Category: Finance

  • Financialization

    Even the textbook explanation of finance makes a distinction between “real investment” and “financial investment.” [see Samuelson p. 418] The term “financialization” has been coined to describe a fundamental change in the economy over the last 50 years.[ see Palley] It has been variously defined, but in its broadest sense it “refers to the increasing…

  • Finance

    The textbook explanation of how economic activity is financed is based on a simplified conception of the function of banks and the stock market. Banks theoretically use their depositors’ money to make loans to businesses, and the stock market enables businesses to raise money by selling “shares” to individual investors. Each of these ideas glosses…

  • Credit

    The term “credit” is derived from the Latin term for belief or trust. Perhaps the most common understanding of credit is “buy now, pay later.” It means that you can walk out of the store with something simply because you have given your word that you will pay for it when the bill arrives. This…

  • Debt Financing

    Consumer credit loans seem benign enough except for cases where people dig themselves into a hole by using credit card debt to finance everyday expenses until things take a turn for the better. Mortgages and refinance loans can also be a problem when people bet on their home’s value increasing dramatically, and student loans often…

  • Interest

    The most significant characteristic of money in our society that is not contained in the common definition is its ability to generate “interest.” Interest is commonly described as a form of rent charged when money is lent to someone else. Economic theory also talks about interest as the “price of money” or the “price of…

  • Banks

    In classical economic theory banks have two functions. They facilitate economic transactions by “clearing” or settling through checking accounts, and they make loans to individuals or businesses. In mainstream economic theory when banks make loans they are lending money deposited by customers in their accounts. The idea is that depositors do not need all the…