Abstract
We live in an era characterised by a complex and dynamic relationship between financial innovation, the state and patterns of investment. At its core is the little understood issue of shadow money—a ‘promise to pay’ backed by high-grade collateral, usually government bonds, which means that government debt now plays a key role in the stabilisation of the financial system. Central banks’ growing appreciation of how shadow money can generate destabilising dynamics has necessitated them to take preventative actions, and new forms of central bank-led systemic stabilisation have materialised. This new and complex dynamic requires a new social contract, the investment state—a compact between the state and financial markets and between the stabilisation and investments arms of the state.
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Baker, A., Murphy, R. (2018). Systemic Stabilisation and a New Social Contract. In: Hay, C., Hunt, T. (eds) The Coming Crisis. Building a Sustainable Political Economy: SPERI Research & Policy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-63814-0_11
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DOI: https://doi.org/10.1007/978-3-319-63814-0_11
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