IDEAS home Printed from https://ideas.repec.org/a/mes/ijpoec/v40y2011i2p61-78.html
   My bibliography  Save this article

Can It Happen Again?

Author

Listed:
  • Sergio Rossi

Abstract

I elaborate on the structural causes of the global systemic crisis of 2007-9 to show that its ultimate origins lie in the still defective bookkeeping structure of national and international payment systems. As monetary circuit theory shows, banks are special, insofar as they can grant loans without the need to dispose of preexistent bank deposits. When the loans-generate-deposits causal chain occurs on the factor market, for firms to pay the wage bill, the money-output relation is not affected by banks' intermediation. This relation is modified when banks exploit the loans-generate-deposits mechanism for any financial market transactions, whether for their clients or for their own sake. Financial liberalization and deregulation pushed banks to compete with nonbank financial institutions, for them to retain their market share, reducing both their markup on monetary policy rates of interest and the credit standard they used to apply to firms as well as households. In that process, banks have, therefore, become "financial supermarkets," engaged first and foremost in investment banking, which is a misnomer, because, in fact, it has nothing to do with investment properly speaking: it is speculation on "global" financial markets, which are indeed far from providing any support to productive investment within the economic system.

Suggested Citation

  • Sergio Rossi, 2011. "Can It Happen Again?," International Journal of Political Economy, Taylor & Francis Journals, vol. 40(2), pages 61-78.
    • Handle: RePEc:mes:ijpoec:v:40:y:2011:i:2:p:61-78
    DOI: 10.2753/IJP0891-1916400204
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2753/IJP0891-1916400204
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.2753/IJP0891-1916400204?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dirk Bezemer, 2014. "Schumpeter might be right again: the functional differentiation of credit," Journal of Evolutionary Economics, Springer, vol. 24(5), pages 935-950, November.
    2. Christian Hugo Hoffmann & Charles Djordjevic, 2020. "Complexity, Power Laws and a Humean Argument in Risk Management: The Fundamental Inadequacy of Probability Theory as a Foundation for Modeling Complex Risk in Banking," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 37(3), pages 155-182, December.
    3. Mastromatteo, Giuseppe & Rossi, Sergio, 2023. "Central Bank Digital Currencies: A Monetary Macroeconomic Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(3), pages 387-416.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:ijpoec:v:40:y:2011:i:2:p:61-78. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MIJP20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.