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RN06_03: Finance, Debt, Bubbles, and Critical Theories of Money
4:00pm - 5:30pm
Session Chair: Laura Horn, Roskilde University Session Chair: Ian Bruff, University of Manchester
Location:GM.332 Manchester Metropolitan University
Building: Geoffrey Manton, Third Floor
4 Rosamond Street West
Off Oxford Road
Currency Internationalization and Monetary Dependency
Johannes Jäger1, Claes Belfrfage2, Annina Kaltenbrunner3, Adriana Nilsson2
1University of Applied Sciences BFI Vienna, Austria; 2Universty of Liverpool; 3University of Leeds
Monetary dependency represents a serious obstacle to development. This paper seeks to analyse recent efforts to increase the regional and international use of semi-peripheral currencies. Those efforts are taking place against the background of changing global geography of production and the related transformation of the so-called Dollar-Wall Street Regime. The Chinese Renminbi and the Brazilian Real represent two contrasting but related cases which are studied in depth. Based on a critical international political economy framework, the dependency approach and on post-Keynesian perspectives we show the reasons for the upscaling of peripheral currencies and the emergence of a new regional (and global) geography of money, its central implications, and also its limitations. It is concluded that the different national (and regional) social relations of production, related growth regimes an (trans-)national (class) struggles are crucial to explain the specific types of currency internationalization and the related changing geography of money which have the potential to contribute at least in part to overcome monetary dependency.
Monetary Policy as Usual? The Class Characteristics of the Bank of England’s Exceptional Monetary Policy Since the 2007 Global Financial Crisis
John Evemy1, Edward Yates2, Andrew Eggleston3
1University of Birmingham; 2The University of Sheffield, United Kingdom; 3University of Manchester
The 2007 global financial crisis triggered a revolution in the central banking world, as pre-crisis inflation targets were abandoned in favour of new and exceptional monetary policy. In the UK, the Bank of England’s exceptional monetary policies have been three-fold: a commitment to historically low interest rates, the use of Asset Purchase Facility to drive up the price of financial instruments, and the use of funding subsidies to lenders via the Funding for Lending Scheme and Term Lending Facility.
This paper argues that when viewed from the perspective of labour these developments in monetary policy are not ‘exceptional’. Rather, they are the intensification of a long standing strategy by capital and the UK state to discipline labour through wage restraint and increased indebtedness. This paper interrogates the relationship between exceptional monetary policy and labour through an analysis of domestic markets for housing and labour in the UK.
The unique contribution of the paper is the foregrounding of labour as an analytical category, which reveals how ‘exceptional’ monetary policy has served to shield financial capital from the costs of crisis by increasing the current value of claims on the future incomes of UK workers and subsiding the cost of funds to UK businesses. Meanwhile a combination of austerity and permissive inflation targeting served to devalue labour, increasing the competitiveness and profitability of UK capital. This paper argues that this strategy is now reaching its limits as the rising cost of household debt is driving up the effective minimum price of labour and thus monetary policy makers now face a choice between a new wave of defaults, rising wage inflation or the increasingly elusive gains to productivity.
What We Can Learn About Platform Capitalism from Past Speculative Bubbles
University of Cambridge, United Kingdom
A speculative bubble involves rapid asset price inflation driven by increasingly bullish investment which draws in further investors looking to secure profits. A historical analysis suggests they are a social cultural economic singularity, where the strongest business models and practices survive through brutal market-based selection. While bubbles are short lived, they have a lasting effect on the culture and practices of speculative and debt capitalism.
I consider two pre-industrial and pre-technological (Tulip Mania, 1634-1637 and the South Sea Bubble, 1720) and two technological bubbles (Railway Mania, 1844-1847 and the Dot-com bubble, 1995-2001). They all feature advances in finance, debt and the way in which investors are encouraged to speculate; each bubble represents a progress in the financialization and socialisation of speculation. The later technological bubbles motivate speculators through imagining unlimited potential from technology, this is particularly evident in the nineteenth-century railway bubble. The Dot-com bubble goes beyond this, there is a sophisticated debt-based speculative economy, strong belief in the limitless transformative power of technology and the emergence of platform businesses as intermediaries which monopolise aspects of human attention and action and use collected data through artificial intelligence to influence behaviour.
Platform capitalism emerges where there is a debt-based speculative economy. It is the speculative-bubble event that results in changes in practices and that allows platforms to become embedded into daily life. The speculative energy, innovation and the opening up of the public imaginary leads to changes in habits and practices. Importantly, we can see how a speculative bubble, like the Dot-com bubble, creates a Darwinist evolutionary moment for the adaptation of technology where successful forms survive because they are adapted to new habits and practices.
The Changing Nature Of Money And The Role Of The State
Independent researcher, United Kingdom
The relationship between the state and money is at the heart of the crisis of our times. The dominant current of economics in the last 40 years has been based on ideas from the 18th century. It adovcates that money should be separate from the state and markets independent of government influence.
The unique contribution of this paper is to describe how money today differs from the commodity money used in the 18th century. The paper describes how and why the money in common use has changed in the last three centuries making use of the insights of archaeology and sociology.
Money today is largely created by banks. But its value depends on the credibility of nation states. The 2007/8 global financial crisis demonstrated that nation states are the ultimate guarantor of banks. In contrast, 18th century money, which largely influences monetary theory, depended on the value of precious metal. As money is now a liability of individual nation states, the role of states in the market has radically changed.
Much current monetary theory is based on the commodity money of the 18th century and is obsolete. Obsolete monetary theory has contributed to an increasing frequency of financial crises, the global financial crisis of 2007/8 and the Euro-crisis. As nation-states are the ultimate guarantors of money today, they need to take a greater role in creating and managing the money supply. Generally they should increase the money supply by creating money and spending it into existence.