Description
The paper adopts a Minskyan perspectives, which highlights endogenous financial boom-bust cycles, and explores their implication for financialisation and financial globalisation and the role of the state therein. First one can distinguish, with respect to macroeconomic performance three phases of financialisation. A first phase (late 1970s/1980s) with high interest rates and relative low growth; a second phase (mid 1990 up to 2008) with mostly low growth and high asset price growth and relatively low interest rates. Then a third phase (since the GFC) with low interest and depressed house prices. Second, while in most formal economic models of the financial cycle there is a symmetry of mechanisms between upswing and downswing; in practice one would expect an asymmetry due to political economy factors: in a crisis pressures on the state will rise. This has two implications for the theory of currency hierarchies. First, a key difference arises between countries with core and peripheral currencies. While the former experiences capital inflows, which enable gov’t deficit spending, the latter experience outflows, which makes gov’t spending more difficult. Thus the position in the currency hierarchy impacts state capacity. Second, the management of a crisis by the central bank (and the respective government) matters. Letting the crisis spin out of undermines the hegemonic position of the currency. This enters the traditional field of the IPE of international currencies. The Minskyan perspective favours an emphasis on financial factors, but also highlights the importance of state policies in determining the position in the currency hierarchy.
