What The Fcuk Is Money (And The Monetary System)?

To normal people nothing is more natural and nothing less unclear than money and a society based on money. When you take a look into the literature you quickly learn that money has never found much interest, especially in economics. However, there is surprisingly little consensus on what money is and where it comes from. Is money real or a fiction? Is there one money with one historical origin or are there many independent monies? Is money a thing or a thought? Has money value or the things exchanged for it? Is money the product of economic activity or its precondition? Do states have their own money or can they only tax? Do banks lend money or create it? Is money constituted by mutual trust or hierarchical power? Does money make free or does it enslave? Can money be reformed or is it eternally the same? Is a modern society without money possible? These are many questions. But we are lucky. If we combine history and real-world economics with systemist philosophy – and even talk a bit about love – many of those questions can find an approximate answer. By Daniel Plenge

In the 28th month of life someone asked “What is this, life?”. Although that someone lives in a tribe of atheists, the next day the little human wanted to know “Who is God?”. In this spirit of puzzlement, curiosity, honest concern and experimentation the What-the-Fcuk series asks classic and current questions at the intersection of the real world and public as well as academic thought.

When a child asks you “What is life?” or “Who is god?” probably your feeling of astonishment will be followed by a sentiment of insecurity. To the first question you may want to answer that any thing that has a metabolic process is alive. Too complicated, so you help yourself out with examples. Stones, tables and dumbphones are not alive; trees, bees and brothers are. To the second question you may answer what you have been told visiting church, or that god is what people who go to church believe in.

When the kid asks “What is money?” most of us probably don’t see any potential issues. Not even children ask that question. Money quickly becomes a part of their lifeworld before they can even talk. Their watching their parents act leads to playful imitation, which is elaborated on with the help of socio-political propaganda in the form of children’s books which combine the seemingly obvious with historical myths. As a consequence, curiosity is killed and then rots to never return.

Textbooks’ answer

So, you answer what is written in your textbook.

Money is what you have in your pocket or in your bank, coins and bills. It is what is needed to buy toys. Toys need to be produced. Everybody needs toys, but not everybody produces toys. Once upon a time, people produced everything in isolation for themselves. We today call them “self-sufficient” or “subsistent.” But then they thought it would be nice a thing to exchange stuff.

Life is boring when you always play with the same toys. Therefore, one day one kid’s father went with a toy car to another kid’s father who wanted to get rid of a doll. The problem was that the dad with the car didn’t want a doll for his son. He wanted a boat, but the other had none. He went on and on in search for someone to swap a boat for a car. It was all so complicated. When he hit on someone who was willing to swap a boat, that fellow didn’t want a car! He wanted a plane!

Clearly, this could not stay this way. People thought it would be great if everybody would have something objectively valuable that could be exchanged for individually cherished cars, boats puppets and all the toys in the world. That ingenious invention people agreed upon was money.

Now the father with the car could give the father with a boat simply money, and the latter could use that money to buy a plane somewhere else. Great!

But boats are not as expensive as planes. This made men realize two more epochal problems and their solutions. The first was to use precious metal as money to measure the value of toys and stuff, and to partition them into small doses, which became coins. If the boat was only worth 10 coins but the plane the father wanted 20 coins, then he had to sell two boats. That’s fairly obvious! Anyway, if the car would have been worth only 5, it would have been unfair to exchange it for the boat that was worth 10! Exchange – for sure – needs to be of equivalences.

To make it even more easy, someday the value of the coin was stamped on it with a number. How practical is that! Now people could simply compare the number on the money with the number on the price tag of the thing or commodity.

The division of jobs

Still, it was a mess. There were not many toys around because fathers and grandpas only occasionally sat down to fiddle them together. But once upon another time people had the idea that if everybody specialized this would be to the advantage of all. Those who were great in making toys started to make only toys, day in and day out, but not only for themselves: for all of us! Awesome!

Those who were great with animals became ranchers or butchers. Some made great PowerPoint-presentations and made only that. A bit later, those who excelled at presenting became influencers on social media, while those great at sex became sex workers. This is how professions and jobs developed. When everybody does what he knows (and likes) best, this saves us all time. Imagine how long it would take you to build your tablet computer by yourself!

In summary, at first everybody produced everything he demanded on his own for himself. Then everybody produced something for anybody who demanded it – in exchange for money.

The eternal bourgeois society

At this point in your story you get a bit sincere. Junior, if you don’t produce toys, you need money to buy them, so you need work (aka jobs) to buy toys. Money simply is what everybody needs and accordingly wants, either more or less of it. If you want expensive toys, you need to save money. Some people can’t hold it and spend everything before the end of the month. But others think long term. They economise. By abstaining today, they have more tomorrow.

However, if you would put your pocket money under the pillow or into the money sock, nobody could use it as long as it is there. What a waste! And it could be stolen by your sibling! Here bankers come in. You need trustworthy people who ensure during the time others use it that you get your money back the moment you need it. That’s again of advantage to all of us. If small savings are put on a pile, big investments are possible. Even better, you earn interest by doing nothing. Your money works for you!

In effect, and this is a lesson for life: money always moves from one pocket into the other, and the latter pocket could be yours. Therefore, common sense uses to say that money never disappears if someone loses it. It is just making somebody else richer, as in a game of poker.

The usual metaphor is that money flows. The assumption is that the stream carries bits or loads of value.

Robber government

The sophisticated liberal-conservative parent will add to the story that not only siblings and burglars are a risk to people’s money socks, their savings and aggregate private investment, but government is an even greater risk.

Quoting Margaret Thatcher, (s)he will say that government has no source of money of its own other than the imposition of taxes or borrowing of taxpayers’ savings in the bank. And it is obviously true. If you introduce government into the bartering society, it can only grab what others have. As Maggie said: “There is no such thing as public money. There is only taxpayers’ money.”

The state can merely redirect the money-stream, flowing from taxpayers into its treasury. As Theresa May said, there is no magic money tree, which is fairly obvious because money is earned via work and production for markets, isn’t it? And the state does neither, or does it? It is parasitical. It crowds out the financial resources of businesses and thus hinders investment.

The Britons were always good with money. Remember, they invented the central bank back in 1695! No wonder that their prime ministers still produce famous quotes.

Tit-for-tat: a simple story, merely

This is all straightforward and well known. Your textbook might come from introductory economics, the children’s books which copy from them, or political commentary. The only trouble is that everything here is false, myth, nonsense, or philosophically dubious.

This becomes obvious the moment you realize that power and social systems (also called “institutions”) do not disturb this harmonious fantasy. There is no question of (contemporary) money creation, only of faraway origins. There is no indication of structural inequality in access to money, of threats and open violence.

In the tit-for-tat world of independent barterers, everyone is still self-sufficient, otherwise (s)he is simply a sucker not willing to produce or offer something that others need. Only at one point back in the mist of time humans have out of rational compulsion agreed on what is most efficient and clearly just: exchange of equivalences among free equals.

In effect, what we have here is a philosophy of history and society, a bad philosophy (or a „phobosophy„).

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What does money do?

At times, it is said that in current thinking the question what money is would mostly be answered by what money does. But, obviously, money does nothing. If “money” means coin or banknote, it may reflect light, burn or whatever, but does nothing socially significant on its own.

However, our story frames the functions of money that are normally mentioned in textbooks and also known from the lifeworld. Already back in 1878, an American economist said that money is identical with four functions:

  1. money is a measure of value, also called “money of account” (of all commodities, including human lifetime)
  2. money is a means of payment or settlement (of debt of different kinds, think also of fees)
  3. money is a medium of exchange (for all other ‘commodities’)
  4. money is a store of value (ready to materialize in other form in the future, almost identical to what moderns call “wealth”).

From a scientific standpoint, this is rather trite, because what is generally interesting about functions is not what happens but how and why. Even worse, given the centrality of money in our world, it is surprising how controversial an object it is when you look a bit around.

We learn that it was hardly a topic in the social sciences at all since their modern inception. And if it has, “the greatest paradox is that such a commonplace as money should give rise to so much bewilderment, controversy and … error.”

A recent monograph tells us that “even today no one can tell us what money is.” Heterodox economists such as the Australian Steve Keen still publish articles (here on March 25, 2021) and books that need to argue that “money matters,” because mainstream economists ignore money, even after so-called grand financial crises, the first of which is claimed to have happened in the Netherlands of 1634:

Staggering though it might seem to a non-academic audience, the overwhelming majority of mainstream economists do not understand, nor do economists study, the nature of credit and money, or indeed the wider financial or monetary system.

Even in ecological discourses about economic growth “it is remarkable how little attention has been paid to the phenomenon of money.”

When it comes to history, a recent publication claims that money is roughly 500 years old. Others think it is 5000 years old, or even as old as humankind. For instance, money is called a “social technology” and compared with “writing and number,” which would make it indispensable in every human future, whereas others flirt with the idea of getting rid of ‘it’ – whatever ‘it’ is.

Money’s mysteries

This is a clear sign that the phenomenon is still unclear, in contrast to its supposed clarity in common sense. It was claimed back in the 19th century, by a guy called Karl Marx, that not even love has made as many people fools as thinking about money. But what we call “money” is obviously such miraculous an ‘it’ that this is understandable.

Whatever love is, it may bond people together over decades, which is miraculous as long as you believe humans to be purely self-interested ‘utility’-maximisers. Money is even more puzzling than love. Why? Because love can never transcend those loving. Money does, or seems to do so, as we will discuss below. Money seems to flow. Love doesn’t.

The money earned by selling bombs produced by forced labour, which is stored in the accounts of a bank or a household safe, may be exchanged for a cocktail party worth the same amount of money one hundred years later by the heirs of the bombs-entrepreneur; the keyboard strokes by a banker may be the socially crucial link in moving tons of materials and hundreds of workers in building a hospital; a pop-song composed in thirty minutes and recorded in a day may be exchanged for thousands of hours of human lifetime, materialized in commodities, which are believed to have the same value as measured in money; financial speculation gains money (and supposedly value) in amounts that would have been unimaginable even for pre-modern kings, although it creates nothing; the electronic transfers of small monetary numbers from hundreds of bank accounts in different countries to one bank account can be exchanged for life-saving health care of an un- or underinsured person in need of help, who would otherwise have died; or, more mundane, you can grab your money sock and travel around the “monetary space’” of your country’s currency and get the stuff you need or merely want without anybody asking who the fuk you are or where you come from.

These are some of the ‘miracles’ of money and its flows.

Some philosophical puzzles

Those miracles lie already in the above functions which money is said to fulfil. In the philosophical mode of thought, they cannot be taken for granted.

Here’s why:

  • Money is a measure of the value of things? On the face of it, neither a bee nor a tree nor an apple has such a value, and humans have valued stuff and other humans without money for thousands of years.

After coins had been invented in the 6th century BC as (marginal) means of payment in China, India and the Aegean Sea, and credit accounts are even known since 3000 BC, the European Middle Ages (500 – 1500 AD) are said (e.g. by Jacques Le Goff) to have known no shared concept of money that could thus be central to human interaction and, it is argued, no concept of abstract value either, of a value-quality that is supposed to be present in any thing. Even more, it is claimed:  

A word that means this value does not exist in any language before the early modern era.”

Although to us this is straightforwardly unbelievable, note how strange an idea it initially is that an ‘it’ which has a number on it, or just is a number, can measure the value of every thing in the world, where value seems to be quantifiable but is no quality in itself.

Already here we get to a point of controversy because estimating that one thing is appropriate to be exchanged for another (in a specific context) and in this sense of the same value may be taken – and in fact is taken – to be something completely different than to say that two things have an equivalent value:

What we call ‘money’ isn’t a ‘thing’ at all; it’s a way of comparing things mathematically, as proportions: of saying one of X is equivalent to six of Y. As such it is probably as old as human thought.”

Money is by definition a means of measuring and comparing the value of different things.”

David Graeber thus believed that people have next to always measured value with what “we call ‘money’”, whereas Eske Bockelmann believes that we did not have any idea of (abstract equivalent) value before the 16th century and, as a consequence, also no money proper, and that any other assumption is anachronistic, imposing ideas that have been developed later onto historically prior cultures.

Is this a dispute about words or the most central point? Hard to tell.

Comparison of values? Prices? Both?
  • Money is a store of value? On the face of it, this isn’t at all obvious; just look at a coin, a bill, or today’s entries in your electronic bank deposit depicted on your screen; that they are inherently valueless – and, even more, next to nothing – makes it puzzling to believe that it can somehow store value, and many investors don’t buy the story, at least within crises.

Of course, here the easiest way out is to say that the value of money is the amount of stuff ‘it’ can be exchanged for, that money’s value is external to ‘it’. This would mean in the end that the value of money is stored in other things than money or, ultimately, humans handing them over.

Initially at least, this is a strange store. Whether this is as trivial as saying that the ‘value’ of a voucher for a glass of beer is a glass of beer handed over by the one who printed the voucher is then the question, because money is, on the face of it, no such voucher because you can exchange it in principle for anything and not only with those who issue it.

Here as elsewhere, one problem in approaching our question and its answer is that money appears to be either quite trivial or quite mysterious, dependent on the overall perspective, a transhistorical phenomeon or a historically specific something.

  • Money is a medium of exchange? Well, we use ‘it’, but although barter has never occurred outside of prisons or after the breakdown of monetary economies, people have for thousands of years exchanged or shared stuff in different ways without money.

Even more, we assume that most exhanges of stuff in the word happen with money, but this is not certain because, for instance, processes within corporations are not organized via markets and money, while families and friends don’t exchange via money either. David Graeber called the foundation of social life accordingly “everyday communism.”

  • Money is a means of payment or settlement? This is neither miraculous nor very interesting, because humans entered into debt relations or were forced into them next to forever. This is close to an ahistorical statement. If this were all, the promise to repay something with a kiss would make the kiss money.

Payment and payment by money, whatever ‚it‘ is, arguably are not the same.  At least we might think so. A medieval peasant that hands over a bushel of wheat to his landlord makes a payment without money, because part of this social relation is the obligation to do so. A debt in kind even today is often settled by giving back the same type of stuff later, where 5000 years ago it was regularly necessary to borrow foodstuff before the next harvest.

Human history: one money or many monies?

Clearly, whichever of these functions you ascribe to what you call “money” today, separately or together, you may find different origins in past history. Maybe you find different ‘origins’ of different monies – and, therefore, no single origin of a single money. If this would be so, then our question has no single answer.

If there are no transferable tokens representing abstract value, but there is a measuring unit, was this money? If taxes were paid in kind according to some accounting unit and in part redistributed, was this money? If there were a few coins used at the margins of the ancient or medieval economy to buy something, which where perhaps minted just for the occasion out of some dishes, was this money or just one means of payment among others? Is there money only when a unit of account is universally used as a means of exchange and measure of abstract value in a society which has become a universal market (an economy) – not a ‘market’ in the sense of a premodern location of exchange -, where the aim of everybody is to participate in profit-making?

Ideal-typically, Geoffrey Ingham distinguishes “four successive, but overlapping, modes of monetary production” which do not mention production and reproduction in the overall historical societies. The talk of “overlapping” seem to indicate some sort of continuity:

1 Money accounting according to a standard of value, without transferable tokens (earliest known case: Mesopotamia, third millennium BC

2 Precious metal coinage systems (Asia Minor, c. 700 BC to early twentieth century AD)

3 Dual system of precious metal coinage and credit money (fifteenth to early twentieth century)

4 The pure capitalist credit-money system (mid-twentieth century onwards)

One trouble here is that credit was also used in the Middle Ages. However that may be, there are two more sorts and sources of mystery here.

What the fcuk is money?

One source of mystery lies in regarding money as a thing. The second lies in regarding money as a social relation, exactly what love is. While the second answer is more correct, it doesn’t make money less mysterious than the first, at least when we enter our monetary system.

Our tradition of thought features two main philosophies or theories of money. On the one hand, commodity theory aka materialism aka metallism aka naturalism, on the other hand credit theories aka nominalism aka constructivism.

One variety of credit theory are state theories of money aka chartalism. With the latter credit theory, the functions money fulfills can only be fulfilled because of the pre-existence of the state (and its power over people grounded in the threat of violence), while in other credit theories different forms of social systems can play that role (e.g. early modern associations of merchants or contemporary exchange circles).

Commodity theory

In the commodity theory, of course, money is itself a commodity, a thing that can be exchanged for other commodities. It can take the role of money (medium of exchange) because it supposedly has the property of being valuable. It shares this property with other commodities. Because its value doesn’t corrode or rod but is intrinsic to the material, it is believed to be a natural store of value.

Because this value was often not only seen as inherent in metals and a natural property, the terms “metallism” or “naturalism” are also used. The properties of portability, divisibility, and durability seem to make metals predestined to function as money in such a view.

Money may also be taken not to be valuable in itself but function by being a symbol for such a valuable commodity. For instance, a dollar bill could be merely representative of gold, for which it could in principle be exchanged. A nice and simple historical story can then be told: first there was bullion, then there were coins with a real metal value, and finally there were coins with a pure nominal value, but which were exchangeable for real metal.

In fact, in modern history coins and bills could, in principle, be exchanged for gold at treasuries or central banks, until the last “gold standard” (Britain had adopted it in 1717) fell with the international convertibility of the US-dollar in 1973. The consequence was that governments needed to have huge reserves of metal stored somewhere, and the issuing of new money required more metal to back up its supposed value.

Since then at least, commodity theories are an obsolete historical curiosity. If you go to the Bank of England today to check whether the promise on the bill to pay its holder this or that amount holds, you don’t get metal for your bill, but just another bill of the same (nominal) value.

Obviously, the historical myth this philosophy is built on is the fiction of a barter society. Meanwhile, it is totally discredited in the intellectual sphere, though not in the ideological.

Credit theory

In a credit theory, of course, money is a claim or credit. In other words, it is a debt. Claims, credits or debts are obviously not things, but relations between persons (or social systems/legal entities as represented by persons). They are mental representations of social relations between a person X and a person Y.

The mental representations at the same time constitute these relations. Without the former the latter would not exist. This is even more simple than it at first sounds: X believes “I owe Y” and Y believes “I lent X”. This relation of credit and debt can be symbolized in some form on some material.

Is this counterintuitive to you?

It certainly is. The reason may be that we are usually commodity theorists and believe that what we have in our pocket really, really, really is in itself as valuable as the stuff we exchange it for. There is nothing strange about this idea because we practice that idea every time we shop around. Children learn it early in life. This habit of thought also allows us to say that to waste this or that is insignificant because “it only costs so much”, a few cents or whatever, and can easily be replaced. We normally don’t think in terms of relations between people we make to produce what we waste. We think in terms of value.

Although all money is believed to be debt within credit theories, not any debt is believed to be money. What makes the difference?

One view identified “money” with “quantifiable debt.” A critique of this view is that also three kisses can be exactly quantifiable debts, but therefore are no money, or at least not modern money, although they could very well be an accepted means of payment in some cultural context.

What minimally needs to happen is that a relation of credit and debt becomes detached from two individuals and thus transferable within a social system. Moneyness entails “the possibility that the original creditor in a relationship can transfer their debtor’s obligation to a third party in settlement of some unrelated debt.”

This is the strangeness of money. What does it mean?

When person D (debtor) owes 100 dollars to person C (creditor), i.e. the former promises to pay the latter 100 dollars in the future in exchange for 100 dollars in the present, then person C may use D’s promise-to-repay to buy something worth of 100 dollars from a person Z. Person Z will get (and accept) from C a token that represents D’s debt, although Z and D had nothing to do with each other.

In other words, the content of the relationship between C and D – the promise to pay – ends up in the pocket of Z. Of importance here is that the 100 dollars stand for every thing of the same value, not, say, just 100 grams of cocaine. Otherwise this would not be a general means of exchange.

Seen in this way, the old analogy of ‘things’ – coins and notes – ‘circulating’ with varying ‘velocity’, like blood through the body, is inappropriate. Rather, money should be understood in terms of a vast network of overlapping binary debt contracts which are settled by the transmission of reusable credits.”

The basic idea, then, is that in the end-state of the emergence of a monetary system, money is a network of debt-credit-relations in which the individual, personal nodes of the network have become insignificant or secondary: debt dissolves into abstract purchasing power (or value) as “reusable credit” by finding a symbolic representation that is widely accepted. The other way around, not any credit/debt is money, because it may not be accepted anywhere else.

We will see below how this works within the hierarchy of our monetary system.

Three kisses and a rose are usually not transferable, though they may constitute a debt. And if A loves B and hands over such love-tokens, B will not have much success in giving them over to C, because C will neither believe to be able to do something with it when meeting A or any other person Z.

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Accordingly, in credit theory the value of money does not inhere in the money token (coin, bill, credit card, whatever): “all money is credit in the sense that its value is given by the existence of debts that it can cancel;” or “the value of all money is its value as credit denominated in an abstract money of account;” “all money consists in symbolic tokens of abstract value that signify, and are constituted by, their own social relations of credit-debt;” “the value of the credit that we know as ‘money’ is given by the existence of actual or prospective debts awaiting settlement.”

The strange thing, again, is that this is to us at the same time totally incomprehensible as it is obvious.

When we exchange stuff for money at, say, ebay, we have no contact with valuable commodities we swap. We change numbers in two accounts (data sheets) in banks. It also doesn’t even make sense to say we transfer money because nothing is transferred but an electronic impulse. The debt here is incurred the moment the auction ends and you had made the highest bid, or you simply pressed “purchase.” The same happens in the store in the very moment the cashier in front of you presses “enter” or “sum” and says to you “$14,99, please.” Money has prospective value for future purchases because it is believed to cancel such debt priced at $14,99 in the future.

You clear the debt by handing over token-money (whatever medium of exchange) which represents another debt within the hierarchical monetary system. If you hand over cash, this is a (strange) debt by the state which these days merely promises to give you another bill or coin, and to accept money in clearing another debt, namely taxes and fees. If you use your bank account, you pay with something the bank owns but owes you, namely the number in your bank account.

However, as in the story above about person D and person C, the debt needs to be in the conventionally accepted unit of account, for instance 1 dollar, which is also called the “money of account.” According to credit theory, the unit of account function of money precedes all the others. It primarily constitues the so-called “moneyness” of money:

“Money-of-Account, namely that in which Debts and Prices and General Purchasing Power are expressed, is the primary concept of a Theory of Money,” wrote John Maynard Keynes right at the beginning of his treatise.

The money of account is nothing but a measure used in accounting (and pricing), and nothing tangible. A classic quote by Mitchell Innes reads:

“The eye has never seen, nor the hand touched a dollar. All that we can touch or see is a promise to pay or satisfy a debt due for an amount called a dollar (which is) intangible, immaterial, abstract”.

In this sense (which can be traced back until 1690), money is on a par with centimeters measuring length or degrees Calvin measuring temperature, and merely an accounting tool. While for a centimeter I always get the same length, for a dollar I don’t always get the same amount of stuff.

This invites the question: What, if anything, is it that money ‘measures’? In this view, money measures debt, which is a relation between persons (not between commodities these persons exchange). Of course, we shouldn’t let language fool us: people measure or assess, not money itself.

In principle, this unit of account can be anything. We could send over rose blossoms to clear debt, if they would be generally accepted. The questions, then, are why some arbitrary standard is chosen and how it gets accepted as an ‘institutional’ (systemic) fact people built their mutual expectations on, for instance in making investments in the production of goods.

Money’s Leviathan

When society is modelled according to the barter myth, one trouble is that it is hard – some claim impossible – to imagine that all the barterers agree on a unit of account which is independent of any single swapping but provides the measure used and presupposed in all swaps.

What comes to mind that might have the authority, the potential for violent enforcements of a standard and debt payments, which also induces the general expectation (“trust”) into the permanence of the standard and creditor-debtor relations assessed in that standard? Of course, the state, even more so in the 19th century when state theories of money were invented.

The narrative is as simple and stylized as the barter myth: At first, it is claimed, the state imposes taxes on its citizens in a unit of account with an arbitrary name. This creates a demand for the currency the moment people have to fear to end up in prison or dead if they don’t pay the taxes. To pay the taxes, they need tokens which bear the unit of account, i.e. money. Given that this – a dollar – is strictly speaking a nothing, they need something that the authority claims to be equivalent to that nothing. This could initially happen by declaring that “1 dollar = 3 coffees” (the ancient way) or to arbitrarily set a gold standard (the modern way) by declaring that “1 dollar = X gold.” However and in any case, the state helps its citizen-debtors out by issuing the currency via tokens. It does it not by throwing it from helicopters, but by buying human lifetime in the form of services and goods from its citizens in exchange for currency.

Historically, the first time this happened might have been on the occasion of provisioning large armies with food and stuff. If you give soldiers money tokens, and show people weapons you will use if they don’t give you money in paying taxes, those people will be quickly convinced to sell stuff to those soldiers for money they otherwise cannot get a hand at.

Of course, in this theory or narrative the ‘intrinsic value’ of money-tokens does not and did never really matter. If the creditor, here the state, keeps a book of its credits, and uses whatever symbol that designates a unit behind each number it writes down, then for each debtor it does not matter how she cancels the debt – which thing with or without ‘value’ is however delivered or used to deliver the abstract unit – but that the creditor changes the entry in its bookkeeping by accepting it.

Finally, not only the state and citizens get into monetary relations using the unit of account or currency, but also citizens measure their debts among each other in, say, dollars. One reason for this could be that the state promises to always accept tokens in its unit of account to clear tax-debts. For state theorists of money, cash is a credit to pay taxes, which are a debt owed to the state.

Note that also such accounts are general stories, not historical accounts representing facts. They find their plausibility in chosen examples and their implausibility in counter-examples (which is stressed, for instance, by some Marxists).

By some (unique) historical process that is usually not historically dealt with, namely the establishment of a system of ‚independent‘ producers dependent on market exchanges and the emergence of the modern state at the same time, all things (including humans) which are traded in the public and private sectors acquire prices (and values) in the unit of account. (On the horrors of the ‚monetization‘ of economies by colonial regimes, see Jason Hickel.)

Money becomes what ‘it’ had never been, namely the very reason for production and the primary social means of production (capital), central in planning short and long-term, and is somehow involved in next to all human actions. Things (and ‘services’) are then not produced because they are needed by someone; they are produced because they are expected to yield not only money but monetary profits.

Among the traditional functions of money is in part missing that, in capitalism, money (and value) is also abstract or pure investment in the waiting. It is the ‘it’ which is nothing, a pure number, but can become anything. Goods are exchanged for money (value) and by money (medium). Things are produced in expectation of more money (for profit) because things, people, actions and future social states are also measured in money.

For short: Money does not only measure debt but the world.

If money would not represent the value of stuff people would have no reason to enter into those social relations. The latter are only a means to acquire the former.

Philosophers would insist at this point that a debt relation has not two elements (debtor and creditor) but at least three, if not four:

A debtor D owes a creditor C an amount of money M.

If we write it down this way, we exclude the rest of the material universe from the relation, which is relevant everywhere the relation is not purely monetary or, if you wish, financial, namely outside of banking:

A debtor D owes a creditor C the amount of money M for thing X (where x could also be labour).

Finally, in the normal worldview of the individualized person confronting the social world of commodities and a universalized market, those relations disappear in something like this:

Things have value, measured in money, and I need and want things. Period.

Things acquire value – or, if you wish, ‘exchange value’ – because they are measured in money by collective habit the moment they become commodities. Credit theories often seem to underestimate this by situating the value of money only in debts or taxes of the state, which makes a world historical difference.

There is no boundary of increasing numerical values in accounts (of central banks, private banks, or private households), and there is also no boundary in measuring credit and debt with numbers that are money. But when material things are produced because they are believed to have a monetary value, the boundary is the destruction of the biosphere.

In the end, money (pseudo-)measures the stuff the debts are finally about. Take our national accounts: GDP does not only measure monetary income and monetary spending, but also material production, i.e. the use and abuse of energy.

Money: fiction or real?

The dual character of money is that it is, in a sense, at the same time a fiction and perfectly real. This constitutes its mystery from a philosophical standpoint.

Neither ‘it’ nor the social relations it represents, nor the things it measures, have intrinsic value. Put differently: nature does feature neither such value nor the money that measures it. If people who have been socialized in a specific culture would disappear, so would money and the (exchange) value of things. As it is commonly said: ‘it’ is a social construct.

Modern Monetary Theory (MMT) uses the somewhat funny analogy between money and points on a scoreboard which represent the state of a game of, say, soccer/football. If you ask where those points are and what their intrinsic value is, the first answer is obviously that they are nowhere and that they have no such value. What is the value of a 1:0?

But obviously, for the people composing a monetary system, money is so real that everybody needs it or (s)he may starve. It is even the primary societal reality in modern society. Within the realm of play it is exactly the same, though not as dramatic. Those who don’t play football don’t care about the rules of accounting for goals. But for those who play the game the ‘value’ of a 1:0 is the lead in a game, which is a phenomenon in the brains of all participants.

We are so used to the fetishism of the (exchange-)value of things and money’s intrinsic value that it is hard to grasp that money is (or is “constituted by”) a permanently reproduced set of social relations which is real only in the brains of people and the hard drives of computers used in banks.

What we get in modern times as the end-result of complex historical processes (for the first time) is a hierarchical monetary system of creditor-debtor relations: the state-banking-capital-labour-nexus.

This makes it even stranger.

What is the monetary system?

If you believe in money’s inherent value, you will ask who mines it and where. If you believe in it being without such value, the question is who ‘creates’ it by entering into monetary relations from a privileged perspective, and who accepts or strives for such relations for which reasons from a not so privileged perspective.

To reconstruct the monetary system in its bare bones, nothing more needs to be done than to name who or what is in a relation of credit and debt. (In the terms of systemist philosophy, you sketch a CESM-model of its composition, environment, structure, and mechanism.)

The components of the national monetary system are primarily the state’s treasury (or ministry of finance), its central bank and private banks. If you want to make the model international, you can add monetary relations between international components, also social entities such as the IMF. For instance, private banks are related to many central banks in different nations. In the end, all those persons who have a bank account (62% of the world’s human population according to Oxfam) or merely use a currency in cash are part of that system.

The types of relations are as follows:

  • Treasury/ministry of finance – central bank
  • Central bank – private bank
  • Private bank– private bank
  • Private bank – individual or social system/legal entity.

Cash and reserves are created by the central bank. So-called “reserves” are nothing else than a type of digital money which the central bank lends to private banks, which use them only in monetary relations among each other and with the central bank:

Central bank reserves never leave the banking system to enter the real economy.”

For short, this is a type of money normal people have nothing to do with, and these are creditor-debtor relations among social systems (‘institutions’): a central bank lends something to another bank.

Private banks have reserve accounts at the central bank, similar to the accounts private persons have at public banks. They also can exchange reserves for cash at the central bank. One promise of the central bank is to always exchange reserves for cash, which the public receives through private banks only, but, of course, only if private actors want it and draw on existing bank deposits.

The lending of private banks to the public is not constrained by their monetary relations with the central bank. That also means that banks don’t lend out central bank money (reserves). However, private lending is obviously denominated in the state’s unit of account. Thus, private banks are said to ‘shadow’ the state’s currency without issuing it officially. This is their privilege granted by the state.

Follow the link to the source.

How is money created? States

Given the importance of money in our societies, one interesting question – to some probably the most interesting – is how money enters and leaves the world. Every kid knows that creating money normally leads into prison. It is called “counterfeiting.” And as long as extra-terrestrial species don’t create earthly money (or engage in some monetary exchanges), the system of monetary relations is closed.

Since the financial crisis we know that money is created the way god may have created the earth, i.e. certainly not by arduous work.

Ann Pettifor described a famous TV-moment under the heading “Bernanke breaks a taboo.” What had the chief of the US central bank done in 2009? He said what in fact every grown up kid knows, but which still seems to be hidden by a creation myth.

The federal reserve, which was founded in 1913, thought it would need to save the global financial system by saving an insurance company. That required overnight $85 billion dollars. Bernake gave a TV-interview in which the journalist asked whether that money would have been taxpayers’ money.

Perhaps he had Maggie Thatcher in mind telling us that the state has no money of its own and feared that a scarce good, mined by taxpayers in hard work, could be wasted by finding the wrong pocket. If you believe that money has an intrinsic value it is even more interesting or even worrying when the government ‘transfers’ it.

Here, Bernanke revealed that God is dead or, if you wish, quite alive:

Had the $85 billion been tax money? ‘No’, said Bernanke firmly. ‘It’s not tax money. The banks have accounts at the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.”

For short: money is created by writing numbers into a table in a computer. Those numbers then can be used to buy all the wealth in the world.

Already in November 2009, the total amount of money created out of thin air to bail out the finance sector was estimated to amount to $14 trillion or 25 per cent of the world’s GDP. Since then, the ‘press’ never stopped until it took up pace again within the current pandemic.

Central banks have the functions of being the state’s banks, producing ‘stable’ money, and lending money to the system of private banks. If ‘the state’ or federal ‘government’ buys stuff, it pays with its account at the central bank, which is a formally independent institution. This nowaday happens without coins or bills:

Instead of minting and issuing coins, the treasury/ministry of finance advises the central bank to credit the central bank account of the specific payee’s bank. The private bank then in turn credits the demand account of the payee. That’s all.

Follow the link to the source.

This happens with a computer keyboard. While central banks also act on their own to fulfil the aims they have been institutionalized for, they are the government’s own bank and then act as its serfs.

For short, states that are in this way monetary sovereigns have their own money. Who else would? And how could anyone think something else? In principle, they have infinite amounts of money in the money of account they themselves issue, which reduces in the end to data entries.

This is similar to the way a modern stadium can never run out of points for its scoreboard, which is also embedded in a hiearchy of clubs, leagues, national and international organisations (e.g. FIFA). The difference is that in sports the overarching association does neither issue the points that are scored by teams nor does it tax points that represent goals, and goals are neither sold by the clubs nor do they constitute credit or debt, although strictly speaking they are also constitutive of social relations (namely leading or being down in a game).

The state’s budget

Modern Monetary Theory accordingly makes for quite some time the (somewhat obvious?) point that states which issue their own money are no households. They don’t need to earn a monetary income to engage in monetary spending. Therefore, they don’t have to follow the norms of the “Swabian housewife” chancellor Angela Merkel talked about and to balance their monetary budget, as private businesses, housholds, and subordinate levels of government have to. As long as people accept the money created, money – entries in accounts – is never the problem. 

It appears and is more complex even for experts because of self-imposed rules which demand that governments sell bonds (“borrow”) to private banks when their account at their central bank reads zero or negative. Private banks then buy those bonds with central bank money (reserves) in order to earn interest on the bonds. This fills up the treasury’s account at the central bank although the central bank could in principle do the same without the ballyhoo.

As stated above, when a treasury then buys something with its account at the central bank, the central bank ‘transfers’ reserves to an account of a private bank, which creates within its own accounts an identical deposit, and then pays the party the government ordered from.

At times we also read that a government deficit on its own creates the reserves the private banks then use to buy the bonds. The arcane game can be that central banks are not allowed to directly buy treasury bonds (as they have done in GB within the pandemic), so they buy bonds for higher prices from private banks, so that private banks then again buy new government bonds. All of this are just accounting activities, no gold is carried anywhere.

This is taken from a slide in a presentation by Steve Keen that you find here or in full below.

That all of this is just some form of theater we should realize if we simplify the issue by risking an analogy: if you create a deficit (overdraft) in your bank account, there are two things to notice. Firstly, your money painted in red is as good as your money painted in black. You just buy stuff with it. Secondly, your negative entry produces an identical positive entry somewhere else.

If the government overdraws its account at the central bank, the same is the case. Entries in the accounts of the banking sector simply go up. The red ink on the side of government in effect is the black ink in the private sector. The difference to your overdraft is that you have to pay interest to a bank you don’t own and the bank will send you representatives of the legal system if you don’t pay back the loan, whereas the government could simply ignore its overdraft: no one will ever send the police or military to the minister of finance to enforce him or her to pay something back, because it has created what it spends.

One structural issue of the neoliberal European Union is that governments within the monetary union have deprived themselves of this power; they are not monetarily sovereign but on a par with states/provincial governments that are subordinate to federal government, or even normal citizens. (It’s even worse.) However, these are also only self-imposed rules which have a political and ideological motivation.

All of this has its roots in the early modern emergence-period of capitalism and the settlement between the king’s treasury and private money holders. In this tradition, it is the central bank that lends money to the king (or government), who thus becomes the (eternal) debtor of the central bank, which then ‘monetizes’ the kings debt by issuing the governments promise to pay as new money. This is the analogy to our story above featuring the persons C (central bank), D (king) and Z (private persons).

Yes, when it sounds silly and irrational we start to smell the stale odor of past power-conflicts or the fresh wind of contemporary power relations. David Graeber wrote about all of this: “In part, these systems work because no one knows how they really work.“

The result of this strange hierarchy of money in our monetary system is something like this:

Insofar as our money is ultimately an extension of the public debt, then whenever we buy a newspaper or a cup of coffee, or even place a bet on a horse, we are trading in promises, representations of something that the government will give us at some time in the future, even if we don’t know exactly what it is.”

We don’t know it because the promise is money which is, in the end, nothing. This is why the story that the ‘function’ of money is to be a store of value is not in any sense trivial and self-explanatory.

How is money created? Banks

A common believe certainly is that most money is created by the “printing presses” of the state. If you believe in state theories of money you may also tend to find this idea plausible. However, according to the bank of England, 97 per cent of the money supply in the modern economy is created by private banks in electronic form, as bank deposits or, as they are also called, demand deposits. Only 3 per cent are coins and banknotes.

Accordingly, the easiest way to answer our question is to be found in an accounting perspective: What the fcuk is money? Money is the totality of the liabilities (debts) of the banking sector to the public, plus cash.

Private banks create money and – if money is a story of value – value in the same way central banks create money: by pressing numbers on a computer keyboard in filling out a data sheet and then “enter.”

Accordingly, there are three basic types of money:

(1) cash,

(2) reserves (both together are called “base money”), and

(3) bank accounts (“broad money”).

Computer money is created by central banks as well as private banks, but only the state mints cash.

Interestingly, in two papers from 2014 the Bank of England confirmed that the descriptions of the process in orthodox economics textbooks are false, which are similar to our myth above, and those of heterodox economists correct. Money is created by making loans to customers which fit the bank’s criteria and demand them, i.e. credit is rationed from the side of banks and its expectations, but also demanded according to private interests and respective expectations into the future of society.

In this process, deposits are newly created with the help of the computer keyboard. Contrary to common sense, the money socks of customers in deposits, which are the legal property of banks, are not or need not be touched, and no banker asks the central bank for permission.

Banks do not need to wait for a customer to deposit money before they can make a new loan to someone else. In fact, it is exactly the opposite: the making of a loan creates a new deposit in the borrower’s account.”

Banks do not wait for deposits in order to make loans. Bank deposits are created by banks purely on the basis of their own confidence in the capacity of the borrower to repay the loan.

This contradicts the usual theory that deposits (or money socks stored in banks) make loans, which, e.g., was also held by the former German minister of finance, Wolfgang Schäuble.

Photo by Pixabay on Pexels.com

The ideologically and at the same time politically important point to notice lies in one of the above ‘miracles,’ namely that people’s savings are not needed to finance investments into real-world material production. As we saw above, the same is true of (federal) government. It can, in principle, spend without taxing, if it issues its own currency.

Neither the poor nor the rich who save money privately in banks, nor taxpayers finance private or public investment or are necessary to do this in a once established monetary system of the modern kind. Of course, usually the rich claim to do both and lodge claims to political influence on this. We shall all be gratefull that we have them because otherwise we, allegedly, couldn’t do anything.

Again, in this process of money creation we find creditor-debtor relations. The borrower on his side makes the legally enforceable promise (IOU or debt) to pay back the loan of the bank in the future in order to get a deposit (an asset) in the present, whereas the customer’s promise becomes an asset of the bank. The bank has the legally enforceable liability to pay out the amount in the created deposit.

The very moment the customer draws on the loan in the deposit fresh purchasing power (or ‚value‚) enters the social world, independent of the central bank or any savings. The financial asset of the borrower becomes liquid. Normally it is directly used to buy some good or service, which leads to other bank accounts being credited, either electronically or by handing cash over the counter.

Curiously, when a loan is paid back, something happens that would put the life of those who would do it with cash and publicly at risks: money is destroyed.

This sounds impossible if you believe that existing cash only changes pockets. If you don’t believe it, listen to Steve Keen: “money is created by lending and destroyed by repayment”, because data entries are wiped out. The same is true of taxation, which destroys money that has been created by government spending: Government spending creates new money, taxation destroys existing money.

If two bank accounts in different banks are involved in a transaction, these banks can use their accounts at the central bank to make the payments with reserves (see the figure above). Note the obvious: they also don’t ‘transfer’ any intrinsically valuable items. The reserves are only entries in a database looking like this: 

This is the account of the two banks at the Bank of England in pounds, but they will have the same type of account at other central banks with their national reserves in a different unit of account, which are used to make international payments (in the way depicted below).

Because this private money-creation process of 97% of all the money ends up in investment, production and consumption, it is clear that banks play a central role in determining what happens and what does not happen in the economy/society, i.e. what people overall do. They determine the amount of money in the economy (or aggregate demand) because their loans create deposits out of thin air.

Although it sounds absurd according to common sense: borrowing creates money. (Common sense is also irritated over the analogical thing happening on the government side, which is hidden by the vocabulary of borrowing: spending creates money.)

Follow the link to the source.

The sovereignty of bankers

Given the amount of bank deposits, private bankers are unelected little sovereigns, only constrained by the rules that they are legally bound to follow. Though unelected, they distribute power by distributing money to those who speak their language and promise profits, whether socially useful or not, whether ecologically sustainable or not.

They distribute power by distributing money because everybody in modern society needs money. That is the truth of our myth above, although it hides that this is a relatively new phenomenon. Put in different terms: within a monetary economy, when a person wants to buy a person’s labour with money which originated in a loan, (s)he can only do this as long as there are people who are permanently in need of money.

However, we should not rush too quickly to blame anything on some group and tell a simple story of robbery and redistribution. In a hegemonic monetary system, everyone who buys anything uses the power of permanent artificial scarcity to make people do things for them they otherwise would – ceteris paribus – not do. Think of the last time you used a delivery service within one of the lockdowns – or whatever.

The moral is simple and takes the form of a question: if money is never scarce – as any child knows – why exactly is it made scarce? (Forget about inflation here.) If it is only made scarce, are ‚goods‘ necessarily scarce? Of course, the popular academic myth in the first case is that money is scarce. That is basically what the whole political game is about. We should also not believe the same story in the latter case in relation to at least much stuff of the ordinary kind. It is for a part only made scarce (or, historically put, “enclosed”) – because every one individual needs money, a nothing, to get a hand at it, and shall need money.

Eske Bockelmann writes revealingly that a German organisation claims it would collect “bread for the world,” but what it collects is, of course, simply money. Bread is already there (or easily produced). Only money is missing to provide access without fear of prison. Of course, the myth of the scarcity of money is a pretty effective way to cover up all sorts of moral crimes: sorry, there was no money.

That this is also structurally the same in the First World or Global North every fool has learned recently in the pandemic when many suddenly lost access to money although the necessary stuff was available as before. In this world, within every crisis, everybody has to pray to the Gods and the economists that ‘the economy’ ‘recovers’ or is ‘rebuilt’ quickly, that economic growth returns, so that everybody has access to money again to survive, may it cost the biosphere.

Is money freedom or serfdom?

This reveals another pair of contradictory features of ‘it’ which are also emphasized by different political groups. On the one hand, money is what enslaves (or ‚enserfes‘) by forcing those people into monetary social relations who don’t have it or don’t have enough of it. On the other hand, those who have money or enough money also have the freedom to buy those who need money. And, overall, because in normality everybody needs money, we all tend to believe that money makes anybody equal and merely helps exchange things of equal value.

People of the more conservative or ‘liberal’ creed consequently emphasize that money would be in essence trust (a relation of trust), while the critical camp could at least emphasize that money is primarily power (a power relation).

The end of money: reform or revolution?

Because money and the monetary system appear to be natural to common sense, the political establishment and many social scientists, there does not seem to be much debate about changing it, even after the crisis of 2008. („Even for most Marxists, money is like water to fish.“) Isn’t that astonishing?

To emphasize the strangeness of this we could express the fact that this system is based on human-made rules, which are ultimately centred in government, by calling the framework of rules the “monetary constitution” (“Geldverfassung”) of the monetary system (which is a subsystem of the economy, which is a subsystem of society), as it is at times done. It is a part of the overall political constitution, and arguably by far more relevant to the lives of people (and the biosphere) than the rest.

However, as always, there are preservers, reformers, and revolutionaries.

The preservers want democratic capitalism to stay the way it is, that means with the same amount of enclosure of money and stuff to upkeep existing relations of power for those ‘entrepreneurs’ and rentiers at the top (especially the 1%), while politics is in effect bought by those with money.

They will always say that money is scarce and do anything to convince the public of their myth. Of course, they defend the welfare state as one way to prohibit easy access to money, to terrorise receivers to ‘earn a living,’ which is marketed as the duty to fulfil a natural law, not as a violent threat. They will keep on repeating the liberal-conservative metaphysics that money has an inherent tendency to create a dynamic society with social mobility, in contrast to traditional hierarchies: money is freedom.

Within all of this, they will ignore the subject. Silence is one of the manifestations of ideology:

Significantly, a standard textbook on the history of economics that has shaped the minds of generations of economists does not devote a single word to reflecting on the phenomenon of money itself, without which economics as discipline would not exist.“

‘Progressive’ reformers of state finance and/or private banking from different angles will try to spread the news that money is never the problem, that the problem is real (material) resources, their production and distribution.

If well managed, there need never be a shortage of money for society’s most urgent projects.”

Reformers then want to manage (or plan) the monetary system in a different way, but keep it structurally more or less as it is, which extends to the way societal production is organized, including much of its relations of power. It shall have monetary profits as its aim, financed by interest bearing loans. But they want to channel it to achieve some preferred ends, projects or missions which would have to find consent in the process of representative democratic capitalism. When money is not in principle scarce but people keep on accepting ‘it,’ then ‘it’ theoretically can be used to achieve ‘the common good,’ a ‘balanced’ economy or a green transformation. It is a ’social technology‘ that can be used to achieve preferred ends.

To be able to do that and manage the system, money still needs to be made artificially scarce to such a degree that people are ‘nudged’ (or forced) by the rules of the game to do what they are supposed to do because they want ‘it’ (also if they don’t want it). The philosophical sound surrounding such projects may be the human right to work and employment (in order to earn ‘it’), which are identified with freedom, and, still, the real value of stuff that needs to be measured by money and produced beforehand.

This might be achieved by imposing rules regulating what bankers are allowed to create money for (say, green production instead of speculation) or by letting the state decide under which conditions its subjects get access to money-out-of-thin-air. Some may want to abolish private banking altogether or to create additional (local) banks to finance projects, which are constrained by the rule only to lend out funds received by central banks, i.e. without autonomous money creation.

Other reformers may prefer the provisioning of basic state services or a job guarantee by the state, so that the creator of money of the last resort also becomes the employer of last resort. This would make the access to money different and in a sense easier, namely by being guaranteed to those who play by the rules of those who make the rules. Thus, the anarchy of the market and private money creation (“endogenous”) is preserved while the planned economy and state money (“exogenous”) is liberated from self-imposed austerity.

In contrast, a basic income true to its name, as one element of democratizing money, would not be favoured by more conservative reformers because it has more of a risk to it. One proposal is to creat an additional currency that can only be spent locally and to distribute it as basic income.

By abolishing the scarcity of money at least in relation to ‘basic needs’ it might make it harder to nudge, compel or convince people to do what they shall do. The potential trouble is that, if money is not scarce any longer, there are less reasons to offer anything on ‘the market’, including lifetime, just for money. In the end, the magic of money may implode, conservative reformers fear, implicitly admitting that this magic is not so much grounded in trust but invisible power.

Monetary revolutionaries even campaign for the seemingly impossible: the abolishment of money. Of course, they would be regarded as cranks by almost anyone if they were known. Within thought-experiments at least, there is nothing impossible about it.

Imagine that within the lockdowns people would have realized that roundabout 75% of the ‘jobs’ in economies up ‘North’ are superfluous for survival and even ‘the good life.’ They exist just for the reason that people need money. In a historic moment of emancipation, as soon as the virus allowed it, people got together and decided to no longer be fooled by academics, politicians and the media. So, they quickly abolished all the shit.

For a start they parked most of their cars they only needed to get to work on highways, which lost much of their function, too. For a transmission period, people agreed that those occupying ‘essential jobs’ would keep on as before, so that the others could do some rethinking and organizing, especially international relations. But instantly people started to share the burden and reduce what was to be done by everyone, also by training everyone in what was needed.

They noticed that money as a rationing tool as well as societal organisation by monetary coercion were superfluous. Nobody could understand any longer that people once used to carry their social relatedness in their pockets.

It was also quickly noticed that nobody had an interest in stealing stuff any longer because it had quickly lost the value that it by nature never had. People furthermore noticed that for the maintenance of trust in the social provisioning of stuff the fiction of (monetary) value became unnecessary as soon as people entered into different types of relationships. People noticed that stuff was still in the supermarkets even when nobody demanded money any longer, so that it was not exchanged by and for money but simply taken if needed.

Nobody noticed that with the capitalist class private property of the means of production had disappeared because their only qualification had been their access to finance capital.

Of course, it would not be that simple, but probably not that much more complicated either. People would have to re-learn how to be socially related. Still, there would be promises, debts because of accounts, and in some spheres of life tokens as means of payment and exchange would probably be developed. The question, then, would again be whether that would already be money. If it is true that money has no ‘essence’ or ‘nature,’ then it can be anything as long as ‘it’ is used to organize social relations of some general sort (e.g. carbon credits).

Only a hundred years ago, credit theorists were regarded as cranks, whereas heterodox Marxians who claimed that intrinsic value is a fiction (and thus rejected the labour theory of value) were frowned upon only 20 years ago. Meanwhile, the opposite is about to be viewed as cranky.

So, there are alternatives, although they are not present in our imagination.

(c) Daniel Plenge

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