ABSTRACT
The first systemic crisis of finance-dominated capitalist systems erupted in 2007 in the US housing market, affecting the whole financial sector across the country with a number of negative consequences in terms of output and employment losses that then spread quite rapidly to the rest of the world, particularly the European Union. The ultimate origins of this crisis are to be found at the structural (rather than at the behavioral) level, as we shall explain in this chapter with respect to money and banking. To be sure, none denies that greed and predatory forms of behavior played a role in the building up of the credit bubble in the United States after the so-called dot-com bubble burst in early 2000. Also, it is widely acknowledged that financial regulators and monetary policy makers in the United States failed to address the systemic risks that were induced by too low rates of interest for a too long period of time, in a framework of increasing deregulation, and liberalization, of both financial markets and institutions that (individually or as a whole) were (and still are at the time of writing) too big to fail without implicating the state and, eventually, taxpayers (see Panzera and Rossi, 2011). The point, and the problem, is that fixing these and other disturbing forms of behavior does not and cannot ensure that another systemic crisis will not happen in the near future. Hence, all regulations that are discussed or already enforced at national or international level at the time of this writing miss the point, as they will not affect the workings of the system as a whole. Indeed, it does not come as a surprise to critics of “micro-founded” macroeconomics (see Rossi, 2010a, for analytical elaboration on this subject) that only a series of correctly designed structural reforms can avert the occurrence of a systemic crisis. As a matter of fact, the latter is the empirical evidence of a structural disorder that remains out of reach if one merely looks at the aggregate outcome of agents’ forms of behavior (independently of the functional categories into which these agents are ranged for analytical purposes).
