1. Dealing with the crisis Discussant: Nobuharu Yokokawa Musashi University

2. Cyclical Crisis and Structural Crisis • In Marx’s theory of crisis, cyclical crisis is a physiological phenomenon that enforces self regulating character of capitalist economy. • Accumulation of real capital plays main role and financial sector plays subordinate role.

3. Cyclical crisis • Prosperity starts with accumulation of capital. In the prosperity banks function as financial intermediary. • At the end of prosperity higher wages reduce industrial demand for loanable money. • Then loose credit encourages speculation. When speculators cannot rollover credit, speculations collapse, and crisis starts.

4. Cyclical crisis • In the depression, capital introduces a new and more productive method of production, which creates a relative surplus population and relative surplus value. • Self regulating character of capitalist economy works only with the support of suitable international and domestic institutions.

5. Structural crisis • Structural crisis is a systemic crisis of a capital accumulation regime. • Changes of hegemon of capitalist world systems create the most serious structural crisis. • In between, repetition of cyclical crisis accumulates problems and changes the characters of accumulation regimes.

6. Minsky’s financial instability hypothesis • In contrast to Marx, Minsky’s financial instability hypothesis pays attention only to the monetary side of crisis. • It does not pay attention to real accumulation of capital and relation between accumulation of money capital and real capital.

7. Increasing fragility of an accumulation regime • Capital accumulation regime must allow cyclical up and down which is essential to solve physiological problems. • We could observe over accumulation crises in the 1950s and 1960s. • Once wages went up in prosperity, they did not decline even in the depression, increasing conflict between capital and labour. • The conflict finally destroyed the capital accumulation regime of the golden age in the 1970s.

8. Financial fragility • After the1980s, financial sector played main role. • Boom and bust are created monetary. • Current account imbalance -> Short term capital flow -> Boom -> Bust -> Depression. • A lower volatility of GDP in this period may reflect less dynamism of economy. • Ratchet effects appeared in the interest rate. • Financial fragility increased last three decades. The crisis in the 2000s is a structural crisis.

9. Longevity of the dollar standard system • The Bretton Woods system broke down in 1973. G7 and other international cooperation played important role to extend the dollar standard system. • Is it the US that forced Japanese yen to appreciate, or Japan and other countries that appreciated their currencies voluntarily and cooperated the USA in order that the international monetary system survive?

10. Can international imbalances be managed publicly? • A world central bank can supply liquidity but not long term capital. • It must be supplied by savings from structural surplus economies. • The world central bunk functions here as a financial intermediary of the first resort. However can it pick up the winners among many candidates?

11. Regulation of the domestic credit system • Commercial banks create deposit money. If there is no regulation it can create money indefinitely increasing both asset and debts in their balance sheet simultaneously. • If banks function as financial intermediary why capital requirement is needed? In the 1950s and 60s reserve requirement worked well in Japan without capital requirement.