Capital as cannibal
Commodity's present undeniable ubiquity is not enough to produce value, nor is capital's equally undeniable accelerated circulation enough to cause profitability.
Fictive capital consists of shares, i.e. fragments of title deeds that are bought and sold, and speculated with. It has a reality of its own. There is no such thing as a "real" economy, as if a car body had a factual existence, and a bank note only an artificial existence. The securities of an energy company are as real as its power plants, pipelines and engineers, and the company will not hesitate to get rid of many of those plants, pipelines and engineers if this results in a higher stock market valuation. But the mechanism only functions if somehow the energy company manages to put its pipes and engineers (or similar production factors) to profitable use. Money does not create itself, not indefinitely. Like any master, money is at a loss without servants.
Speculation is no longer content with anticipating the future of a firm, for instance an electricityproducing firm, to make money out of the rise of that firm's shares. It now anticipates the rise and fall of the price of electricity. People speculate on speculation.
Kant's philosophical dove thought the air around its wings was an obstacle, and believed it would fly better in a void. Likewise, capital's utopia is to free itself from blue collar workers and just keep flexible intellectual labour, as if it could feed on itself and develop as a sum of value that had done away with the conditions that produced it. It's not enough for capital to picture itself liberated from labour: it also wants to break loose from matter (no factory, no goods, no stock or as little as possible, just a flow of value), and finally from money itself (no gold, no liquidities, only credit lines, figures on a screen, 0 and 1 digits). Freed from the constraints of space by relocation, capital dreams of becoming a mere movement through time, and nullified time, because "in real time" means immediately. In fact, an engine with neither piston nor rod, with neither fuel nor operator, would no longer be an engine, but just the abstraction of motion, the principles of mechanics applied to an engine that exists only virtually. In that case, profits are virtual too. If time measuring and saving are certainly at the heart of the value cycle, valorisation is the transformation of human activity into something profitable, be it an X-rated film or a loaf of wholemeal bread, but something that's eventually bought with a benefit for the seller and producer. Financiers exchange between themselves: they do not reproduce themselves. The wonders of capitalist incest turn out to be monsters.
The stock market is necessary for capitalism, which needs a meeting-place for title deeds to be compared and exchanged. However, today's astounding groundswell in stock market valuation does not correspond to a mass issuing of shares sold among the public to finance investments. Most of the issuing takes place within firms which buy back their own shares to push up their price (and take advantage of this overpricing to help them borrow more), or between firms, when one company buys another one. Nowadays, more money is spent repurchasing shares and paying out dividends than in issuing new shares. When a company buys back its own assets, it's tantamount to a "de-capitalisation" (J.-L. Gréau), because the company pays (often a lot) for its own capital, and makes no fresh investment. The shareholders get richer without the company yet realising any profit. But it's because the inflow of money exceeds the possibilities of sufficient returns, that firms now buy themselves back, in order to increase a shareholding value unlinked to their actual results. The stock exchange no longer acts as a meeting-place between the enterprise and the saver or investor.
Whereas a private speculator (or a banker) can get out of the share market if he thinks it's in his best interest, pension funds and hedge funds live off that market, and tend to maintain valorisations disconnected from the effective results of companies. This leads to a closed-circuit system that knows no other regulation but itself, with no guidelines that would compel it to rationalise itself before it reaches its breaking point.
Besides, as the most astronomically capitalised companies are usually those with their own pension funds, their search for profitability urges them to gamble on the rise of the market as a whole, even if it runs against their interests as value-productive firms. US pension funds (which own one third of US stock market valuation) invest worldwide and their very strength makes them vulnerable to an interruption of trade.
There's nothing absurd in a stock market valuation being 900 times the total of the annual profit of a firm (Yahoo in 2000), or 60 times (Google in 2006, reaching the sum of 155 billion dollars). Those figures signal the investors' logical behaviour in the face of truly outstanding achievements in an obviously promising sector. What's wrong is to equate the capital of a firm with a valuation that only reflects the mutual trust of economic actors: that trust has only the rationality of reciprocal optimisms.
A chain-reaction financial bankruptcy (similar to the post-1929 one) is not inevitable. But what was improbable in 1960 because of corporate and State safeguards, now becomes more of a likely possibility. True, the State is more able to act, like the Federal Reserve that forced US banks to bail out the hedge fund LTCM (total losses: 4,6 billion dollars) in 1998. The shockwaves of the crisis of the "new" Asian industrial countries after 1997 were contained, as well as the breakdown of other fragile economies in Latin America, and later the "new economy" crash. But will States be able to play this stabilising role if they're confronted with multiple bankruptcies ? Globalisation opens up the possibility of a systemic crisis.
