A credit crash ahead?

The pandemic global slump of 2020 is different from previous slumps in capitalism.  The boom and slump cycle in capitalist production and investment is often triggered by a financial crash, either in the banking system (as in the Great Recession of 2008-9) or in the ‘fictitious capital’ world of stocks and bonds (as in 1929 or 2001).  Of course, the underlying cause of regular and recurring slumps lies in the movements in the profitability of capital, as has been discussed ad nauseam in this blog.  This is the ‘ultimate’ cause.  But ‘proximate’ causes can differ.  And they are not always ‘financial’ in origin.  The first simultaneous international post-war global slump of 1974-5 was triggered by a sharp rise in oil prices following the Arab-Israeli war; and the double-dip recession of 1980-2 had similar origins.  Again, the 1991-2 recession followed the ‘Gulf War’ of 1990.

The pandemic slump also has a different ‘proximate’ cause.  In a sense, this unprecedented global slump, affecting 97% of the world’s nations, kicked off because of an ‘exogenous event’ – the spread of a deadly virus.  But, as has been argued by ecologists and in this blog, the rapacious drive for profits by capitalist companies in fossil fuel exploration, timber logging, mining and urban expansion without regard for nature, created the conditions for the emergence of a succession of pathogens deadly to the human body to which it lacked immunity.  In that sense, the slump was not ‘exogenous’.

But the ensuing slump in world production, trade, investment and employment did not start with a financial or stock market crash, which then led to a collapse in investment, production and employment.  It was the opposite.  There was a collapse in production and trade, forced or imposed by pandemic lockdowns, which then led to a huge fall in incomes, spending and trade. So the slump kicked off with an ‘exogenous shock’, then the lockdowns led to a ‘supply shock’ and then a ‘demand shock’.

But so far, there has not been a ‘financial shock’.  On the contrary, the stock and bond markets of the major countries are at record highs.  The reason is clear.  The response of the key national monetary institutions and governments was to inject trillions of money/credit into their economies to bolster up the banks, major companies and smaller ones; as well as pay checks for millions of unemployed and/or laid off workers.  The size of this ‘largesse’, financed by the ‘printing’ of money by central banks, is unprecedented in the history of modern capitalism.

This has meant, contrary to the situation at the start of the Great Recession, the banks and major financial institutions are not close to meltdown at all.  Bank balance sheets are stronger than before the pandemic.  Financial profits are up.  Bank deposits have rocketed as central banks increase commercial bank reserves and companies and households hoard cash; given that investment has stopped and households are spending less.

According to the OECD, household savings rates have risen between 10-20% points during the pandemic.  Household deposits at the banks have soared.  Similarly, non-financial corporation cash holdings have increased as companies take out cheap or interest-free government-guaranteed loans, or larger companies issue yet more bonds, all encouraged and financed by government-sponsored programs.  Taxes have also been deferred as companies go into lockdown or purdah, again building up yet more cash.  Tax deferrals are equivalent to 13% of GDP in Italy and 5% of GDP in Japan, according to the OECD.

Indeed, the latest corporate profit figures (Q3 2020) in the US showed a sharp rise in profits, almost entirely due government loans and grants that have boosted cash flow along with a fall in sales and production taxes as companies stopped trading.  Corporate profits increased $495 billion in the third quarter, in contrast to a decrease of $209 billion in the second quarter.  The government statistical office explains Corporate profits and proprietors’ income were in part bolstered by provisions from federal government pandemic response programs, such as the Paycheck Protection Program and tax credits for employee retention and paid sick leave, which provided financial support to businesses impacted by the pandemic in both the second and third quarters.”  Around $1.5trn of US government grants and loans went into subsidising US companies during the pandemic.  So corporate profits have been sustained by government intervention – at the cost of unprecedented levels of government budget deficits and rises in public sector debt.

The hope now is that as the vaccines are delivered and distributed during 2021 and the lockdowns are ended, the world economy will spring back and the build-up of household savings and corporate profits will be released, as ‘pent up’ demand flows back into the capitalist economy.  Consumer spending will return, people will resume international travel and tourism and go to mass events; while companies will launch an investment binge.

The OECD is less sanguine about this scenario.  It is concerned that much of the increase in personal savings is with the rich who tend to spend less as percentage of their incomes (because they just have too much!).  The average household in the major economies (and also in the less developed capitalist economies) has not accumulated savings – on the contrary, they have raised their levels of debt during the pandemic. Moreover, with the likely ending of government pay checks and other support during 2021, the situation for the average household could well deteriorate. These inequalities also apply to the corporate sector.  The OECD reckons that the bulk of government support in loans and grants has gone to the larger companies, particularly in the technology sector – a sector least hit by the slump.

So this is the likely place to look for the third leg of the pandemic slump – a credit crunch and financial crash when companies, particularly small to medium firms, go bust as government support evaporates, sales revenues remain weak and debt and wage costs rise.

The Institute of International Finance (IIF) recently reported that the ratio of global debt to gross domestic product will rise from 320 per cent in 2019 to a record 365 per cent in 2020. The IIF concludes starkly: “more debt, more trouble”. As Martin Wolf put it in the FT: “Financial markets have ignored these warnings. Global equities have reached new highs and credit spreads have been narrowing, almost as if extreme debt is a good, not a bad, economic development.”

As has been reported before, even before this pandemic corporate debt was at record highs, whether measured against annual GDP, or perhaps more relevant for potential bankruptcy, against the net worth of company assets.

The OECD reckons that if corporate profits were to fall sharply in 2021 as governments withdraw financial support, many companies could become “distressed”.

Already, the number of so-called ‘zombie companies’, those which are not making enough profits to cover the interest on their outstanding debts, has risen significantly. The OECD notes that one-fifth of firms in Belgium, for example, could not meet their financial liabilities for more than three months without taking out more debt or getting an equity injection.  That ratio was much higher in certain sectors like accommodation, events and leisure.

The OECD concludes that “financial stability concerns are likely to re-emerge”, as the rapid build-up in public sector and corporate sector debt could soon lead to “solvency concerns in a large number of companies.”  Corporate defaults on bonds of weaker companies could well double in 2021, says the OECD, particularly in “hard-hit sectors like airlines, hotels and the auto industry.”  Bankruptcies in small and medium size companies in the retail, leisure and commercial property sectors are particularly likely.

This scenario is even more so in the so-called emerging economies.  Indeed, even in China, where the economy at large is making the fastest recovery globally, a range of companies with heavy debts are starting to default on their bond payments, putting the government into a quandary.  Should it save these companies (some of which are local government-owned state enterprises) or should it let them go bust, in order to reduce the overall debt burden on the economy?  This won’t lead to a major financial crash or a collapse in the Chinese recovery because the government has massive reserves and can draw on the huge household savings of the Chinese people, mainly deposited in the state-owned banks – unlike in other major economies.  But the troubles of a range of Chinese over-indebted companies is a harbinger of what could be a ‘debt tsunami’ in many corporate sectors elsewhere during 2021.

Much depends on whether the corporate sector can stand on its own feet in 2021 as government subsidies disappear.  Even if interest costs on existing debt stay low, if corporate profits do not rise but instead take a dive in 2021, then the OECD reckons that upwards of 30% of companies globally could be ‘distressed’ and face bankruptcy.  And at the very least, companies will not raise their investments, but sit on their hands.  The OECD reckons that there is a risk of a ‘debt overhang’ which would cut business investment growth by 2% points compared to the long-term average before the pandemic.

So even if there is no debt tsunami and a financial crash caused by a wave of corporate bankruptcies, the recovery in most capitalist economies is likely to be very weak.  The OECD in its latest forecast for the world economy talks about a “brighter future” in 2021 as the COVID vaccines are distributed. But its forecast still expects most economies in the world will not recover the output losses suffered in 2020. By end 2021, only a few economies will have experienced some real GDP growth over the two years since end-2019.

The leading economy on that measure will be China – up nearly 10%; followed by South Korea and Indonesia. The rise in GDP in these countries delivers an average rise in world GDP over the two years. ButChina will contribute one-third of that real GDP growth up to end 2021. The G7 advanced capitalist economies will have had no real GDP growth at all (the US) or will have contracted by anything between 3-5% by end 2021 (Europe and Japan), with the UK performing the worst at -6.4%. And large G20 economies like India and Brazil will have had significant declines.

The OECD expects a ‘gradual but uneven recovery’. And that assumes the best possible news on the COVID vaccine impact. Even then, while the world economy GDP is expected to return to its pre-pandemic level by end 2021, it will still not catch up with where world GDP would have reached without the pandemic slump (leaving about a 6% of GDP gap). The ‘reverse square root’ trajectory of the Long Depression looks set to continue.

47 thoughts on “A credit crash ahead?

  1. You might think I don’t care (apres moi la deluge) but I do. We should talk about this later in the afternoon


  2. Why has everybody, including the left, bought into the idea that SARS-COV-2 is deadly, when the reality is, that 98-99% of the people who catch it, survive? It’s as deadly as seasonal flu (between 0.1 – 0.2%), which around 650,000 die from, every year.

    Yet of course, the notion that this virus is ‘deadly’ (the assumption being pushed, to a great many of us), is absolutely essential if the imperialist states are to implement their attempt at ‘rejigging’ the global economy. States that start global wars, think nothing of destroying their own societies, and this is exactly what the global lockdown has done, to nearly 200 countries, most of which are in the ‘Global South’.

    I’m appalled at how the left has been sucked into this engineered crisis and allow the capitalist states to abolish most of our civil rights and punish us for getting sick! What kind of leftist is it that is complicit in this nightmare?

      1. But are they ‘covid’ deaths? Given that every US hospital gets PAID extra to report coronavirus ‘deaths’ and that (just like the UK) simply dieing WITH the virus is treated identically to dieing FROM the virus, the very basis for making scientificaly informed decisions about events, has been totally undermined! It’s also interesting to note that the enormous ‘drop’ in deaths from other causes, that has happened since the virus appeared, is matched EXACTLY by the rise in the number of coronavirus fatalities. In other words, statistics are being manipulated for nefarious purposes.

      2. 91% let’s use English these were people who were chronically ill (co- morbidity is a Big Parma sophorism). By 65 two thirds of people in Britain and USA are chronically ill and in the USA by 18 two fifths are. This is what makes this virus so deadly as it seeks out the already ill.

      3. Are we really going to entertain this stuff here? Covid not fatal, because the flu kills 650,000 a year? Covid has killed twice that number, that we know of, and the year isn’t over.

        Hospitals get paid more for assigning the death to Covid? This is another right-wing generated ‘alternate fact,’ that uses that fact that hospitals get reimbursed at a higher rate as meaning there must be fraudulent reporting. No evidence of fraud, of course, has been produced. It’s Fox News all over again, and Trump’s “voter fraud” all over again.

        But yes, if I have heart disease, and I get taken to the hospital because Covid has reduced my ability to breathe, and I die in the hospital from that lack of oxygen, the cause of death is assigned, rightly, to Covid, not heart disease. If I get hit by a car, and I have heart disease, and my heart can’t handle the strain of the injuries, I’m dead because of the impact, not the disease.

        Assertions of fraud, embrace of conspiracy theories are not elements of Marxist critique. It’s possible to recognize the reality of the pandemic without supporting the repressive measures of the capitalist regimes; and it’s more than possible to point out a) the lack of preparedness and incompetence of the capitalist states in dealing with this– b)the devastation this lack of preparedness has visited on the most vulnerable of society c) the additional burdens imposed on “necessary workers”– like food and meat processing workers in the US, like transportation workers, etc etc.

        The right wing conspiracy theory disinformation should not find a platform on Michael’s blog.

    1. If this were like the seasonal flu, the hospitals would not be over full. Any healthcare worker can tell you this is not the same as the flu.

      1. They are. There are 800,000 in patient beds in the USA and currently about 100,000 covid patients so one in eight beds. Current projections go as high as 200,000 by year end. That compares to peaks of under 70,000 earlier in the year.

      2. I never said the corona virus was the same as flu, I just compared their fatality rates, is all. Everything you’ve said, is irrelevant, a diversion.

      3. Once more, who said it was “like seasonal flu”? Not me and as to the hospitals ‘filling up’, it has absolutely nothing to do with my comment.

      4. Their fatality rate is lower because their highly infectious nature means that there would be more healthcare effort put more into it than the flu. How is that hard to understand? Don’t be an idiot like this.

    2. I don’t agree. If death rates are that much low, this is because the measures state has taken in order to keep hospitals empty enough. This virus may have low death rates but it has a good chance of putting you in a very critical condition which will be fatal without treatment. If the state did nothing, death rates would be massive in my opinion. Not to mention people with various sicknesses who are unable to receive treatment because hospitals are completely full.

    3. The statistics you use here are confusing. If 98-99% survive, that means 1-2% fatality, not 0.1-0.2%. Please clarify and give the source of your numbers.

      1. See, for example, this:



        I also mentioned a study published by the WHO, authored by professor John Ioannidis at Stanford University, which was based on antibody data. That study estimated that the mortality rate for covid was around 0,23% overall, which would mean that roughly one in 430 people who are infected overall die of the disease, and 0,05% for people under 70, which would mean that if you’re under 70, the risk of dying of covid is about one in 2,000.

        Since then, professor Ioannidis has updated his figures. The newer numbers have been published in The European Journal of Clinical Investigation. The modifications have been made to compensate for the fact that the earlier estimates were extrapolated from the countries that were hardest hit by covid. When this is accounted for, the new estimate is that covid kills around 0,15-0,20% of those infected, so around one in 600 infected people die of the disease overall. Among people under 70 years of age, the revised estimate is that 0,03-0,04% die, which is around one in 3,000.

    4. Please provide a source for your contention that the decline in deaths from other causes is matched exactly by the rise in Covid fatalities.

    5. In answer to your question, YOU Barovsky likened Covid 19 to the seasonal flu. You said: “It’s as deadly as seasonal flu (between 0.1 – 0.2%), which around 650,000 die from, every year.” That’s pretty much a definition of likening the impact of one disease to the impact of another disease. It’s quite reasonable for others to claim you likened Covid 19 to the flu when you have stated, however mistakenly, “it’s as deadly as seasonal flu.”

      As for being appalled and what’s appalling, the willingness of supposed leftists to embrace the anti public-health crusade of the wing-nut right is the really appalling characteristic on display.

    6. For decades CDC, NIH, and UK authorities have all dismissed and refused to research post viral syndromes. The result is we have thousands of Long Covid sufferers and physicians have no idea what to do. Many of these folks may be seriously impaired for life. They will be accused of being anxious slackers afraid to exercise. They will be dismissed by physicians and denied any form of social support. Their lives will suck. Big time.

      After 17 years of dealing with myalgic encephalomyelitis (the original name for “chronic fatigue syndrome”) I am mostly housebound and living in poverty. I have been abandoned by friends, family, the medical machine, and social service agencies. After fighting with Social Security for six years I now have a small pension and I can survive. Other patients (about two million total in US) are not so fortunate and day-to-day survival is in doubt.

      Please, I’m begging, take this virus seriously. Death may not be the worst outcome. There are ME patients stuck in bed in dark silent rooms, sometimes for decades. That could also be the fate for some Long Covid patients, although it is too soon to know for sure. Of course opportunists are taking advantage of the epidemic, as always. That does not negate the fact that if someone gets Long Covid, they will certainly regret it.

    7. Sorry for the late response, but I was working and just got the chance to examine your sources.

      The original Stanford study by Ioannidis et al. has long been notorious for its use of antibody tests (unreliable) and for carelessness and poor methodology. You can read more about it here: https://www.mercurynews.com/2020/05/24/coronavirus-research-stanford-scientists-accused-of-hyping-covid-19-antibody-study/. Any study by Ioannidis should be approached with extreme skepticism.

      The paper removed by Johns Hopkins was not a scientific study but an article appearing in a student newsletter. The article’s author, Genevieve Brand, has no expertise in epidemiology. She compared changes in the proportion of deaths among different age groups; however, this method obscured the increases in the raw number of deaths because more deaths can occur without marked changes in the proportion of deaths among different age groups. Statistics from the CDC (which you’ll probably dismiss) show around 300,000 excess deaths in the USA so far this year.

      I live in New York City, which has been ravaged by Covid. I’ve lived here through decades of seasonal flus. What happened in March and April (and may happen again this winter) was unprecedented and harrowing. Socialists must be vigilant about the ruling class using the pandemic to impose more police-state measures. But the seriousness of this pandemic is real.

  3. I agree with you: this is not the crisis you predicted. It’s yet to come.

    The fun is just beginning for the capitalist world.

  4. An important factor for the world economy is that the rate of exploitation of the working class has gone sharply up with the pandemic. Governments and companies have slashed wages and laid off people by the millions, while hundreds of thousands and millions have found jobs in amazon and other firms based almost on slave labor. This already has incidence on the rate of profit and the stocks markets celebrate with huge rises in there prices. In the so called emerging economies is where workers have suffered most, but at one point a full fifth of the workers in the USA were unemployed, while those who remained in the sectors that generate plus value were exploited more than ever.

  5. Regardless of how deadly the virus is, the fact is the non-essential economy needed to be closed down; recall those pictures of people dying in the street in Jakarta, and makeshift morgues in New York.

    Now, the obvious solution to the required *forced lock-down of non-essential production*, is for governments to announce an extended stay-at-home ‘holiday’ for all non-essential workers, while guaranteeing funding of all ‘cost of living’ expenses for the laid off workers – and guaranteeing the incomes of all essential workers. ie a complete take-over of the economy by the government, funded by using the *currency issuing capacity* of national treasuries and reserves banks. All without a postulated “credit crash” – that’s just your neoliberal monetarist orthodoxy showing.

    Who would have thought: a Marxist take-over of the global economy is the correct method to deal with a global pandemic….

    1. The only ‘non-essential’ production under capitalism is production that makes no profit. I note, judging by the TV commercials that all kinds of ‘new’ products are tempting the consumers, even in the midst of the crash of the ecnomy. To ask that the capitalists act rationally, is the height of self-delusion.

  6. Barovsky a word of caution. The US hospital system is at breaking point. With Covid hospitalizations increasing at 3000 a day many areas are actively preparing rationing. They call it crisis management. Trump is trapped. He has to maintain the charade of a stolen election, to cover for his misdirection over the virus. If he accepts the verdict of the voters his supporters will begin to question his dismissal of the virus.

    The road to hell is paved with debt. Quite right Michael. Look at Debenhams, Arcadia and Woolworths. All the product of financial engineering which burdened them with unnecessary debt robbing them of the ability to invest responsively. Canaries in the mine. And yes the profit figures show the wrong class received treasury help. Credit is no substitute for surplus value. Its fool’s gold.

    1. Undoubtedly, the US health system is severely stressed but at the same time, hospitals have been retrenching medical staff (since the beginning in fact). My point is that by focusing only of this poor, fucking virus, we’re ignoring all the root causes. So it’s not the virus that’s threatening healthcare, it’s capitalism!

      1. Except comrade Barovsky in reproducing false information, you are specifically not targeting capitalism as the threat to healthcare. YOU said that hospitalizations had nothing to do with your comment– your comment that the extreme mortality and morbidity of Covid 19 was fraudulent; when in fact the contagious nature of the disease, the lack of prophylaxis treatments, and the failure of the US govt. in particular to institute a rigorous test and trace and quarantine system has allowed the disease to overwhelm healthcare providers…..and the economy.

        I have yet to read a single word of criticism from our “hoax virus” believers about the lack of protections afforded to the most immigrant workers in the US meat packing industries; or a criticism of the NY MTA for the deaths among transit workers due to a failure to change work practices. I have yet to read a criticism from the “hoax” believers, on the failure of the US govt to provide supplies of PPE adequate to the needs of medical care-givers.

        The question the so-called “left” advocates of the hoax theory need to ask themselves is– “How would a true socialist society respond to a pandemic?” and “How do the actions of the current regimes compare to that anticipated socialist program?” And then, our “left” hoaxers should ask themselves if they think their counterparts on the right holding to the hoax theory would tolerate for one second those socialist measures?

        Let me repeat, Michael would be wise to prohibit all discussion of the reality of the Covid pandemic from this platform. It’s one thing to argue that the state will take advantage of the existence of a serial killer to strengthen and militarize the police, and it’s quite another thing to say the serial killer doesn’t exist, and there’s no need to protect yourself from said killer.

      2. Anti-capital, take Barovsky’s adivice: read more carefully. What the writer critiques is the government’s manipulation of peoples’ understanding of lock downs, social distancing, and depression-like economic conditions–both of which are attributed to the covid virus. The reality of the virus itself is not in question. Where’s the hoax? If there’s a hoax going on, it’s being perpetrated by the capitalist state. The loss of jobs, the continued degradation of the nature of work and wages taking place are the effects of the liberal virus, much more virulent than covid 19, itself one of its products.

        Isn’t it the liberals who liken skeptical leftists to supporters of Trump? Calm down. Do you really think it’s you who decides whose comments get posted?

      3. mandm: Physician, heal thyself.

        Where’s the hoax in barovsky’s comments? Right here:

        “But are they ‘covid’ deaths? Given that every US hospital gets PAID extra to report coronavirus ‘deaths’ and that (just like the UK) simply dieing WITH the virus is treated identically to dieing FROM the virus, the very basis for making scientificaly informed decisions about events, has been totally undermined!”

        The difference between this approach and a proper critique is that the critique should focus with what has been established and not what is implied, to wit: a real investigation of hospitals would establish FIRST that fraud has been committed, and then search for the reasons behind the fraud.

        The hoaxer’s investigation is informed by and throughout it’s pre-existing ideological purpose– that there is a conspiracy to distort, manipulate the “truth” and therefore all reports are fraudulent except the reports that embrace the ideology. Thus barovsky touts as “evidence” an article in a student newsletter and then tells us it was removed obviously as part of the great hoax being perpetrated on the masses when it was not..

        Nope, I don’t think it’s me who decides what gets posted. I think Michael should keep his site free of “hoaxers” “anti-vaxxers” and conspiracy ideologues. I

  7. What I don’t understand is why being sceptical about Covid19 is a RIGHT wing phenomena. I am sure we all know lefties who are sceptical.

    We have been given a choice, you are either are a full supporter of the Covid19 narrative or you are not.

    The moment you have accepted this dual choice you have sold your soul to the devil.

    We should all be deeply self critical of what is happening, we should scrutinise, question.

    Indifference to evil is more insidious then evil itself.

    It is deeply worrying that a lot of people are locking themselves into a choice of either or.

    We should all be fighting for integrity, truth telling and keeping track of structures of domination.

    Brother M Roberts is fighting for an analysis of our economy with a deeply critical lens of what is happening.

    We need the same in all areas of society especially Covid which is deeply relevant at the moment.

    We should be deeply sceptical of the technocrat culture we are developing -with graphs, statistics, references.

    This technocratic and academic way of thinking as I have experienced can be easily be manipulated to make any argument.

    What about the side the other side critical of covid. Should we dismiss them completely? Why?

    As an evolving Marxist I highly doubt Brother K. Marx would blindly accept one side of the narrative especially in a world dominated by capitalist interests which Brother M. Roberts so generously analyses and shares with us here.

    1. I also don’t understand why being sceptical about Covid19 is a RIGHT wing phenomena. Not only the US health system is stressed. I discovered that in Holland the last fifteen years cuts have been made on 10.000 beds and 1000 ic beds in the last five years! While the population has increased of one million inhabitants to 17 million. Nevertheless, health care in the Netherlands is the most expensive per inhabitant in Europe.
      How can you trust gays who are making those cuts anyway. The hospitals where already full in 2016/2017 during a flu epidemic. They went on cutting health care and even closed complete hospitals!
      And can you trust a company like AstraZeneca that has been convicted at least 19 times and they are not the only company to have been convicted multiple times. And they are going to supply us with a vaccine in an abbreviated procedure based on a gene therapy that has never been tried before. And you don’t have to be a leftist to know that capitalists are capable of doing whatever god has forbidden for profit! So start thinking instead of immediately shouting right, right, right. Don’t label but think about it and start to criticize (farma)capitalism!
      By the way even right wing gays can think and can come to conclusions the left can share! And may be critical left should read this book from 2013: https://www.routledge.com/Deadly-Medicines-and-Organised-Crime-How-Big-Pharma-Has-Corrupted-Healthcare/Gotzsche/p/book/9781846198847

    2. “What I don’t understand is why being sceptical about Covid19 is a RIGHT wing phenomena. I am sure we all know lefties who are sceptical.

      We have been given a choice, you are either are a full supporter of the Covid19 narrative or you are not.”

      You may know some crazy anarchists or role players online in places like Reddit that are skeptical of COVID, but I assure you in every single of one of the larger English speaking Socialist spaces NOBODY is skeptic of COVID.
      The vaccination effort itself surely is another topic, but you don’t “deny” COVID and its consequences unless you are suffering from questionable mental health or you have questionable ethics to put it mildly.

      And yes it is a right wing phenomena because those that are “skeptical” follow the same pattern of providing or supporting no solution while having delusions that their “rights” are being attacked simply because they are forced to wear masks now.

      Another factor is these “skeptics” will 100% of the time be people who have not been infected or do not have personal contact with someone that was infected and had complications.
      It is all very easy to deny as a conspiracy until you see a loved family member struggling to breath and dying a horrible death in an ICU bed, if you are lucky enough to get one.

      Of course some lunatics will not be convinced even on their own deathbeds, there are reported stories of people, specially Americans denying COVID right to the end.


      Don’t let this be you, if it is, I am just sorry.

  8. Unfortunately, there seems to be little discussion of Michael’s analysis here – mainly a side-tracked (and might I say, futile) debate on Covid. Addressing Michael’s analysis: a severe slump and consequent financial crisis following the sharp fall in private investment is more than likely unless governments are prepared to shoulder the burden of ramping up public investment. With public debts having risen sharply to prop up consumption, that seems improbable and for some countries with little or no control over their currencies and therefore their ability to borrow, impossible. However, a determined government in countries with under-used productive capacity could engage in ramping up investments in renewable energy generation and subsidise the production of infrastructure to distribute and consume renewable energy in a way that reduces costs for the private sector and households. Given the massive investment that will be required to decarbonise the world economy, the left should be using the current situation to encourage public investment in this direction. So long as productive capacity is not strained to the point of severe inflation, public investment can help fill the void created by the slump. What should be avoided is investment with little payoff in environmental and long-term productive capacity – proverbial “bridges to nowhere”.

    1. Dear Peter,
      you said:
      “However, a determined government in countries with under-used productive capacity could engage in ramping up investments in renewable energy generation and subsidise the production of infrastructure to distribute and consume renewable energy in a way that reduces costs for the private sector and households.”

      Your suggestion comes with an ease that hides all deep-seated problems.
      Yes, the state can make or subsidize additional investments. However, only those investments that bring profit for companies are “sustainable”. So let us assume that the state itself makes and promotes investments that bring profit to the capitalist economy. But profit is an excess over costs. Yes, the state can partially cover the costs. But who bears these costs? If the capitalist corporations are relieved, these costs will be incurred elsewhere. Who else will it be than the “households” – that is, the non-capitalists?
      Reducing costs “for the private sector AND housholds” is squaring the circle – or the art of making gold out of lead.

      Wal Buchenberg

      1. Thanks Wal. I take your point that these investments must, in the end, be profitable. It is also true that governments have a long history of initiating investment in industries that, initially, may not have been profitable enough to attract private investment. These often (almost always?) involved large scale infrastructure. Investments in renewables include such infrastructure which may not yield a high level of profitability but which will reduce the costs to other parts of the “economy “ (a word I hate to use). For example, renewable energy will not require continuous extraction and transportation of coal and other minerals to generate energy. This will, with efficient energy distribution networks, lower costs to manufacturing, transport and indeed all consumers of energy including households. Higher profits that result from this can be clawed back from owners of capital. It will also lower costs, often ignored, such as the costs to the health system from the continued burning of fossil fuels (and I don’t need to mention the other larger long-term benefit).

    2. “Unfortunately, there seems to be little discussion of Michael’s analysis here”

      That is because in a very uncharacteristic move he decided to once again(go back to the initial COVID posts to see the history of this) allow these questionable comments to be published.

      Nothing good comes out of discussing with people so uninformed and so ideologically bankrupt, yet we can’t just allow their nonsense to spread like a virus(pun intended) without opposition, at least people who read the comments shouldn’t have the impression leftists/socialists are now on board with COVID “denial” of its most basic and deranged form.

      No deep commentary(some “try” but fail on the very first basic premise) just yet another nonsense about it not being as bad as the flu. Unfortunately I thought we were past this already.

      1. I agree, but I also remember that I did not initially believe that the virus was so bad we should shut the world down. The disaster facing the losers in this generalised shutdown must be recognised with more than lip service by the left. Lives are being crushed as we moralise. The aged must also realise the sacrifice the young are making to save them. No one should try to monopolise the high ground in this.

  9. Debt/GDP is a flawed measure. You’re comparing stock to flow. Better would be r vs. g. It is hoped that thanks to Govt stimulus and it’s ability to control r, that this will always be r<g.

  10. Prof. Roberts:

    I have had a question for some time about crises of overproduction, and I think you may be able to help me. I understand (a) you are busy, and have plenty to do, so if you cannot take the time to write a reply, I get it; (b) this blog post is not quite relevant to my question, which is more general, so if you want to refer me to another way of reaching out to you, I also understand that. Even a reference for further research would be very helpful to me. Here is my question:

    To me it seems like there are (or may be) two different types of overproduction crises – one I understand well (I think) and another I don’t know so much about. These may be simply two aspects of the same thing, and it may be I haven’t dug deep enough yet to grasp this.

    (1) The type of overproduction I’m most familiar with is due to (or, more properly said, is a manifestation of) the TRPF. As I understand it, the “over” in this overproduction refers precisely to the quantity of constant capital and produced commodities “over” what will yield a revenue greater than the investment cost–and this “overage” occurs because the price has fallen too low (and the cost of the fixed capital has risen too high).

    (2) The other type of overproduction that I’ve heard of but understand far less, is one mentioned, for instance, in “Fundamentals of Political Economy”, a work of political economy out of China. They write,

    “The source and cause of economic crises of overproduction lie in the capitalist system itself. The source of crisis lies in the contradiction between the social nature of production and the capitalist ownership of products.” … The basic contradiction of capitalism inevitably manifests itself in a contradiction in which the productive forces greatly increase while the purchasing power of the laboring people relatively decreases. … The development of capitalist production and the adoption of new techniques inevitably keep a large number of workers outside the factory gates and expand the ranks of the unemployed. … Thus, on the one hand there is an immense growth of production, and on the other hand there is a relative decrease in the purchasing power of the laboring people. This contradiction makes the economic crises of overproduction inevitable.”

    In other words, since the entire capitalist class is forced to steadily increase the prevailing, economy-wide ratio of constant capital to variable capital, and since variable capital is the only source of purchasing power for the consumers who make up the society-wide market, the capitalists are constantly diminishing the size of the very market they must sell to in order to make a profit.

    To my mind, then, there seem to be two distinct things causing crises:

    (1) The competition-by-efficiency drives the price lower and lower, and invariably some capitalists stumble into making investments that will never become profitable.

    (2) The ever-increasing ratio between constant capital to variable capital shrinks the size of the market. And thus even if theoretically the cheapness of manufacturing one unit of a given commodity hadn’t driven the price too low for a capitalist to profit, there simply isn’t anyone with the money to pay the prevailing price for it.

    I suspect I may be missing some connection that unites these two phenomena, but right now I don’t see it, and it seems like they may be two distinct things. What do you say?

    Also, regardless of the possible connection with these two, is there somewhere Marx writes about, in an elaborating way, the second type (aspect?) of overproduction?

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