Speculation and Fictitious Capital
Profit can be made purely from trading in a variety of financial claims existing only on paper. This is an extreme form of the fetishism of commodities in which the underlying source of surplus-value in exploitation of labour power is disguised. Indeed, profit can be made by using only borrowed capital to engage in (speculative) trade, not backed up by any tangible asset.
The price of fictitious capital is governed by a series of complex determinants. In the first instance they are governed by the "present and anticipated future incomes to which ownership entitles the holder, capitalised at the going rate of interest". But fictitious capital is also the object of speculation. The market value of such assets can be driven up and artificially inflated, purely as a result of supply and demand factors which can themselves be manipulated for profit. The inflated value can just as rapidly be punctured if large amounts of capital are withdrawn.
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Famous quotes containing the words speculation, fictitious and/or capital:
“When speculation has done its worst, two and two still make four.”
—Samuel Johnson (1709–1784)
“It is, indeed, at home that every man must be known by those who would make a just estimate either of his virtue or felicity; for smiles and embroidery are alike occasional, and the mind is often dressed for show in painted honour, and fictitious benevolence.”
—Samuel Johnson (1709–1784)
“I should not regret a fair and full trial of the entire abolition of capital punishment.”
—James Madison (1751–1836)