Financialisation in Crisis (Historical Materialism Book by Costas Lapavitsas

By Costas Lapavitsas

Costas Lapavitsas (ed.)

In this significant and well timed quantity, a couple of recognized political economists draw at the insights of Marxist and different heterodox economists to argue that the turmoil of 2007 to 2009 represents a problem of financialized capitalism which can in simple terms be understood via tracing out the structural adjustments within the glossy international economic climate. conscientiously studying household and foreign facets of the financialization of capitalism over the last thirty years, the members persuasively show that the continuing monetary situation started within the sphere of finance, unfold to construction, after which turned a global recession.

With Contributions From
Carlos Morera Camacho • Paulo L. Dos Santos • Gary Dymski • Nuray Ergüneş • Makoto Itoh • Costas Lapavitsas • Juan Pablo Painceira • Demophanos Papadatos • José Antonio Rojas Nieto

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Extra info for Financialisation in Crisis (Historical Materialism Book Series, Volume 32)

Example text

Consequently, commercial banks strove to evade the regulations by shifting assets off the balance-sheet as well as by trading CDSs, which lowered the risk-weighting of their assets. Therefore, Basle II effectively promoted securitisation. By engaging in investmentbanking practices, commercial banks could continually ‘churn’ their capital, seemingly keeping within regulatory limits, while expanding assets on and off the balance-sheet. In this marvellous world, banks appeared to guarantee solvency while becoming more liquid.

Subprime mortgages were precisely loans for which the threshold was low. Banks have also begun to estimate the risk of default of their assets by applying mathematically-based models that utilise historical rates of default. These estimates are largely extrapolations from past trends, stress-tested within limits indicated by data. 37 On this basis, banks estimate their ‘Daily Earnings at Risk’ (DEAR), that is, the probability that the value of their assets would decline below a certain level on a daily basis.

Consider the following for the USA, Japan and Germany. There are differences among countries in this respect. US-corporations, for instance, rely more heavily on issuing bonds. These differences reflect the bank-based character of the German and Japanese financial systems as opposed to the market-based character of the US-system, briefly discussed in Section 6. But the trend is not in doubt, as is shown in Figure 1. Put in Marxist terms, monopolies have become less reliant on banking credit to finance fixed capital.

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