Tendency of the general rate of profit to fall

[Thinking Man's Idiot]

The progressive tendency of the general rate of profit to fall is, therefore, just an expression peculiar to the capitalist mode of production of the progressive development of the social productivity of labour. This does not mean to say that the rate of profit may not fall temporarily for other reasons. But proceeding from the nature of the capitalist mode of production, it is thereby proved logical necessity that in its development the general average rate of surplus-value must express itself in a falling general rate of profit. Since the mass of the employed living labour is continually on the decline as compared to the mass of materialised labour set in motion by it, i.e., to the productively consumed means of production, it follows that the portion of living labour, unpaid and congealed in surplus-value, must also be continually on the decrease compared to the amount of value represented by the invested total capital. Since the ratio of the mass of surplus-value to the value of the invested total capital forms the rate of profit, this rate must constantly fall.

- Karl Marx, Capital Volume 3, chapter 13 [4]

[jamiedb]

Most amusing financial story of the day...

BEIRUT: The credit squeeze in the United States, Europe and some of the oil-rich Gulf countries has convinced many Lebanese expatriates and Arab nationals to transfer parts of their massive assets to Lebanese banks, local bankers said Friday. "The deposit base in some Lebanese banks surged in the third quarter and this trend is continuing due to the global financial crisis," Saad Andary, the adviser to the chairman of Bank of Beirut and the Arab Countries (BBAC), told The Daily Star. He added that Beirut was now regarded as a safe haven by many depositors. [!]

At present, total bank deposits in Lebanese banks are close to $73 billion and bankers expect this figure to reach $80 billion by the end of 2008.

The International Monetary Fund has credited the Banque du Liban for adopting stringent measures that shielded Lebanese banks from the direct fallout of the global financial crisis.

Andary said that most of the deposits are coming from Lebanese expatriates who are based in Africa and Europe.

According to the Association of Banks in Lebanon (ABL), more than 45 percent of the assets in Lebanese banks are liquid and most of this liquidity is in foreign currency, which affords protection to these banks.

In addition, the lending-to-deposits ratio is one of the lowest in the region.

The Central Bank prohibits commercial banks from making direct investment in properties in Lebanon or any other country. But banks are allowed to lend, to a certain degree, to investors seeking to develop real estate projects.

They [Lebanese expatriates] are liquidating some of their portfolios in Europe and the United States and depositing this cash in Lebanese banks," Andary said.

Another banker, who spoke on condition of anonymity, also applauded the ban on direct investment in real estate.

This policy, which was enforced by [Central Bank Governor] Riad Salameh, has allowed local banks to avoid making any risky investment," the banker said. "At the end of the day banks should not venture with the deposits the clients.

The banker said that investors had confidence in the soundness of Lebanese banking system and this trust was translated into more deposits.

Lebanese bankers stressed that if the flow of deposits increased in the coming months many banks would start paying lower rates on deposits because of various costs and risks associated with digesting such large amounts of capital.

"We have to cut our rates down and we have started doing this few months ago," Andary said.

The average current interest rate on dollar deposits is a little less than 4.5 percent, while the average interest on Lebanese-denominated deposits is between 8 and 9 percent.

Echoing similar views, Joe Sarrouh, the adviser to the chairman of Fransabank, said that banks are getting lot of inquiries from abroad. But he stressed it is difficult to calculate the deposits that are coming to the country for the time being.

Daily Star, Daily Star staff 10/11/2008
http://www.dailystar.com.lb/article....ticle_id=96679