Value, Price and Epic Recession

SMC Author

Jack Rasmus

SMC Affiliated Work

1

Status

Faculty

School

School of Economics and Business Administration

Department

Economics

Document Type

Article

Publication Date

2010

Publication / Conference / Sponsorship

Critique Journal

Description/Abstract

The concepts, assumptions, and models of contemporary mainstream economics are inadequate for analyzing and explaining the current global financial and economic crisis. The crisis is neither a ‘normal’ (typical post-1945) recession nor yet a classic great depression, but instead represents what is called an ‘epic recession’, which is a specific kind of economic contraction that is precipitated by a major financial system crash with origins in excessive global liquidity, an extended period of speculative financial asset investment, asset price inflation, extreme debt accumulation, and declining real asset investment. The failure of mainstream economics to properly understand the current crisis lies in its misunderstanding of the character and role of asset prices, credit, debt, as well as its inability to differentiate between speculative and non-speculative forms of investment. The origins of epic recessions are not only different from normal recessions, but the evolution and trajectory of epic recessions differ as well. Epic recessions typically result in either an extended period of general economic stagnation, i.e. a ‘Type I’ epic recession (U.S. 1907–1914), or in a ‘Type II’ (U.S. 1929–1931) with a high probability of transitioning to a bona fide depression. To explain epic recession new concepts of global money parade, speculative investment shift, debt-deflation-default nexus, and financial fragility and consumption fragility are introduced as key forces underlying, and integrating, both financial and real economic aspects of the crisis. The analysis of epic recession that follows is undertaken at the level of price categories. However, the article concludes with an exploration of the implications of the analysis for explaining the current crisis at the level of value, in the Marxist sense of that latter term. Suggestions are made how key Marxist ratios of rate of surplus value, organic composition of capital, and falling rate of profit might be extended and expanded to include financial variables, such as credit and debt, in order to better explain the obvious critical role played by finance capital in causing and contributing to the current epic recession.

Keywords

Epic Recession, Speculative Investment Shift, Financial Fragility, Consumption Fragility, Debt-Deflation-Default Nexus, Marxist ratios, Retro-Classicalists, Hybrid Keynesians

Scholarly

yes

Peer Reviewed

1

DOI

10.1080/03017605.2010.492686

Volume

38

Issue

3

First Page

445

Last Page

464

Disciplines

Business | Economics

Original Citation

Rasmus, J. (2010). Value, price and epic recession. Critique Journal, 38(3), 445-464

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