A Historical-Institutional Balance-Sheet Approach to Financialization in the United States

This paper focuses on long-term conceptual and ideological causes of financialization and, since 2010, the emergence of counter forces. Confusions between financial balance sheet data and national income data produced two errors of conceptual stretching: of banks into financial firms and of financial claims into assets and money. This induced double-counting of income, selection bias, and misinterpretation of national accounts that became an ideological veil of finance. Financialization has compounded inequality, concentrated banking and finance, and centralized monetary authority, increasing policy capture, perverse incentives, moral hazard, and political fait accompli. Data from the NIPAs (1929-2021), Z1 Reports (1945-2022), and the IMAs (1960-2021) clarifies these causes and consequences of financialization and three counter forces: declining marginal returns to the rise of finance; the emergence of social reactions of self-defense against the commodification of banking, savings, and money; and a back to the future return to traditional banking and monetary moralities.