Such easy credit encourages each firm to undertake massive productive investments as it competes to get a bigger slice of the expanding market than its rivals, even though this causes their combined output to far exceed the capacity of the market to absorb it. Easy credit also enables those on friendly terms with the banks to embark on an orgy of luxury spending, and all sorts of crooks and fraudsters to join in the very profitable business of borrowing in order to lend and lending in order to borrow. The real, underlying processes of production, exploitation and creation of surplus value get completely hidden from view-until the economy suddenly starts turning down and all the bits of paper which represent credit have to be repaid from profits which are too small to do so. At this point firms and banks come to distrust the ability of each other to pay back what has been borrowed, and lending can grind to a virtual stop in what is today called a "credit crunch":
The chain of payment obligations due at specific dates is broken in a hundred places. The confusion is augmented by the attendant collapse of the credit system . . . and leads to violent and acute crises, to sudden and forcible depreciations, to the actual stagnation and disruption of the process of reproduction, and thus to a real falling of in reproduction.20
The behaviour of "fictitious capital" serves further to intensify the general boom-recession cycle of capitalism. Despite its nonproductive nature, the monetary value of fictitious capital at any point in time represents a claim on real resources that can be converted into cash and from cash into commodities. When, say, share prices are rising during a boom, they add to the capacity of their owners to buy goods and tend to intensify the boom; when they fall with a recession, this adds to the pressure, reducing expenditure through the economy as a whole. The inevitably unstable, suddenly fluctuating, prices of the various sorts of fictitious capital add to the general instability of the system as a whole. They intensify the swings from boom to recession and back, and they also play havoc with the capacity of money to provide a fixed measuring rod for value.
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Understanding the System: Marx and Beyond