chapter three of The Future of Money - Financialization

1. Economics for Activists
Week Four – Financialisation and Debt
Mechanics Institute Limerick, 30 May 2013

2. Money circulation through the
financial system is seen as the
outcome of private economic acts,
not as a function of social
relationships and public authority. P.2

4. money rests upon a social and
political base, a combination of social
conventions, banking systems, public
trust and state authority.

7. The purpose of capitalism is self-expansion – capital begets capital – and it does so by monetizing
social value and human labour. This is a circuit of transformation.
“Historical capitalism involved therefore the widespread commodification of processes – not
merely exchange processes, but production processes, distribution processes, and investment
processes – that had previously been conducted other than via a „market‟. And, in the course of
seeking to accumulate more and more capital, capitalists have sought to commodify more and more
of these social processes in all spheres of economic life.”
Immanuel Wallerstein, Historical Capitalism (London: Verso, 2011), 15.

8. THE FUTURE OF MONEY: CHAPTER THREE
PEOPLE‟S CAPITALISM: FINANCIALISATION AND DEBT
1. THE „DEMOCRATISATION‟ OF DEBT
2. FROM SAVINGS TO CAPITAL INVESTMENT
3. HOUSING: HOME OR ASSET?
4. DEBT AS DEVELOPMENT
5. DEBT AND CAPITALISM

9. At the heart of financialisation was the assumption that money
can be made out of money and that money in itself can secure a
person‟s economic life. (p.59)

10. At the heart of financialisation was the assumption that money
can be made out of money and that money in itself can secure a
person‟s economic life. (p.59)
… the banking system makes more money by putting people into
debt than by encouraging them to save:
“banking is about selling a single product: debt.” (p.61)

12. A pattern emerged that was to recur in the housing market: the
most profitable borrowers for the credit companies were those
least able to pay. (p.61)

13. A pattern emerged that was to recur in the housing market: the
most profitable borrowers for the credit companies were those
least able to pay. (p.61)
… most of these [new] bankruptcies don‟t represent profligate
expenditure but people. Particularly women, trying to keep their
head above water.
A major cause of indebtedness in the US is borrowing to pay for
health care. (p.62)

14. 2. From savings to capital investment
While many household have been sucked into financialisation
through high levels of debt, people have also been sucked in
through the promise of profitable investment. (p.63)

15. 2. From savings to capital investment
While many household have been sucked into financialisation
through high levels of debt, people have also been sucked in
through the promise of profitable investment. (p.63)
This is characterised by an approach to savings that treats them
more like capital, with the expectation of growth over time. (p.63)

20. 3. Housing: Home or Asset?
Mortgage debt has been a major aspect of money creation in the
second half of the twentieth century, accounting for up to 80 per
cent of personal debt in the US and 60 per cent of bank loans.
(p.68)
Homes were seen as a kind of milch cow that could be milked for
consumer spending or for life cycle costs such as college fees,
health care needs or income in old age. (p.68)

22. The housing market seemed to create wealth out of nowhere
which, given the huge shift to bank-based credit money
creation, is exactly what it was doing. House price inflation
created ideological support for financialisation, capital
accumulation and the capitalist market system. (p.70)
An asset-based welfare system with its promises of opportunity
and choice will inevitably be underminded if asset prices start to
drop. (p.71)

23. 4. Debt as development
… achieving social change through economic
empowerment…
… a market solution to poverty.
(p.76)

24. 5. Debt and Capitalism
In the short term, together with globalised cheap labour goods,
[debt] appeared to overcome Marx‟s prediction that capitalism
would be in crisis if the mass of the people in society did not
receive enough in wages to enable them to buy the products of the
economy. (p.79)
Harvey: “ever expanding endebtedness is a perilous way to keep
consumerism alive.”

25. Debt generated growth was reaching its limit: in the US by
September 2003 it was taking six dollars of extra debt to generate
one dollar of growth.
The dilemma for the financialised Anglo-american economies was
that debt had become a (failing) agent of growth and a heavy
burden to borrowers.
When the only source of future income is more debt being issued,
it cannot be a secure source of wealth. (p.80)

26. While bank issue of debt money has been central to the growth of
capitalism it has its own limits and contradictions. When debt
issue becomes the only engine of capitalist growth it must
eventually come up against Marx‟s contradiction that, if profit is
to be extracted, people will not have sufficient money to enable
them to consume all the goods produced, even with debt.
The debt machine has run out of steam. (p.80)