Labor in the Twenty-First Century

Minsky in "Can 'It' Happen Again? A Reprise" (1982):

"Money is created as banks lend--mainly to business---and money is destroyed as borrowers fulfill their payment commitments to banks. Money is created in response to businessmen's and bankers' views about prospective profits, and money is destroyed as profits are realized. Monetary changes are the result, not the cause, of the behavior of the economy, and the monetary system is "stable" only as profit flows enable businesses that borrow from banks to fulfill their commitments."

In what follows, I will only loosely refer to the text above, and again simplify. I hope you can bear with me. My aim is to create discussion around this and find out where I make mistakes - I'm happy if you can help me with that.

In our economic system a certain "symbiosis" has made it necessary for the wage earners to spend their wages later on the products of the firms so that the debts could be repaid. This was because the wages in effect were paid in IOUs (bank-created money) which the workers could later switch for goods they desired. The whole idea was to produce these goods and then use them. These goods - not the IOUs - were the fruits of the labor. When the workers gave the IOUs to the firm as a payment for goods, and the firm forwarded them as loan repayments to the bank where the loan was originated, the IOUs (made by the firm) ceased to exist. Money was destroyed.

Here's my updated version of Minsky's text above:

Money is created as banks lend--mainly to households---and money is destroyed as borrowers fulfill their payment commitments to banks. Money is created in response to households' and bankers' views about prospective wages, and money is destroyed as wages are realized. Monetary changes are the result, not the cause, of the behavior of the economy, and the monetary system is "stable" only as wage flows enable households that borrow from banks to fulfill their commitments.

The very same "symbiosis" I described above makes it now necessary, if we follow this logic, for the firms to spend their profits later on the wages of the households so that the debts can be repaid. Many households have paid for the goods in IOUs (bank-created money). These IOUs are what the employees and the owners of the companies have received for the goods they produced. Again, money is an IOU. Many households have received the goods --the fruits of yet-to-be-performed labor-- already. These households can look forward to labor without (further) fruits. This is what "debt slavery" is.

All this means that the wages and profits of past decades are good only to the extent these IOUs are good. The money some people have accumulated is good only to the extent to which the debts will be repaid. And the debts will be repaid if there will be enough wages. The problem for the firms is that these wages paid to indebted masses will not be buying the goods the firms produce.

To sum this all up using a reference to my previous posts:

Money created out of nothing has a value, but the value is directly connected to the value of the promise to pay. If the promise to pay doesn't hold, like was obvious in the case of subprime loans (just to give an extreme example), then the money created and used for payment ended up having very little value. It was not "good" money. We need to remember that when money is destroyed, an IOU is destroyed, and so debt is made good.