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Economics for Activists Week Four Limerick May 2013
 

Economics for Activists Week Four Limerick May 2013

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chapter three of The Future of Money - Financialization

chapter three of The Future of Money - Financialization

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    Economics for Activists Week Four Limerick May 2013 Economics for Activists Week Four Limerick May 2013 Presentation Transcript

    • Economics for ActivistsWeek Four – Financialisation and DebtMechanics Institute Limerick, 30 May 2013
    • Money circulation through thefinancial system is seen as theoutcome of private economic acts,not as a function of socialrelationships and public authority. P.2
    • money rests upon a social andpolitical base, a combination of socialconventions, banking systems, publictrust and state authority.
    • The purpose of capitalism is self-expansion – capital begets capital – and it does so by monetizingsocial value and human labour. This is a circuit of transformation.“Historical capitalism involved therefore the widespread commodification of processes – notmerely exchange processes, but production processes, distribution processes, and investmentprocesses – that had previously been conducted other than via a „market‟. And, in the course ofseeking to accumulate more and more capital, capitalists have sought to commodify more and moreof these social processes in all spheres of economic life.”Immanuel Wallerstein, Historical Capitalism (London: Verso, 2011), 15.
    • THE FUTURE OF MONEY: CHAPTER THREEPEOPLE‟S CAPITALISM: FINANCIALISATION AND DEBT1. THE „DEMOCRATISATION‟ OF DEBT2. FROM SAVINGS TO CAPITAL INVESTMENT3. HOUSING: HOME OR ASSET?4. DEBT AS DEVELOPMENT5. DEBT AND CAPITALISM
    • At the heart of financialisation was the assumption that moneycan be made out of money and that money in itself can secure aperson‟s economic life. (p.59)
    • At the heart of financialisation was the assumption that moneycan be made out of money and that money in itself can secure aperson‟s economic life. (p.59)… the banking system makes more money by putting people intodebt than by encouraging them to save:“banking is about selling a single product: debt.” (p.61)
    • A pattern emerged that was to recur in the housing market: themost profitable borrowers for the credit companies were thoseleast able to pay. (p.61)
    • A pattern emerged that was to recur in the housing market: themost profitable borrowers for the credit companies were thoseleast able to pay. (p.61)… most of these [new] bankruptcies don‟t represent profligateexpenditure but people. Particularly women, trying to keep theirhead above water.A major cause of indebtedness in the US is borrowing to pay forhealth care. (p.62)
    • 2. From savings to capital investmentWhile many household have been sucked into financialisationthrough high levels of debt, people have also been sucked inthrough the promise of profitable investment. (p.63)
    • 2. From savings to capital investmentWhile many household have been sucked into financialisationthrough high levels of debt, people have also been sucked inthrough the promise of profitable investment. (p.63)This is characterised by an approach to savings that treats themmore like capital, with the expectation of growth over time. (p.63)
    • 3. Housing: Home or Asset?Mortgage debt has been a major aspect of money creation in thesecond half of the twentieth century, accounting for up to 80 percent 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 forconsumer spending or for life cycle costs such as college fees,health care needs or income in old age. (p.68)
    • The housing market seemed to create wealth out of nowherewhich, given the huge shift to bank-based credit moneycreation, is exactly what it was doing. House price inflationcreated ideological support for financialisation, capitalaccumulation and the capitalist market system. (p.70)An asset-based welfare system with its promises of opportunityand choice will inevitably be underminded if asset prices start todrop. (p.71)
    • 4. Debt as development… achieving social change through economicempowerment…… a market solution to poverty.(p.76)
    • 5. Debt and CapitalismIn the short term, together with globalised cheap labour goods,[debt] appeared to overcome Marx‟s prediction that capitalismwould be in crisis if the mass of the people in society did notreceive enough in wages to enable them to buy the products of theeconomy. (p.79)Harvey: “ever expanding endebtedness is a perilous way to keepconsumerism alive.”
    • Debt generated growth was reaching its limit: in the US bySeptember 2003 it was taking six dollars of extra debt to generateone dollar of growth.The dilemma for the financialised Anglo-american economies wasthat debt had become a (failing) agent of growth and a heavyburden to borrowers.When the only source of future income is more debt being issued,it cannot be a secure source of wealth. (p.80)
    • While bank issue of debt money has been central to the growth ofcapitalism it has its own limits and contradictions. When debtissue becomes the only engine of capitalist growth it musteventually come up against Marx‟s contradiction that, if profit isto be extracted, people will not have sufficient money to enablethem to consume all the goods produced, even with debt.The debt machine has run out of steam. (p.80)