Financial capital gained vital importance within the capitalist system especially in the early twentieth century. At what time does its origin go back? What is the financial capital based on and what were the reasons for its success? What are their characteristics? In this article we answer all these questions. In addition, we will also see that financial capital has been affected by economic recessions that we will also comment.
Concept: financial capital
Basically, the financial capital is the money that is invested in the different financial entities with the main objective of obtaining an income to the capital . That is, it is a sum of money that has not been consumed by the owner of that money. Instead, the owner transfers the amount saved to the financial market in order to obtain an income that generates profits. These benefits are for the owner, so they do not increase the productive capital that exists in a country. In its origin, financial capital was formed by the high concentration of industrial capital that was merged with banks, and exponentially this has led to monopolies, producing the maximum exposure of this system.
As main characteristics, financial capital presents a constant search for profits or profits in the financial market through stocks, currencies and other financial products . Thanks to financial capital, the credit and asset financing system has been strengthened. It has allowed, thanks to this system, the development of large multinational companies and banks have had a greater importance in the development of the business fabric and in the lives of people. However, an overlap of this system has brought inconveniences such as the excessive increase in speculation and the banking benefits as well as all types of financial intermediaries and insurance companies.
Origins of financial capital
At the end of the 19th century and the beginning of the 20th century, this concept appeared: the concept of financial capital. Why did his appearance occur? Because of the high concentration of industrial capital and also of banks. This caused banks and companies to start merging. There, new business relationships were forged.
Banks offer short and long-term loans, and can influence and make decisions regarding the fate of the companies themselves. The banking entities began to transfer financial resources to the companies in the form of shares. Banking consortia are formed, in turn. That is, small banks began to be absorbed by the big banks.
Financial capital crisis
Financial capitalism has had to overcome two severe crises. The first one occurred in 1929, with the crack of the New York Stock Exchange .
The famous Black Thursday produced a historical devaluation of the financial assets of American companies. A large percentage of companies were ruined and not only American, as the crisis spread to the rest of the world. The other crisis we already know, because we have it very present.
We are still suffering its disastrous consequences. In 2008 and with the fall of the American bank Lehman Brothers and later of many other banks. There was also a real estate bubble, which affected us especially in Spain. The consequences were terrible, especially for some countries in Europe. Our country was one of the most affected, financial capital living its biggest crisis in the years after that 2008.
This crisis gave rise to a widespread distrust of banking entities and doubts about the capitalist system. The position of the banks did not help, they began to close in on themselves, forgetting the historical function of their existence. And is that banks stopped granting credit precisely to anyone who has more need to finance. All those families that suffer to reach the end of the month were excluded from the financial capitalist system. This situation, together with the development of new technologies and the Internet, gave rise to the appearance of non-banking financial entities that offered much fairer financial products and better conditions for people who need urgent financing. Online personal loans offered by companies like Left Credit are a growing and increasingly recurring product for many people who need little face unexpected expenses that may arise in the day.
Alternatives: new loans
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