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Why We Need to Understand Derivatives in Relation to Money: A Reply to Tony Norfield

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Abstract The issue of the relation between financial derivatives, money and crisis remains one of on-going debate within Marxism. This paper takes issue with a recent contribution to this debate by Tony Norfield. We contend that the relationship between financial derivatives and the concept of ‘money’ needs to be framed in the context of a changing understanding of liquidity, and that issues of crisis and renewed accumulation are better understood though this path than via debates about speculative versus real investment and productive versus unproductive capital. Indeed these latter taxonomies are being superseded by current developments within finance, and Marxian analysis needs to be attuned to these current developments.

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21. FN1 1. Norfield 2012.
22. FN2 2. For example, McNally 2009, p. 70; Lapavitsas 2006 and 2011; Norfield 2012.
23. FN3 3. Financial Timesn.d.
24. FN4 4. For example, Lapavitsas 2000 and 2005.
25. FN5 5. Ingham 2001 and 2004.
26. FN6 6. The importance of liquidity in conceptualising money is one reason why Hicks preferred to talk of currency rather than money.
27. FN7 7. Merton H. Miller (Miller 1988, p. 109), one of the leading figures of modern conventional finance theory, locates the foundations of the analytical dilemmas of preference shares in the original Black-Scholes option price theory.
28. FN8 8. Bank for International Settlements 2010.
29. FN9 9. See Chen, Filardo, He and Zhu 2011 for a useful current review.
30. FN10 10. See, for example, a view from the Bank of England (Fisher 2010).
31. FN11 11. Board of Governors of the Federal Reserve System 2011.
32. FN12 12. Sengupta and Tam 2008.
33. FN13 13. Norfield 2012, p. 106.
34. FN14 14. Keynes 1971, p. 3.
35. FN15 15. Norfield 2012, p. 113.
36. FN16 16. Ibid.
37. FN17 17. See Callinicos 2012 for a succinct summary.
38. FN18 18. Lapavitsas 2009; see also dos Santos 2009.
39. FN19 19. Fine 2010 challenges the formulation of both Lapavitsas and dos Santos on the grounds that they do not pose the question of whether financial deductions from labour are pre or post a measure of the value of labour-power. It is an important point, but Fine, like Lapavitsas and dos Santos, here situates working-class engagement with finance as a process of exchange, not in accumulation, and so fails to identify how workers are being incorporated as part of (indeed foundations of) financial capital.

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Affiliations: 1: Department of Political Economy, University of Sydney ; 2: School of Business, University of Sydney


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