A Financialized Monetary Economy of Production

The monetary theory of production offers a systemic approach to describe systemic crises, but, faced with contemporary capitalism, it needs to be modified. In accordance with the Schumpeterian perspective, we adopt a framework that points to both the monetary nature of and qualitative changes in the capitalist system. The low level of wages, and the consequent underconsumption, is not the unique cause of the 2007-9 crisis. Not only has financialization changed the behavior of consumer-savers, but investment has also changed. The overfinanced leverage that was an important characteristic of the crisis may be better understood historically with the emergence of the 1990s' technological paradigm. The crisis stems mainly from overinvestment in new technologies. Particularly during the 1990s, the emerging industrial technology favored its own sort of financing. The financialization of the monetary economy of production can be better explained if we understand the shift to a new technological paradigm as a general outlook on the productive problems faced by firms, whereby the relevance of the so-called immaterial production takes on greater importance. To describe this dynamic, we present two different analytical forms of the monetary economy of production: the first one represents the new economy scenario, and the second one represents the financialized monetary circuit during the real estate bubble.