Do Shadow Banks Create Money? ‘Financialisation’ and the Monetary Circuit

Michell, Jo

Abstract

© 2016 John Wiley & Sons Ltd The rise of the shadow banking system is viewed through the theoretical lens of Graziani's Monetary Theory of Production. Graziani's categories of ‘initial finance’ and ‘final finance’ are used to analyse the new forms of credit created in the shadow banking sector. It is argued that the accumulation of leverage in the shadow banking system and the creation of credit money by the traditional banking sector are symbiotic processes. While Graziani's triangular debtor-bank-creditor relationship remains central, the circuit operates in a perverse form in which household debt is stored on the balance sheets of shadow banks, allowing the banking system to break the historical connection between money creation and productive activity.

• Journal Article Type: Article
• Acceptance Date: Feb 1, 2016
• Online Publication Date: Sep 28, 2016
• Publication Date: May 1, 2017
• Deposit Date: Apr 20, 2016
• Publicly Available Date: Sep 28, 2018
• Journal: Metroeconomica
• Print ISSN: 0026-1386
• Electronic ISSN: 1467-999X
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 68
• Issue: 2
• Pages: 354-377
• DOI: https://doi.org/10.1111/meca.12149
• Keywords: shadow banks, monetary circuit, Graziani, financialiasation, money
• Public URL: https://uwe-repository.worktribe.com/output/888475
• Publisher URL: http://dx.doi.org/10.1111/meca.12149
• Additional Information: Additional Information : This is the peer reviewed version of the following article: Michell, J. (2017) Do shadow banks create money? ‘Financialisation’ and the monetary circuit. Metroeconomica, 68 (2). pp. 354-377, which has been published in final form at http://dx.doi.org/10.1111/meca.12149. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
• Contract Date: Apr 20, 2016