A fundamental shift in the nature of value
While derivatives have existed for millennia, under financialization they move from the periphery to the center of the economic order. Today, the value of outstanding “over the counter” derivatives contracts (private futures, options, and swap agreements not made on recognized exchanges) dwarfs the entire world’s GDP, and the volume of annually traded OTC derivatives (which may change hands multiple times a minute) dwarfs even that figure. For Randy Martin, author of Knowledge LTD, the derivative not only names a particular set of financial instruments, it identifies a methodological tendency in capitalism. New technological and mathematical instruments have emerged that allow derivatives to be priced and exchanged as their own financial assets. Derivatives can be built atop one another in a portfolio, creating a complex cascade of mutually reinforcing or cantilevered speculations. They can be aggregated into complex synthetic derivatives or sliced and diced into new cuts of financial meat to suit the taste of a variety of clients. These promissory notes become the bedrock of a new financial system that is increasingly distant from providing the insurance and security for our hypothetical baker and more about a constant drive toward securitization, a felicitious financial term that means the splitting apart and re-bundling of assets to create new securities — as when banks deaggregated and re-aggregated subprime and other loans into the infamous mortgage-backed securities (MBSs) they sold-on to their clients as risk-free investments.
By contrast, the advent of the modern derivative, and the broader shift toward financialization it portends, marks a shift in this logic. The circulation of money appears to become an end into itself. Financialized speculation ultimately seeks to generate wealth external to any necessary change in the underlying capitalist economy. For some, this signifies a fundamental shift in the nature of value under capitalism.
— Max Haiven, Art After Money, Money After Art: Creative Strategies Against Financialization
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