From the Monetary Production Economy to the Financial Production Economy

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Andrea Fumagalli:

"With the advent of the capitalist system of production, money becomes an expression of capital and its social relationship of exploitation with labour. With the transition from the Taylorist – Fordist capitalism to the cognitive and financialised bio-capitalism, the main function of money has changed. The credit function, typical of a M-C-M’ system (monetary production economy), where investment activity in the production of goods requires a monetary anticipation and the indebtness of economic actors (be they private firms or the State), leaves more and more space to the finance money (financial production economy). This financial function coincides with the total dematerialization of money, being pure sign money.

We are witnessing the transition from credit money, under the control by monetary institutions (Central banks) to finance money, dependent on the dynamics of the financial market .

Until the crisis of Fordism, in fact, the institution of the Central Bank had the task of exercising a direct and precise control over the amount of banknotes and coins issued by the national Mints (fiat money). But 95 % of the money supply is now provided by private banks and financial investors in the form of loans or speculative activities, on whose portion the Central Bank has only a very indirect control. This means that, despite the Central Bank could unilaterally and autonomously fix interest rates and impose reserve requirements on banks, the amount of money in circulation is less controllable by the same Central Bank. In a capitalist system that is based on a financial production economy, the amount of endogenous money is determined by the level of economic activity and by the evolution of the financial conventions (in Keynesian term) that govern the international financial market. The Central Bank can only try to increase or decrease the money supply in circulation, but nothing more. This possibility is now being further reduced by the new role played by financial markets and by financing investment activity, via capital gains and the creation of highly liquid securities (defined near money) .

It paradoxally follows that the discretionary powers of the Central Banks are more reduced as much as they themselves have become politically independent institutions. As result, the management powers of the banking sector and, through the adjustment of interest rates, the entire economic system of the Central Bank are increasingly ancillary to the dynamics taking place in the financial markets and increasingly dependent on oligarchies that dominate them.

This means that, in the bio – cognitive capitalism, money and the determination of its value is no longer under the control of the Central Bank. At the very moment in which money is pure sign money, it escapes any public scrutiny. Money loses the status of ” public property good”. Its value is determined from time to time from operating speculative activity in financial markets. Its functions of means of payment and unit of account (measure of value ), as well as a store of value and means of funding the accumulation / development, becomes beyond any control. At a time when its quantity and mode of movement are determined by the conventions that dominate the financial markets, more and more concentrated, money is hostage to the expectations that the oligarchy (or rather, the dictatorship of the oligarchy) of the financial markets is able to exert .

Today, we can say that the creation of finance money is the expression of the libertarian communism of capital. This is evidenced by the fact that the monetary policy is function of the financial dynamics. The same interest rates are no longer fully controlled by monetary policy.

Money is, today, an expression of financial bio-power, since its value is determined by the financial conventions, whose governance represents a proxy of the expropriation of the common, as the new form of capital-labour exploitation in a cognitive bio-capitalism." (