The Financialization of Home and the Mortgage Market Crisis

A brief summary of Manuel B. aalbers's The Financialization of Home and the Mortgage Market Crisis 

Mortgage markets have evolved drastically during the past century.  They have been transformed “from being a facilitation market for homeowners in need of credit to one increasingly facilitation global investment.”

The volatility of mortgage markets in recent years has been said to be on account of the correlation and relationship between homeowners and global investors and the increase of financializing and globalization of markets in general.

Another example of financialization beyond mortgage markets is pension funds. “The financialization of pension funds ties the fate of individual pension beneficiaries and workers to the fate of financial markets because capital meant for the tertiary circuit switches directly to the quaternary circuit. 

Within our society, the extraction of profit, capital as well as their accumulation is valued highly and therefore this creation of a quaternary circuit has occurred. This manifestation has further implemented financialization as well as capital switching, not just as a form of crisis prevention but for the progression of capitalism, capital-accumulation and advancement of industry.

Financialization:

The increase of finance being influential in the operations of capitalism.  This means that former industries, markets etc. that did not necessarily directly relate to financial industries now go through these financial channels in order to assure significant growth of industry and economic prosperity.  It creates the notion of financial tools such as money, credit and securities being capital and market in and of themselves.  This process also values high levels of capital accumulation.

This new process has also created a new form of competition, that further increases its progression.

Capital Switching:

When capital flows from one sector of the economy to the other, usually from the primary circuit of the economy to the secondary circuit.

Capital is used as a strategy to prevent crisis.  However, when capital switching occurs from the secondary to the quaternary (financial markets) this could cause moments of crisis due to a higher potential for unstable income sources and over accumulation.