The financialisation of global capitalism means that it is no longer simply the falling rate of profit that is the key issue – but instead the way in which the profits of  productive industrial capitalism are syphoned off into what Marx called unproductive ‘money capitalism’ or ‘usury capitalism’, i.e. private investment banks who use them only to speculate and circulate unproductively in the ‘casino economy’ of the financial markets.

From a Marxist perspective this global financialisation of capitalism has come about as a result of technological advances in the means of production – in this case  the means of production of money itself –  not only through abolition of the gold standard alone but through the replacement of gold, paper money and even paper stocks and bonds through the electronic digitisation of money.

Furthermore however, the combination of these these technological developments with global deregulation of banking means that private banks have for a long time been literally able to create ‘money out of nothing’. For they are now able to place numerical loan deposits in borrowers’ accounts through a few key strokes on a computer. In this way they can accumulate what Marx called ‘fictitious money’ on a massive scale – for under the system known as ‘Fractional Reserve Banking’ only a tiny fraction of what the banks lend out needs to be covered by their own monetary reserves. This is the real reason for the ‘credit booms’  and bursting ‘credit bubbles’ we have seen in recent decades – together with the ‘credit crunch’ that results from competitive over-lending by banks.

Yet as a result of the long-standing privatisation of their own ‘central banks’ – such as the Bank of England or the U.S. Federal Reserve – governments have themselves continued to remain wholly dependent on borrowing from the financial markets and private banks to finance their own spending – on top of which they then have ‘bail out’ those same banks at the people’s expense when their massive fictitious assets  (and remember that for private banks the credits they give our are accounted as assets and not liabilities) turn out to be based on over-lending and high-risk loans.

Marx would have found it totally consistent with the development of new electronic forms of money and monetary exchange that its ultimate formula would not be M-C-M (Money-Commodity-Money) but ‘M-M’ or ‘M-M-M’.  M-C-M is the principle of the exploitation of labour itself – bought as a Commodity on the labour market to create profitable Commodities for the market. The meaning of this formula M-M-M however, is that money itself now becomes the chief commodity by which to increase capital accumulation – not money as a commodity in the old form of a tangible use value like gold or even labour but in the form of pure exchange value  – ‘fictitious credit’ lacking any tangible assets or even financial reserves to back it up.

As a result, instead of being re-invested in it,  money is syphoned off from the productive industrial sector of national economies into the wholly unproductive sphere of speculation on the international financial markets – the ‘casino economy’. Here stock prices no longer bear any relation to the profitability of different industries or corporations but have become a mere means of speculative profit-making. Industrial profits are both sucked dry by interest on corporate debt and/or gambled away by the same investment banks that lend to, hold or own industrial corporations – if not entire industrial sectors.

Under the formula ‘M-M’ or ‘M-M-M’  what was formerly the monetary exchange value of real, tangible commodities – commodities with use-values such a investment in industry, housing and infrastructure – now becomes the principal ‘use-value’ itself – replacing the real economy, real commodities and even labour itself as the source of more money.  For money itself can now not only be created out of nothing as credit  simply by keying numbers into electronnic accounts – it can be  instantaneously electronically traded for the speculative gambling of stock values, currencies and ‘Credit Default Swaps’.

Credit Default Swaps are  insurance bonds for bad loans that are profitable for their buyers only if creditors actually default on their loans – hence they have a vested interest in encouraging defaults. There is no regulation of the trillion dollar market in Credit Default Swaps and other so-called ‘Derivatives’. Hence the incentive on the part of financial speculators and traders to actively bring about such defaults – for example by downgrading the credit rating of indebted nations, whilst at the same time undermining their ability to ever pay off their debts by imposing ruinous cuts in both wages, employment, benefits and investment in tangible public assets such as transport infrastructure, schools, hospitals, water and power supplies etc. National governments with a very high national debt to the international banking cartels called ‘central banks’ are invariably forced by then to privatise all such public assets – which can then be bought for next to nothing, raise prices for the people and increase the profits of the banks that own them.

Asset-stripping through enforced privatisation of public utilities, cuts in public investment in industry, and the imposition of further interest-bearing loans disguised as ‘bailouts’ to national economies, all serve to cripple those economies and plunge them into ever further and less affordable debt. This is what we now see happening to Greece as well as Spain, Portugal and Ireland under pressure from the European Central Bank and IMF – the same type of pressure to cut public spending and privatise public services and  utilities that has been imposed for decades on  ‘developing’ nations by the IMF and World Bank – all in the name of ‘aid’!!!

Yet when even basic utilities such as water, transport and health become unaffordable for the poor the results are catastrophic for individuals and their families. This applies not only to developing countries but to supposedly developed countries such as the United States, where the  infrastructure for an industrial economy is moribund, where bridges regularly collapse and gas pipelines explode, where  20% of the population now depend on food vouchers, 25% are below the poverty line and many can no longer afford the health treatment or prescriptions they rely one, leading whole families of the newly homeless and unemployed in major U.S. cities to form long queues to receive a handout of just 5 potatoes each, and resulting in one man announcing in advance to the press his intent to rob a bank of $1 – solely in order to be arrested and get the vital medical help in the only place he could –  prison.

This is the new meaning – and real consequence – of the formula: ‘M-M’ or  ‘M-M-M’  (Money-Money-Money!) in the era of unregulated and rampant finance capitalism, a formula which goes beyond the mere accumulation of interest through loans.  The formula can be rewritten as ‘Cr-Cr-Cr’ or as ‘D-D-D’ – using Credit and Debt to create yet more credit and debt – in Marxist terms debt being now the major asset or ‘Capital’ of global finance capitalism and its cartels of rich bankers and speculators, who no longer have any interest in preserving even a ‘middle class’, and are launching ever more rabid class attacks on the low paid.  ‘Class War’ then is no Marxist ideological anachronism but very real – for it is now being waged on a massive scale by the banks – on the peoples of all nations.  And if economic war and pressure fails, then real war is used  – itself a major source of profit for the military-industrial complex and arms traders worldwide.

Before the abolition of the gold standard upon which Marx’s commodity theory of money was based, he had already had the first inkling of what was later to become known as Fractional Reserve Banking. Thus in Capital Vol. III Part V we find a chapter (25)  entitled Credit and Fictitious Capital in which Marx quotes Gilbart’s The Currency Theory Reviewed pp. 62-63:

“It is unquestionably true that the £1,000 which you deposit at A today may be reissued tomorrow, and form a deposit at B. The day after that, reissued from B, it may form a deposit at C … and so on to infinitude; and that the same £1,000 in money may thus, by a succession of transfers, multiply itself into a sum of deposits absolutely indefinite. It is possible, therefore, that nine-tenths of all the deposits in the United Kingdom may have no existence beyond their record in the books of the bankers who are respectively accountable for them … Thus in Scotland, for instance, currency (mostly paper money at that) has never exceeded 13 million, the deposits in the banks are estimated at £27 million…. Unless a run on the banks be made, the same £1,000 would, if sent back upon its travels, cancel with the same facility a sum equally indefinite. As the same £1,000 with which you cancel your debt to a tradesman today, may cancel his debt to the merchant tomorrow, the merchant’s debt to the bank the day following, and so on without end; so the same £1,000 may pass from hand to hand, and bank to bank, and cancel any conceivable sum of deposits.”

The way Gilbart describes deposits multiplying is actually the way in which so-called Fractional Reserve Banking multiplies credit supplied by private banks.  For example, taking out a single loan of £1,000 from a private bank effectively gifts that bank with more than £900.00 of money loanable in the form of further credits, since the bank is only  required to actually hold as reserve less than ten percent of the fictional ‘number money’ with which it credits the customer’s account. This credited money does indeed pass into the hands of other banks as deposits for whatever the customer uses the credit to pay for – deposits 90% or more of which they are free to loan out,  thus creating a multiplier effect whereby the original £1,000 loan adds £9.000 to the assets of the banking network.  For as we know, bank deposits are formally accounted as liabilities, whereas bank loans – credits – count as assets for the banks, even without taking into account interest payments accrued from them.

Hence the hunger of banks to extend credit.  From a Marxist perspective however,  there is a basic, in-built  contradiction in today’s financial system. That is because the hunger to sell loans cheaply and in this way accumulate vast monetary assests in the form of ‘fictitious credit’ inevitably leads to hubris and financial crisis in the form of an accumulation of ‘bad’ debts. Having no reserves to cover these debts,  banks then cease to lend to industry and commerce in the way they still did in Marx’s time. Instead they withhold credit to both individuals, industry and indeed whole nations – demanding money from the latter in the form of ‘bailouts’ paid for by the taxpayer, by cuts in public spending – and/or by further borrowing from international banking cartels and central banks such as the IMF and European Central Bank.

As Michael Hudson writes (see  From Marx to Goldman Sachs by Michael Hudson, on “the fictions of fictitious capital”) Marx himself recognised full-well the parasitic nature of  unproductive ‘money capitalism’ or  ‘usury capitalism’ i.e. the interest burden it places on  the profits of productive industrial capitalism, the upward pressure this places on prices and the downward pressure it places on both the wages and purchasing power of the working class.

“Usury centralises money wealth,” Marx states. “It does not alter the mode of production, but attaches itself to it as a parasite and makes it miserable. It sucks its blood, kills its nerve, and compels reproduction to proceed under even more disheartening conditions. … usurer’s capital does not confront the laborer as industrial capital,” but “impoverishes this mode of production, paralyzes the productive forces instead of developing them.”

“Under the form of interest the whole of the surplus over the necessary means of subsistence (the amount of what becomes wages later on) of the producers may here be devoured by usury…”

Yet it was only after Marx’s death that first Engels first saw the possibility and that Lenin later  recognised the reality that that “finance capitalism and the global financial oligarchy”  (what Marx had called “usurer’s capital” or “money capitalism”) had effectively taken over the reins of industrial capitalism – and that the financial oligarchs or “money capitalists” were quite prepared to sacrifice even whole industries the sake of accruing interest and capital for further lending and speculation on the financial markets.

Yet the sole solution remains the same as that presented by Marx and Engels in The Communist Manifesto of 1848:

“Centralisation of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.”

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