The US stock market turned volatile this week and has now erased all the gains made up to now in 2018 in just a week or so.  So much for Trump’s boast that things for rich investors have never been better.  The fall in the US market has been matched by similar drops in the European and Asian stock markets.  The all-world index has had its worst performance since the Euro debt crisis of 2012.

Now this fall could just be what market traders call a ‘correction’ and not a full ‘bear market’, when the prices of shares enter a long and deep decline.  But it could be that investors are beginning to fear that the boost to profits and sales that the Trump tax cuts generated is soon to be over, while interest rates (the cost of borrowing to invest or buy back shares to boost prices) are rising significantly.

CitiBank’s ‘global economic surprise index’ — which measures how often data comes in better or worse than expected — has been in negative territory since April. That is the longest sub-zero stretch in four years.

A slowdown in growth is pretty clear in Europe, where the measures of business activity are showing a significant drop in the pace of expansion.  The IMF in its latest report has already signalled the coming slowdown but lowering its forecast for global growth by a couple of notches.  And within sectors, there are serious declines; the global materials sector (manufacturing basic inputs for production) is down 20%.  ECB chairman Mario Draghi said in his press conference yesterday that there was a “weaker momentum” in Europe, but this was just temporary and really just to do with German car sales and Italy’s budget.  Next quarter will be better.

And it is not just Europe that is slowing.  China’s growth rate has been slowing since 2014, as the government tries to reduce debt in local authorities and industrial firms.  In Q3 2018, the real GDP growth rate slowed to 6.5 per cent, the slowest reading since the 2009 post-crisis nadir.  Falling profitability and the trade war with the US is beginning to have some effect.

And South Korea also appears to be slowing down with Q3 real GDP growth of 2% being the slowest expansion rate in nine years.  Investment dropped 6.5%.

However, unlike the rest of the world, the US economy still looks better.  The latest business activity surveys showed steady expansion.

And globally, the price of copper – a good leading indicator of global activity – remains above the ‘recession’ level it fell to in the growth trough of 2015-6.

However, investors are beginning to fret that the corporate profits growth seen earlier this year is as good as it will get, given rising wage costs, interest bills and materials prices. Moreover, the impact of the 2018 tax cut will make this year’s results hard to beat in 2019.  The third-quarter results of 3M and Caterpillar, two US industrial bellwethers that reported last Tuesday, feed this concern. 3M cut its earnings forecasts. While Caterpillar’s profits beat forecasts, its warnings of rising materials costs rattled investors.

The US may have reached a new trade agreement with Mexico and Canada to replace the Nafta deal reviled by President Trump, but Washington remains at loggerheads with China, slapping $250bn of tariffs on Chinese goods and demanding sweeping changes to the country’s economic policies. After occasional hints of a thaw, the imbroglio appears to have reached an impasse. If there is no progress in the coming weeks, the Trump administration is expected to introduce another $200bn worth of tariffs — perhaps sanctioning all Chinese imports.

And investors remain on edge about the impact of rising interest rates on both fixed-income and equity markets. The Federal Reserve is expected to lift rates for a fourth time this year in December, and is slowly but surely shrinking its balance sheet, which has been stuffed with bonds acquired when combating the financial crisis.  Former Fed chair Janet Yellen sounded a warning that the planned hikes could cause a new financial bust as many companies have taken out what are called ‘leveraged loans’ which are subject to sharp changes in interest rates.  Yellen commented that “If we have a downturn in the economy, there are a lot of firms that will go bankrupt, I think because of this debt.  That would probably worsen a downturn.”  Indeed, it is estimated that nearly 20% of US firms are already finding the cost of servicing their debt greater than the earnings to cover it.

Yellen also pointed out what current Fed Chair Powell has observed, that it was not clear what the appropriate Fed policy interest rate should be to ensure full employment and moderate inflation; there was “genuine uncertainty”.  In other words, the Fed has no idea what it was doing in raising interest rates.

Other central banks are also trying to ‘normalise’ monetary policy and turn off the money flow. The European Central Bank plans to end its own bond-buying by the end of the year, and even the Bank of Japan is easing back on its monetary pedal. The net effect of this is what investors have dubbed “quantitative tightening”, a sea change in the global monetary environment since the financial crisis that bodes ill for markets in 2019.

Back at the beginning of October I wrote that if the Fed is wrong and the productive sectors of the US economy do not resume ‘normal growth’ (the average real GDP growth rate since 1945 has been 3.3% – so growth is not back there yet), the rising costs of servicing corporate and consumer debt could lead to a new downturn.  The first estimates of real GDP growth figures for the US in the third quarter to September are out tomorrow.

Most important, corporate profits, after a stellar two quarters are beginning to fall back.  If you strip out financial sector profits, then corporate profits are still below levels of 2014, even after Trump’s tax boost. And in the productive sectors of the economy, like manufacturing, they are falling quite sharply – as measured per employee.

The stock market is not always a harbinger of what happens in the ‘real’ economy, but it may be this time.


13 thoughts on “Correction?

  1. Trump has had an obvious villain to blame for the fall in stock prices, because of course, whilst all rises in asset prices are his doing, the reverse must always be someone else’s fault. He has blamed the Federal Reserve, and his nomination J. Powell, for having raised interest rates.

    In a sense, he’s right. As Marx shows, asset prices are merely capitalised prices of the revenues produced by assets – land prices, are capitalised rent, share prices capitalised dividends, bond prices capitalised coupon. So, when interest rates rise, these capitalised prices fall, often even when the revenues from these assets are still rising. Its not a falling mass of rent, or dividends that causes land or share prices to fall, necessarily, but rising interest rates, which is why between 1965-1985, despite rising masses of profits, share prices fell in inflation adjusted terms, because during that period interest rates were rising. In the period 1985-2000, profits actually grew at a slower pace, but with interest rates steadily falling, stock markets soared, the Dow Jones rising by about 6 times the growth in US GDP.

    But, he’s wrong in blaming the Fed for the rise in interest rates, because, as Marx also notes, interest rates are not in the gift of central banks, because they are determined by the interaction of the demand for, and supply of money-capital. Central banks can print more currency, but they cannot create more money-capital. They can use printed money to manipulate the prices of some assets, such as government bonds, which is what they have done via QE, and they can encourage commercial banks and financial speculators thereby to gamble on the price of those bonds continuing to rise, and they can encourage commercial banks to divert money towards provision of mortgages and property speculation, assisted by appropriate bribes from government, for such speculation, but that does not provide money-capital for those who seek to use it as such, for real capital accumulation.

    On the contrary, it diverts money away from those other uses. It means that businesses use the potential money-capital from their realised profits for speculative purposes rather than for real capital accumulation, because its a no brainer, to do so, when the central bank is underpinning significant capital gains in financial assets. So, the profits then go to finance share buy backs, including borrowing via bond issuance, so as to do so.

    The reality is that central banks are raising official interest rates, and stepping back from money printing, because all of their attempts to divert money-capital into such speculative activity, and away from real capital accumulation have failed to prevent real capital accumulation from continuing. As you admit, its not that economies are experiencing recessions, i.e. a shrinkage of their economies, only a slow down in the rate of their growth.

    As I said at the start of this year, I expected that to happen, because it fits with the 3 year cycle that has existed for at least the last thirty years. Given the effects of Trump’s trade war, and of Brexit in restricting trade and investment, its amazing that growth has continued at the pace it has. The three year cycle ends in the third quarter of this year, and I expect to see growth begin to accelerate again into the next year. Its that growth, amidst a continued rise in global employment that is already having its effect on wages, which in turn causes a further rise in demand for wage goods, which causes the demand for money-capital to rise faster than the supply of money-capital, which is causing interest rates to rise.

    As asset prices continue to fall, more of the liquidity tied up in those asset markets, will go back into the real economy, as demand continues to rise, forcing firms to have to expand, as competition means each has to try to capture its own share of this rising demand for wage goods. Central banks know they cannot stop that process from unwinding, and that the consequence will be a crash in asset prices, even as economic growth rises, indeed because economic growth rises. They are simply trying to get from being so far behind the curve, so that when the next big financial crash happens, they are not left with absolutely no tools to be able to respond to it.

    As it is, they will only be able to offer minor palliatives this time, as economic reality imposes itself, and capital resumes its normal course, of real capital accumulation, and not the fantasy that wealth can be created simply on the basis of a continued hyperinflation of asset prices.

  2. And so it begins. More than a correction. The car industry is the worlds biggest. Global sales fell 15% month on month in September, over 20% in China. In China numerous reports of rioting as investors protest against the discounting of property by developers desperate to move unsold properties. In Europe, where Germany’s fortunes are tied to China, and having exhausted the potential exploitation of Eastern Europe, prospects look grim. As Michael has pointed out the best of the US now in the rear view mirror. Until now the world economy remained stuck in rising animation with profits significantly below 2014 making it highly dependent on interest rates. There are now no drivers for the world economy with high tech flat lining, and an indebted China unable to get out of bed never mind rouse the world economy.

    We are entering a new period. Will class war or world war prevail? This is the key question. General Hodges, US military commander in Europe 2014 – 2017 that war between China and the US in the next 15 years is a “very strong likelihood”.

    1. I disagree. There are plenty of drivers for economic expansion. The decline in car sales is due to the fact of the diesel scandal, but also because there is a general move away from ownership to rental, or service based sharing driven by Uber, and so on. There is also a move away from – though from a very low level – petrol engined cars, to electric, which is why the big oil companies are investing heavily in, and taking over companies involved in, rapid charging systems.

      In India, there are 11,000 new electric rikshaws hitting the streets, each month. That is just one of the new forms of commodity that will drive the new expansion.

      The major form will be the growth of commoditised health solutions, as the old Fordist Healthcare systems like the NHS get replaced by new post-Fordist, systems, based upon a large range of cheap health commodities, based upon the principles of flexible specialisation, as Aglietta et al predicted, ranging from tailored medicines, based upon gene technology, through to the development of domestic robots, exo-skeletons and so on, that provide for the mobility and social care needs of an ageing population.

      In Britain, its been announced that the police will start random checks of drivers to see whether their eyesight is sufficient to allow them to keep driving, and that licences will be removed from those that are not. The development of self-driving electric vehicles, will remove the potential that large numbers would lose their mobility. By 2020 electric vehicles will be cheaper to buy than petrol engined vehicles and cost less than a tenth of a petrol engined vehicle to run. Last year, for the first time in thirty-five years I bought a second-hand car, rather than a new car to replace my existing main vehicle. The reason being that I expect in the next few years to be buying electric, and so only wanted a car that would last be through that short interval.

      The looming crash in asset markets is being driven by rising interest rates, driven by continued economic expansion, despite Trump’s Trade War, Brexit etc. Next year, economic expansion will proceed more quickly, and that will cause interest rates to rise faster. A continued rise in employment will cause wages to rise faster, squeezing the rate of profit, but as those rising wages pass through into rising demand for wage goods, firms will be forced by competition to expand output, causing them to have to utilise a large proportion of their profits for accumulation, rather than payment of dividends, as well as needing to borrow more money-capital for such accumulation. That will push interest rates higher still, causing asset prices to fall even faster.

      1. ” The decline in car sales is due to the fact of the diesel scandal, but also because there is a general move away from ownership to rental, or service based sharing driven by Uber, and so on. There is also a move away from – though from a very low level – petrol engined cars, to electric, which is why the big oil companies are investing heavily in, and taking over companies involved in, rapid charging systems.”

        1. There is no “diesel scandal” in China where sales are slowing to the point that 2018 sales are predicted to be below 2017 sales, with ominous results to the bottom line of major international producers. Nor is there a diesel scandal in the US where sales have declined, except of course for more expensive pick-up trucks.

        2. How “general” is the “general move away from ownership to rental”? How many Uber users a) don’t already own an automobile b)would own an automobile if Uber didn’t exist?

        3. Yes there’s a “move” to electric vehicles, but it’s small If globally 80,000,000 autos are sold in a year, electric car (including hybrids) are less than 2 million. Tesla will account for about 10%, the other 90% are products of the major producers themselves, so it makes little sense to blame the downturn on the increased sales of models made by the same producers of combustion engine autos.

        “Next year, economic expansion will proceed more quickly, and that will cause interest rates to rise faster.”

        4.Three or four months ago, the same author was telling us that “rising growth” was returning to the EU for the 3rd and 4th quarters. Or was it the Eurozone? Or was it Europe with, or without Britain? Anyway, everything was going to good with the EU, or was it Eurozone, or was it with or without Britain, achieving “normal growth,” based of course on the numbers provided by the PMI. Well the PMI latest numbers for the Eurozone show a decline in October from September, from 54.1 to 52.7 (still positive, but slowing), the lowest level in 25 months, with the German component also slowing to 52.7, the lowest since 2015. The slowdown is being led by declining exports. France registered 54.3, but the manufacturing component dropped to 48.8, signaling a contraction.

        5.Next year, growth returns……. Except there’s a looming crash in asset prices, caused by increased interest rates (an explanation straight out of Trump) and somehow that won’t impact economic growth– just like the crash in asset prices in 2008-2009 didn’t impact growth, right?

        6. In the US, the increased growth rate has been fed by tax breaks, and…….faster government spending. Since April 2017, the average annual rate of growth of US GDP has been 2.9 percent, versus 2.2% for the 2009-April 2017 period. Half the increase is accounted for by the govt. spending, particularly defense spending. Between 09 and 2017, defense spending registered a NEGATIVE 2.1 growth percent rate. Since April 2017, surprise surprise, it has increased at a 2.9% rate. The other important component has been and increase in energy investment, which accounts, by itself for almost the entire remaining increase. But, according to the US commerce department, in September, without defense orders, durable goods orders fell.

        7. Excuse me for being pessimistic, but I think there’s tremendous overproduction going on, again, in oil and gas, and while sanction against Iran, and the collapse of Venezuela may sustain market price, or even lead to a blowout to the $100/barrel level, the last two times the price blew, economic contraction followed closely behind. The shadow recession of 2015, 2016 was preceded by a price blowout, as was the grand recession of 2008-20??.

        8.In sum, the future is not so bright that we should be passing out sunglasses while we wait for our autonomous autos to deliver themselves to our front doors.

      2. 1) The diesel scandal exists everywhere. As I recall, it was in the US that it erupted, and where manufacturers have been most heavily fined. Everywhere, potential buyers are wary of buying diesels anticipating heavier taxes to be introduced.

        2) Not as general as the move to leasing. Very few new cars are today sold. The vast majority are leased, and that has resulted in a large amount of second hand, three year old cars on the market, when the leases run out, which has given an incentive for people to buy these cheaper second-hand cars. In cities, there is a growing number of people.

        On sharing, more details are given in this article.

        3) The rise of electric cars affects demand for petrol cars. China is investing heavily in electric cars, as well as renewable energy technologies, to deal with its pollution problems, reduce reliance on imported oil, and to gain a competitive advantage in these new spheres of more profitable production. There is no point buying a new petrol engined car, at the moment, that might last ten years, if in 3-4 years, they will be more heavily taxed, and electric cars will be cheaper to buy, and much cheaper to run.

        4. Three or four months ago, what I actually wrote is what I also wrote at the end of last year, and start of this year, which is that the usual three year cyclical slowdown would be in place between Q3 2017, and Q3 2018, so that the trend for growth would start to rise from Q4 2018. I stick by that, despite all of the limitations to growth, being inflicted by Trump’s global trade war, Brexit, austerity, and attempts by governments and central banks to divert potential money capital away from the real economy and into financial speculation, so as to try to keep asset prices inflated.

        Despite all of those impediments to growth, despite the fact that the three year cycle does not start to bring an increased pace until October 2018, as you admit, growth in the EU, Eurozone etc has remained positive, and the PMI numbers continue to show growth, not a new recession, or long depression.

        5. The crash in asset prices caused by rising interest rates is directly from Marx not Trump. Marx sets it out in Capital III, in explaining the basis of capitalised asset prices. He also sets out there why there is no reason for a crash in asset prices to necessarily affect the real economy, and why it should actually have a positive impact. As Marx says, asset price crashes only amount to a transfer of fictitious wealth from one set of hands to another. It does not affect the value of the commodities that comprise the elements of real capital. In fact, as I’ve demonstrated elsewhere, by reducing the cost of shelter, and the cost of pension provision, by cheapening these assets that have been massively inflated due to speculation it reduces the value of labour-power, thereby raising the rate of surplus value, and rate of profit, and also releases capital, thereby, as Marx sets out in TOSV, Chapter 22, which is then available for accumulation, and its also releases revenue that can be spent on actual commodities, rather than going in rents to landlords, or taxes used to subsidise landlords etc.

        The 2008 financial crash affected the real economy, because the authorities allowed a credit crunch to affect the circulation of capital and commodities, and then attempted to prevent a repeat of the crash, and to instead inflate asset prices, by printing vast amounts of currency to buy up financial assets, and bail-out banks, whilst (at least in Europe) imposing harsh austerity, so as to restrain economic growth, to prevent rises in interest rates. As Marx and Engels show in Capital III, in 1847, and 1857, similar financial crashes, whilst they had a short term effect on the real economy, due to a similar credit crunch, had no real longer term impact on the real economy, once the 1844 Bank Act was suspended, and the credit crunch was ended. In 1847, in particular, once the credit crunch was ended, the economy, in 1848 resumed its previous significant boom.

        6. The US was experiencing rising growth even before the tax breaks, and has seen rising employment for years before Trump was even elected. In a service based economy, durable goods orders are not a defining factor. The increase in capital accumulation, in the form of circulating capital is.

        7.Overproduction implies that capital has expanded to a level whereby labour supplies are running out, pushing up wages, so that profits are squeezed. Crises of overproduction are a feature of periods of boom,and the periods of exuberance that extend beyond them, which rather contradicts the picture you are trying to present. Unemployment is perhaps down to around 4%, but in the 1950’s/60’s it was down at 1-2%. We have many workers working part-time, or on zero hours contracts, so the scope for extending the working day is still considerable. We have the potential to reduce unemployment further, and to bring back into the workforce, some of those boomer generation workers who took early retirement, we have the potential to increase immigration. So, the potential exists to also thereby increase the social working-day, so that, as Marx explains in Capital III, and in TOSV, we can still increase significantly the amount of absolute surplus value produced, whose restriction is a major cause in creating crises of overproduction.

        The flexible nature of modern capitalism, also means that existing labour supplies can be used more effectively, before it starts to become necessary to resolve a squeeze on profits caused by raising wages, by a further round of major innovation, and the introduction of new labour-saving technologies. That is 15-20 years away.

        8. I prefer to stick with the basis of Marx’s analysis of the crisis, rather than your Malthusian analysis, of perennial crisis.

  3. 1. Diesel engine auto sales represent about 3% of the auto market in the United States. The VW diesel scandal broke in late 2015. New car and truck sales achieved records in the US in 2016, 2017. Light truck sales continue to expand

    2. Modern auto leasing got its start in the late 1960s in the US, accelerating through the 80s and 90s, today making up about 30% of the auto market. Throughout this period car and light truck sales demonstrate cyclicality, not steady decline. . Between 2011 and 2016, new car leases grew 91%, yet new car and light truck sales notched a record in 2016. Not sure, but I think leases are included in the sales statistics.

    Yes, having cars on 2 year leases may impact current year sales, just like having bought a car 2 years ago with loan financing will impact current sales, although loans are generally for longer than 2 years. Same-same when it comes to new purchases, or even a bit of advantage to the lease, as its term is generally much shorter.

    3…is just so much speculation.

    4. Yes, you wrote that we would see, if we were not already seeing rising growth in the EU in the 3rd or 4th quarter. You cited the PMI numbers as evidence. The current PMI numbers show slowing growth, not rising growth.

    5. The issue is not if crashing asset prices must, or might, or might not determine the course of the economy. The issue is if the course of the economy determines the trajectory of asset prices. The US asset price collapse in 2001 was pre-figured by a decline in corporate profitability, as was the implosion of 2008. Right, the asset price collapses of 1847, and 1857 had “no long term” impact on the “real economy.” Except 1847 was part of the economic dislocation, the conflict between means and relations of production that triggered revolution in Europe, and the recovery from 1857 triggered the US Civil War.

    2008 was not a “credit crunch” as government monetary policies were hardly restrictive. Banks were not lending because they were insolvent, not because the monetary policies were restrictive. More importantly corporate profitability had turned down in 2006.

    6. Yes the US economy had resumed growth prior to the tax cuts. Earnings growth however over the past year due to the tax cut is estimated to account for 35-50% of the total amount. Nice work if you can get it.

    7..”Overproduction implies that capital has expanded to a level whereby labour supplies are running out, pushing up wages, so that profits are squeezed.”, not exactly– overproduction as manifested in 2014-2015 during the shale oil blowout and collapse did not “use up” labor supplies, causing a wage squeeze of profits. Moreover, Marx is quite clear in rejecting the Ricardian wage squeeze theory of declining profits.

  4. just to add on– leases are indeed included in sales numbers.

    secondly, does anyone seriously think that that the overproduction in maritime shipping– container ships etc. that flooded the shippers with excess tonnage beginning in 2007-2008, and continuing through this year had anything to do with “using up labor supplies” and or a “wage squeeze” on profits? Didn’t happen, and doesn’t happen that way.

    1. 1. Your Point 1 contradicts your general argument in relation to the US!

      2.Your point about cyclicality also contradicts your general point about overproduction. In the UK, about 60% of private car purchases are via Personal Contract Schemes, which is basically leasing. In 2015, 80% of Mercedes new car sales in the UK were via such schemes. I think this is true about most of Europe now too. The point is that, the increase in leasing, means that a large surplus of used cars hits the market, which has caused used prices to fall sharply, which gives an incentive to buy cheap used cars rather than buy new.

      3.No it isn’t.

      4.This is what I wrote in my December 2017 Review of my predictions for that year.

      “The last quarter of 2017, saw the onset of the latest three year cycle, during which growth tends to moderate for a year. However, such moderation is necessarily a relative effect. Global growth, has in fact, risen notably in the last year, and the pace of that growth appears to be accelerating, including in the most important economies in the US, and the EU. In other words, even if the effect of the three-year cycle is to knock 1% off the growth figure, for 2017-18, that does not mean that the growth figure itself might not be say, 3%, and may, therefore, be higher than in 2016-17. It means that when the effect of the three year cycle is removed, if conditions continue on the same basis, growth for 2018-19, might be expected to be closer to 4%.”

      In fact, according to the latest IMF estimates, global growth is indeed estimated to be 3.9% for 2018, and for 2019. As we are still only in October, and so only the first month of the fourth quarter, the increase in growth, I expect to resume, as predicted, cannot yet be judged to have been correct or not. As I agreed with Michael previously, only time will tell, and it also depends on whether Trump continues to damage global growth, via his global trade war, particularly against China and Europe, which incidentally is another reason for the effect on car sales.

      5. In the post-war boom period, between 1950-1980, the Dow Jones rose by less than half the rise in US GDP. In fact, in the period, 1965-1985, when interest rates were rising, the Dow Jones fell in inflation adjusted terms. By contrast, between 1980-2000, the Dow Jones rose by more than 5 times the rise in US GDP! That was a period when interest rates were falling.

      Asset prices, as Marx and Engels explain are capitalised revenues. An increase, in rents will undoubtedly, all other things being equal cause higher land prices, just as higher dividends will lead to higher share prices. But, as Marx describes, a more powerful effect on these capitalised prices comes from changes in the rate of interest. It was rising interest rates, which caused asset prices to fall in real terms between 1965-85, just as it was falling interest rates that led to asset prices soaring between 1980-2000, and every time interest rates have started to rise, asset prices have crashed.

      1847 clearly wasn’t part of any economic dislocation or contradiction between means of production and relations of production. As soon as the credit crunch ended, the economic boom continued. The Revolutions of 1848, were a consequence of the growth of the bourgeoisie, and urban proletariat due to the rapid growth of capital. It meant those classes combined against the old landed aristocracy to demand political rights.

      2008 most certainly was a credit crunch, and I know of no serious economist that thinks otherwise. It was manifest in the sharp rise in overnight lending rates, such as LIBOR, which meant that banks could not borrow from each other, and that in turn seized up their lending to the broader economy.

      6. You are confusing gross output with net output. Gross output continues to rise, and as wage share increases due to more workers being employed (and then wages themselves rising) that causes additional demand for wage goods, which forces firms to expand their output to grab their share of that market. They, therefore, use more retained profits, or borrow more, which increases the demand for money-capital relative to supply causing interest rates to rise, which causes asset prices to fall.

      7. Marx only rejected Ricardo’s explanation of a profits squeeze due to a falling rate of surplus value, as an explanation of the long-term law of the tendency for the rate of profit to fall. He most certainly did not reject it as a short-term cause of profits being squeezed, leading to an overaccumulation of capital.

      In Capital, III, Chapter 15, he says,

      “Given the necessary means of production, i.e. , a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e. , the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given. And the capitalist process of production consists essentially of the production of surplus-value, represented in the surplus-product or that aliquot portion of the produced commodities materialising unpaid labour.”

      And further on,

      “There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0. The purpose of capitalist production, however, is self-expansion of capital, i.e., appropriation of surplus-labour, production of surplus-value, of profit. As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.”

      He also sets out this basis of over accumulation of capital, and profits squeeze in Theories of Surplus Value, Chapter 21.

      Odd that you should have the same obsession with maritime shipping as Sartesian, and that you write using the same “voice”.

      1. That’s because I am S.Artesian, as I announced when this site wouldn’t accept that login, but would accept the Anti-Capital log in.

        I have no obsession with maritime shipping. It is critical to the world market. Containers handle, as the phrase goes, “95% of everything.

        My point was that auto sales were slowing after the record years, and not because of “dieselgate” or leasing (which leases are included in sales).

      2. Boffy: “In fact, according to the latest IMF estimates, global growth is indeed estimated to be 3.9% for 2018, and for 2019.”

        Just not true; as is so often the case Boffy hears what he wants to hear and regardless of when he hears it, it’s always the latest.

        Here’s what the IMF said on October 3, 2018 in its World Economic Outlook: (

        “Global growth for 2018–19 is projected to remain steady at its 2017 level, but its pace is less vigorous than projected in April and it has become less balanced. Downside risks to global growth have risen in the past six months and the potential for upside surprises has receded. Global growth is projected at 3.7 percent for 2018–19—0.2 percentage point lower for both years than forecast in April. The downward revision reflects surprises that suppressed activity in early 2018 in some major advanced economies, the negative effects of the trade measures implemented or approved between April and mid-September, as well as a weaker outlook for some key emerging market and developing economies arising from country-specific factors, tighter financial conditions, geopolitical tensions, and higher oil import bills.”

      3. I had not seen your admission that you are Sartesian. I see you are continuing with the same method of argumentation, which means that I can continue to ignore your future comments. However, as I have had to read your current ones, I will briefly respond to them.

        Auto sales as you admit were slowing from record high levels. Precisely, record high levels of sales are not an indication of a period of stagnation, but of growth. As I said, crises of overproduction are a feature of periods of boom and exuberance. The slowdown in car sales, as with shipping is an indication of a period of boom, during which excess investment took place, in those particular spheres. It is the same as I have set out elsewhere, discussing the usual progress of the long wave cycle during which at the onset of the upswing, the supply of raw materials cannot meet the demand, which causes a sharp rise in primary product prices – seen very markedly after 1999 – which prompts a splurge of investment in new mines etc. – again seen in the early 2000’s, which once those new resources start to come on stream, which takes around 12-13 years, causes an oversupply, and sharp fall in prices, again seen in 2014, with the sharp drops in oil, copper, iron ore prices etc.

        These are also what Marx calls partial crises of overproduction, which affect particular spheres, they are not generalised crises of overproduction.

        I took the 3.9% figure from the July IMF release – – the fact of whether the figure is 3.9 or 3.7 is not significant for the point, being made, and again this is typical of the way you argue of seizing upon some irrelevant discrepancy rather than the substantive point at issue. The substantive point was that, last December I wrote that the three years cycle had begun in the fourth quarter of 2017, and would run approximately to the start of the fourth quarter of 2018, which would cause a relative slowdown in growth during that period.

        That is what I also said in posts here a couple of months ago, and repeatedly clarified that what I had said about a rise in PMI’s for the Eurozone referred to a month on month rise, not a rise compared to the previous year. A look at the quote you have given from the IMF in fact also supports the point I I was making. It says, for example,

        “The downward revision reflects surprises that suppressed activity in early 2018 in some major advanced economies, the negative effects of the trade measures implemented or approved between April and mid-September, as well as a weaker outlook for some key emerging market and developing economies arising from country-specific factors, tighter financial conditions, geopolitical tensions, and higher oil import bills.”

        Hardly a message that it is some underlying major economic crisis at work.

        But, this, as I have found in the past, is the problem of trying to have a sensible discussion with you and other trolls, which is that it ends up being simply a useless discussion over trivia, and misrepresentation, which is why I decided it was pointless doing it, and why I won’t be responding further to your comments.

      4. From the FT of 10/31/18:

        “Eurozone slowdown clouds ECB easing strategy”

        “The eurozone is growing at its slowest pace for more than four years..”

        …”The eurozone expanded 2.4 percent in 2017, its fastest pace in a decade [!] and one that the ECB initially believed the single currency union could replicate this year too. The institution has since revised down growth to 2 percent.”

        Rising growth, as Boffy predicts, for the 4th quarter is irrelevant if the overall growth for the year 2018 is below that of previous years, and continues to slow in 2019

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