From liberal finance inconsistency to relevant systemic regulation : an institutionalist analysis

This article suggests an institutionalist analysis of monetary capitalism and points to the inconsistency of liberal regulation mechanisms. It leans on the characteristics of money in a capitalist economy, often ignored by the consensual wisdom but explicitly studied by institutionalist approaches as major concerns in economic evolution. The article then shows, in a Minskyian vein, the weaknesses and irrelevance of liberal financial structures with regard to the prerequisites of sustainable macroeconomic stability. The main implication is that macro-prudential regulatory reforms must be designed and implemented to tame speculative finance. Therefore, market-based self-regulation mechanisms must be replaced by public regulation processes that could be framed on two rules: preventive-constrained finance and preventive-binding funding