Money and Credit Circuits, Cycles and Crises

This chapter examines the nature of money, credit and finance under capitalism, paying special attention to the principle of innovation, involving IEPE scholars seeking to understand and change the system for the better, and the principle of policy/governance where they try and improve the theoretical tools of policy-making. The principle of historical specificity is used to situate money and finance in history since the political revolutions of the late 1700s, industrial revolutions of the 1800s, and the recent series of financial crises during the 1980s–2020s. We study the circuits, instabilities and crises that beset the major nations, especially over the past 50 years, and illustrate through the principle of contradiction how crises arose and forces leading to institutional-habitual changes generating phases of evolution. Then we scrutinize the principle of uncertainty through an analysis of money, credit and finance in the circuit of social capital, endogenous money and credit, and the financial instability hypothesis (FIH). Hyman Minsky’s FIH is explicitly related to the most intense period of financial instability and crises experienced by nations and regions, during the 1980s–2020s. We go on to examine reforms of the international financial architecture, especially in the context of the principle of hegemony and uneven development, vis-à-vis the role of the US dollar, plus the major tenets of modern monetary theory (MMT) as well as critics of this theory.