Where angels fear to tread

A month ago I agreed to give a talk on Marx’s Capital. I wasn’t the first choice, but my thesis supervisor had another engagement. Actually he sounded quite happy to have another engagement and warned me that it would be impossible to boil Capital down to 20 minutes. I wasn’t too worried – I’ve spent so much time reading it and the secondary literature that it couldn’t be too hard, surely. Besides I had a holiday in New Zealand and a wedding in beween promise and delivery, so I wouldn’t have to think about it until a couple of days before. I would dash up some notes on the day and things would be splendid.

Well, the supervisor was right, and I’ve had a nail-biting couple of days working out what the hell to say. I found out just how little I could really say confidently about value or capital, how much the wandering in the labyrinth of the secondary lit had confused me about what Marx Actually Said.

The occasion was a meeting of the Monty Pelican Society, a pretty casual reading group with a random membership that’s been meeting for the last few months in a little office in Surry Hills to read through the classics of economic thought. I went along myself while the group worked through Adam Smith and David Ricardo.

It happened tonight and in the end it went pretty well. The group ranged from a pair from a feminist reading group who had been reading Derrida’s Spectres of Marx and decided to get a more solid look at the spectre himself, to a risk analyst for a major investment bank, slumming it. The discussion was great, especially considering most of them were reading Marx for the first time.

Afterwards I ended up having a few beers with the banker, and he told me things were “coming apart at the seams” in the market for commercial paper, and that the general consensus among his mates in the investment banking community was that a big financial shock was coming by 2010 at the latest. Now this is the kind of investment banker who goes to the odd reading group on Marx, but still, if a run on commercial paper sparks the next 1929 (his comparison), well, you heard it here first.

Anyway, I will try to post what I said on Capital here soon, but really this is just a note to explain that life is still hectic. Away for another couple of days at the Society for Heterodox Economists’ Winter School. I might also look into this commercial paper business…

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Published in: on 4 July, 2007 at 10:25 pm  Comments (3)  

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  1. I don’t know what ‘commercial paper’ is, but I’m still cleaving to Chris Jefferis’s 2005 prediction (in conversation) that 2008 will be 1929 Redux.

  2. Commercial paper = short-term securities issued by big firms. Like bonds except short term and generally issued to finance working capital instead of new investments. Since working capital has to keep being rolled over, so does commercial paper. If the same kind of paper becomes less attractive to investors for some reason (say they start to consider it to be riskier) the interest rate on it will rise. At some points in time there have been full-on runs, in which investors have moved out of paper en masse, forcing the companies to try to re-intermediate through the banks – though if it happens to firms all at once – i.e. a run on the whole market for commercial paper – banks are not likely to be able to cater for all.

    The classic run was sparked by the Penn Central bankruptcy in 1970 – all of a sudden its paper lost its value and caused investors to freak out about commercial paper in general. In that case the Federal Reserve stepped in to make sure banks had enough reserves to reintermediate if they had to, and by doing that made commercial paper more solid, since it made it less likely that one firm’s default would spread.

    At that time commercial paper was relatively new. These days it’s more established with more complex arrangements. Not sure exactly what the guy was talking about – there is a story in last week’s Economist about buyers simply not showing up for commercial bond auctions, but that looks like longer-term bonds. (Incidentally, check out the cover of this week’s issue. The Economist tends to be bearish, but lately it has been very worried about systemic risks.)

  3. [...] value theory of labour 1 So, this talk on Capital I mentioned. Since the audience had previously looked at Adam Smith’s Wealth of Nations and David [...]


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