Friday, November 8, 2013


So, financialization is nothing other than the translation of production, labour, GDP, capital, into terms of debt, into the terms used by the octopi monster that is the debt-money system, with parties being owed and parties owing - the parties owed being owed more and more, and the parties owing, owing more and more. And the insistent force of this translation goes to show how debt is the number one problem, and not financialization, which is basically just the symptom of the underlying cause.

I'm pretty sure that is a correct summation.

I mean, Michael Hudson explains it right here (from Wikipedia):

  • Michael Hudson described financialization as "a lapse back into the pre-industrial usury and rent economy of European feudalism" in a 2003 interview:

"only debts grew exponentially, year after year, and they do so inexorably, even when–indeed, especially when–the economy slows down and its companies and people fall below break-even levels. As their debts grow, they siphon off the economic surplus for debt service (...) The problem is that the financial sector’s receipts are not turned into fixed capital formation to increase output. They build up increasingly on the opposite side of the balance sheet, as new loans, that is, debts and new claims on society’s output and income.
[Companies] are not able to invest in new physical capital equipment or buildings because they are obliged to use their operating revenue to pay their bankers and bondholders, as well as junk-bond holders. This is what I mean when I say that the economy is becoming financialized. Its aim is not to provide tangible capital formation or rising living standards, but to generate interest, financial fees for underwriting mergers and acquisitions, and capital gains that accrue mainly to insiders, headed by upper management and large financial institutions. The upshot is that the traditional business cycle has been overshadowed by a secular increase in debt. Instead of labor earning more, hourly earnings have declined in real terms. There has been a drop in net disposable income after paying taxes and withholding "forced saving" for social Security and medical insurance, pension-fund contributions and–most serious of all–debt service on credit cards, bank loans, mortgage loans, student loans, auto loans, home insurance premiums, life insurance, private medical insurance and other FIRE-sector charges. ... This diverts spending away from goods and services."

"A lapse back into the pre-industrial usury and rent economy of European feudalism."

Financialization is  just a membranous "middle-man" between the inception and final chapter of the epic story of money-as-debt. It is merely debt enabling itself into the myriad and natural complexities of our economic activities to be our final overlord.

The problem is not "finance", but money-as-debt.


Enbrethiliel said...


I don't always understand your posts about finance, Stilwell, but your last line is totally in my wheelhouse--for debt is a problem in other modern areas as well.

Take my favourite hypothetical example: a philanderer who says, "I could be faithful IF I found the right person." The mistake there is faithfulness-as-debt: the idea that virtue can be had "on credit" and given the same legitimacy as evident virtue practiced by people who are actually faithful in relationships.

Paul Stilwell said...

Oh, I like your analogy very much.

Paul Stilwell said...

Actually, on second thought, your analogy is more literal than analogous.

Belfry Bat said...

verily, for credit, "he believes", is founded on good faith.