What we have and haven’t learned from the 2008 financial crisis.
The year 2018 marked a decade since the global financial crisis, an anniversary that inevitably provoked reflections on the legacy of the crash. These ruminations fixated on the path-altering nature of the crisis, that is, on the crisis as a watershed moment. In so doing they revisited, replayed and reloaded many of the key maxims produced in the immediate aftermath of the crash. We heard how the crisis had dispossessed a whole generation of a meaningful future, how at the heart of the crisis was excessive and unchecked speculative activity on the part of financiers and financial institutions, how the crisis had triggered a deep international recession on a scale not seen since the Great Depression of the 1930s, and how the crisis was the result of a trading on the future that ultimately bankrupted the present. In addition to recycling these familiar maxims, the reflections on the crisis’s legacy focused on post-crisis interventions. The public bail out of private banks, the massive (and unorthodox) monetary stimulus on the part of central banks, and the rollout of austerity policies by specific governments were positioned as straightforward responses, that is, as measures aimed at redressing the problems of a runaway and unruly finance and at returning the economy to a healthier state.
It is critical we recognize that not only has the post-crisis period restored the profitability of finance and worked to shore up the speculative order but also that this order is long-term in character and not a blip or any short-term trend.
What such assessments singularly fail to address, however, is how, post-crisis, the speculative character of finance and hence, a specific economic order, remains intact. Indeed, what such assessments underplay is how, following an initial downturn, asset values (and especially the asset value of housing) have continued to rise and financial securitization has continued apace. Widely held to be at the very center of the financial crisis, securitization is the practice of making illiquid assets (such as residential mortgage debt) liquid and hugely profitable via the pooling and selling on of payment streams to third parties for trade on finance markets. What’s more, the assessments of the legacy of the financial crisis tend to ignore the fact that the very measures ostensibly designed to redress the problems wrought by the crisis and to reign in the excesses of finance have produced these effects. Quantitative easing, for example, has both protected and boosted asset values (and, moreover, has especially done so for the wealthy), while the lowering of interest rates (in some cases to almost zero) has contributed to this effect. In addition, and via the further withdrawal of socialized provisioning, austerity measures have provoked yet more household debt. By purchasing securitized residential mortgages and other securitized household obligations, central banks in concert with private banks and other institutions of finance have effectively transformed the household into the supplier of safe assets for finance capital via payment streams.
It is critical we recognize that not only has the post-crisis period restored the profitability of finance and worked to shore up the speculative order but also that this order is long-term in character and not a blip or any short-term trend. The key elements that make up the contours of this order – stagnant wages, asset-based welfare, rising asset prices, expanded household debt, rising debt to income ratios, expanded consumer finance, precarious labour and intense financial innovation that has transformed the illiquid into the liquid – have been institutionally orchestrated since the 1970s. At core, this order is centered on money and finance; indeed, it is an order in which wealth is produced primarily not through the extraction of surplus from human labor but from the speculative movements of money and finance. The speculative order therefore concerns a specific set of capitalist dynamics. It is an order, moreover, that does not only concern financiers, central banks, and other institutions of finance; it is one in which entire populations are enrolled. This takes place not simply because of people must incur debt in order to survive but because of the everyday payments that households make to guarantee their persistence, including mortgage payments and household bills. Tranched and pooled, these contracted payments are the lifeblood of contemporary finance trading and profoundly connect populations to finance markets and to the profitability of finance. The speculative order is, then, not only an economic order but also a social order. It is an order in which populations typically leverage their repressed and often unpredictable wages to access assets (characteristically, residential homes) and where asset ownership is the key to survival. This is also an order in which the distribution of assets plots a map of inequality. We must begin to recognize speculation not only as a social order but as a lived social relation.
By purchasing securitized residential mortgages and other securitized household obligations, central banks in concert with private banks and other institutions of finance have effectively transformed the household into the supplier of safe assets for finance capital via payment streams.
What is clear is that a focus on the financial crisis as a path-changing moment and on the legacies of that moment will not and necessarily cannot reveal the contours of the speculative order or of speculation as the telos of action. While it is true that post-crisis interventions have further embedded the speculative order, to understand these interventions as such requires an analysis of the longue durée of that very order. It requires, in other words, mapping the structures and processes that have slowly and at times imperceptibly changed our modes of life. It is precisely these structures and processes that The Time of Money sets out to map.
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