The World We Live in Right Now Is a Keynesian One
Karl Marx, First Real Business Cycle Theorist

Karl Marx the Behavioral Finance Economist

Reaching for yield in a time of low interest rates. Karl Marx:

Neue Rheinische Zeitung Revue: If the new cycle of industrial development which began in 1848 takes the same course... the crisis will break out in 1852. As a symptom that the excess speculation which is caused by overproduction, and which precedes each crisis, will not be long in coming, we can quote the fact that the discount rate of the Bank of England has not risen above 3 per cent for two years....

The additional capital which... is always unloaded onto the bond market in times of prosperity, is enough by itself to force down the interest rate... but the interest rate is reduced to a much larger extent by the enormous expansion of credit produced by general prosperity.... The capitalists with investments in loan capital thus see their income reduced by a third or more... under pressure to look for more profitable capital investments. Overproduction gives rise to numerous new projects, and the success of a few of them is sufficient to attract a whole mass of capital in the same direction, until gradually the bubble becomes general....

Innumerable schemes will be ruined, but as with the English railway system in 1845, at least the outline of a universal shipping system will this time emerge from this over-speculation. No matter how many companies go bankrupt, the steamships — which are doubling the Atlantic traffic, opening up the Pacific, connecting up Australia, New Zealand, Singapore and China with America and are reducing the journey around the world to four months — the steamships will remain...

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