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This volume develops an original critique of the belief that the present era of finance, where finance markets dominate contemporary capitalist economies, represents the best possible way of organising economic affairs. In fact, it is argued, the ensuing economic instability and inefficiency create the preconditions for the end of the dominance of finance. The End of Finance develops a theory of capital market inflation rooted in the work of Veblen, Kalecki, Keynes and Minsky, demonstrating how it disinclines productive activity on the part of firms, provides only short-term conditions that are propitious for privatisation and distorts monetary policy in the long-term. The author examines the role of pension fund schemes and financial derivatives in transmitting capital market inflation and provides a nuanced analysis of the contradictory role they play in the financial system. Capital market inflation is also examined in its historical context and compared with past inflations, in particular the South Sea and Mississippi Bubbles, which spawned the first financial derivatives, and the first privatisations. This broad historical vision allows us to see these forms of inflation as temporary and provisional in character.
List of contents
Introduction: Antecedents and Methodology PartI: The Theory of Capital Market InflationChapter 1. Capital Markets and the Real Economy1.1 Outside finance and industry1.2 Liquidity and capital marketsChapter 2. Value and Excess in Capital Markets2.1 The value of company securities 2.2 Some policy issues Part II: Ponzi Finance and Pension Fund CapitalismChapter 3. Pension Funds and Ponzi Finance 3.1 Pension funds, bamking and investment 3.2 Capital market inflation and monetary policy 3.3 Ponzi finance and securities markets Chapter 4. Capital Market Inflation and Privatisation Chapter 5. Pension fund inflows and their investment 5.1 The cash inflow into pension funds 5.2 Pension funds and their investment income 5.3 Peripheral and integrated markets Chapter 6. The end of funded pension schemes 6.1 The limits of capital market inflation 6.2 Capital market disintermediation Part III: Financial Derivatives and Liquidity PreferenceChapter 7. Liquidity preference and the conventional approach to finanial futures 7.1 Financial futures in context 7.2 Some concepts in the thepry of financial futures Chapter 8. Commercial and investment uses of financial futures 8.1 Derivatives use by industrial and commercial firms 8.2 Derivatives use by Rentiers Chapter 9. The broking of financial futures Chapter 10. Regulation and the systematic risk of financial futures 10.1 Regulation and the rise of risk in financial futures markets 10.2 Financial derivatives, institutions and financial fragility Part III Conclusion Chapter 11 The ends of finance
About the author
Jan Toporowski
Summary
The original theory of finance which grows out of this critique is of interest to students and researchers of financial economics, practitioners in finance and policy-makers.
