The End of Finance

by Amato, Massimo; Fantacci, Luca

• ISBN13: 9780745651118
• ISBN10: 0745651119
• Edition: 1st
• Format: Paperback
• Copyright: 2011-11-21
• Publisher: Polity

Summary

This new book by two distinguished Italian economists is a highly original contribution to our understanding of the origins and aftermath of the financial crisis. The authors show that the recent financial crisis cannot be understood simply as a malfunctioning in the subprime mortgage market: rather, it is rooted in a much more fundamental transformation, taking place over an extended time period, in the very nature of finance. The 'end' or purpose of finance is to be found in the social institutions by which the making and acceptance of promises of payment are made possible - that is, the creation and cancellation of debt contracts within a specified time frame. Amato and Fantacci argue that developments in the modern financial system by which debts are securitized has endangered this fundamental credit/debt structure. The illusion has been created that debts are universally liquid in the sense that they need not be redeemed but can be continually sold on in increasingly extensive global markets. What appears to have reduced the riskiness of default for individual agents has in fact increased the fragility of the system as a whole. The authors trace the origins of this profound transformation backwards in time, not just to the neoliberal reforms of the 1980s and 90s but to the birth of capitalist finance in the mercantile networks of the 16th and 17th centuries. This long historical perspective and deep analysis of the nature of finance enables the authors to tackle the challenges we face today in a fresh way - not simply by tinkering with existing mechanisms, but rather by asking the more profound question of how institutions might be devised in which finance could fulfil its essential functions.

Author Biography

Massimo Amato is Associate Professor in Economic History at Universit Bocconi. Luca Fantacci is Assistant Professor at Universit Bocconi.

Table of Contents

Introduction	p. vii
Phenomenology
Do we know what the financial markets are?	p. 3
At the root of the possibility of crisis: Liquidity and risk	p. 14
What is credit?	p. 25
What is money?	p. 35
Finance starting from the end	p. 43
Capitalism and debt: A matter of life and death	p. 53
History
From credit risk to liquidity risk (2008)	p. 67
The globalization of capital (1973)	p. 76
'Fiat dollar'. And the world saw that it was good (1971)	p. 88
The Eurodollar chimera (1958)	p. 100
The European Payments Union (1950)	p. 110
Bretton Woods: The plan that might have made it (1944)	p. 121
Bretton Woods: The system that found implementation (1944)	p. 133
The standard crisis (1929)	p. 146
Orchestra rehearsal. The international gold standard and the dissolution of gold (1871)	p. 159
Money before and after the gold standard (1717)	p. 174
Money for nothing: The invention of central banking (1694)	p. 183
The international currency of the trade fairs (1579)	p. 197
Politics
Double or quits?	p. 211
The way out of liquidity: The Gordian knot and Utopia	p. 221
Prevention or cure? The structural paradox of the anti-crisis policies	p. 232
Another finance	p. 242
The (rare) 'green shoots' of a possible reform	p. 253
If not now, when?	p. 268
Notes	p. 278
Index	p. 305
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