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The Spread of Transactions

In: Finance: Servant or Deceiver?

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  • Paul H. Dembinski

Abstract

Modern finance, as described in the previous part of this report, is based on the possibility of transactions. It assumes that asset managers can instantly buy or sell securities on more or less organized, liquid markets. The financial version of the efficiency ethos can only take full effect if there are numerous transactions. Financialization has spread through the economy and society by fundamentally altering the relationship between financial relationships and financial transactions. This change has affected not only the relative numbers of each, but also the underlying goals. Until the euphoric years, transactions were the exception rather than the rule — partners in relationships were expected to remain faithful. Transactions were essentially the by-product of relationships, whereas today — once again — the reverse is true.7 Increasing, financial relationships are established and projects launched purely with a view to a transaction. This is precisely what has led to the subprime crisis of 2007–8 and was dubbed the ‘originate and distribute’. This shift towards transactions at the expense of relationships will be discussed below in terms of (i) how it has transformed financial systems, and (ii) statistical orders of magnitude.

Suggested Citation

  • Paul H. Dembinski, 2009. "The Spread of Transactions," Palgrave Macmillan Books, in: Finance: Servant or Deceiver?, chapter 2, pages 83-104, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-59505-7_6
    DOI: 10.1057/9780230595057_6
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