Making of a Banksta’s Paradise
The story of Idle Money

“Merchant of Venice”• European Feudal Era where social wealth rooted in land –activities of money lending and merchant trade highly
corrosive• Merchant activity intervening between producers +consumers fostering indebtedness and expropriation of landas it corrupted ruling classes• Usury or “loan capital” – little socially redeeming value as
disconnected from substantive economic life
• Money lenders indifferent to use of funds as they are to howloan plus interest repaid• Loan repayment may be arbitrarily set to exact such an
exorbitant cost that debtor is ruined or must strive for ruin ofothers

“Money makes Money”• “Capital” or “capitalism” often conceived interms of “money making money”• Throughout history money lenders havecharged interest for money loaned asmerchants who were often borrowers mademoney by buying things at one price andselling them for a higher price• In capitalist economies money makes moremoney through unique circuitous “shapeshifting”

Shape Shifting of Capitalism• Capital successively assumes + sheds forms ofliquid money capital, productive capital asmeans of production and labor process, andcapital as goods or commodities emerging
from production• Capital is none of these considered separately• Exists in part as money, in part ascommodities, though found primarily in formof productive capitalEfficiency of Capitalism
1. Capitalism internalizes its own fount of regeneration
and augmentation as it subsumes the labor andproduction process of society
2. Capitalism conscripts the activities of money
lending or “loan capital” + merchant buying andselling under conditions where IT calls the shots3. Both the business of money lending + buying andselling commodities are operated to ensure
perpetual motion of capital as it shape shifts toaugment mercantile wealthCapitalist Role of Idle M• In the course of business cycles monies drawn from profits set
aside for future investment, contingency or depreciation
funds rendered temporarily idle and deposited in bankingsystem• Such funds “socialized” in banking systems “traded” in money
market at rate of interest• Redeeming economic value in use of such idle M – whether
directly for productive investment or indirectly to more
rapidly discount bills in sale of commodities – is that credit
offered in anticipation of income created by funds
determinate use• In all instances accumulation of idle M to be kept withinbounds as time funds remain idle minimized

Fetishism of Interest• Banks do not lend their own money• Their role is one of intermediation• Idle funds banks “trade” are not capital but
funds assuming form of a commodity or“asset” with a price• No certainty such funds will become capital
yet their “trading” in money markets fostersperceptions of actual capital as automaticallyan income generating force

“Fictitious” Capital• Unlike idle M – stock markets develop outside thecircuit of industrial capital under auspices offinancier class• While “capital” or equity markets grow in
conjunction with money markets, prices at whichshares/securities traded are not rates of interest• Stocks “traded” in “capital” markets according tofictitious values in that the equity market activities
occur independently of motion of real capital

Idle M Rising• Post WWII “golden age” ever expanding massconsumption + abundant savings combined –thus US savings outstripped domestic
investment requirements• Idle M fuelled US acquisition of overseas
assets + excess liquidity mopped up by
Keynesian welfare/warfare state• Waning of golden age – ability of business andgovernment to mobilize monetary savings for
productive ends increasingly constrainedInternational Pooling of Idle M• US machinations to support dollar as hub currency
following demise of Bretton Woods and Nixon’s
closing of gold window saw supply of money + credit
increase much quicker than growth of real economy• Recycling of “petrodollars” through internationalbanks rather than real investment of those funds
swelled pools of idle M globally• Explosion of Eurodollar holdings from $3 billion in1960 to over $1 trillion by 1984
• Money market funds swell from $3 billion in 1976 to$230 billion by 1982

Domestic Pooling of Idle M• Rise of coterie of so-called institutional
investors pension/mutual/insurance and later
hedge funds drives casino-like search for shortterm arbitrage “investment” opportunities• US pension fund assets grew from $977 billionin 1980 to $6.4 trillion in early 1990s• 1995 assets held by OECD institutional players
already = 110% of OECD GDP• Such holdings dwarfed those of central banks

Retreat of Capital to its AntediluvianForm• Idle M bloating without limits reverts to aform of money lending capital that had
thrived in the pre-capitalist epoch• It begins to seek out speculative activities on
its own account• Late 1980s through 1990s into current century
we see industrial cycles based on fixed capital
investment, construction, inventory
utilization, etc. replaced by cycles of asset
bubbles and bursts

Idle M + Domestic Banking• As the US abdicated its production centeredeconomy the banking model that had supported US
economic growth also morphed• So-called relationship banking which marks thecapitalist era involved banks taking money fromvarious classes of depositor• These were paid less for their deposits than banks
charged borrowers.
• “Relationship”, of course, is the operative word here
because with banks bearing the risks, knowing theborrower and what they will do with the borrowed
money is de rigueur.“Merchant of Venice” Banking• The new banking model catering to idle money isoriginate-to-distribute (OTD) model• In the OTD model banks engage in financial
disintermediation – originating loans only to package
them as marketable securities and sell them off,collecting fat fees as the moves are endlessly
repeated• Under OTD banks have little concern for thecreditworthiness of borrowers or to what purposethe loans will be applied given that interest
payments along with the principal are paid to end
buyers of securities, not banks