Monetary Economies of Production
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Monetary Economies of Production

Banking and Financial Circuits and the Role of the State

Edited by Louis-Philippe Rochon and Mario Seccareccia

The central focus of this book is the relationship between money, the sphere of production, and the State. It explores how best to adapt the fundamental ideas of the circulationist perspective to achieve a better understanding of the financialisation of the production processes within contemporary capitalist economies. Importantly, the expert contributors illustrate that the true challenge ahead is to address how these new emerging forms can be eventually tamed, a challenge that the recent financial crisis has forcefully proven essential.
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Chapter 14: The monetary conditions for growth: Parguez’s debt stability condition

Massimo Cingolani


This chapter discusses a criterion for debt sustainability in a monetary production economy formulated by Alain Parguez in 2010. This states that public debt should grow in line with private debt in order to avoid the accumulation of financial imbalances. In the light of this principle, one of the causes of the current financial crisis is to be sought in an excessive development of private debt with respect to the growth of public debt, for which statistical evidence is presented in the first two sections of the chapter. Simple models presented in this chapter explore some of the economic factors that can explain these results. The last section concludes and draws the policy implications of the analysis. Parguez’s principle for debt stability implies that, contrary to a widely held opinion, the way out of the current crisis must be sought in a reasoned expansion of public debt, in particular ‘good’ public debt, used to generate real wealth and revenues.

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