Other complications arise out of this state of affairs. The lending that financial institutions make is not necessarily restricted to the amount they actually have at their disposal as a result of their own investment and borrowing. The financial institutions can assume that what they have borrowed will not have to be paid back immediately. Therefore they can extend their lending beyond their immediate means, trusting that enough of it will be paid back for them to meet their own debts as they become due.
This makes sense so long as the productive sector of the system is expanding its output; increased lending today can be paid back out of increased output and surplus value in the not too distant future.
Such prophecies about increased lending being recoverable are self-fulfilling up to a degree, since the increased lending to productive capital encourages it in turn to increase its own levels of investment, and to produce more profits from which to repay the bankers. But invariably a point is eventually reached when the drive for financial profits leads to levels of lending above what can be paid back out of the expansion of real output, producing financial crises on the one hand and attempts to escape their impact through fraud on the other. As Marx puts it, "The credit system accelerates the material development of the productive forces and the world market", but does this through developing "the incentive to capitalist production, enrichment through exploitation of the labour of others, to the most pure form of gambling and swindling" .14 Finance drives "the process [of production] beyond its capitalist limits" resulting in "overtrade, overproduction and excessive credit"15 in ways that rebound on production itself.
Marx's view of this process foreshadowed by a century the currently fashionable account of Hyman Minsky, 16 according to which financial operations invariably move on from a stage of normal profitable business ( "hedging") to one of speculation which culminates at a point (a "Minsky moment") when all of what is lent cannot be recovered-and encourages Ponzi 17 or pyramid schemes whereby money from new investors is simply used to pay high interest rates to old investors.
The final complication is that financial institutions do not only use their funds to lend to productive capital. They also lend to individuals for their own requirements (notably for buying property), or to buy shares in already existing companies through the stock exchange. Such use of funds is expected to earn the going rate of interest, just as lending to productive concerns does, and for this reason is regarded by the financial institutions as an "investment" of "capital". Yet it in no way contributes to the process of capital accumulation, and the interest earned is parasitic on what is taking place in the productive sector of the economy. For this reason Marx calls it "fictitious capital", describing it as "the most fetish like form of the relations of capital'',18 since "capital appears as a mysterious and self-creating source of interest" and "it becomes the property of money to generate value and yield interest, much as it is an attribute of pear trees to bear pears" .19
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Understanding the System: Marx and Beyond