VALUE MU/ %IFT 9 FAVOR ( ! LATT]4 ,PR(ITS MU/ BE PRODUC$1 & IT IS ONLY  ?OSE  PR(ITS ACTUAL  PRODUC$ ?AT DET]M9E CAPITAL ACCUMULATION & ACCORD+LY  ! /ATE ( ! ECONOMY  9 G5]AL4 

,IF ! PROGRESSIVE MONOPOLIZATION ( CAPITAL IS A REFLECTION ( & RESPONSE TO ! 9CREAS+ PR(IT DIFFICULTIES ( ACCUMULATION1 IT IS CLE> ?AT ! P>TIAL ELIM9ATION ( COMPETITION CAN H>DLY BE EXPECT$ TO 9CREASE SOCIAL PR(IT4 ,MONOPOLY PR(ITS >E CREAT$ AT ! EXP5SE ( 9DIVIDUAL CAPITALS /ILL CAU<T UP 9 COMPETITION1 :I* =CES !M ALSO TO RAISE PRICES TO AVOID LOSSES4 ,?US ALL PRICES BECOME 9  A S5SE MORE OR LESS MONOPOLY PRICES1 AL?\< ! DEGREE TO :I* ?IS IS SO WILL V>Y WIDELY1 :I* 9DE$ PROVIDES ! :OLE PROCESS ) SOME 0S5SE02 NAMELY1 ! REAPPORTIONM5T ?AT IT EFFECTS 9 SOCIAL PRODUCTION 9 FAVOR ( CAPITAL EXPANSION4 ,NOR IS ANY ( ?IS CONTRADICT$ BY ! OBS]VATION1 (T5 HE>D1 ?AT MONOPOLIES IMP$E RA!R ?AN PROMOTE CAPITAL ACCUMULATION1 AS SUPPOS$LY EVID5C$ BY ALL ! IDLE PRODUCTION CAPACITY4 ,BUT ?IS >GUM5T SAYS NO MORE ?AN ?AT DUR+ P]IODS ( ECONOMIC /AGNATION1 MONOPOLIES /RIVE TO KEEP !MSELVES ALIVE AT ! EXP5SE ( WEAK] CAPITAL 5TITIES & AT ! EXP5SE ( ! POPULATION AT L>GE4 ,TO REPRODUCE ITSELF AS CAPITAL1 MONOPOLY CAPITAL MU/ ALSO ACCUMULATE2 & IT !RE=E 5DEAVORS1 ?R\< A MONOPOLI/IC PRICE POLICY1 TO EFFECT A FUR!R DIVISION ( PR(IT & WAGES 9 CIRCULATION TO ADD TO ! PRIM>Y SEP>ATION BETWE5 WAGES & PR(IT 9 ! PRODUCTION PROCESS4 

,AL?\< MONOPOLY PRICE =MATION MU/1 LIKE CAPITAL ACCUMULATION1 >RIVE AT A DEAD 5D1 IT HAS AT FIR/ SOME POSITIVE EFFECTS4 ,LIKE ! SPURI\S PR(ITS G5]AT$ BY PRODUCTION 9DUC$ BY PUBLIC SP5D+1 MONOPOLY PR(ITS /IMULATE ! ECONOMY PRECISELY BECAUSE !Y >E OBTA9$ BY ! R\NDAB\T WAY ( PRICE 9FLATION4 ,?US1 ON ! ONE H&1 WE HAVE /ATE-9DUC$ PRODUCTION1 & ON ! O!R1 ! NE$ TO PROMOTE CAPITAL ACCUMULATION BY WAY ( FUR!R MONOPOLIZATION3 9 EI!R CASE ! RESULT IS 9FLATION4 

,AFT] ,WORLD ,W> ,I,I B\RGEOIS ECONOMICS DELUD$ ITSELF ?AT IT NOT ONLY HAD DISCOV]$ ! SECRET ( CRISIS1 BUT ALSO ?AT IT POSSESS$ ! MEANS TO NIP ANY FUR!R CRISIS 9 ! BUD2 ! EXPANSION ( CAPITAL1 !RE=E1 :I* WAS TAK+ PLACE L>GELY ON ITS [N MOM5TUM1 C]TA9LY WAS NOT DESIGN$ TO UND]M9E ! CONVICTION ?AT ANY ECONOMIC RECESSION C\LD BE C\NT]M&$ ) ! PROV5 ANTI-CYCLICAL MEASURES4 ,?IS CONVICTION P]SI/$ UNTIL ! ADV5T ( DEFLATION>Y 9FLATION1 :]E GR[+ @& UNEMPLOYM5T WAS ACCOMPANI$ BY AN ACCEL]AT+ RATE ( 9FLATION4 

,! FIR/ RESPONSE TO ?IS SITUATION WAS ALMO/ AUTOMATIC3 ! ,KEYNESIAN TACTIC ( A WAGE FREEZE4 ,TOGE!R ) HI< 9T]E/ RATES1 ?IS FREEZE >TIFICIALLY MA9TA9$ PRICES1 R$UC$ ! PR(ITABILITY ( CAPITAL1 & H9D]$ ITS EXPANSION4 ,! FROZ5 WAGES ( DEPRESSION /OOD 9 CONTRA/ TO ! RIS+ WAGES ( ! 0FULL-EMPLOYM5T0 P]IOD1 :I* W]E BLAM$ = ! 0WAGE-PRICE SPIRAL40 ,IT HAD1 9DE$1 BE5 ACKN[L$G$ = SOME TIME ?AT FULL EMPLOYM5T C\LD HAVE 9FLATION>Y EFFECTS1 BUT !Y W]E1 IT WAS >GU$1 ! SIGNS ( PROSP]ITY & %\LD BE SE5 9 A POSITIVE LI<T4 ,?AT ?+S HAD ACTUALLY DEVELOP$ DIFF]5TLY WAS DUE NOT TO ! SY/EM ITSELF BUT TO FACTORS /EMM+ FROM \TSIDE IT1 NAMELY1 ! IRRATIONAL MANIA ( ! WORK]S TO GET MORE \T ( ! SY/EM ?AN WAS 9 IT4 

,?IS UND]/&ABLE & WIDESPREAD NONS5SE1.<#b.> :I* ( C\RSE FROM ! VIEWPO9T ( CAPITAL MAKES QUITE GOOD S5SE1 W\LD NOT EV5 BE WOR?Y ( SPECIAL COMM5T W]E IT NOT (T5 5C\NT]$ 9 SUPPOS$LY 0LEFTI/0 EXPLANATIONS ( ! CRISIS4.<#c.> ,UND] CONDITIONS ( FULL EMPLOYM5T1 :E!R BR\<T AB\T BY ! AUTONOM\S MOVEM5T ( CAPITAL OR BY /ATE-9DUC$ PRODUCTION1 OR BO? SIMULTANE\SLY1 IT IS OBVI\SLY MORE DIFFICULT TO CUT BACK WAGES OR PREV5T !IR RISE4 ,IT IS ALSO CLE> ?AT ! ORGANIZ$ WORK]S >E ABLE TO IMPROVE !IR WAGES ?R\< ECONOMIC /RUGGLES4 ,F9ALLY1 IT IS EVID5T ?AT UND] SU* CONDITIONS CAPITALI/S SEEK 9 SOME CASES TO AVOID CONFLICTS BY GRANT+ PAY RAISES1 :I* !Y CAN !N REC\P BY RAIS+ PRICES CORRESPOND+LY4 ,NOR IS !RE NE$ TO DISPUTE ?AT ! SUCCESSES ( ORGANIZ$ LABOR 9 ?IS DOMA9 ALSO (T5 5ABLE UNORGANIZ$ WORK]S TO IMPROVE !IR SITUATION AS WELL3 9 A P]IOD ( BOOM WAGES >E G5]ALLY ABLE TO FOLL[ PRICES UPW>D4 

,BUT 9 A P]IOD ( RECESSION PR(ITS DECL9E4 ,IF WAGES DO NOT FALL 9 PACE ) PR(ITS1 ! DEPRESSION DEEP5S4 ,TO GET \T ( DEPRESSION IT IS NOT 5\< TO BR+ ! FALL 9 WAGES 9 L9E ) ! FALL 9 PR(ITS2 PR(ITS MU/ BE AUGM5T$ AT ! EXP5SE ( WAGES4 ,9 ! PA/ 9 CRISIS SITUATIONS1 ! HEI<T5$ COMPETITION AMONG WORK]S = JOBS L$ TO A R$UCTION 9 WAGES4 ,! 9/ITUTIONALIZATION & MONOPOLIZATION ( ECONOMIC LABOR ORGANIZATIONS1 IT IS CLAIM$1 HAS N[ MADE ?IS IMPOSSIBLE4 ,= ! B\RGEOISIE1 EV5 ! DEF5SE ( EXI/+ WAGE LEVELS IS SUFFICI5T TO EXPLA9 BO? CRISIS & 9FLATION4 

,IT IS QUITE POSSIBLE & 9DE$ UND\BT$LY ALSO (T5 ! CASE1 ?AT A WAGE POLICY FAVORABLE TO CAPITAL CANNOT BE PUT ?R\<4 ,9 ANY EV5T1 B\RGEOIS /ATI/ICIANS HAVE NO DIFFICULTY PROV+ ?AT BO? MONEY WAGES & REAL WAGES 9CREAS$ & (T5 EXCE$$ ! 9CREASE 9 PRODUCTIVITY4 ,BUT O!R /ATI/ICS EXI/ AS WELL %[+ ?AT :AT WORK]S GA9 9 WAGES IS TAK5 FROM !M AGA9 LAT] 9 ! CIRCULATION PROCESS4.<#d.> ,:ATEV] ELSE SU* /ATI/ICS MAY MEAN1 !Y >E NO ACCEPTABLE EMPIRICAL DEMON/RATION ?AT 9FLATION IS DUE TO WAGES1 OR ?AT ! OPPOSITE IS ! CASE4 ,FIR/1 PRICE RELATIONS TELL US NO?+ AB\T ! VALUE & SURPLUS VALUE RELATIONS UND]LY+ !M2 YET 9 ! 5D !Y DET]M9E ! /ATE ( ! ECONOMY4 ,SECOND1 PR(ITS MAY ACTUALLY BE HI<] :5 WAGES >E ALSO UP ?AN :5 !Y >E L[ IF ! %>E ( SURPLUS VALUE 9 ! TOTAL VALUE ( PRODUCTION IS SUFFICI5TLY L>GE4 ,9DE$1 ?IS SURPLUS VALUE RE/S NOT ONLY ON ! EXTREMELY LIMIT$ /ATI/ICALLY DISC]NIBLE 9CREASE 9 LABOR PRODUCTIVITY1 IT ALSO DEP5DS ON ! TOTAL SURPLUS VALUE PRODUC$ ON A WORLD SCALE 9 PROPORTION TO WORLD CAPITAL AS TOTAL CAPITAL & = ?IS !RE >E NO /ATI/ICS AVAILABLE EV5 AP>T FROM !SE CONSID]ATIONS1 H[EV]1 ! V]Y EXI/5CE ( AN ECONOMIC BOOM DEMON/RATES ?AT H[EV] WAGES GO PR(ITS 9CREASE MORE RAPIDLY ?AN HE %>E ( LABOR 9 ! SOCIAL PRODUCT4 ,TRUE1 ! PO/W> BOOM WAS ACCOMPANI$ BY CREEP+1 ?\< UNEV51 9FLATION.<#e.> FROM ! V]Y \TSET ,BUT ! REASON = ?IS LAY NOT ) RIS+ WAGES :I* W5T BEYOND ! 9CREASE 9 LABOR PRODUCTIVITY1 BUT ) ! FACT ?AT ! BOOM & ITS CONT9U$ EXI/5CE W]E POSSIBLE ONLY  BECAUSE ( 9FLATION>Y PRICE POLICIES1 :I*1 MOREOV]1 HAD OV] A RELATIVELY LONG P]IOD ( TIME BE5 US$ LIB]ALLY & EFFECTIVELY TO MA9TA9 ! WAGE PR(IT RELATION NECESS>Y = ECONOMIC EXPANSION4 ,BUT :Y HAS ?IS ACCUMULATION P]IOD1 9 CONTRA/ TO E>LI] BOOMS1 BE5 SO CONSI/5TLY 9FLATION>Y8 ,9 ! ECONOMIC CYCLES ( ! PA/ C5TURY1 EV]Y CRISIS WAS PREC$$ BY ! 9FLATION>Y PH5OM5A ( A HEAT$ UP ECONOMY4 ,WAGES1 PRICES1 & 9T]E/ RATES ROSE4 ,A WIDE EXPANSION ( CR$IT CONCEAL$ A DECL9E 9 PR(ITABILITY ?AT HAD ALREADY BEGUN1 !REBY DELAY+ ! 5D ( ! BOOM4 

,9 O!R WORDS1 CAPITAL N[ 0ACCUMULATES10 ?\< PR(ITS >E 9ADEQUATE1 )\T ?IS AT FIR/ BE+ EVID5T [+ TO ! ME*ANISM ( ! /ATE DEBT4 ,!RE IS NO DIRECT PRESSURE TO R$UCE WAGES1 S9CE ! PR(ITABILITY ( CAPITAL CAN REMA9 AT A /EADY LEVEL EV5 AS WAGES RISE AS LONG AS AS DEM& IS SUFFICI5TLY 9FLAT$ BY /ATE-9DUC$ PRODUCTION4 

,IF CAPITAL W]E UNABLE TO 9CREASE ITS PR(ITABILITY ON ITS [N1 ! /ATE-9DUC$ UPSW+ W\LD SOON HAVE TO COME TO AN 5D4 ,AN AUTONOM\S EXPANSION ( PR(IT1 H[EV]1 IS POSSIBLE ONLY BY WAY '( AN 9CREASE 9 LABOR PRODUCTIVITY1 I4E41 A HI<] RATE ( EXPLOITATION ( LABOR1 :I* RELATIVELY DEPRECIATES LABOR'S VALUE4 ,AS ?IS IS DIFFICULT TO A*IEVE UND] FULL-EMPLOYM5T CONDITIONS1 CAPITAL ATTEMPTS TO OBTA9 ! PR(ITS IT REQUIRES = ACCUMULATION BY WAY ( PRICE =MATION4 ,! RESULT IS ! SAME3 A GR[+ %>E ( TOTAL PRODUCTION FALLS TO CAPITAL1 :ILE PROPORTIONATELY LESS GOES TO ! WORK =CE4 

,NOT ONLY DOES ! RELATION%IP BETWE5 WAGES & PR(ITS *ANGE1 ! DI/RIBUTION ( ! SOCIAL PRODUCT G5]ALLY %IFTS 9 FAVOR ( CAPITAL ACCUMULATION4 ,! SOCIAL LAY]S ) FIX$ 9COMES1 :I* F9D IT DIFFICULT1 IF NOT IMPOSSIBLE1 TO ADJU/ TO ! 9FLATION>Y TR5D1 MU/ GIVE UP MORE ( !IR 9COME TO CAPITAL4 ,! SAV+S ( ! 0LITTLE MAN0 >E EAT5 UP PROGRESSIVELY AS ! VALUE ( PRODUCTIVE CAPITAL RISES 9 PACE ) 9FLATION4 ,IT WAS ?IS PROCESS ( CREEP+ 9FLATION :I* CONTA9$ ! SECRET ( PROSP]ITY4 ,! DISADVANTAGES ( 9FLATION SEEM$ = ! TIME BE+ TO BE (FSET BY ! ADVANTAGES ( ECONOMIC BOOM4 

,AL?\< ! DEP5D5CE ( CAPITALI/ PROSP]ITY ON CAPITAL ACCUMULATION IS IMMAN5T TO ! SY/EM1 IT IS NOT RECOGNIZ$ BY B\RGEOIS ECONOMIC !ORY4 ,= B\RGEOIS ECONOMI/S 9FLATION IS CAUS$ BY A DEM& 9 EXCESS ( PRODUCTION1 OR EV5 BY ! IMMOD]ATE CLAIMS ( ! WORK]S1 AL?\< ! V]Y UNIV]SALITY ( 9FLATION IS A PAT5T CONTRADICTION ( ?IS VIEW2 9DE$1 9FLATION PLAGUES EV5 C\NTRIES ) EXTREMELY L[ WAGES1 :]E !RE IS NO MONOPOLY ( LABOR & :]E DEM& LAGS F> BEH9D SUPPLY4 ,9FLATION OCCURS 9 DEPRESSIONS1 :]E ONE W\LD EXPECT DEFLATION4 ,! 9T]NATIONAL *>ACT] ( 9FLATION IS PRO( 5\< ?AT 9FLATION 9VOLVES MORE ?AN M]ELY ! ]RATIC CONSEQU5CES ( HI< WAGES 9 A FEW C\NTRIES4 

,N[1 H[EV]1 ':5 9FLATION & CRISIS EXI/ SIDE BY SIDE 9 ! LEAD+ CAPITALI/ C\NTRIES1 ! CONT5TION ?AT 9FLATION IS A CONSEQU5CE ( FULL EMPLOYM5T & DEM& \T/RIPP+ SUPPLY IS NO LONG] T5ABLE4 ,! ONLY ?+ LEFT TO BLAME1 !RE=E1 IS HI< WAGES4 ,& DESPITE ALL ! MONOPOLIZATION ( LABOR1 OR P]HAPS EV5 BECAUSE ( IT1 ! B\RGEOISIE /ILL F9DS RIS+ UNEMPLOYM5T A GOOD TASKMA/]4 ,WAGE CONTRACTS1 (T5 LONG T]M1 HAVE ) A FEW UNIMPORTANT EXCEPTIONS MADE IT IMPOSSIBLE TO C\NT]ACT ! BURD5 ( /EEPLY RIS+ PRICES OR TO MAKE UP = PA/ OMISSIONS ?R\< WILDCAT /RIKES2 ALL ! MORE REASON1 !RE=E1 TO TAKE ADVANTAGE ( ! ALL-P]VASIVE DEPRESSION TO REAP 9FLATION>Y PR(ITS4 ,ONE MU/1 SO ONE HE>S 9 QUITE A NUMB] ( TRADE UNIONS1 FACE ! FACTS3 9FLATION EATS AWAY AT ANY WAGE RISE1 MAK+ CONT9U$ DEM&S MEAN+LESS4 ,:AT IS N[ NECESS>Y TO GET \T ( ! DEPRESSION IS A RESPONSIBLE WAGE POLICY1 I4E41 CAPITAL MU/ BE GIV5 ! *ANCE TO REGA9 ITS LO/ PR(ITABILITY4.<#f.> 

,IT IS ( C\RSE CLE> ?AT IF WAGES >E D[N1 PRICES CAN BE R$UC$2 BUT AL?\< POSSIBLE1 ?IS NE$ NOT BECOME A REALITY4 ,PRICES DEP5D ON O!R ?+S BESIDES 0M>KET RELATIONS0 & 0FACTOR CO/S10 E4G41 9DIRECT TAXES1 SUBSIDIES1 /ABILIZATION PROGRAMS1 & MONOPOLI/IC MANIPULATIONS4 ,EV5 :]E PRODUCTION IS /EADILY DECL9+1 :]E !RE IS MASS UNEMPLOYM5T1 & :]E WAGES >E AT />VATION LEVELS1 PRICES CAN /ILL CONT9UE TO CLIMB 9TO ! BLUE BEYOND2 & 9DE$ 9 ! PA/ !Y HAVE DONE SO1 ) ! ULTIMATE RESULT ?AT 9FLATION DEG5]ATES 9TO HYP]9FLATION4 ,EV5 BE=E 9FLATION GETS \T ( CONTROL1 DEPRESSION1 :I* DRIVES WAGE CO/S D[N1 IS NOT SUFFICI5T TO PUT AN 5D TO RIS+ PRICES4 ,9 ANY EV5T ! MO/ REC5T ANTI-9FLATION>Y POLICIES HAVE HAD V]Y DISAPPO9T+ RESULTS1 :I* MOREOV] >E ALL ! MORE QUE/IONABLE 9 TAT !Y HAVE L$ TO SITUATIONS COMPELL+ A REC\RSE TO 9FLATION TO KEEP ! SOCIAL FABRIC 9TACT4 

,/ATE DEFLATION>Y OR 9FLATION>Y POLICIES >E NOT MEASURES TO CONTROL ! ECONOMY SO MU* AS REACTIONS TO PROCESSES ?AT >E ALREADY BEYOND CONTROL4 ,! REAL DEVELOPM5T ( CAPITAL IS DET]M9$ BY ! LAW ( VALUE1 I4E41 CAPITAL PR(ITABILITY & CAPITAL ACCUMULATION4 ,/ATE 9T]V5TIONS >E AIM$ M]ELY AT SUP]FICIAL M>KET PH5OM5A :OSE ROOT CAUSES >E TO BE F\ND 9 ! PRODUCTION SPH]E1 ?AT IS1 9 PRODUCTION RELATIONS4 ,/ATE REACTIONS >E !RE=E JU/ AS BL9D AS !SE PROCESSES !MSELVES2 IF !Y CO9CIDE AT ALL ) ! EV5TS UND]LY+ DEVELOPM5TS ON ! M>KET1 IT IS BY PURE *ANCE4 

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g.> 

,?US ALL ! OLD DISPROV5 & DISCR$IT$ !ORIES >E REVIV$ TO EXPLA9 9FLATION & >E EXPECT$ TO PROVIDE ! KEY TO ITS SOLUTION4 ,! FACTS ( ! PRES5T 9FLATION MU/ BE COMPLETELY OV]LOOK$ 9 ! PROCESS1 H[EV]2 ?IS 9FLATION1 LIKE EA* ( ITS PR$ECESSORS1 IS NO ACCID5T BUT ! RESULT ( A QUITE DEF9ITE ECONOMIC POLICY4 ,9FLATION MU/ BE CREAT$1 EV5 IF UND] ! PRESSURE ( ECONOMIC & POLITICAL PROCESSES ?AT ORIG9ATE NOT 9 CONSCI\S ACTS BUT FROM A COMPULSIVE NE$ TO ACCUMULATE CAPITAL4 

,WORLD ,W> ,I DE/ROY$ ! CU/OM>Y WORLD M>KET RELATIONS AS WELL AS ! RELATIONS AMONG ! NATIONAL CURR5CIES1 :I* W]E BAS$ ON ! GOLD /&>D4 ,UND] ! GOLD /&>D FLUCTUATIONS 9 ! VALUE ( EA* 9DIVIDUAL CURR5CY W]E HELD )9 V]Y N>R[ LIMITS4 ,IF A NATION ELECT$ TO ADOPT 9FLATION>Y MEANS TO COMBAT AN ECONOMIC D[NTURN1 IT HAD TO FREE ITSELF FROM !SE RE/RICTIONS4 ,ONCE ! GOLD /&>D WAS AB&ON$1 A MONET>Y POLICY RELATIVELY 9DEP5D5T ( ! WORLD M>KET C\LD BE ADOPT$4 ,BUT 9FLATION REMA9$ )AL A NATIONAL AFFAIR ?AT C\LD BE DEALT ) OR NOT BY 9DIVIDUAL GOV]NM5TS AS !Y SAW FIT4 ,! DIFF]5T NATIONS HAVE ?US TRI$ TO SOLVE !IR PR(IT PROBLEMS 9 DIFF]5T WAYS1 & 9FLATION ACQUIR$ A DI/9CTLY 9T]NATIONAL *>ACT] ONLY AFT] ,WORLD ,W> ,I,I4 

,WORLD ,W> ,I,I PUT A TEMPOR>Y 5D TO CAPITAL ACCUMULATION4 ,HALF ( 9T]NATIONAL PRODUCTION WAS PRODUCTION = PUBLIC CONSUMPTION1 :I* DEV\R$ BO? M5 & MAT]IALS4 ,PR(ITS W]E WRITT5 AS /ATE DEBTS4 ,TO AVOID AN 9FLATION>Y SURGE1 RATION+ & =C$ SAV+ W]E ! POLICIES ADOPT$1 AL?\< ! RIGOR ) :I* SU* MEASURES W]E APPLI$ V>I$ FROM ONE BELLIG]5T C\NTRY TO ANO!R4 ,AT W>'S 5D ! WORLD WAS NOT ONLY A DIFF]5T PLACE1 IT WAS TOTALLY IMPOV]I%$4 ,ONLY ! ,UNIT$ ,/ATES1 :I* WAS ! LEA/ T\*$ BY ! RAVAGES ( W> & :I* EV5 BE=E ! W> HAD ALREADY ASSUM$ ! NUMB] ONE POSITION AMONG ! WORLD'S CAPITALI/ P[]S1 WAS ABLE TO RESUME ! ACCUMULATION PROCESS ON ! BASIS ( AN ESS5TIALLY UN*ANG$ CAPITAL /RUCTURE4 ,! O!R 9DU/RIAL C\NTRIES HAD TO RESUME AGA9 FROM A MU* L[] LEVEL & HAD TO GO ?R\< A LONG P]IOD ( ACCEL]AT$ ACCUMULATION BE=E !Y ONCE AGA9 REGA9$ !IR ABILITY TO COMPETE4 ,! RE/ORATION ( ! WORLD M>KET & ( CURR5CY CONV]TIBILITY =C$ A S]IES ( CURR5CY RE=MS1 (T5 QUITE RADICAL1 & ! ,BRETTON ,WOODS AGREEM5TS1 CONCLUD$ :ILE ! W> WAS /ILL 9 PROGRESS1 9TRODUC$ A MODIFI$ GOLD /&>D4 

,! PO/W> P]IOD WITNESS$ A GR[+ 9T]NATIONALIZATION ( CAPITALI/ PRODUCTION1 :I* PICK$ UP /EAM RAPIDLY & /IMULAT$ WORLD TRADE4 ,! AUT>*IC T5D5CIES ( ! PRE-W> P]IOD1 :5 EA* C\NTRY 5DEAVOR$ TO F9D A WAY \T ( ITS [N PROBLEMS AT ! EXP5SE ( O!RS1 EV5 TO ! PO9T ( IMP]IALI/ W>S ( CONQUE/1 CAME TO A TEMPOR>Y 5D 9 PO/W> EV5TS :5 ! ,UNIT$ ,/ATES ASSUM$ HEGEMONY OV] ! WORLD M>KET4 ,! 0FREE WORLD M>KET0' WAS REBORN \T ( ! EXP&+ ,AM]ICAN ECONOMY1 HELP$ ALONG BY ! ,M>%ALL ,PLAN & ! EXPORT ( PRIVATE CAPITAL4 ,CAPITAL ?AT C\LD NOT BE 9VE/$ ) ADEQUATE PR(ITABILITY 9 ! ,UNIT$ ,/ATES ITSELF F\ND BETT] CONDITIONS = VALUE EXPANSION 9 ! NATIONS 5GAG$ 9 RECON/RUCTION4 

,UNTIL ,AUGU/ #a#e1 #a#i#g#a1 ! 9T]NATIONAL MONET>Y SY/EM WAS BAS$ ON ! DOLL>1 :I* WAS ITSELF L9K$ TO A FIX$ PRICE = GOLD1 & ! P>ITIES ( O!R CURR5CIES W]E BAS$ ON IT4 ,) O!R CURR5CIES TI$ FIRMLY TO ! DOLL> & ! DOLL> A RES]VE CURR5CY1 ! ,UNIT$ ,/ATES C\LD SETTLE ITS 9T]NATIONAL PAYM5TS OBLIGATIONS BY EXP&+ ! DOLL> RES]VES ( O!R C\NTRIES4 ,AS LONG AS ! DOLL>'S GOLD BACK+ WAS FELT TO BE SECURE1 ! EXPORT ( DOLL>S /IMULAT$ ! WORLD ECONOMY4 ,AL?\< ! ,AM]ICANS ACQUIR$ :OLE 9DU/RIES & NATIONAL CONC]NS DEVELOP$ 9TO MULT9ATIONALS1 !SE CORPORATIONS W]E NOT ONLY TOL]AT$1 !Y W]E EV5 COVET$ AS A MEANS TO GET ! ,EUROPEAN ECONOMY MOV+ AGA94 ,BETWE5 #aie & #aig DIRECT ,U4,S4 9VE/M5TS 9CREAS$ T5FOLD1 & 9 VALUE T]MS ! \TPUT ( ! MULT9ATIONAL CORPORATIONS EXCE$$ TOTAL ,AM]ICAN EXPORTS BY MORE ?AN ?REE TIMES4 ,?IS WAS P>T ( ! PROCESS ?AT1 TOGE!R ) ! HI< ACCUMULATION RATES ATTA9$ 9 ,EUROPE1 PRODUC$ ! LONG P]IOD ( ,WE/]N PROSP]ITY4 

,S9CE ,U4,S4 PRODUCTION MADE UP APPROXIMATELY HALF ( ! TOTAL PRODUCTION ( ! CAPITALI/ WORLD1 *ANGES TAK+ PLACE 9 ITS DOME/IC ECONOMY W]E B\ND TO MAKE !MSELVES FELT ?R\<\T ! RE/ ( ! WORLD4 ,TO ATTA9 PR(IT RATES ADEQUATE TO ! NE$S ( FUR!R ACCUMULATION1 ! %>E ( ,AM]ICAN CAPITAL 9 TOTAL WORLD PRODUCTION & 9 WORLD TRADE HAD TO BE 5L>G$4 ,?IS1 ( C\RSE1 WAS TRUE ( ALL CAPITALI/ C\NTRIES4 ,AT ISSUE WAS H[ ! SURPLUS VALUE PRODUC$ WORLDWIDE WAS TO BE DIVID$ UP4 ,! PO/W> SITUATION (F]$ ,AM]ICAN CAPITAL A SPECIAL OPPORTUNITY TO 9CREASE ITS %>E 9 WORLD PR(ITS & AT ! SAME TIME PUT ! DEVA/AT$ WORLD ECONOMY BACK ON ITS FEET4 

,! W> HAD ALSO CREAT$ NEW /ATE CAPITALI/ C\NTRIES ?AT W]E V]Y DIFFICULT TO BR+ 9TO ! 0FREE M>KET ECONOMY0 & 9 ANY CASE W]E ANY?+ BUT CONDUCIVE TO ! EXPANSION ( PRIVATE CAPITAL2 H& 9 H& ) ! RE/ORATION ( ,WE/]N CAPITAL1 !RE=E1 W5T ! ATTEMPT TO CONTA9 ! EXPANSION ( /ATE-CAPITALI/ C\NTRIES4 ,! PO/W> P]IOD EVOLV$ 9 ! ATMOSPH]E ( ! COLD W>1 9AUGURAT$ BY ! FIR/ TE/ ( P[]1 ! ,KOREAN ,W>1 :OSE \TCOME REMA9$ 9DECISIVE4 

,! COLD W> LAID CLAIM TO A L>GE PORTION ( PUBLIC CONSUMPTION4 ,/ATE DEBT1 :I* HAD ALREADY GR[N TO EXTREME PROPORTIONS1 GREW FUR!R1 IF N[ MORE SL[LY & )9 N>R[] LIMITS1 & PLAC$ ! PR(ITABILITY ( CAPITAL UND] PRESSURE4 ,ORIG9AT+ 9 ! ,UNIT$ ,/ATES1 9FLATION PURSU$ ITS ONW>D C\RSE1 UNTIL IT F9ALLY EMBRAC$ ! 5TIRE WORLD4 ,IT IS IMPOSSIBLE TO SAY :E!R ! PO/W> BOOM WAS RESPONSIBLE = ! FULL1 OR NE>-FULL1 EMPLOYM5T A*IEV$ 9 ! DIFF]5T C\NTRIES1 OR TO :AT EXT5T ?IS HAD CONT9U$ TO BE DEP5D5T ON /ATE-9DUC$ PRODUCTION4 ,9 ! ,UNIT$ ,/ATES1 9 ANY EV5T1 PRODUCTION CAPACITY WAS NEV] FULLY UTILIZ$ AT ANY TIME ?R\<\T ?IS 5TIRE P]IOD1 & UNEMPLOYM5T /ABILIZ$ AT >\ND #d P]C5T ( WAGE E>N]S4 ,WORLD-WIDE1 H[EV]1 PRIVATE CAPITAL EXP&$ RAPIDLY ?ANKS TO ! RAPID 9CREASE 9 LABOR PRODUCTIVITY1 AN ACCEL]AT+ CAPITAL CONC5TRATION WORLDWIDE1 & AN 9FLATION>Y PRICE POLICY4 

,H[EV]1 ONE ELEM5T CONTRIBUT+ TO ! ECONOMIC BOOM1 ! ACCOMPANY+ 9FLATION1 ALSO REVEAL$ AN 9N] WEAKNESS BEH9D ! \TW>D PROSP]ITY1 A WEAKNESS1 MOREOV]1 ?AT ALSO EM]G$ 9 ! FACT ?AT ?IS PROSP]ITY DID NOT TAKE HOLD 9 EQUAL MEASURE 9 ALL C\NTRIES4 ,IT IS ( NO IMPORTANCE1 IF IT CAN BE ASC]TA9$ AT ALL1 :E!R IT WAS ! EXTREMELY HI< CO/S ( IMP]IALI/ POLICY :I* PUT ! ACCUMULATION RATE 9 ! ,UNIT$ ,/ATES BEH9D ?AT 9 ! O!R EXP&+ C\NTRIES1 OR :E!R ?IS W\LD HAVE OCCURR$ 9 ANY EV5T4 ,H[EV] IT MAY BE1 IT IS USELESS EV5 TO POSE SU* A QUE/ION1 S9CE IMP]IALISM CANNOT BE SEP>AT$ FROM NATIONALLY ORGANIZ$ CAPITAL4 ,S9CE1 H[EV]1 PUBLIC CONSUMPTION ALWAYS DETRACTS FROM ACCUMULATION1 ! CONT9UATION ( VA/ PUBLIC SP5D+  NECESSITAT$ BY IMP]IALI/ POLICY ONLY MADE 9FLATION WORSE4 

,H[ TRUE ?IS IS BECOMES EVID5T :5 WE NOTE H[ ! AV]AGE RATE ( 9FLATION HAS ACCEL]AT$ S9CE #a#i#f#e4 ,BECAUSE ! ,AM]ICAN ECONOMY WAS ALREADY RELATIVELY /AGNANT1 ! ONLY MEANS ( F9ANC+ ! CO/LY W> 9 ,9DO*9A & ! EV] GR[+ DEM&S ( AN IMP]IALI/ WORLD POLICY WAS MORE DEFICITS & H5CE MORE 9FLATION4 ,AS LONG AS EX*ANGE RATES W]E FIX$1 ! GR[+ 9FLATION RATE HAD TO EXT5D ITSELF TO O!R C\NTRIES4 ,! ,AM]ICAN BALANCE-(-PAYM5TS DEFICIT CONT9U$ TO GR[1 5L>G+ ! DOLL> RES]VES ( O!R C\NTRIES1 & ) IT CAME MORE 9FLATION4 

,S9CE A ,U4,S4 DEFICIT MEANT A SURPLUS = O!R C\NTRIES1 !Y 9ITIALLY FELT NO PRESS+ CONC]N TO C\NT] ! ACCOMPANY+ 9FLATION>Y T5D5CIES1 AL?\< ,AM]ICAN DEFICITS 9 L>GE MEASURE MEANT A R$UCTION 9 ,AM]ICAN1 & H5CE 9 WORLD PR(ITS4 ,! GR[+ DOLL> RES]VES ( ,EUROPEAN C\NTRIES HELP$ TO F9ANCE ! ,AM]ICAN DEFICIT1 :I* MEANT AN 9T]NATIONALLY ACCEL]AT+ 9FLATION RATE1 BUT ALSO A /EADY DEPRECIATION ( MONET>Y RES]VES4 ,UND] !SE CONDITIONS 9T]NATIONAL COMPETITION1 :I* ALSO IS F\<T \T BY WAY ( MONET>Y POLICIES1 C\LD AFFECT ! DIV]SE 9FLATION RATES1 BUT NOT 9FLATION ITSELF4 

,= A CAPITALI/ ECONOMY ! IDEAL /ATE W\LD BE SIMULTANE\S DOME/IC & EXT]NAL EQUILIBRIUM1 ) /ABLE PRICES & AN EV5 BALANCE ( PAYM5TS4 ,KEYNES'S !ORY ESS5TIALLY RETA9$ ?IS IDEAL PICTURE1 EXCEPT ?AT IT PROPOS$ TO A*IEVE ?IS EQUILIBRIUM ?R\< /ATE 9T]V5TIONS4 ,:ILE1 H[EV]1 DOME/IC EQUILIBRIUM IS DEP5D5T ON NATIONAL MONET>Y & FISCAL POLICIES1 ! EXT]NAL EQUILIBRIUM ( ALL C\NTRIES W\LD DEP5D ON ! NATIONAL MONET>Y  & FISCAL POLICIES ( ! ,U4,S41 AS LONG AS ! WORLD MONET>Y SY/EM WAS BAS$ ON ! DOLL> ) FIX$ CURR5CY EX*ANGE RATES4 ,( C\RSE1 ?IS MEANT ?AT ! ECONOMIC 9DEP5D5CE ( EV]Y O!R C\NTRY' WAS L>GELY UND]M9$4 ,ATTEMPTS TO *ECK 9FLATION DOME/ICALLY W\LD BE AT ! PRICE ( IMPAIR+ A NATION'S CAPACITY TO COMPETE AT ! 9T]NATIONAL LEVEL & H5CE C\LD NOT BE V]Y EXT5SIVELY UND]TAK54 ,?US ECONOMIC CONTROL AT ! NATIONAL LEVEL WAS GREATLY IMPAIR$ BY ! CAPITALI/ 9TEGRATION ON ! 9T]NATIONAL SCALE4 

,AS A WORLD WIDE PH5OM5ON 9FLATION WAS EVID5TLY A PRODUCT ( ! ACCUMULATION DIFFICULTIES DUE TO ! PECULI>ITIES ( CAPITALI/ PO/W> EXPANSION4 ,! 9FLATION>Y C\RSE CONCEAL$ !SE DIFFICULTIES1 BUT IT DID NOT ELIM9ATE !M2 & AL?\< IT WAS L>GELY CAUS$ BY ! SPECIFIC SITUATION 9 ! ,UNIT$ ,/ATES & WAS FUR!R TI$ 9 ) ! DOLL>'S /ATUS AS AN 9T]NATIONAL RES]VE CURR5CY1 ! BREAKD[N ( ! ,BRETTON ,WOODS SY/EM & ! RETURN TO FREE OR FLOAT+ EX*ANGE RATES HAS DEMON/RAT$ ?AT !RE WAS MORE TO 9FLATION ?AN ! DIS9TEGRAT+ EFFECT ( AN 9T]NATIONAL MONET>Y SY/EM MADE OBSOLETE BY ! GR[? ( ! WORLD ECONOMY4 ,9DE$1 ! SY/EM ( FLEXIBLE EX*ANGE RATES HAS HAD NO EFFECT AT ALL ON ! 9FLATION>Y C\RSE4 

,! WORLDWIDE ECONOMIC 9TEGRATION ( NATIONAL ECONOMIES1 & P>TICUL>LY ( !IR CAPITAL M>KETS1 9T]NATIONALIZ$ CAPITAL MOVEM5TS & PRICE RELATIONS4 ,WORLD TRADE & ! CREATION ( 9T]NATIONAL CAPITALI/ CORPORATIONS MADE 9FLATION A WORLDWIDE PH5OM5ON4 ,! 9CREASE 9 SURPLUS VALUE BY WAY ( 9FLATION IS FACILITAT$ BY /ATE MONET>Y POLICY )\T BE+ DIRECTLY DET]M9$ BY IT4 ,NO SIMPLE & OBVI\S RELATION%IP EXI/S BETWE5 A C\NTRY'S MONET>Y POLICY & ?AT POLICY'S ECONOMIC REP]CUSSIONS1 :I* MAY BE MODIFI$ EXT5SIVELY BY RELATIVELY 9DEP5D5T1 AUTONOM\SLY UNFOLD+ ECONOMIC PROCESSES4 ,ONCE 9FLATION GETS />T$1 H[EV]1 IT CONT9UES ITS C\RSE 9 RELATIVE 9DEP5D5CE ( ANY?+ GOV]NM5TS MAY CONSID] DO+1 NOT ONLY BY WAY ( PRICE RISES1 :I* ACCEL]ATE IT FUR!R1 BUT ALSO BY MEANS ( ! GREAT] 9VOLVEM5T ( 9T]NATIONAL CAPITAL M>KETS1 ! CREATION ( ADDITIONAL S\RCES ( MONEY & CR$IT - SU* AS ! ,EURO DOLL> M>KET - OR EV5 BY ! SIMPLE EXPANSION ( COMM]CIAL CR$ITS4 ,9 ?IS WAY 9FLATION DISGUISES ITSELF AS A %ORTAGE ( 9VE/M5T CAPITAL1 AN 9SUFFICI5T LIQUIDITY1 :I* SEEM+LY CANNOT BE SATIAT$ DESPITE ! 9FLATION>Y 9CREASE 9 ! MONEY SUPPLY4 

,! L>GE CAPITAL CONC]NS /ILL TRY TO 9CREASE !IR %>E 9 TOTAL WORLD PR(ITS BY ACQUIR+ DIRECT CONTROL ( MAJOR %>ES ( WORLD PRODUCTION 9 ADDITION TO ! PR(ITS !Y SECURE = !MSELVES BY ! 9FLATION>Y R\TE4 ,SU* PROC$URES >E NO MORE ?AN CAPITAL CONC5TRATION BY WAY ( 9T]NATIONAL COMPETITION4 ,9 ! PROCESS1 H[EV]1 CAPITAL M>KETS >E ALSO 9T]NATIONALIZ$1 :I* MEANS ?AT !Y >E NO LONG] UND] ANY GOV]NM5T'S CONTROL4 

,= 9/ANCE1 GOV]NM5T RE/RICTIONS ON ! EXPORT ( CAPITAL TO FIRM UP ! ,AM]ICAN PAYM5TS BALANCE W]E L>GELY IGNOR$ BECAUSE CAPITAL C\LD BE GA9$ 9 ! ,EURO-MONEY & ,EUROCR$IT M>KETS4 

,! ,EURODOLL> M>KET >OSE 9ITIALLY FROM ! ACTIVITIES ( ,U4,S4 BANKS \TSIDE ( ! ,UNIT$ ,/ATES4 ,OV] ! LA/ T5 YE>S !IR DEPOSITS ABROAD HAVE GR[N FROM @s#a TO @s#a#h#e BILLION4 ,O!R CURR5CIES W]E ALSO TRAD$1 BUT ! DOLL> PR$OM9AT$1 REPRES5T+ #g P]C5T ( TOTAL DEPOSITS4 ,AP>T FROM PRIVATE CR$IT TRANSACTIONS1 ! C5TRAL BANKS ( A NUMB] ( C\NTRIES ALSO 9VE/ EXCESS OR UNWANT$ RES]VES 9 ! ,EURODOLL> M>KET OR BORR[ FROM IT TO BRIDGE OV] PAYM5TS DIFFICULTIES4 ,! ,EURODOLL> IS PREF]R$ BECAUSE IT IS UND] NO GOV]NM5T CONTROLS & OP]ATES ) NO RES]VE REGULATIONS1 & H5CE CAN (F] BETT] T]MS TO BO? BORR[] & L5D]4 

,AL?\< SIGNIFICANTLY SMALL] ?AN ! ,AM]ICAN CAPITAL M>KET1 ! ,EURODOLL> M>KET IS /ILL L>G] ?AN ! CAPITAL M>KETS ( O!R C\NTRIES & IS !RE=E ABLE TO AVOID OR F9D WAYS >\ND GOV]NM5T MONET>Y & CR$IT POLICIES4 ,S9CE IT CONSI/S MA9LY ( DOLL> DEPOSITS1 !RE IS ( C\RSE A CLOSE CORRELATION BETWE5 ! CREATION ( MONEY 9 ! ,UNIT$ ,/ATES & ! EXPANSION ( ,EURODOLL>S4 ,:ILE 9 ! NATIONAL BANK+ SY/EMS ! EXT5T ( ! MULTIPLI] EFFECT ( ANY ADDITIONAL SUPPLY ( MONEY IS TW(OLD OR ?REEFOLD AT MO/ BECAUSE ( RES]VE REGULATIONS1 ! ,EURODOLL> IS UND] NO SU* RE/RICTIONS4 ,! MULTIPLI] EFFECT ( ! ,EURODOLL> ?US P]MITS A MU* BROAD] EXPANSION ( CR$IT & CONTRIBUTES FUR!R TO ! PURELY SPECULATIVE *>ACT] ( CAPITAL MOVEM5TS1 AS WELL AS TO ! 9FLATION>Y TR5D4 

,) 9FLATION ! PRICE ( MONEY ALSO RISES4 ,S9CE 9T]E/ RATES1 H[EV]1 >E DEP5D5T ON ! RATE ( PR(IT1 !Y >E ABLE TO CONTRIBUTE TO 9FLATION ONLY SLI<TLY4 ,HI<] 9T]E/ RATES >E NOT A SIGN ?AT MONEY HAS BECOME DE>]2 RA!R !Y 9DICATE ?AT MONEY HAS DEPRECIAT$ 9 VALUE4 ,! REAL 9T]E/ RATES USUALLY REMA9 UN*ANG$1 AUGM5T$ ONLY BY ! EXI/+ & EXPECT$ 9FLATION RATES DUE TO G5]AL PRICE RISES4 ,NONE!LESS EV5 RELATIVELY /ABLE 9T]E/ RATES >E A BURD5 = CAPITAL :5 PR(ITS >E DECL9+4 ,COMMITT$ CAPITAL1 :I* DOES NOT HAVE ! P[] TO SET PRICES MONOPOLI/ICALLY1 CAN ALSO F9D A /EADY 9T]E/ RATE 9TOL]ABLE4 ,?US UND] BO? 9FLATION>Y & DEFLATION>Y DEPRESSION1 BANKRUPTCIES MULTIPLY4 

,! CO/ ( CR$IT1 :E!R HI< OR L[1 %\LD NOT BE ASCRIB$ TOO MU* SIGNIFICANCE4 ,9T]E/ RATES1 :I* >E 9CLUD$ 9 CAPITAL PRODUCTION CO/S1 CON/ITUTE ONLY A SMALL P]C5TAGE ( TOTAL CO/S4 ,9 ADDITION FIRMS HAVE LONG F9ANC$ !IR [N CAPITAL =MATION FROM !IR [N PROCE$S4 ,?IS PRESUMABLY CUTS 9TO DIVID5DS1 BUT IT ONLY MEANS ?AT A L>G] %>E ( ! ACCRU$ PR(ITS IS US$ = ACCUMULATION PURPOSES :ILE A CORRESPOND+LY SMALL] %>E GOES TO CAPITALI/ CONSUMPTION4 ,?IS TELLS US NO?+ AB\T ! ABSOLUTE SIZE ( EI!R ( !SE %>ES1 :I*1 IF PR(ITS >E SUFFICI5T1 MAY BO? 9CREASE TOGE!R4 ,IF PR(ITS >E 9ADEQUATE1 BO? CAN ALSO BE AMASS$ BY MEANS ( 9CREAS$ PRICES1 :]EBY 09T]NAL F9ANC+0 BECOMES A =M ( ACCUMULATION BY MEANS ( 9FLATION4 

,BUT IT IS NOT G5U9E ACCUMULATION4 ,AS ?IS TYPE ( 0SELF-F9ANC+0 EXP&S1 ! ABILITY ( O!R CAPITALS TO ACCUMULATE IS CORRESPOND+LY IMPAIR$4 ,! TOTAL  MASS ( PR(IT AVAILABLE TO ! WORLD ECONOMY REMA9S :]E IT IS ,CAPITAL SELF F9ANC+ LIKE CAPITAL MONOPOLIZATION1 IMPLIES !N NO MORE ?AN A R$I/RIBUTION ( TOTAL PR(ITS BY WAY ( PRICE MANIPULATIONS4 ,AL?\< HI< RATES ( PR(IT MAY BE A*IEV$ BY MEANS ( >BITR>Y PRIC+ POLICIES1 !Y IMPLY AN 9CREAS+ RATE ( 9FLATION1 :I* SOON] OR LAT] WILL ALSO AFFECT ! PRIVILEG$ CAPITAL UNFAVORABLY4 ,?IS DOES NOT MEAN ?AT 9FLATION /OPS1 BUT ONLY ?AT H5CE=? IT WILL NOT BE A DIRECT AID 9 EXP&+ ! PRIVILEG$ CAPITALS4 ,IT WILL1 AT BE/1 S]VE ! MA9T5ANCE ( !IR PR(ITS UND] CONDITIONS ( /AGNATION & DECL9E4 

,COMPETITION DE/ROYS CAPITAL1 BUT IT ALSO IMPROVES ! PR(ITABILITY ( ! CAPITAL ?AT COMES \T ON TOP 9 ! /RUGGLE4 ,YET ?IS DOES NOT MEAN ?AT TOTAL SOCIAL PR(ITS HAVE GR[N 9 ANY SIGNIFICANT MEASURE - ?AT IS ONLY POSSIBLE ?R\< AN 9CREASE 9 SURPLUS VALUE4 ,SURPLUS VALUE1 H[EV]1 CAN GR[ 9 ONLY TWO WAYS3 

?R\< AN 9CREASE 9 ! RATE ( EXPLOITATION1 & BY 9CREAS+  ! NUMB] ( WORK]S4 ,BUT !SE TWO WAYS PROCE$ ALONG P>ALLEL C\RSES ONLY UND] C]TA9 CONDITIONS2 !IR 9H]5T T5D5CY IS TO DEVELOP 9 OPPOS+ DIRECTIONS4 ,GREAT] EXPLOITATION MEANS ?AT MORE PRODUCTS >E PRODUC$ ) LESS EXP5DITURE ( LABOR1 I4E41 !RE IS AN 9CREASE 9 ! PRODUCTIVITY ( LABOR A*IEV$ ?R\< IMPROV$ MEANS ( PRODUCTION & BETT] ME?ODS ( CAPITALI/ ACCUMULATION4 ,UND] !SE CONDITIONS ! ABSOLUTE NUMB] ( WORK]S MAY 9CREASE AS WELL1 BUT !IR NUMB] RELATIVE TO ACCUMULAT+ CAPITAL DECREASES4 ,S9CE SURPLUS VALUE IS REALLY ONLY SURPLUS LABOR1 SURPLUS VALUE ALSO DECREASES RELATIVE TO ! 9CREASE 9 CAPITAL & LEADS TO A T5D5TIAL DECL9E 9 ! RATE ( PR(IT & ! R$UCTION ( ! PACE ( CAPITAL ACCUMULATION4 

,UND] CAPITALISM NO?+ 9 ?IS SITUATION CAN BE *ANG$1 NO MATT] H[ MANY O!R MODIFICATIONS >E MADE ELSE:]E 9 ! SY/EM4 ,LIKE ANY PREVI\S BOOM1 ! MO/ REC5T ONE ALSO CONTA9$ ! SE$S ( ITS [N DECL9E4 ,BUT :]EAS PREVI\SLY ! DECL9E WAS DUE MA9LY TO A DECREASE 9 ! MASS ( SURPLUS VALUE RELATIVE TO ! ACCUMULAT$ TOTAL CAPITAL1 9 ! PRES5T P]IOD LABOR PRODUCTIVITY 9 ! 9DU/RIAL C\NTRIES HAS 9CREAS$ TO SU* AN EXT5T AS TO 9CREASE ! CO/S ( CIRCULATION DISPROPORTIONATELY TO PRODUCTION1 & ?US TO ACCEL]ATE ! R$UCTION ( ! RATE ( 
PR(IT4 ,S9CE PRODUCTION CANNOT BE SEP>AT$ FROM DI/RIBUTION1 ONLY ! TOTAL REPRODUCTION PROCESS ( CAPITAL CAN TELL US ANY?+ AB\T ITS ACTUAL PR(ITABILITY4 ,BUT 9 ! PA/ ! PROPORTION ( WORK]S 5GAG$ 9 PRODUCTION RELATIVE TO ?OSE EMPLOY$ 9 CIRCULATION WAS MORE FAVORABLE TO PR(IT ?AN IT IS TODAY4 ,AS PRODUCTIVITY 9 ! PRODUCTION SPH]E HAS 9CREAS$ VA/LY1 ! NUMB] ( WORK]S EMPLOY$ 9 PRODUCTION HAS DECL9$1 :ILE ! NUMB] ( ?OSE EMPLOY$ 9 DI/RIBUTION HAS RIS5 DISPROPORTIONATELY4 ,BUT BECAUSE SO F> IT HAS NOT BE5 POSSIBLE TO 9CREASE LABOR PRODUCTIVITY 9 CIRCULATION TO ! SAME EXT5T AS 9 PRODUCTION1 ! T5D5TIAL DECL9E 9 ! PR(IT RATE ACCOMPANY+ CAPITAL EXPANSION HAS ACCEL]AT$4 ,! %IFT FROM CAPITALI/ PRODUCTIVE LABOR TO CAPITALI/ UNPRODUCTIVE LABOR HAS BE5 AN IMPORTANT FACTOR 9 ! 9FLATION>Y PROCESS4 

,) ! /EADILY GR[+ PRESSURE ON ! PR(IT RATE1 DUE TO A V>IETY ( CAUSES1 ! PO/W> EXPANSION HAD TO COME TO A HALT DESPITE ALL ITS 9FLATION>Y PROPS4 ,! HI< PR(ITS ?AT HAD BE5 AMASS$ D[N TO ! V]Y LA/ HAVE TURN$ \T TO BE L>GELY PHANTOM PR(ITS D]IV+ MORE FROM 9FLATION ?AN FROM PRODUCTION4 ,OV] ! LA/ TWO YE>S1 OR 9/ANCE1 ! HI< PR(ITS ( MANY ,AM]ICAN FIRMS HAVE CONSI/$ ( 09V5TORY PR(ITS10 I4E41 PR(ITS /EMM+ FROM ! DIFF]5CE >IS+ BETWE5 ! PREVI\S L[] CO/S ( ! MAT]IALS US$ 9 PRODUCTION & ! CURR5T PRICE ( ! F9I%$ PRODUCT1 :I* EFFECTS ! PRES5T PRICE ( ! MAT]IALS US$4 ,ACCORD+ TO ,U4,S4 ,DEP>TM5T ( ,COMM]CE /ATI/ICS1 !SE 09V5TORY PR(ITS0 REA*$ MORE ?AN @s#c#g BILLION 9 #a#i#g#d1 OR #f P]C5T ( ! TOTAL PR(IT 9CREM5T4.<#h.> ,BUT ?IS PROCESS IS NON-REPEAT+ UNLESS ! RATE ( 9FLATION 9CREASES /EADILY1 & EV5 !N IT IS SO ONLY = GOODS ?AT REQUIRE QUITE LONG PRODUCTION TIMES4 ,BUT :ATEV] ! CASE1 ! RATE ( ACCUMULATION IS ! 9DICATOR ( PR(ITABILITY1 & 9 ITS T]MS EV5 ! HI< PR(ITS TURN \T TO BE 9ADEQUATE4 

,9FLATION HAS NO FUTURE2 DUR+ AN ECONOMIC UPSW+ IT CAN ADD FUEL TO ! PROCESS1 BUT IT MU/ BE KEPT )9 C]TA9 LIMITS IF ! PR(ITS IT MAKES POSSIBLE >E NOT TO VANI% AGA9 9TO ?9 AIR4 ,IF AN ACCEL]AT+ 9FLATION RATE GETS \T ( CONTROL1 ITS 0POSITIVE0 EFFECT TURNS 9TO ITS OPPOSITE4 ,! *AOS SO *>ACT]I/IC ( CAPITALISM !N BECOMES EV5 MORE *AOTIC2 9T]NATIONALLY ?IS %[S UP AS RECURR5T MONET>Y CRISES1 ) A RESULT+ DIS9TEGRATION ( WORLD TRADE4 ,AL?\< ! AV]AGE ANNUAL WORLD 9FLATION RATE WAS REC5TLY E/IMAT$ AT #ab P]C5T1 IT AFFECTS EA* C\NTRY QUITE DIFF]5TLY DEP5D+ ON ITS COMPETITIVE POSITION ON ! WORLD M>KET4 ,P]SI/5T FLUCTUATIONS 9 NATIONAL CURR5CIES1 SAID TO MAKE ! SQU>+ ( 9T]NATIONAL PAYM5TS BALANCES EASI]1 MISC>RY1 NOT ONLY ON ! WORLD M>KET BUT ALSO ) REG>D TO ! CONT9U+ ]OSION ( ! NATIONAL ECONOMIES4 ,! ALLEG$LY ANTI-9FLATION>Y ,SPECIAL ,DRAW+ ,RI<TS 7,S,D,R7 ( ! ,9T]NATIONAL ,MONET>Y ,FUND1 W]E DESIGN$ TO REM$Y A PURPORT$ LACK ( LIQUIDITY2 !Y W]E A SY/EM = SQU>+ PAYM5TS BALANCES BY MEANS ( UNCOV]$ MUTUAL OBLIGATIONS2 BUT IT ALSO PROV$ TO BE M]ELY ONE MORE 9FLATION>Y MEASURE1 JU/ LIKE ! DOLL> AFT] ITS GOLD CONV]TIBILITY WAS ABOLI%$4 ,AS 9T]NATIONAL ECONOMIC RELATIONS BECOME MORE & MORE DIFFICULT TO SEE ?R\< & DEFY ATTEMPTS TO CALCULATE BUS9ESS ACTIVITY1 CAPITAL IS FL[+ ACROSS BORD]S ON A COLOSSAL SCALE 9 AN ATTEMPT TO GLEAN PR(ITS FROM ! MONET>Y *AOS & ! P>TICUL> DIFFICULTIES ( EA* C\NTRY1 9S(> AS !Y >E NOT ATTA9ABLE BY ANY O!R MEANS4 

,EV5 UND] ! BE/ CONDITIONS1 A /EADILY RIS+ 9FLATION RATE LEADS EV5TUALLY TO ECONOMIC /AGNATION4 ,9FLATION MU/ !N BE HALT$ AT ! PO9T :]E IT BEG9S TO HAVE A NEGATIVE EFFECT ON ! ECONOMY4 ,JU/ AS GOV]NM5TS ADD /EAM TO 9FLATION BY !IR MONET>Y & FISCAL POLICIES1 CONTR>Y MEASURES CAN SL[ ITS C\RSE4 ,H[EV]1 IT IS NOT )9 ! P[] ( GOV]NM5TS TO BR+ 9FLATION TOTALLY TO HEEL1 S9CE PRICE 9FLATION WILL CONT9UE DESPITE DEFLATION>Y GOV]NM5T MEASURES4 ,?IS BE+ ! CASE1 DEPRESSION IS AGGRAVAT$ 9 TWO DIRECTIONS3 ON ! ONE H&1 BECAUSE ( A /EPP$ UP G5]AL ECONOMIC DECL9E1 & ON ! O!R1 BECAUSE ( ! MULTIPLY+ SOCIAL CONFLICTS G5]AT$ BY ! 9FLATION>Y DI/RIBUTION ( 9COME4 

,DEPRESSION1 LIKE AN UPSW+1 SETS LIMITS TO 9FLATION4 ,BUT ANY LIMIT CAN BE OV]/EPP$ IF ONE IS WILL+ TO ACCEPT OR IS UNABLE TO AVOID ! ATT5DANT SOCIAL RISKS2 ! HYP]-9FLATIONS ( ! PA/ >E AMPLE TE/IMONY TO ?IS4 ,BUT ! RISK IS F> GREAT] :5 9FLATION IS WORLDWIDE ?AN :5 IT IS ISOLAT$ )9 9DIVIDUAL C\NTRIES1 AS HAS BE5 ! CASE 9 ! PA/4 ,! B\RGEOISIE !RE=E TRIES TO *ECK IT1 BUT IT CAN ONLY DO SO BY ACCEPT+ L[] PR(ITS1 R$UC+ PUBLIC SP5D+1 & ALL[+ DEPRESSION TO DEEP54 ,9 #a#i#g#d1 = 9/ANCE1 TOTAL ,U4,S4 PRODUCTION FELL BY #a4#d P]C5T1 UTILIZATION ( PRODUCTION CAPACITY FELL TO #fh P]C5T1 & ! (FICIAL UNEMPLOYM5T RATE WAS #h4#g P]C5T4 

,! ECONOMIC SITUATION ( ! LA/ FIVE YE>S1 :I* HAS BE5 LESS S]I\S1 /ILL REQUIR$ A #e P]C5T 9CREASE 9 PUBLIC SP5D+ & BUDGET>Y DEFICITS 9 EXCESS ( @s#a BILLION4 ,)\T ?IS PUBLIC SP5D+ ! ECONOMIC DECL9E W\LD PROBABLY HAVE BE5 MORE CONSID]ABLE4 ,AS ! DEPRESSION SPREADS1 ! ONLY WAY REMA9+ TO C\NT]ACT ITS POLITICAL CONSEQU5CES WILL BE NEW /ATE LOANS1 :I* >E EV5 N[ BEG9N+ TO DOM9ATE ! CAPITAL M>KET4 ,DEFICITS ( @s#a#b#e BILLION = #aige & #aigf >E BE+ CONSID]$1 :I* WILL 9EVITABLY EXP& ! MONEY SUPPLY FUR!R4 ,AS ! HOPES ?AT ! DEPRESSION WILL HAVE A DEFLATION>Y EFFECT FADE1 !Y >E REPLAC$ BY PROSPECTS ( A NEW BOOM CONTRIV$ BY 9FLATION>Y MEANS4 ,:]E ALL ?IS WILL LEAD CANNOT BE =ECA/ ) C]TA9TY1 BUT AT LEA/ ONE ?+ IS SURE3 ! PRES5T CRISIS1 ) ITS PECULI> DEFLATION>Y 9FLATION1 WILL KEEP ! WORLD 9 A P]PETUAL /ATE ( UNRE/ ?AT C\LD EASILY LEAD TO CATA/ROPHE4 

,NOTES 

#a4 ,A4 ,N4 ,PHILLIPS1 0,! ,RELATION BETWE5 ,UNEMPLOYM5T & ! ,RATE ( ,*ANGE ( ,MONEY ,WAGES 9 ! ,UNIT$ ,K+DOM1 #a#h#f#b-#a#i#e#g10 9 ,ECONOMICA1 VOL4 #b#e1 NO4 #a1 ,DECEMB] #a#i#e#h1 PP4#b#h#c-#i#i 

#b4 ,FROM ! EXT5SIVE LIT]ATURE ON ?IS TOPIC1 SEE ,JOHN ,HICKS1 ,! ,CRISIS 9 ,KEYNESIAN ,ECONOMICS1 ,OX=D1 #a#i#g#d1 ESPECIALLY ! *APT] 0,WAGES & ,9FLATION02 ALSO1 ,AUBREY ,JONES1 ,! ,NEW ,9FLATION1 ,H>MONDSWOR?1 #a#i#g#c4 

#c4 ,A4 ,GLYN & ,B4 ,SUTCLIFFE1 ,BRITI% ,CAPITALISM1 ,WORK]S & ! ,PR(IT ,SQUEEZE1 ,LONDON1 #a#i#g#b4 

#d4 ,ACCORD+ TO ,B4 ,JACKSON1 ,H4 ,A4 ,TURN]1 & ,F4 ,WILK9SON 7SEE ,DO ,TRADE ,UNIONS ,CAUSE ,9FLATION81 ,CAMBRIDGE ,UNIV]SITY ,PRESS1 #a#i#g#b71 ! TOTAL 9COME ( ,AM]ICAN WORK]S 9 MONEY WAGES ROSE BY #d4#g P]C5T ANNUALLY BETWE5 #aiff & #a#i#g4 ,! 9CREASE R$UC$ TO 4#h P]C5T 9 REAL 9COME T]MS1 & AFT] TAX D$UCTIONS !RE TURN$ \T TO BE AN ANNUAL DECREASE ( 4#c P]C5T4 ,9 ,AUGU/ #aigd ,A4 ,F4 ,BURNS1 ,DIRECTOR ( ! ,U4,S4 ,F$]AL ,RES]VE ,BO>D1 OBS]V$ ?AT 0OV] ! LA/ YE> ! REAL 9COME ( WORK]S 9 ! ,UNIT$ ,/ATES FELL BY #e P]C5T0 7,! ,NEW ,YORK ,TIMES1 ,AUGU/ #a#f1 #a#i#g#d74 

#e4 0,FROM #aie TO #aif ! ANNUAL DEPRECIATION ( MONEY WAS #b4#a P]C5T 9 ! ,UNIT$ ,/ATES1 #c4#i P]C5T 9 ,5GL&1 #b4#a P]C5T 9 ,G]MANY1 #e4#d P]C5T 9 ,FRANCE1 #a4#h P]C5T 9 ,ISRAEL1 #a#g4#f P]C5T 9 ,BRAZIL1 #c#f4#f P]C5T 9 ,BOLIVIA1 ETC4 ,!RE WAS NO C\NTY :OSE MONEY DID NOT DEPRECIATE1 AL?\< ! RATE ( 9FLATION V>I$ WIDELY FROM C\NTRY TO C\NTRY0 7,FIR/ ,NATIONAL ,CITY ,BANK1 ,MON?LY ,ECONOMIC ,LETT]1 ,NEW ,YORK1 ,JULY #a#i#g#d4 

#f4 ,9 ?IS CAPITAL ONCE AGA9 F9DS GR\NDS = A CAUTI\S OPTIMISM1 E4G41 9 ! VIEW ( ,]N/ ,WOLF ,MOMMS51 *AIRMAN ( ! BO>D ( ,F4 ,KRUPP ,GMB,H1 :O /ATES1 0S9CE ,I N[ ALL ?OSE CONC]N$1 9 P>TICUL> ! TRADE UNIONS & CORPORATIONS1 HAVE LE>N$ ! LESSON ( ! PA/ TWO OR ?REE YE>S1 IT W\LD BE WRONG TO KEEP PUTT+ ?R\< NEW NOM9AL RAISES 9 PRICES & WAGES & TO ACT AS IF ALONGSIDE !SE NOM9AL RISES REAL RISES >E /ILL POSSIBLE 9 PREVI\S MEASURES4 ,! NEW WAGE /ATI/ICS 9 ! ,F$]AL ,REPUBLIC >E A RESPONSIBLE /EP 9 ! DIRECTION ( KEEP+ ! NATION'S ECONOMY HEAL?Y & S\ND4 ,! READ9ESS ( ! TRADE UNIONS TO ACT1 & F9ALLY AFT] ?REE YE>S ( /AGNATION TO RE-/IMULATE ! 9VE/M5T CAPACITY ( ,G]MAN 9DU/RY1 MU/ BE EVALUAT$ POSITIVELY4 ,?IS HAS /R5G!N$ ! WILL+NESS ( ,G]MAN 9DU/RY TO 9VE/ & IMPROVE AGA9 \R JOB SECURITY0 7,FRANKFURT] ,ALLGEME9E ,ZEITUNG1 ,APRIL #a#d1 #a#i#g#e74 

#g4 ,MON?LY ,ECONOMIC ,LETT]2 ,NEW ,YORK1 ,FIR/ ,NATIONAL ,CITY ,BANK1 ,JULY #a#i#g#d1 P4 #c4 

#h4 ,NEW ,YORK ,TIMES1 ,AUGU/ #d1 #a#i#g#d4 

#aigf 

,FROM 3 ,M>XI/S4ORG4 

,*RONOLOGY 3 
,M>* #c1 #bba 3 ,*APT] #b -- ,ADD$4 

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