‘MONEY’ AND OTHER USELESS CONCEPTS Anastasia Nesvetailova City, University of London

Three examples ‘Money’ Accumulation Financialisation Finance, debt, balance sheets (Minsky) Credit, investment, debt (Keynes, Toporowski) Capitalism, society (P. Mehrling)

How useful is a concept that has 51 definitions? [financialisation] Macro-historical school – as a phase in capitalism Socio-cultural – as transformations led by and within finance Evolutionary – tradability of risk

What is the point of a definition if the concept is amorphous and phenomenon ever-changing? [money] M0.. M4.. M27…. M 1111st Legal tender, credit money, local money, shadow money, webmoney, Ether and bitcoin “Anybody can create money, the problem is to get it accepted” (Minsky)

What is the value of scholarship based on obsolete understanding?

Yet

Brexit Investment Association BBA European Financial Services Charmian's Advisory Committee Association for Financial markets in Europe THECITYUK Financial Services Negotiating Forum

Finance vs Real Economy

Why does it matter?

The perfect storms of 2007/09 and Brexit

Threats Finance, services, the construction industry and manufacturing UK’s attractiveness for investment is diminished The City cannot thrive as a financial tax haven Financial stress in the shadow banking system External economic environment is less benign Years of austerity have weakened the public sector

Can banking and finance withstand the crisis? We arrived at this moment: weakened by austerity; debating three visions of finance;

1. Nostalgic

2. Continual (same, but better regulated)

3. Evolutionary

1. Radical proposals 100% reserve banking Higher capital charges Capital controls FTT Separation of ‘utility’ and ‘casino’ banking Making banks into closed partnerships - but shareholders do have influence ‘bring back’

Glass-Steagall No going back to 1933 because the original was flawed “A new Glass-Steagall Act would have to be substantially different from the original, and some of the internal structural contradictions that led to its demise remedied” (Kregel 2010).

The problems with nostalgia Most radical proposals are not applicable in the capitalism of futurity: “In its modern meaning, capital is divorced from the obsolete meaning of savings, because modern capital is comprised of intangible property (the present value of future sales) and incorporeal property (the present value of expected payments of debt)” (Commons 1934: 456, cited in Atkinson and Whalen 2011: 55). Debt (and risk) is a foundational feature of capitalism today.

The problem with debt Economic theory and policy has a lot to say about individuated aspects and power of debt But debt is foundational because in tightly integrated economic systems of today it is aggregative

2. More regulation is not better regulation Basle III and higher capital requirements Over-collateralisation New regulations have pushed many banking activities into the shadow banking system Regulatory capture

Next crisis (e.g. Brexit ) May involve pensions funds, asset managers and insurance sector Maybe CCP Politically it may be easier and cheaper to bail out a bank The post-2009 banking system is being tested

3. Technological evolution Banking is changing as we speak Less intermediation and more direct human /techno involvement Financial ‘market’ is increasingly, an abstraction The regulators are fighting the last war, and most of these developments remain overlooked as are the risks of the new industry Politicians are slower still. Regulatory capture, again

Where next? Evolutionary development of finance and banking Treating key aspects of finance as public goods/utility (the state) But all new opportunities will only become realisable after the next crisis Are we ready?

Regulators Much better prepared than in 2006 But there is a lag between the quantity of new data, information and the ability and capacity to work with this data

Academics Mainstream is largely a lost case. Civil society: there is a problem of expertise, capture and ideological presumptions (Financial transaction case is an example)

Politicians Political cycle is shorter than the financial cycle In an ideal scenario, politicians needed to work closely with the industry preparing for the next (inevitable) financial crisis and developing tools and ideas

Since 23 June We have seen: That politicians tend not have a clue about the risks ‘Experts’ have been dismissed There is still a very weak understanding that Brexit is not a UK event but a global re-evaluation of assets, going concerns and risks Central banks, again, are the crisis managers