Who owns money? How the government lost its ability to control money, with the emergence of shadow banking

Mads Emil Hansen

Student thesis: Master thesis


This analysis dissects contemporary private money, created in the newly recognised shadow banking system. Shadow banking played a key role in the financial crisis in 2008 because it had expanded private credit money on the backing of questionable collateral. This thesis uses a critical realist method to document the fact that the financial crisis was a money crisis. Not only did the private money system break down as the market for Repurchase Agreements froze as confidence vanished, but it was also a crisis of the state-money nexus as financial stability was interrupted. By analysing the contradiction within the theory of money, the political and historical roots of private money, the contemporary shadow banking system with its ability to create and transform money, as well as the regulatory response to the crisis, this thesis concludes that there is a need to rethink the state-money nexus and a need for substantial reforms. There are however two things one must have in mind when speaking of reformation. Firstly, the regulatory process as a “public” response is a mistaken perception. As this thesis show, the regulatory process has been privatised and works more as a competitive battlefield. Secondly, the state has aligned its interest with the financial system in the process of financialisation and the state is thereby reluctant to regulate on private money. Thus, states may have lost both the ability and willingness to control money.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
Publication date2012
Number of pages74