This is Part 4 of a 4-part series.
What Financialization Really Is
But what really is financialization? Its simplest definition is, separated from the buzz and energy of its surface world, the present hedging of an entire nation’s aggregate asset value plus the hedging of all future profits derived from these assets in every sector of the economy, both public and private. This hedge is accomplished through maximizing the amount of debt leveraged against every conceivable tangible, intangible, and imaginary asset class, including the national citizenry. In perfectly efficient financialization, all accumulated liabilities eventually balance to zero against the aggregate net present value of the national asset base, plus all future profits generated by that asset base. Maximizing this leverage is accomplished through a coordinated program of zero real interest rates (or less), combined with the creation of tens of trillions in new fiat money used by first-tier recipients – i.e., Federal Reserve System member banks – to monetize this national asset base. Thus financialization is, at its core, the national descent into zero aggregate net present value and is, for lack of better terminology, the great cashing-in of an entire nation by its financial overlords.
When this national asset base and all its future profits are fully monetized with debt, the entire ownership and control of the national economy are transferred from stock owners (second tier unsecured liens) to bond owners (first tier secured liens). Therefore, full and efficient financialization turns the entire focus of national economic endeavor away from generating profits that fund discretionary capital investments that lead to collective economic growth, towards generating revenue to cover ever increasing non-discretionary interest payments for a concentrated select group of bond holders. Growth sustaining capital investments eventually evaporate as these increasing interest payments devour more and more discretionary spending, and thus “business” becomes a quest to continually whittle away at its remaining discretionary cost base, like labor and innovation, while simultaneously acting out a facade surrounding “shareholder value” for the decreasing number of shareholders who become increasingly irrelevant with every new corporate bond issue and share buy-back.