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By Robert Guttmann

In Finance-Led Capitalism , bestselling writer and economist Robert Guttmann presents a brand new conceptual framework to evaluate the dominate position of contemporary finance in the workings of our modern economic climate. This full of life and provocative learn will problem the various center ideals approximately sleek finance and the realm economy.

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Additional resources for Finance-Led Capitalism: Shadow Banking, Re-Regulation, and the Future of Global Markets

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Both had a vested interest in gradually growing US current account deficits, which just pumped more dollars into the rest of the world where those were easily absorbed for recycling back into the US economy or other engagements in the dollar-based world economy. And this mutual interest in growing US deficits formed the background for the securitization-driven US real estate boom we discussed in chapter 1, which in turn led to the subprime crisis in 2007. Having the United States run large and growing trade deficits continuously from the early 1980s on helped absorb a huge demographic shock, which saw three billion people, nearly half of the planet’s population, enter the capitalist economy all at once in less than a decade (between 1989 and 1998).

The mainstream of the economics profession is not helpful here because its approach is so wedded to the notion of equilibrium that it has a hard time even conceding capitalism’s inherent propensities to grow in a cyclical fashion and engender occasional explosions of financial instability, let alone face such a major challenge of destabilization as a structural crisis. We need to go elsewhere then! One way to address the topic of structural crisis is to go back to the long-wave approach of Kondratiev and Schumpeter and presume that this phenomenon would typically occur during the downswing phases of such waves, either as their Long Waves, Structural Crises, and Credit-Money ● 51 trigger (when it occurs near the long-wave peak) or as the vector for massive reorganization (near the long-wave trough), which sets the stage for a new upswing phase.

Here we have to look in particular at the work of Hyman Minsky (1982, 1986) whose lifelong focus on financial instability as an endogenous feature of capitalist economies with correspondingly cyclical growth patterns has regained the attention it deserves after the events of 2007/08. Minsky’s principal argument is that business cycles are reinforced in both upswing and downswing phases by a parallel credit cycle whose sharp turning point at the cyclical peak arises in the wake of acute explosions of financial instability of sufficient force to push the economy into recessionary adjustment.

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