Full text: Effective Demand in the Short Run and in the Long Run

prices rose tremendously in the course of the 70s and 80s - this 
movement has come to an end just recently, wit^ness the near 
bankrupcy of Mr.Trump.The increase in the price of land had to be 
financed and this offered another field for the banks. 
Overlapping with the developments mentioned occurred a large 
increase in borrowing of consumers, both for mortgages and for 
durable consumer goods. This proved to be the mainstay of the 
large and extended boom after 1982. 
It may be surmised that the appearance of these new opportunities 
was not merely a fortunate coincidence but that the banks 
themselves had a hand in it,whether by their influence on economic 
policy or by their manipulation of the modern propaganda machine ( 
the media which contributes not a little to the growth of 
fashions, movements and trends in our society and economy. 
Deregulation, tax provisions for consumers credit, tax treatment 
of capital gains played their role, moreover, the banks themselves 
created sepecialised institutions (investment banks) which were a 
decisive factor in facilitating the scope,speed and growth of the 
leveraged buy out movement. 
Capitalism today is not exaxtly what it used to be. The classics 
used to see it as a production machine which produced a surplus 
from which the owners paid the interest to the banks which 
financed it. Today the greater part of the interest does not come 
from that source but from governments, development countries, and 
from consumers and home owners directly. If the shrinking of the 
surplus producing machine in relation to the financial apparatus 
is going to continue we may expect a continuation of the trend to 
more direct extraction of interest. Does it make a difference? Can 
it be a permanent feature of the system or are there going to be 
difficulties arising from it?

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