Block-Chains, the Shaky Art of Blowing Economic Bubbles, and the FDIC (original) (raw)

An economic wonderland: derivative castles built on sand

Critical perspectives on international business, 2009

PurposeThis paper seeks to use the way in which markets in derivatives have developed historically to examine how neo‐classical market‐oriented economic theory has been used as a stalking‐horse to create an illusionary market in the increasingly complex derivatives that have brought about the current global financial crisis and which threaten liberal democracy.Design/methodology/approachThe paper analyses the current global financial crisis using three separate themes in the development of derivatives themselves: the development of financial derivatives themselves; the subversion of risk analysis; and the co‐opting of the concept and analysis of fair value by the financial services industry and its support network. These themes are used to show how self‐regulation, supervision and the perception of risk have effectively been abandoned in the creation of an immensely profitable market based on an imaginary product. The study uses a combination of available facts and figures from prof...

"The Rules of Abstraction: Methods and Discourses of Finance"

In 2009 Forbes magazine ran an article that was one of a collection of postmortems on the 2007 -8 credit crisis and its (still) ongoing aftermath. Whether we call this economic event the Great Recession, following the work of Carmen Reinhardt and Kenneth Rogoff, or the endless crisis, following the work of John Bellamy Foster and Fred Magdoff, the incredible expansion and seismic contraction of global credit between 1992 and 2007 would seem to necessitate a serious review of the technologies and ideologies that enabled it. 1 This particular Forbes article was concerned that finance had become so complex that basic regulation of it was no longer possible. Not only might patrons cease to trust financial institutions, the writer worried, but financial institutions might cease to trust one another. "Without trust," the article claimed, "the necessary fictions of finance cannot function." 2 Forbes's readers never learned what those necessary fictions of finance were (or are). Indeed, adjectives such as fictitious and complex, the two that predominate in this article and many others like it, would seem less to elucidate financial operations than to obfuscate them. The article reveals an important trope in academic and popular writing about finance -that of the complex or abstract -and it deploys that trope to familiar ends: to call forth an immediately knowable and representable world of institutional financial transactions and then to suspend knowledge and description of that world by claiming its mechanisms are beyond our collective cognitive, linguistic, and epistemological reach.

An economic wonderland: derivative castles built on sand, Jon Cloke

Purpose – This paper seeks to use the way in which markets in derivatives have developed historically to examine how neo-classical market-oriented economic theory has been used as a stalking-horse to create an illusionary market in the increasingly complex derivatives that have brought about the current global financial crisis and which threaten liberal democracy. Design/methodology/approach – The paper analyses the current global financial crisis using three separate themes in the development of derivatives themselves: the development of financial derivatives themselves; the subversion of risk analysis; and the co-opting of the concept and analysis of fair value by the financial services industry and its support network. These themes are used to show how self-regulation, supervision and the perception of risk have effectively been abandoned in the creation of an immensely profitable market based on an imaginary product. The study uses a combination of available facts and figures from professional literature and from international financial institutions and financial services organisations, as well as comparative analyses outlining financial services praxis. Findings – It is suggested that in an effectively unregulated, globalising capitalism this crisis and others like it are inevitable, and that the self-regulating capacities of capitalism suggested by neo-classical theory are non-existent. Originality/value – The paper uses facts and figures provided by the financial services industry to illustrate the poverty of the theoretical justification of the market in financial derivatives and the critiques of various practitioners and experts to point out that the crisis came foretold.

Reframing Finance: From Cultures of Fictitious Capital to De-regulating Financial Markets

2016

Financialization – the leverage and promotion of anything to be turned into a tradable product – and its cultures are what Haiven addresses in his book Cultures of Financialization: Fictitious Capital in Popular Culture and Everyday Life. Like many authors before him, he indicates that financialization is not only reduced to the transformation of currencies, goods, loans, etc. into tradable financial products such as swaps and futures, but that culture itself is under transformation and is being turned into an object of financial capitalism. The book’s opening sentence states the aim of the book very clearly: He wants to re-theorize financialization. In Haiven’s words financialization refers to ‘the increased power of the financial sector in the economy, in politics, in social life and in culture writ large’ (1).

Market shaping as an answer to ambiguities. The case of credit derivatives

Organization Studies, 2009

, we describe the social processes surrounding a new financial OTC 3 derivatives market, the market for credit derivatives. We show that in contradiction with more traditional derivatives, credit derivatives generate ambiguities of a cognitive and political nature. By conducting an in-depth longitudinal qualitative study from 1996 to 2004, we document the efforts made by the promoters of the market to alleviate these ambiguities and show how the amount of resources needed results in the leadership of the most powerful. We thus provide a socially based explanation for the concentration and lack of transparency of the market. Our research exemplifies the contradictions between the rhetorical justification of financial innovations provided by financial theory and the empirical realities of a modern derivative market. It suggests that the actual structure of the market might best be understood by paying attention to the way different cognitive and political communities react to these contradictions.