The Value of Everything: Making and Taking in the Global Economy

by Mariana Mazzucato

As long as financial assets can be bought and sold in a reasonable amount of time without incurring losses, and debt can be rolled over to pay previous loans, markets are liquid and the economy runs smoothly. But once investors realize that borrowers are not earning enough to pay interest and principal (on which the interest is based), creditors stop financing them and try to sell their assets as soon as possible. Financial bubbles can be seen as the result of value being extracted; during financial crises value is actually destroyed. The fallout can be measured not only in output and job losses but also by the amount of money that governments had to pour into private banks because they were ‘too big to fail’: the quantitative easing (QE) schemes that followed the crisis might have been used to help sustain the economy, but ended up further propping up the banks.