Financialization and the decline of productive capitalism

Financial Industry

There appears to be a disjointed understanding concerning the functioning of a capitalistic economy and its use of money. Financializaition is a mostly new model of the use of money as a valuable resource in and of itself. Money is essentially fetishized as the most prominent capitalists strive to gain more and more money. Money makes the world go around in many ways, but there lies a question in to how humanity uses the precious inventions of trade and commerce in more reasonable and just manner that excludes the negative aspects that financial institutions and their machinations attempt to dominate the economic progress of a people.

The purpose of this essay is to argue that financializaition and its offspring intermediaries have set the capitalistic world balance off a productive trajectory. The greed of those who seek value in material wealth without any real or substantial backing is at the heart of this issue as this essay will argue that without a better understanding of how money works or is created, the trends towards to financializaition will also be marginalized at perhaps a great price.

This essay will discuss the process of the creation of money using the American Dollar as an example of how financializaition is ultimately based on no real tangible backing or asset. Using this argument as a premise this essay will continue to argue that the offspring of the banking systems that have been created has provided the root cause to the problematic effects that financializaition appears to have on the world's economy and the state of the human race as it seeks to peacefully coexist and conduct commercial activity without the unnecessary conflicts that are often residual from financial institutions that supposedly have a lock hold on the way the world operates and conducts business.

Background

There is less secrecy regarding the power structures of the world, and it appears that financial institutions certainly play a very large role in the powering of this planet and has its hands in many human endeavors. Pike and Pollard (2009) explicitly agreed with this idea when they wrote "financializaition -- shorthand for the growing influence of capital markets, their intermediaries, and processes in contemporary economic and political life -- generates an analytical opportunity and political economic imperative to move finance into the heart of economic geographic analysis. Drawing upon long-standing concerns about the relatively marginal location of finance in economic geography, we emphasize the integral role of finance in connecting the entangled geographies of the economic to the social, the cultural, and the political."

Denning (2014) also commented on the nature of the economy when he wrote "throughout history, periods of excessive financializaition have often coincided with periods of national economic setbacks, such as Spain in the 14th century, the Netherlands in the late 18th century, and Britain in the late 19th and early 20th centuries. The focus by elites on "making money out of money" rather than making real goods and services has led to wealth for the few, and overall national economic decline. In a financialized economy, the financial tail is wagging the economic dog." This idea of how money became such a popular item to have despite having any real value presents unique problems that depicts an economic world that is based on many false illusions.

Creating the U.S. Dollar

The U.S. Dollar, despite recent disasters and turbulent times remains a powerful currency on the global market. This means that those who own U.S. Dollars have significant buying power of goods and services in markets that accept such currencies. This is not a problem until it is revealed the nature of money and how this money comes into materialization. The manipulation of this system by financial institutions have spread their influence in the form of financializaition throughout the global economy much like a harmful virus out to destroy the very organism it chooses to feed off of in its state of peril and weakness.

The U.S. Dollar is created out of thin air in a seemingly act of magic and illusion. To complete this transaction, the U.S. Congress asks a privately owned bank known as the Federal Reserve, to create money for them. The Federal Reserve is an internationally owned private bank. This small institution creates U.S. Dollars and loans them to the U.S. Government with a rate of interest. Unlike the past, the U.S. Dollar is not based on any precious metal standard or have any real financial banking. It is play money. The gold standard was replaced many decades ago and the paper that people use to carry on their lives is essentially worthless if not for the collective pledge to make this system work for all.

The question that immediately arises is that if this is play money than how or why does it work? The U.S. Dollar works because there is confidence in its ability to purchase items and services. This confidence is not real or actually measurable in any real tangible way. Financial institutions create models such as confidence indices that reflect a spurious notion of equity and balance while simultaneously promoting this conglomerate's own self-worth and value.

Financializaition As Usury

The concept of usury transcends politics, ethics, philosophy and economics. The concept of usury has troubled mankind throughout the ages. The story of Jesus rebuking the money lenders suggests that financializaition of the holy temple was too much for him to take. " the concept of usury has a long historical life, throughout most of which it has been understood to refer to the practice of charging financial interest in excess of the principle amount of a loan, although in some instances and more especially in more recent times, it has been interpreted as interest above the legal or socially acceptable rate," ( Visser & Mcintosh, 1998, p.175.) Financializaition is not new it has plagued mankind for many years.

Many great economists and philosophers also critiqued the practice of financializaition or usury. These great thinkers understood money not to be the root cause of doing an action, rather that money is nothing more than a tool or model to help develop more important aspects of human living. The idea of making money off money by using interest rates is the very core essence of the finance industry, always betting on the outcomes of the future, while ignoring the precious here and now. The religious antimony towards usury and its practice throughout the world resonates with the great power that financial institutions wield in the face of the poor and oppressed. IT makes sense that the religious leaders of almost all of the world's religions would be staunch opponents of the practice of usury and its present day form of its excessive use and abuse known as financializaition.

2008 Meltdown

The most pressing and applicable forewarning about the dangers or financial institutions and their intermediaries becoming too involved in commercial activity can be seen in the massive and global financial crisis that was unveiled in 2008. During this time, the entire global economy took a major hit as gross errors, intentional deceit and greed eventually exposed the dangers of placing too much emphasis on financial transactions and not enough on the actual goods and services that are being exchanged. "The most recent financial crisis has led us to revisit the balance between the two strains of thought in the context of today's financial system. This has posed unprecedented challenges. The dynamics of the financial system are tremendously more complex than ever before, including global interconnections that bring into question the ability of individual jurisdictions to effectively regulate, " (Crotty,2009.)

The problem lies in the fact that financial institutions are not intimate with their investments and treat people and their creations with a sense of disdain. Intermediaries work with a sense of entitlement and ignore the more reasonable and human aspects of labor and the end state of creating real value for the development of the human condition. Intermediaries tend to work with ungrounded ideas, that look to exploit every advantage. This speculation has caused great harm due to the irresponsible mode of operation that these peoples usually take when doing their job. "Mainstream commentators often treat this as a national neurosis tied to a U.S. addiction to high consumption, high borrowing, and vanishing personal savings, made possible by the infusion of capital from abroad, itself encouraged by the hegemony of the dollar. Radical economists, however, have taken the lead in pointing to a structural transformation in the capital accumulation process itself associated with the decades-long historical process -- now commonly called financializaition -- in which the traditional role of finance as a helpful servant to production has been stood on its head, with finance now dominating over production," (Foster, 2008).

Supporting Financializaition

There are those who stand to benefit when financial institutions are dominating the global trade environment. These arguments are premised on the idea however that money itself is the goal. Only when the invisible power of money is removed do the advantages of financial intermediaries also disappear. The financial growth that has been taking place over the past decades can be argued that it would not have happened if financial institutions were not performing their normal deeds of lending money, merging companies and creating money out thin air. This technique can work in certain areas but for how long. The entire mortgage industry is based on this principle and event through a tough and horrible crisis as seen in 2008, the banking industry is still going. In the U.S. The banking industry was protected with many government regulations ignoring the very basic competitive tenets of capitalism and free markets. This act suggests that the "too big to fail" mantra that has been assigned to this industry is worthwhile, and if not propped up may create a situation that is worse than ever. The argument for the continuation of financial intermediaries rests upon the idea that it is the lesser of two evils. Those people who work in this industry are also supportive of the industries actions because it allows for growth in this small subculture of the global economy.

Conclusions

Money and finance has replaced true value and quality in the pecking order of life. The heavy impacts of the financial system has created an unfair playing ground which places the power of buying, selling and investing into the hands of special players who have access to certain avenues of approach and details of information that keep others outside the realm of true knowledge. The false notions upon which money is ultimately created, distributed and repaid represents a criminal pattern that has been rallied against throughout the ages. As usury and finance continue to dominate in this short-term paradigm, more financial crises and disasters are not too far off, as the social repercussions of these practices denote a problem in society that can affect the entire planet's population.