For Magdoff and Foster, financialization, with its attendant speculation, bubbles, and debt

driven consumption, is a necessary consequence of intrinsic stagnationist tendencies in

the capitalist economy. These tendencies themselves emerge from the contradictions of

capitalism. There is on the one hand the contradiction between capital and labor, with the

structural domination of capital over labor giving rise to growing EXTREME inequality

and thus the effective demand problem that arises when the workers don't have the funds

to buy back more than a small share of what they produce, and capitalists are faced with

diminishing profit expectations on new investment. One way to overcome this problem

under capitalism is debt driven consumption, which encourages the formation of bubbles.

Thus, in the era of late neoliberal capitalism, itself responding to the contradictions and

stagnationist tendencies in u.s. capitalism's golden age, workers who owned houses with

inflating prices could finance consumption with their appreciating equity--until the

bubble burst.

On the other hand, there is of course the contradiction between capitals at all levels that

lead to profitability crises of various sorts that in turn render speculation and

financialization both attractive and necessary, even if both not only fail to solve but

eventually intensify the contradictions of capitalism to which they were a response.

Foster and Magdoff are very good on how our debt driven consumption works up to a

point to "grow the economy," but past that point, begins to backfire, turning the economy

toward stagnation once again.

It is a very useful study, composed of essays published in the American journal Monthly Review

from May 2006 to April 2008, with an introduction and a last chapter written in December 2008.
It covers the USA's household debt bubble, the wider boom of debt and speculation, the

emergence of monopoly-finance capitalism, the financialisation of capital, the crisis' onset in

2007, and the financial bust of 2008.

The authors show how finance capital has been taking more and more surplus value from

the real productive economy. This led not to growth but to more debt: in the USA, $4.5

trillion in 1980, $51 trillion in 2007. Ben Bernanke, head of the Federal Reserve Bank,

said at the peak of the housing bubble, "these price increases largely reflect strong

economic fundamentals." As a mad monetarist he sees the crisis as solely monetary and

the solution as monetary - print more money. But life is proving that printing money

means more hoarding by the rich, not new loans and investment. In 1965, financial profit

was 15 per cent of all US domestic profits, and manufacturing 50 per cent; by 2005,

finance took 40 per cent, industry just 15 per cent. The financial sector has outgrown its

base in the real economy. No government now has enough money to act as lender of last

resort. War spending dragged the USA out of the 1930s slump, but now even larger war

spending (doubled since 1995) can't prevent a slump. As Keynes wrote, "the position is

serious when enterprise becomes the bubble on a whirlpool of speculation." The authors

write, "increasing inequality in income and wealth can be expected to create the age-old

conundrum of capitalism: an accumulation (savings-and-investment) process that

depends on keeping wages down while ultimately relying on wage-based consumption to

support economic growth and investment." They quote the great American economist

Hyman Minsky who concluded, "Capitalism is a flawed system in that, if its development

is not constrained, it will lead to periodic deep depressions and the perpetuation of

poverty." But restraints on the financial markets are impossible (under capitalism)
because the markets burst through all regulation. So capitalism does always lead to deep

depressions and mass poverty. Stagnation and financial busts, not growth and full

employment, are capitalism's norm. Its inherent laws cause its absolute decline.