Financialisation and shadow banking system. An analysis in the light of Augusto Graziani’s monetary theory of production.

The theoretical model in terms of the monetary circuit elaborated by Augusto Graziani since the second half of the last century has been an important point of reference for numerous scholars in explaining the functioning of the capitalist economy with regard to both the crisis and its normal functioning. Following the 2007-2009 crisis, which saw on the one hand an increasing role of the financialisation process and on the other hand the emergence of the shadow banking system, reservations have been raised by some scholars (see Michell 2017; Lysandrou 2014, 2020) about the explanatory capacity of Graziani’s analysis. This is because, it has been argued, the process of money creation has undergone significant changes from what was theorised in it. The paper aims to demonstrate that, on the contrary, Graziani’s monetary theory of production continues to retain its explanatory capacity for the functioning of a modern monetary economy. Of great theoretical relevance in this perspective is the rigorous analysis of the different forms of financing (of production, investments and the economy) that Graziani placed at the centre of his thinking. Indeed, it gives an account of the fundamental relations that characterise a capitalist economy as a monetary economy in their essential irreducibility. In conclusion, the monetary theory of production is confirmed as a valuable tool also in order to account for both the process of financialisation and the formation of the shadow banking system.