Subprime Mortgages, The Crisis of Capital, and Social Justice
The causes of the mortgage fiasco beginning in 2007 which led to the financial meltdown are admittedly complex. Predatory lending played a significant part, but what was more troubling was the ability of financial institutions to inflate the value of debt that was never really meant to be paid back through various financial tools. Surely, the predatory lenders were acting in their own short-term self-interests. For creating a mortgage you get a commission. As far as the individual lenders can see there was only motivation to increase home sales and mortgages. What is interesting to wonder, though, is whether the “higher level” institution — those buying, repackaging, and reselling the debt in order to make a profit — were able to foresee the effects of what they were doing.
Marx predicted that as capitalism advanced people would begin to see the economic relations that they personally entered into as being for the purposes of making money rather than for being for the purposes of making a good. Money is supposed to be, in capitalism, the symbolic form of use-value. It is the symbolic dimension wherein the strength of both an economy and an individual to produce useful things is expressed. Banking is an industry which profits by mediating exchanges – it itself is much like money in this regard, its purpose is to mediate exchanges. What is the same with regard to a package of debt (interest bearing capital) and money is that neither is actually useful in the same sense a shovel or a coat is useful. That is, a shovel and a coat have a practical use, money does not have a practical use except to be exchanged for things that do have a practical use.
Marx also predicted that interest bearing capital would be treated as something which had an objective power to create value for the owner of that capital, which it does, but that value is purely symbolic, it is monetary but does not reflect a use-value. It, like money, doesn’t reflect any particular content. A symbolic value which does not reflect a real value might be thought of as, in modern terms, a “bubble.”
