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A fetish and fiction of finance: unraveling the subprime crisis

Pani, Erica and Holman, Nancy (2014) A fetish and fiction of finance: unraveling the subprime crisis. Economic Geography, 9 (2). pp. 213-235. ISSN 0013-0095

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Abstract

As the moderately strengthened financial regulation of Basel III comes into effect over the next seven years, this article sets out a cautionary reminder as to why regulation needs to move beyond a focus on the mitigation and distribution of risk. To do so, the article unravels the much-misunderstood experiences of eight Norwegian municipalities whose investments plummeted as the subprime crisis unfolded: investments that had no immediate ties to subprime mortgage lending or mortgage-backed securities. Focusing on the processes, practices, and instruments of financialization, the article puts forward two new analytical concepts—“the fetishization of the knowledge of risk” and “fictitious distance”—to help explain how the crisis spread so quickly and extensively that it threatened not only the municipalities' investments but also the functioning of global finance as a whole. In so doing, it becomes clear that financialization has set a far more risky form of capitalism that is manifest through concrete economic geographies, from towns and cities in the United States to “distant” Norwegian municipalities. In the highly interconnected entanglement of geographies and finance that make up the global financial system, the fetishes and fictions of finance cannot be ignored.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/%28...
Additional Information: © 2013 Clark University
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
H Social Sciences > HN Social history and conditions. Social problems. Social reform
Sets: Departments > Geography and Environment
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 19 Sep 2013 08:43
URL: http://eprints.lse.ac.uk/52731/

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