Note to Self: Potential Dealbreakers:
Marc Ambinder Asks a Question

Welcome to the Thunderdome!

The hundred-and-forty year-old cage match continues.

On the right side, those who rely on benevelont monetary technocrats to calm markets and control the excess of speculation through clever exercise of their discretion, like Sir Robert Peel:

Political Economy Working Notes and Papers: June 2008

Robert Peel, 1844: My confidence is unshaken that we have taken all the Precautions which legislation can prudently take up against the Recurrence of a pecuniary Crisis. It my occur in spite of our Prescuamay occur in spite of our Precautions, and if it does, and if it be necessary to assume a grave responsibility for the purpose of meeting it, I dare say men will be found willing to assume such a responsibility. I would rather trust to this than impair the efficiency and probable success of those measures by which one hopes to control evil tendencies in their beginning, and to diminish the risk that extraordinary measures may be necessary...

On the left side, those who hold that mere financial bandaids cannot resolve a crisis that has deeper causes in overproduction and the dialectical contradictions of capitalism, like Karl Marx:

Political Economy Working Notes and Papers: June 2008

Neue Rheinische Zeitung Revue: The years 1843-5 were years of industrial and commercial prosperity, a necessary sequel to the almost uninterrupted industrial depression of 1837-42. As is always the case, prosperity very rapidly encouraged speculation. Speculation regularly occurs in periods when overproduction is already in full swing. It provides overproduction with temporary market outlets, while for this very reason precipitating the outbreak of the crisis and increasing its force. The crisis itself first breaks out in the area of speculation; only later does it hit production. What appears to the superficial observer to be the cause of the crisis is not overproduction but excess speculation, but this is itself only a symptom of overproduction. The subsequent disruption of production does not appear as [what it really is,] a consequence of its own previous exuberance, but merely as a setback caused by the collapse of speculation...


The crisis reached its peak between 22 and 25 October, when all commercial transactions had come to a standstill. A deputation from the City then brought about a suspension of the Bank Act of 1844, which had been the fruit of the deceased Sir Robert Peel's sagacity.... Since his death Peel himself has been apotheosized in the most exaggerated fashion by almost all parties as England's greatest statesman. One thing at least distinguished him from the European 'statesmen' — he was no mere careerist.... His power over the House of Commons was based upon the extraordinary plausibility of his eloquence. If one reads his most famous speeches, one finds that they consist of a massive accumulation of commonplaces, skillfully interspersed with a large amount of statistical data...

>Capital, chapter 25: The course characteristic of modern industry, viz., a decennial cycle (interrupted by smaller oscillations), of periods of average activity, production at high pressure, crisis and stagnation, depends on the constant formation, the greater or less absorption, and the re-formation of the industrial reserve army or surplus-population.... The expansion by fits and starts of the scale of production is the preliminary to its equally sudden contraction... the simple process that constantly “sets free” a part of the labourers... the constant transformation of a part of the labouring population into unemployed or half-employed hands.

The superficiality of Political Economy shows itself in the fact that it looks upon the expansion and contraction of credit, which is a mere symptom of the periodic changes of the industrial cycle, as their cause...


Capital, chapter 25: It will be remembered that the year 1857 brought one of the great crises with which the industrial cycle periodically ends. The next termination of the cycle was due in 1866. Already discounted in the regular factory districts by the cotton famine, which threw much capital from its wonted sphere into the great centres of the money-market, the crisis assumed, at this time, an especially financial character. Its outbreak in 1866 was signalised by the failure of a gigantic London Bank, immediately followed by the collapse of countless swidling companies. One of the great London branches of industry involved in the catastrophe was iron shipbuilding. The magnates of this trade had not only over-produced beyond all measure during the overtrading time, but they had, besides, engaged in enormous contracts on the speculation that credit would be forthcoming to an equivalent extent. Now, a terrible reaction set in, that even at this hour (the end of March, 1867) continues in this and other London industries...