“Isms” and “Zations”: on fictitious liquidity and endogenous financialization

“Ismos” e “Zações”: sobre a liquidez fictícia e a financeirização endógena

Jan Kregel About the author

Abstract

Financialisation has been represented as a recent phenomenon linked to the deregulation and globalization of the international trade and payments system that has been in progress since the opening of the Chinese economy in the 1980s. It is often represented as the dominance of finance over production or of monetary over real variables. This essay challenges the usefulness of this dichotomy, arguing in the tradition of Keynes, Schumpeter and Minsky that it is impossible to separate the financing of production into separate categories since a production decision always requires finance to be implemented. It instead suggests that it is the process of innovation in the creation of liquidity by the financial system that provides a more insightful analysis of the implications of financialisation.

Keywords:
Financialization; Minsky, Hyman, 1919-1996; Financial crisis; Liquidity; Ponzi, C. 1882-1949

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