Note on Marx's theory of financial crises

Marx argues the C-M-C cycle has the possibility to be destabilizing because of hoarding and adding credit into the mix not only increases the possibility of a crisis, but perhaps makes a crisis inevitable due to changes in the real economy.

Gary Dymski highlights the strategic shift in banking; banks used to know their borrowers and held loans on their own books but now the lending process is disseminated across multiple institutions, "Loan making once involved assessing risk, lending funds, and holding those funds until loans were retired.  This process became disarticulated: the assessment of risk, the lending of funds, the servicing of loans, and the holding of loans all are done by different financial market players" (2013).

The more "innovative" finance becomes, the more fragile and interdependent the cycle becomes.  For Marx, merely adding one contract into the cycle led to increased fragility- think of what the cycle would look like now.