Study On The Evolving Of Financial Fictitiousness And Its Positive & Negative Functions

Nowadays, the phenomenon that financial development departs from the real economy is becoming more and more remarkable, with economy and finance developing rapidly. Financial fictitiousness not only has new impact on real economy, but has deeply influence on financial development. Contemporary financial research make some progresses in micro fields such as financial engineering and derivatives, but still lack the comprehensive research on the new phenomenon of financial fictitiousness. As such, modern finance, at least, ignores the research on the following issues. One is the evolving of financial fictitiousness. The other is the positive and negative functions resulting from the evolving of financial fictitiousness. Obviously, studying on financial fictitiousness will have great influence on the sustainable development of finance or even society. In October 2004, Profess Qinxian Bai brought up the important ideas of"finance is the core of modern economy, financial fictitiousness is the core of fictitious economy, and the focus of present research on fictitious economy is finance", in"the relationship between Chinese fictitious economy and real economy discussion conference"in Tianjin. His new ideas are given significant attentions and positive feedbacks by Mr. Siwei Cheng and other participants in the conference. In view of the necessaries and importance of studying on financial fictitiousness, the paper discusses the evolving, development of financial fictitiousness, as well as the driving forces of financial fictitiousness evolving. In addition, the paper makes deeply analysis on the positive and negative functions of financial fictitiousness.Financial fictitiousness refers to the standard, essential characteristics and states reflecting the phenomenon that the operation of finance, in particular, financial instruments departs from the real economy. Its main features lies in the following three aspects. (1). The relations between continually innovated financial instruments and real assets are becoming increasingly far. (2). The market price of financial instruments is beyond seriously the value of real asset represented by financial instruments. (3). The trade of financial instruments causes financial section to be independent to the real economy. According to the development logic and evolving law of financial fictitiousness, i.e., from weak to strong and from low to high, the evolving process of financial fictitiousness may be divided into three stages: low financial fictitiousness, medium financial fictitiousness and high financial fictitiousness. Low financial fictitiousness stage refers to the period that monetary nominal value isolates from its real value. Medium financial fictitiousness is the stage of the formation of financial market self-circulating system. High financial fictitiousness refers to the stage of financial derivatives emerging and prevailing.The main driving forces of financial fictitiousness evolving are the following ones. Firstly, the growingly improvement of economy financialization and finance globalization is one important driving force. Secondly, the transition of financing structure is another force. Financing structure is one sort of financial structure, and core structure of financial structure. The change of"the reversing of financial tilting"in financing structure prompts the development and evolving of financial fictitiousness. Eventually, continually innovating ability and tremendous trade volume resulting from financial derivatives rapid development for the sake of managing financial risk drives the evolving of financial fictitiousness.Empirical researches in terms of financial trade volume across the world, fund flow accounts and the relation between the rate of return on stock and the real economy display that modern finance has the clear trend of departing from the real economy. The evolving of financial fictitiousness plays some positive roles in economy development. It has investment expanding function and wealth quantity effect. Also, it enhances the core role of price mechanism in economy. As any coin have double sides, the evolving of financial fictitiousness may induce negative functions. It may exacerbate financial fragility, weaken the effect of monetary policy and increase social risk.The extreme manifestation of financial fictitiousness inflating is financial bubble. The probability of financial bubble emerging is much higher after monetary fictitiousness evolved into the highest stage, i.e. the U.S. dollar standard. To a great extend, the Japanese financial bubble in 1980s and 1990s resulted mainly from the U.S. dollar standard.The evolving of financial fictitiousness provides major edifications such as realizing the transform from traditional financial regulation to modern one as soon as possible, strengthening monetary regulation and managing financial risk through improving international cooperation.The innovations of the paper lie in: (1). Making the concept of financial fictitiousness perfect. (2). Dividing the stages of financial fictitiousness evolving from the point view of history and discovering the evolving law of from weak to strong as well from low to high. (3). Pointing out that financial fictitiousness exacerbates financial fragility and the former is the fundamental reason of the latter.