Paradox of Monetary Profit, Shortage of Money in Circulation & Financialisation

Farzad Javidanrad
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Farzad Javidanrad: University of Warwick

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Over the last four decades, the term “financialisation” has entered economics terminologies to explain the development of capitalist economies in which: a) the rate of profit in the production sector is falling or narrowing relative to that in the financial sector b) profit seeking through financial speculation has grown rapidly among the household and the production sectors; c) public and private debt is rapidly accelerating and its ratio to GDP is increasing swiftly; d) there is an independent and accelerated growth of the financial sector compared to that of the real sector. This paper is a theoretical attempt to shed light on these features through the lens of the paradox of monetary profit and its manifestation in the capitalist economy, i.e. the shortage of money in circulation. The aim of this paper is to show how the paradox of monetary profit provides a theoretical framework to analyse the mechanism by which the capitalist economies move towards financialisation. This theoretical argument shows the connection between the shortage of money in circulation and financialisation. The core idea proposed in this paper is that financialisation is the direct result of the shortage of money in circulation, and that this shortage can be explained through the paradox of monetary profit.

Keywords: Capitalism, Paradox of Monetary Profit, Financialisation, Monetary production Economy, Marx JEL Classification: B11; E11; P10 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-fdg, nep-his, nep-hme, nep-isf, nep-mac, nep-mon and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1365

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