The economist Rudolph Hilferding pointed to the dangers of an economic structure where bank capital is dominant and the state becomes its protector and facilitator. A new capitalist economic structure results; a more exploitative and globalized system. He called this new arrangement finance capitalism. Lenin appropriated Hilferding’s analysis, adding that the new capitalist arrangement quickened the process of the export of capital to the colonial world, making colonies a part of the global system of capitalist production.
After World War II the US became the center of world capitalism and global politics, the dollar the major currency. American triumphalists named this the American Century. With the recent financial meltdown and the Great Recession all that has ended. Yet, we’re left with the outgrowth of finance capitalism, a vampire economy that competes with and sucks the blood of the real or productive economy. The logic of the vampire economy is that while it lives on the real economy, it will eventually take it down
The vast economy of derivatives and the market in debt and especially subprime mortgages are means by which the vampire economy sucks the life out of working people, the middle class s and the real economy. The financial meltdown began in the subprime market, but that was merely the most obvious sign of what Roubini and Mihn call systemic rot. The economic boom that preceded the collapse was a speculative bubble. The onset of recession in 2007 exposed fragility in the mortgage markets, which set off a chain of events that culminated in the collapse of Lehman Brothers in September 2008. It shook the edifice of the entire world financial system. The US, drowning in debt and overleveraged, was the source of the collapse. The banks, insurance companies, hedge funds, private equity funds etc increased their indebtedness from 22% of GDP in 1981 to 117% in 2008. Private debt overall went from 123% of GDP in 1981 to 290% in 2008. Economist Hymar Minsky pointed out the greater the reliance on debt the more fragile the financial system (see Roubini/Mihm pp82—83).