Credit, Money and Macroeconomic Policy
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Credit, Money and Macroeconomic Policy

A Post-Keynesian Approach

Edited by Claude Gnos and Louis-Philippe Rochon

With recent turmoil in financial markets around the world, this unique and up-to-date book addresses a number of challenging issues regarding monetary policy, financial markets and macroeconomic policy.
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Chapter 1: A Minsky Moment? The Subprime Crisis and the ‘New’ Capitalism

Riccardo Bellofiore and Joseph Halevi


Riccardo Bellofiore and Joseph Halevi INTRODUCTION It would be impossible to understand today’s capitalism and what has been happening in the European Union, outside a global macroeconomic framework which includes the United States and Asia. The subprime crisis which erupted during the Summer of 2007 and is spreading throughout the world financial markets, seems to confirm some of our earlier interpretations based on the trinity formed by traumatized workers, by indebted consumers, and by manic-depressive savers (Bellofiore and Halevi, forthcoming). These aspects must in turn be set in the context of the policies pursued in the present regime of financialized capitalism where labour itself is subsumed under finance and debt. The dimension of this phenomenon will become clearer when we elucidate the mechanism of investing by asset stripping through leveraged buyout operations. Hence, we shall begin with a reasoned historical account of the subprime crisis. We shall then raise the issue of the ‘Minsky moment’ and how it can be placed in the present context. AN OUTLINE OF THE EMERGENCE OF THE CRISIS ‘Derivatives’ are financial contracts stipulating an exchange based on a guess regarding the future value of a particular financial asset. Formally these are instruments aimed at hedging against risk. There can be as many derivatives as there are guesses and attributes regarding the assets concerned (Bryan and Rafferty, 2006). Since derivatives are just a piece of paper they can be multiplied and issued in relation to other derivatives as well. The big push, as once Harry Magdoff...

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