Historical Materialism 20 (1):103-132 (2012)

Abstract
Financial derivatives have been singled out as the major villain in the latest crisis, particularly through speculative trading by banks. Yet little attention has been paid to the fundamental rôle that derivatives play in modern capitalism. Even less has there been a focus on how the boom in derivatives-trading was prompted by the crisis of profitability and capital-accumulation. This article shows that while derivatives were one means by which speculation took off, the momentum behind this was driven by low profitability. That was why banks turned their mortgage-loans into derivative-driven securities, why pension-funds placed bets on commodity-futures and why countries such as Greece used derivatives to hide the real state of their finances. Derivatives helped determine the form and magnitude of the crisis, but were not its underlying cause. Proposed reforms of the derivatives-market ignore the fundamental determinants of the financial crisis, assuming it to be a failure of regulation.
Keywords rate of profit   capitalist markets   financial crisis   derivatives   hedging   speculation
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DOI 10.1163/156920612X634735
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References found in this work BETA

On the Content of Banking in Contemporary Capitalism.Paulo dos Santos - 2009 - Historical Materialism 17 (2):180-213.
Money in Capitalism or Capitalist Money?Dick Bryan & Michael Rafferty - 2006 - Historical Materialism 14 (1):75-95.
Relations of Power and Trust in Contemporary Finance.Costas Lapavitsas - 2006 - Historical Materialism 14 (1):129-154.

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