Marx is not making any logical connections here. This is a completely unsupported statement and it is not particularly difficult to see the flaws in Marx’s absence of reasoning… since he is not conducting any reasoning the flaws are quite obviously and necessarily in the faulty premises that he assumes.
Marx assumes (he does not argue) that owners of capital will cause/force people to spend more than they can afford. However he omits that in a free market, consumers will also cause/force owners of capital to sell their goods ever and ever cheaper… which brings balance to the economy. Indeed history would suggest that if anything the consumers will always get the upper hand since, in the absence of fiat currency prices have historically fallen very consistently (Adam Smith conducts a very thorough analysis of this in The Wealth of Nations).
Further, Marx incorrectly assumes that consumer’s purchases must be financed by debt. Where interest rates rise above the ability of the public to finance debt people will quite simply stop borrowing. I suspect that at the time of Marx’s writing borrowing was much less common even in industry than it is today. Have a read through the opening chapter of Stefan Zweig’s Le Monde d’Hier (that’s the French title - I’m guessing it’s called “The World of Yesterday” or something in English) and you’ll get an idea of what I mean.
In the United States no central bank existed in 1867. However the Bank of England was established in 1694 and was hardly the first attempt to establish central control over a coordinated banking cartel. Further, the root cause of bankruptcies is the fractional reserve system and legal tender laws, rather than the central bank per say. When all the banks are obliged to use the same legal tender, it becomes a race to the bottom as each bank tries to expand it’s issue of certificates of deposit as quickly (if not quicker) than it’s competitors. For when a bank fails to issue new certificates of deposit and their competitor succeeds in doing so, the bank’s assets are devalued for the benefit of their competitor.
Marx states that the only way to deal with the defaulting of banks is to nationalize them. Once again this is merely dogma and no reason or logic is contained in this statement. In fact, if legal tender laws were repealed and if the government simply took a hands off approach to the banking sector (refusing to act as the lender of last or to lend any form of helping hand to the banks) then banks would not be in a special category apart from other businesses and the failure of one or any number of banks would not present any serious threat to the financial system.
In the absence of fractional reserves implicitly or explicitly backed by the government (and thus tax payer’s money) banks that held insufficient reserves to cover their deposits would no doubt fail fairly rapidly. Depositors in those institutions would no doubt lose their deposits and banks that paid interset on deposits would come to be, correctly, identified essentially as investment companies (with a risk associated with them) rather than as safe houses for money. People who were willing to continue to risk potentially losing their savings would continue to hold accounts at investment banks and people who did not wish to risk their savings would choose instead to keep their money at money warehouses (where perhaps they would be required to pay a storage fee).
In time, banks with good practices would emerge to replace the cowboys that kept minimal fractional reserves and there would be absolutely no reason to have the government involved in the market for money whatsoever - much less to nationalize the banks.
Marx’s writing therefore highlights shortcomings not in the free market system but in the system of socialism itself - for our current banking industry is essentially the most socialist of all the industries that we maintain. The central bank has a government created monopoly on issuing legal tender (the product) and through this monopoly they control the prices (interest rates). There is no notion of profit and loss, since banks are not permitted to make losses (they can only make profits - losses are covered by the tax payer). Does that sound like a free market to you? Is it any surprise that such a system is failing?
Once again, although the central bank may not have existed in the United States at the time of Marx’s writings, the Bank of England has existed since 1694… so socialist banking systems were already well established in Europe at the time of Marx’s writings. It is ironic that Marx himself should have identified these fundamental weaknesses of the socialist nature of central banking.