“The period that opens could be that of a long financial crisis in slow motion”

Ifinancial hegemony died for the first time during the 2008 crisis. Triggered by the over-indebtedness of borrowers poor in the United States, the cataclysm demonstrated that the promises tied in the incredible complexity of financial products were nothing but unsustainable phantasmagoria, unrelated to the effective capacities of our economies to produce wealth. As if, in the words of Karl Marx, money could “to bring interest, just as it is in the nature of the pear tree to bring pears” !

The chain reaction that followed the bankruptcy of the Lehman Brothers bank sounded the death knell of the myth of self-regulation of the financial markets. Unable to support itself, finance had to abandon its claim to become the instance of totalization of economic life, the place where the preferences and resources of today and tomorrow would adjust harmoniously.

Yet it has persisted until today at the top of the hierarchy of our social organization. In the throes of the great recession, in the midst of the upheavals of the eurozone crisis, during the Covid-19 pandemic, public authorities have never ceased to prioritize financial stability. Just one example: in 2020 and 2021, to prevent the effects of the confinements on economic activity from causing a collapse, the European Central Bank (ECB) practically doubled its balance sheet, granting liquidity and buying back securities for an amount total of 4,000 billion euros, or approximately one third of the gross domestic product of the euro zone, or 12,000 euros per inhabitant.

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The second death of financial hegemony has the face of wealthy Californian tech investors. In 2008, the banks were rescued, but bankrupt borrowers had to abandon their homes. In 2023, start-ups and venture capitalists have begged for, and won, Washington’s full support to recover their funds deposited at Silicon Valley Bank. What irony for a sector imbued with a libertarian ideology fundamentally hostile to public intervention!

“risk-off” state

Of course, faced with the specter of panic, the banks are once again benefiting from sovereign largesse. All the floodgates of access to liquidity are wide open. And, as with every crisis, we increase the dose of support. Thus, the Fed inaugurated, on March 12, the Bank Term Funding Program, a mechanism by which it accepts, as collateral for the loans it grants, securities valued at their face value, i.e. at the price at which they were acquired, and not at the price they are now worth on the markets. The balance sheets of financial institutions are, as if by magic, immune to losses.

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