Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Systemic Fear and Forward-Looking FinanceWe have just posted the next installment of Shimshon Bichler and Jonathan Nitzan's "Contours of Crisis" article series: Systemic Fear and Forward-Looking Finance. The article puts forward an original thesis about the class underpinnings—and indeed class limits—of modern finance theory.Here's the beginning of the article: This is the third installment in our series about the current crisis. The first article examined the conventional view that this is a finance-led crisis, a turmoil triggered and exacerbated by "financial excesses." The second debunked the "mismatch thesis," the belief that the present crisis is our punishment for letting financial fiction distort economic "reality." The current paper takes on the notion of the forward-looking investor. According to the conventional creed, investors are forever looking into the future: they discount not profits that have already been earned, but those that they expect to earn. This forward-looking premise lies at the heart of modern finance, and investors usually follow its rituals with religious zeal. Read the full article. Labels: finance sector, financial crisis, Jonathan Nitzan, Shimshon Bichler Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Contours of Crisis: Fiction and RealityWe have posted the second article in a series by Shimshon Bichler and Jonathan Nitzan. Here are the first few paragraphs:This is the second in our Contours of Crisis paper series. The first article set the stage for the series. It began by outlining the conventional view that this is a finance-led crisis, that this turmoil was triggered and amplified by "financial excesses"; it then described the domino sequence of collapsing markets—a process that started with the meltdown of the U.S. housing and FIRE sectors (finance, insurance and real estate), expanded to the entire financial market, and eventually pulled down the so-called "real economy"; and, finally, it situated the pattern and magnitude of the current decline in historical context. The current market collapse is very significant. Even after their last month's rise, U.S. equity prices, measured in constant dollars, remain 50% below their 1999 peak—a decline comparable to the previous major bear markets of 1905-1920, 1928-1948 and 1968-1981. For many observers, though, the depth of the financial crash also implies that much of it may be over, and that the boom bulls will soon oust the doom bears. Predicting boom out of doom isn't far fetched. Equity markets are highly cyclical, and their gyrations are remarkably stylized. As our first article showed, over the past century the United States has experienced several major bear markets with very similar patterns: they all had more or less the same duration, they all shared a similar magnitude, and they all ended in a major bull run. In other words, there seems to be a certain automaticity here, and automaticity gives pundits the confidence to extrapolate the future from the past. But this automaticity is more apparent than real. Finance, we pointed out, is not an independent mechanism that goes up and down on its own. In this sense, the long-term movements of the equity market are not "technical" swings, but rather reflections and manifestations of deep social transformations that alter the entire structure of power. During the past century, every transition from a major bear market to a bull run was accompanied by a systemic reordering of the political economy: the 1920–1928 upswing marked the transition from robber-baron capitalism to big business and synchronized finance; the 1948–1968 uptrend came with the move from "laissez faire" capitalism to big government and the welfare-warfare state; and the 1981–1999 boom coincided with a return to liberal regulation on the one hand and the explosive growth of capital flows and transnational ownership on the other. Read the rest of the article. Labels: Contours of Crisis, financial crisis, Jonathan Nitzan, Shimshon Bichler Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Contours of CrisisWe just posted a great web-only article by Shimshon Bichler and Jonathan Nitzan, co-authors of Capital as Power: A Study of Order and Creorder, RIPE series in Global Political Economy (London and New York: Routledge, forthcoming 2009).Read the article here. Labels: financial crisis, Jonathan Nitzan, Shimshon Bichler Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
