The Process of Financialization in the Industrialized Economies: In the Perspective of the Credit-money System

Abstract

In this article, by analyzing relevant indicators of monetary finance in 20 highly industrialized countries from 1972-2022, we interpret the impact of their credit and monetary systems on the process of financialization of mature industrialized countries. Our findings suggest that in the aftermath of the 2008 global financial crisis, the core of what drives the financialization of national economies began to shift gradually from credit expansion provided by the national financial system to money supplied by the government. In response to this finding, the study further provides the following two in-depth explanations. Firstly, the financial system's requirement for capital accumulation, which is primarily reflected in the accumulation of money, has led to a tendency among mature industrialized nations to engage in financial speculation. This trend has significantly accelerated the expansion of domestic financial activities. Secondly, with the decoupling of money from precious metals and its transition to a government-backed credit system, governments have assumed corresponding responsibilities for social management. The currency pursued by the financial market is tied to both the government and the market due to its credit source, and the government supports unreasonable financial behavior in the market by injecting large amounts of currency. Therefore, if we fail to further regulate financial institutions and implement rescue measures to improve the interaction between the financial markets and the government, we may encounter greater financial risks in the future.