Money: The Unauthorised Biography

by Felix Martin

What is money, and how does it work?

The conventional answer is that people once used sugar in the West Indies, tobacco in Virginia, and dried cod in Newfoundland, and that today's financial universe evolved from barter.

Unfortunately, there is a problem with this story. It's wrong. And not just wrong, but dangerous.

Money: the Unauthorised Biography unfolds a panoramic secret history and explains the truth about money: what it is, where it comes from, and how it works.

Drawing on stories from throughout human history and around the globe, Money will radically rearrange your understanding of the world and shows how money can once again become the most powerful force for freedom we have ever known.

Genres: Economics, History, Nonfiction, Finance, Money, Business, Politics

336 pages, Hardcover

First published June 6, 2013

About the author

Felix Martin was educated in Britain, Italy and the United States and holds degrees in classics, international relations, and economics, including a doctorate in economics from Oxford University. He worked for the World Bank and for the European Stability Initiative think tank and is currently a partner in the fixed-income division at Liontrust Asset Management PLC. He lives in London.

Reviews

[Paul Fulcher · Rating 3 out of 5]

Something of a mixed bag overall - in part because there are two books in one, a reasonably interest history of money and a rather simplistic polemic with his views on reform of the money system post the financial crisis. But overall, worth reading.

The best part is where Martin provides a highly readable account of the history of money from the earliest days, including the evolving philosophy of how people thought about money. Although given how recently it is written it was a shame to see no commentary on the new cyber-currencies such as Bitcoin - although he has since blogged on his views http://prod.wired.com/2014/03/bitcoin...

He successfully refutes some well-trenched myths - for example he asserts, based on anthropological evidence, that money didn't evolve out of a barter system as is commonly thought, and he makes the point that the key to money is the decentralised transfer, with an agreed recording system, of an universally accepted measure of value.

He also emphasis the importance of transferable credit as part of money supply and the key role of banks - albeit the Bank of England have recently written more cohrently about this
http://www.bankofengland.co.uk/public...

It is crucial to his theories that the choice of the economic value of money should be political not physical (he is no fan of the gold standard). But it is at this point that the history stops and the polemic starts - for example he regards central bank independence as misleading at best and dangerous at worst, and would clearly like to see government's instructing central banks to inflate away the current debt build-up.

And he ends up with the old chestnut of "narrow banking" (aka the Chicago plan) presented as if it is the magic solution to 4000 years of monetary crises.

I also found the style of the book a little grating after a while - there is too much meta-commentary including a rather annoying invented conversation with a friend (he is clearly a believer in tell them what you're going to tell them, tell 'em, and tell them you've told them).

[Mehrsa · Rating 5 out of 5]

This is the best--most clear and persuasive--history of money and economics I have ever read. And I read a lot about money and economics. There isn't a single sector or era or philosophy that he doesn't touch. My only complaint is that I didn't find this book sooner.

[Ali · Rating 4 out of 5]

Martin is right on the money :) until he isn’t…Challenging the origins of money from the long held barter theory, he offers a very readable, entertaining history of the money. He mocks Locke a little, even Smith a bit, because they thought money was a thing, commodity. He gives credit to Keynes on the price of peace and his money equation but eventually carries the government intervention to a degree suggesting sovereign states should control central banks and money standards ( not going back to the good old gold standard). Martin also argue pushing for high inflation which could help ease the debt but ignores many more would hurt so wouldn’t achieve the just society that he is shooting for. He skips some of the historical hyperinflation cases though he covers Argentine in a chapter.
Reviewing the 2008 financial crisis Martin proposes narrow banking but adding more regulation or restrictions would shift the risk to nonbank lenders which is what happened with mortgages. Last chapter is great recap of all these arguments in friendly conversation. Overall a very engaging, informative and thought provoking read, at the same time good showcase of good intentions with many unintended consequences.

[Alex Givant · Rating 5 out of 5]

Excellent book about money and all stuff around it.

[Michael Austin · Rating 5 out of 5]

Anyone who takes even a few minutes to think about it can figure out how money evolved: it began in primitive barter societies where people exchanged what they had for what they needed. But this was too limiting, as I might not always have the thing that you need. So, gradually, people began to use other things--cowrie shells, salt, silver, or gold--as a sort of proxy that allowed for an organized, large-scale barter system.

Gradually, we became comfortable with this medium of exchange, so we continued to make it more abstract. Gold became bank notes backed by gold, which became checks, which became credit cards, which eventually became a system of computerized credits and debits many levels removed from the basic barter economy that they represent. But at the core of money there still lies an exchange of valuable goods and services between people, facilitated by a monetary apparatus.

This history of money is intuitive, well-documented, frequently taught, and, according to Martin, completely wrong. And he makes a very strong case that we should stop thinking about money that way.

The problem with the standard narrative is that it treats money as a unit of value rather than as a technology for social exchange. If money has some kind of inherent value--even an inherent value that has been abstracted many times since the days of exchanging chickens for strawberries--then the essential problem of monetary policy is how to create an environment in which the "true value" of money can be expressed. But if money is essentially a facilitator of social exchange, then the essential problem of monetary policy is deciding what kind of society we want to b

This all goes back to the early barter economies, where the standard narrative of money affixes its inherent value. As it turns out, there never actually were barter economies. People have always traded this for that, of course, but we have no evidence that such exchanges were ever the basis of an economic or social system. This is just the economist’s version of the mythical “state of nature” where everybody interacted without any kind of social organization.

But there has never been an original state of nature either. We can go all the way back to chimps and bonobos, and there is always a social organization. And the social organization is always based on promises, obligations, and reciprocal duties. And it is these that are, in Martin's revisionist narrative, the real origin of money.

In pre-monetary societies (which was pretty much every society before the Greek and Ionian city states starting around the 6th century BCE) obligations and promises were structured differently, but they still existed, and people kept track of them (indeed, some anthropologists believe that keeping track of such things drove much of our cognitive evolution--see Robin Dunbar's Grooming, Gossip, and the Evolution of Language). These obligations and responsibilities often took the form of religious sacrifices (which had the effect of redistributing foodstuffs through the cultic center), marital settlements, and reciprocal duties in hierarchical relationships.

When obligations and reciprocal responsibilities become “debts,” and are accounted for in a systematic way, they can be monetized and exchanged. Money is a way to organize social responsibilities in a large society by converting those responsibilities into units that can be tracked and exchanged. For money to exist, then, there must be three things present in a society:

1) The idea of a “universally accepted unit of value,” which means that anything that someone promises to do for, or give to someone else can be assigned a value of X number of units;
2) The ability to keep track of who owes what to who; and
3) The ability to transfer obligations with the confidence that the promises embedded in them will be always be honored.

Martin's history of money begins in about 600 BCE, when the highly developed accounting systems of the Fertile Crescent (Babylon and Persia) came into contact with the nascent Greek concept of universal value. This is why the first coins that we know about trace back to the Ionian kingdom of Lydia in about 590 BCE. Lydia (in Modern Turkey) was situated in between the Greek and Persian worlds, and the two most famous Lydians in history--Croesus and Midas--are probably also the two most famous cautionary tales in history about the dangers of a money economy.

What this means in practice is that the things we consider the most abstract about money are the things that have always been there. Money has always been a promise to pay something that could be recorded and transferred. This aspect of money existed before gold coins, or anything else, became the most common way to do the recording and the transferring. And these tokens have never been necessary to the essential function of money (which is why about 90% of the "money" in the United States, and 97% in the United Kingdom, exists as nothing more than computerized accounting entries). It is the promises, not the exchange tokens, that make money. And it is faith that the promises will be fulfilled, not a certain amount of gold, that gives money its value.

This need for confidence is probably the most important difference between Martin's narrative of money and the "standard version" that I began this review with. The standard version assumes that money has always represented some innate, natural value--either the value of the gold or silver it is composed of, or the value of the gold or silver that backs it, or the value of the goods or services that were once traded by barter. The new narrative rejects this origin of money and, by doing so, rejects nearly all of the assumptions of most modern monetary theories and policies. As Martin himself puts it, paraphrasing the 19th century economist Walter Bagehot:

If money is in essence transferable credit—rather than a commodity medium of exchange, as the academic economists insisted—then fundamentally different factors explain the economy’s demand for it. Meeting demand for commodities is a simple matter of ensuring a sufficient supply on the market. When it comes to transferable credit, however, volume alone is not enough: the creditworthiness of the issuer and the liquidity of the liability come into play. And both these factors are determined not technologically or physically but by the general levels of trust and confidence. (198)

These different ways of understanding money have profound consequences for governments and policymakers. As long as money has inherent value, then the job of policymakers is to simply create the conditions in which the actual value of money can be expressed. But if money is primarily an extension of personal obligations that we have to each other, backed by the confidence that these obligations can be exchanged and honored, then the job of economic policy is to create trust and confidence. These are fundamentally different ways of understanding, not just money, but the role of government.

What ultimately emerges from Martin's analysis is a sort of historical competition between these two very different ways to view money: money as a thing that represents value, and money as a technology that organizes social interactions. The differences are profound. Under the former view, for example, the cause of poverty is that people do not produce anything of value. Under the latter view, the main cause of poverty is that people don't have money.

In Martin's narrative, the two views dueled for about 300 years, with the second view always being articulated by somebody, but the first view winning out because it was more philosophically compatible with the values of the Enlightenment. Over time, though, the tendency of money economies to accumulate debt lead to the growth of a largely unregulated debt management industry that collapsed in 2008 and vaporized trillions of dollars, forcing governments to bail out financial industries that had emerged in the shadows of their monetary policy and thereby combining the worst aspects of both command and laissez faire economies by socializing risk while privatizing profits.

In effect, what happened in the events leading up to the crash of '08 was that the banking industry was treating money as negotiable obligation, while governments and regulators were treating it as something with inherent value. To put this another way, money was acting like the thing that it is, and governments were treating it like the thing it was supposed to be. The only way out of the trap, he suggests, is to flip the lens and acknowledge that money is a social and political construction that organizes social relationships and not a abstract reflection of something called "real value."

I found Martin’s arguments very compelling, and I was impressed by his handling of the sorts of texts not normally associated with economics: Homer and Aristophanes, Dickens and Shakespeare, Cicero and Caesar--they all give us hints about how money worked at certain times in history, and he is as comfortable with them as he is with Adam Smith and Karl Marx.

But where I found Money: The Unauthorized Biography the most compelling was in its author’s ability to balance a sterile (if essential) discussion of monetary policy with a deep understanding of the social relationships that make money, well, money. He helped me grasp, in a way that I never had, the fact that money is essentially a mechanism for social interaction between actual human beings and that many of the problems that we associate with it are actually problems with the way we interact with each other.

[Pete · Rating 3 out of 5]

Money : The Unauthorized biography (2013) by Felix Martin is a decent book that looks at the history of money and then goes on to make various recommendations of dubious merit.

The book starts with a contrived dialogue about what money is. Martin then goes on to describe how money is more than just a medium of exchange and the history of the use of money. When the book is looking at the historic side of money from Ancient Greece to the founding of the bank of England the book is really interesting.

The book goes on to suggest that a major cause of the GFC was a misunderstanding of money. The myriad of other possible causes are not mentioned. Martin goes on to state that central banks should be returned to political control. He ignores the reasons why independent central banks have been set up. He seems to be assuming that we have philosopher kings who will wisely set interest rates and manage money. The experience of massive inflation in many countries all around the world doesn't get much consideration and seriously undermines this idea.

The book concludes with another stilted dialogue where the author winds up the book. It's pretty silly and rarely, if ever works as a technique. The history section of the book is good, the sections that venture into the twentieth century are recommendations for today are weak. But the book does make you think about money and suggests further reading.

[Ints · Rating 4 out of 5]

Laiku pa laikam man uznāk vēlme izlasīt grāmatu, kura cenšas atbildēt uz vienu manas bērnības pamatjautājumu: “Cik maksā rublis?”. Teorijas par to ir daudz un dažādas, atbilde uz šo jautājumu nemaz nav tik vienkārša, un atkarībā no daudziem pieņēmumiem tā var variēt. Taču tādas grāmatas esmu lasījis jau daudz, un tādēļ lasīt vēl kādu par šo tēmu man paliek aizvien neinteresantāk. Taču grāmatas anotācijā bija viens apgalvojums, kas mani aizķēra.

Ja lasām par finanšu pasaules izcelsmes vēsturi, tad parasti tā tiek attēlota kā naturālā saimniecība, tad barters un tad mūsdienu finanšu sistēma. Taču antropoloģiskie pētījumi un vēsture liecina, ka nauda nav radusies kā bartera sistēmas evolūcijas produkts. Grāmatā autors mēģina rast patiesību par naudu, kur tā rodas un kā tā strādā.

Grāmata pēc būtības sastāv no divām daļām. Pirmā ir nudien labi uzrakstīta naudas vēsture. Par to, kā visprimitīvākajās sabiedrībās eksistē kredītu sistēma, kas ļauj katrā brīdī noteikti otras personas maksātspēju vērtību utt. Par naudas nozīmi un būtību cilvēki galvas ir lauzījuši no aizseniem laikiem. Debates par to, kā pareizi novērst kārtējo finanšu krīzi un kā regulēt naudas apjomu nomāca gan senos romiešus, gan Ķīnas impēriju. Vēlāk, sākoties apgaismības laikmetam, Lielbritānija un Francija izmēģināja dažādas metodes sava ārējā un iekšējā parāda pārstrukturēšanai. Padomju Savienība savos pirmsākumos bija nolēmuši iet spartiešu ceļu un atteikties no naudas vispār, taču Ļeņins pārdomāja. Salīdzinoši nesen pērnā gadsimta septiņdesmitajos gados Īrijā darbinieku streiku dēļ aizklapēja ciet bankas. Domājat ekonomika tādēļ apstājās? Nē, valsts pārgāja uz vekseļiem, jo nauda jau ir tikai kredītu kontu un to klīringa mehānisma kosmētiskais elements. Tā teikt, aisberga redzamā daļa un arī ne visa. Noteikti būtu interesanti kaut kur papildus palasīt, kā pērnvasar grieķi iztika bez skaidras naudas. Šī grāmatas daļa nudien ir interesanta un vietām pat pamācoša. Līdz galam gan nenoticēju, ka Francijas pirmā pāreja uz banknotēm bija labi domāta nevis spekulācija.

Grāmatas pārējā daļā autors aizraujas ar pārspriedumiem par monetārās politikas iespēju ietekmēt ekonomiku un kā izbēgt no monetārajām krīzēm. Te nu ir jābūt dikti uzmanīgam - viņa centrālais uzstādījums ir, ka naudas vērtību nosaka politiski nevis fiziski. Tas savukārt nozīmē centrālo banku politisko kontroli, kur, teiksim, parādus ļautu noēst inflācijai pēc vajadzības, ierobežot banku naudas apjomus un dažādas citādas idejas, kuras 4’000 gadu laikā ir izmantotas ne reizi vien un nekad nav kalpojušas kā zāles pret finanšu krīzēm. Tādēļ šo sadaļu vajadzētu lasīt domājot līdzi. Piekrist vai nepiekrist autora pamatuzstādījumiem un no tiem izrietošajiem scenārijiem, paliek katra paša ziņā.

8 no 10 ballēm, vēstures sadaļa nudien ir interesanti uzrakstīta un būs saprotama cilvēkiem, kas ikdienā nesaskaras ar finanšu sistēmas apslēpto pusi. Polemika par efektīvāko monetārās politikas scenāriju ir diezgan slidens jautājums un var iepriekš nesagatavotu cilvēku paraut sev līdzi, jo viņam vienkārši pietrūkst bāzes, lai kritiski izsvēru autora apgalvojumus.

[Muath Aziz · Rating 4 out of 5]

What is money? The classical view (Aristotle and Adam Smith etc) is that in ancient time economy was Natural/Barter system where you give cow milk to the baker in exchange for bread. Then humans found out that the system was not flexible so the rare robust gold was used. This was proven to be a common misunderstanding, there have never been a Barter Economy in human history!

There is a difference between money and currency: "money is the system of credit accounts and their clearing that currency represent". So basically, currency (like the dollar bill) is just tokens representing the money. In modern times, we don't even bother with these tokens: "around 90% of US money has no physical existence at all!".

Irish banks closed for a long period in 1970s due to workers strike. No one had cash, yet economy had grown! Why? Because they used cheques instead, remember that cash is just a token (same case with Yap island and its awesome big rocks currency). "Currency is ephemeral and cosmetic: it's the underlying mechanism of credit accounts and clearing that is the essence of money".

In Iliad and Odyssey, there was no mention of money. Ancient Greek consisted of small tribes where they shared everything (socialism) and exchanged gifts with other tribes, so there was no need for money. But Uruk of Mesopotamia (a big city, not a small tribe) and its clay tables taught us this: Not all writing systems started as Pictography, Mesopotamians used abstract writing, numbers and words (kinda). This led to them developing Literacy, Math, and Accounting. So for example, if I sell you 3 goats, a symbol representing the number 3 and a symbol representing a goat will be drawn in the clay table to record the transaction. But is the symbol representing the goat shows the goat phonologically or is it shaped like a goat? If the latter then it's Pictography. Actually, it was Cuneiform, a primitive alphabet system.

Why did Mesopotamia had some kind of money/exchange/accounting but Greece didn't? Mesopotamia had individuality, a person can work harder and have more stuff, Greece treated everyone equally. But, even though Mesopotamia had literacy, it didn't develop the concept of universal value among different commodities where tokens represent this value, so Mesopotamia didn't develop money. On the other hand, Greece did have the concept of universal value, but lacked literacy, so it too didn't develop money.

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We have standardized measurements (SI measurements), since they are physical concepts, but we can't standardize money (which is an economic value, a social concept).

At the same time Aristotle developed his idea of money being a flexible way for bartering, the ancient Chinese political and philosophical book Guanzi stated that "money's value was directly proportional to how much of it was in circulation compared to the quantity of goods available. This is a very advanced thought honestly! Guanzi suggests that the sovereign shall control the liquidity of currency, making more or less cash to circulate among society, in order to make prices go up (inflation) or down (deflation), whatever he sees fit for the economy. This has political consequences: to have sole power in minting money is to have sole power in controlling the economy.

Kings and governments did take advantage of controlling currency, where for example 10 cents copper coin cost only 1 cent to make, so 9 cents are earned by the king for each coin minted. Even to this day this practice, so called Seigniorage, earns US government 25 billion dollars annually.

Then around the middle ages, a kind of banking system was developing, crediting became so common. "any IOU has two fundamental characteristics: its creditworthiness (how likely it is that it will be paid when it comes due) and its liquidity (how likely it can be realized, either by sale to a third party or simply by coming due if no sale is sought)". Also, to make cross-Europe trade flexible, banks started issuing their private internal currency (ecu de marc) where a merchant from France can go to his local bank to take a loan (he had to be creditable person) in the form of this special currency, then reimburse it Italy and buy merchandise from there and go back to France, selling those merchandise and paying back his loan and keeping his profit. It would've been difficult to trade for the merchant if it weren't for these banks agreeing on their private shared currency where they would meet quarterly to balance their books. Virtually, (indirect) currency exchange was born. This meant that the sovereign no longer had full control over the economy since he no longer sole controller of currency.

At the end of seventeenth century, the king of England lacked money, national lottery was invented, along with government bonds and some kind of public banking. Also, English economy was suffering from high inflation which meant that silver coins had greater value if melted (which also means that seigniorage was a negative value). Locke argued in front of the parliament that coins lost their wight in silver, the solution was to remint coins to their proper weight. Many argued against Locke but his reputation made him win. This was an obviously naive backward understanding of money and made things worse.

In 1840s when Ireland had famine because of bad year harvest, English economists were against helping them, they deeply believed in Adam Smith ideas of "letting the economy adjust itself". They didn't think of the morality of their actions, they only saw numbers.

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Soviet Union tried to abolish money, since a utopian society didn't need it (Plato in his Republic agrees to some extent, but still believes money has to exist). This wasn't a very radical idea. While neighboring states like Athens had money, Sparta was against using money. Banks were nationalized and abolishing money was in action. Lenin on the other hand believed that moving to true socialism will take time (he even believed society had to go through Capitalism btw). And until they achieve world success, money, the greatest weapon of bourgeois class, need to exist, "when you live among wolves, you must howl like a wolf" Lenin said. There was a spectacular collapse in agriculture and industrial output. Completely revised monetary policy was unveiled, banks were back, and money was not to be abolished after all. Btw, I read once that Cuba after their revolution tried to get rid of their currency, it was catastrophic. Now Cuba has a very bad unfair system of two currencies.

Locke's ideas of "money is just silver" and Soviet Union ideas of abolishing money altogether were both wrong. A third solution would be fiat money. A young Scotsman named John Law had the opposite idea of Locke but no one home listened to him. He managed to apply his ideas in France where the french king had a hugh debt. To have large public corporation where debt translated into equity, a radical successful idea. And gold standard was abolished, Law argued that it didn't make sense if a prosperous nation had scarce gold and silver resources, so the solution is to put control of money quantity under the king and not under silver supplies. The corporation was overvalued and when the bubble burst, people blamed it on the fiat money, Law barely escaped his death and this solution was only implemented again after two and a half centuries (1973).

One of the issues Law system had, was that it is in the hands of the king to adjust the market. The market shall adjust itself, surprisingly like what 594 BC Greece did. Jews "shook off" debts every 50 years as Torah teaches. In ancient Mesopotamia, the god-king would from time to time abolish some or all debt.

John Locke, Adam Smith, and John Stuart Mill were all trying to fix the economy top-down, to adjust the economy to fit their abstract ideas. Walter Bagehot (born in 1826) didn't get formal economic education but he learned it be practice. He witnessed many bubble bursts which motive him to educate politicians by writing his simple and brilliantly named book, Lombard Street. He understood economics bottom-up, insisting that money is money, not silver. Why do markets collapse? Not because that the gold behind the money caused the issue; it was loss of trust and confidence.

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The author then gives a comprehensive overview at economical collapses and measurements governments did to prevent and fix. One of the problems is that the common understanding of the economy is flawed, and it's all Locke's fault it seems. Even though many solutions to our modern economical problems where already outlined many centuries ago, traditional classical understanding of the market still persist.

I personally believe (please note I didn't win a Nobel prize for Economy) that most of the effort to fix the economy is done to the symptoms, not the root cause. Combine that with the naive top-down understanding for Economy. Economy is a social aspect, just like language, it involves humans so it needs to be studied bottom-up. This is the good ol' Idealism vs Empiricism. Also, the cycle of giving loans that accumulated to the point that the reset button (were it be every-50-years or the bubble-bursting-market-it-adjust-itself) was needed to be pressed, is inescapable. The core flaw of economy can not be escaped, unless interest was abolished, which is even more ridiculous. The last chapter was hilarious tho!

[J.K. George · Rating 5 out of 5]

This is a great, albeit a bit wonky book. It should be a must-read for all people. The author sets up the conclusions in the first 256 pages, with examples of classical history and culture worldwide, and then summarizes his examples and stories in the final chapter over the last sixteen pages. His final, final argument, is that money is not a fixed amount, like an ounce of gold of a gram of silver, but a means of measuring and transferring a concept of value from one person to another. The idea is based of universally acceptable economic value and best set by democratically (small "d") adjusting the money to achieve social goals of prosperity and "justness." Overall, economics is a moral and not a natural science.

Clearly the author disagrees with ideas such as returning to a fixed monetary standard like gold, etc, and believes that those who argue to "fix" a recession and the resulting debt by starving an economy and cutting back on spending are literally creating societal suicide and fomenting a revolution. It's a compelling argument.

[Mike Sanders · Rating 5 out of 5]

Absolutely brilliant book and for most of it, performs absolutely amazingly. Goes in depth into critical ideas behind money, explains them thoroughly, argues and shows the arguments on the other side convincingly enough that this doesn't read as an ideological rant. The historical explanations, with many examples from varied contexts, make this a very strong piece of work.

There is an issue though, where Martin goes to provide his recommendations. That part of the book is quite weak, and doesn't really stick to the same narrative rigour as the rest of the book. The recommendations weren't needed at all either, since the book is more of a historical explanation, rather than a prescriptive piece. The book is still good enough to compensate for this, and will very definitely be a reread for the future.

[Louis · Rating 2 out of 5]

For me, the value of this type of book is to simplify complex concepts and make them accessible to the lay person. I didn't feel this did that very well. It appears to start with an assumed familiarity with certain terms and concepts.

It also seems to get caught between the portrayal of the historical and philosophical elements of money, failing to do justice to either.

All that said, it does cover some interesting ideas, and in places (the beginning and the end) is fairly readable.

[Mal Warwick · Rating 4 out of 5]

You get what you pay for with Money. Yes, this book really does tell the story of money from its origins in Mesopotamia and Greece thousands of years ago to today’s endlessly complex international economy. At times, the book is rough going. It appears to have been written by a Ph.D. in economics who may presume a little too much about the ability of the general reader to engage in the sort of mental gymnastics necessary to understand the money market. Still, the storyline is clear: this is the tale of how philosophers, businesspeople, financiers, and politicians have engaged in a debate over the centuries about the nature of money — with the wrong definition emerging as orthodoxy, according to the author, Felix Martin. That misunderstanding of what money is and isn’t has had doleful consequences, he asserts — including the Great Recession sparked in 2008.

Through the ages, Martin argues, the predominant view of money is that it is a commodity — a thing like any other — used to facilitate exchange. “The problem,” Martin writes, “is that money is not really a thing at all but a social technology: a set of ideas and practices which organise what we produce and consume, and the way we live together. When it comes to money itself — rather than the tokens that represent it, the account books where people record it, or the buildings such as banks in which people administer it — there is nothing physical to look at.”

By contrast, the alternative view — the correct one, in Martin’s view — is that money is simply a form of credit, an IOU. Coins and currency are simply representations of money; so are bonds, letters of credit, commercial paper, and other financial instruments that facilitate trade today. Once upon a time (actually, before 1973, when Richard Nixon took the US off the gold standard) money was given value by precious metals, either silver or gold. This led to what Martin sees as confusion, giving kings, bankers, and the practitioners of that dismal new social science, economics, reason to believe that money possessed some objective reality quite irrespective of the parties to any financial exchange. Many policymakers today, including (I deduce) those in the (US) Republican and (UK) Conservative parties, still make that same mistake, which has led them to shrink the money supply when it should be expanded and focus on specific inflation targets when they should instead pay the most attention to providing enough credit for business to grow and consumers to buy its products. Why? Because “hoping that the market mechanism will impose limits on itself is a pipe dream.” For example, it was these mistaken policies that helped turn the Crash of 1929 into the depths of the Depression.

Although much of Money relates the intellectual back-and-forth among philosophers, economists, and politicians, Martin manages to lift the discussion well above the level of an economics textbook by bringing to life the circumstances and ideas of the principal debaters. Among the stars in Money are familiar 20th- and 21st-century figures such as John Maynard Keynes, Milton Friedman, and Lawrence Summers. However, Aristotle, Plato, Adam Smith, John Locke, John Stuart Mill, Walter Bagehot, and other influential thinkers from the past join the cast, too. Martin pays special attention to Locke and Bagehot, who represented opposing poles in the debate about the nature of money.

Much of Money is devoted to answering a question posed by Queen Elizabeth II to the faculty of the London School of Economics just seven weeks after Lehman Brothers had collapsed and sent the world economy into a tailspin: “why had none of them seen the crisis coming?” The answer they gave half a year later was “that nobody had seen the big picture: that whilst ‘[i]ndividual risks may rightly have been viewed as small . . . the risk to the system as a whole was vast.'” But Martin regards Alan Greenspan’s answer in testimony before the US Congress as far more satisfactory: “He did not deny that his job had been precisely to understand how the economy worked as a whole. The problem was, he explained with admirable honesty, that his understanding had simply been wrong.”

Felix Martin knows whereof he writes. He describes himself as a macroeconomist and bond investor, who happens to have a Ph.D. in Economics from Oxford University. Money is his first book.

[Tom Atwell · Rating 4 out of 5]

Nice summary in last chapter by way of a dialogue. Which is fitting since, as Martin offers as a kind of final conclusive insight, money is a lot like language. A social technology guided by artificial rules posing as a natural force. You can break the rules. But for them to carry any force, you've got to get a critical mass of others to go along with you.

I agree with his revolutionary idea. Policy makers should abandon protection of the rich (by strangling inflation) as the goal of economic and monetary policy and focus instead on using it to redistribute resources and capabilities in a way that makes everyone happier, more prosperous, and committed to making the world around them a little better.

[José Sousa]

Excellent account of what is money!

[David Baer · Rating 5 out of 5]

Money isn’t a thing. It’s a social technology; a system of transferrable credit.

I had difficulty in comprehending a good deal of the exposition. He was prone to jumping around in history; a theme was how The Iliad and Odyssey depict an ancient Greek society that operated without money. Then, there was something known as the Dark Ages; the ancient Greek Dark Ages. Then, money emerged.

It’s so preposterous an idea, that a complex society could exist without money, that I felt he should have spent more time developing this idea. Particularly, when he is at pains to debunk the just-so story of how money was invented as a medium of exchange to solve the problems with the Barter System. According to him, there is no evidence that any such society ever existed, despite that luminaries such as Adam Smith stated such prehistoric speculations as fact.

He mentions the Yap Islanders, whose giant stone money is famous – or, at least, is something I read about at a young age. Giant carved stone discs with a hole in the middle. I used to wonder about that – what would stop any random islander from carving his own giant stone, any number of them in fact? Yes, well, that would take some doing, especially without steel tools. But more to the point is the fact that the people of Yap would not literally exchange the stones on a routine basis, for goods. They just all extended credit to, say, a given family possessed of a certain stone, based on the mere fact of the stone’s existence. Some rando showing up with a carved stone would not likely get the result I was imagining.

Conversely, a given stone could even be lost at the bottom of the sea, and the family’s credit was still good. Think about that – it’s a very sophisticated understanding of money. Like the ineffable bits of information that comprise my 401K. I rub my hands over the figures showing up in my account, imagining them as stacks of money. But of course, those bits have a lot in common with the islander’s lost stone disc: for me to benefit from them requires the continuing existence of a constructed information system to record my credit. Absent that system… wah (don’t go there).

John Locke was an idiot when it came to money. He thought it was a thing. Silver and gold. Full stop. Voila, the “classical school” of thought concerning money. It is still with us to this day, in spite of all that we have learned through hard experience. Classical economics delights in theorizing about economic relationships where money isn’t even required for the reasoning. Money doesn’t matter, says the classical economist, right up to the moment when the government has to print up a few trillions of dollars to avoid the collapse of several major banks. “Macroeconomics what” says the banker, glibly oblivious to the potential macro effects of creating a few trillions of dollar’s worth of supposedly transferrable credit instruments. Oops. Turns out they are worthless. And it turns out that macroeconomics is a thing after all: all business runs on credit. When banks become insolvent, the businesses that depend on them cannot operate. The government has to print money.

A simple extension of the basic idea that “money isn’t a thing” is that it is arbitrary, and a consequence of this arbitrariness is that there is an ethical dimension to the monetary system that would mystify Locke, whom history remembers as not at all an idiot. Prior to the invention of money, the very concept of economic value did not exist. Martin writes “far from there being any objectively true standard against which economic value must necessarily be measured, the choice of monetary standard is always a political one, because the standard itself represents nothing but a decision as to what is a fair distribution of wealth, income, and the risks of economic uncertainty. … Locke’s view opened the way to the dominance of a particular, quite arbitrary prejudices, and even worse, it covered their tracks with a veil of a kind of apparent scientific objectivity. … It was just that the ethics of money now meant something completely different. If money was a thing and value was a physical property, to discuss either in ethical terms no longer even made sense. To call the monetary standard unjust made about as much sense as calling the weather unfair.

And so, we return again to the spectacle of taxpayers victimized by the crisis of 2008: those political choices about wealth distribution and about who bears the risks made manifest with unusual clarity. It is the undeniable injustice that motivates Martin’s book.

MIND BLOWN: all that money printed by the government in 2008-2009 ALREADY EXISTED. It was created by the banks in the form of novel transferrable debt obligations. When they turned out to have screwed up their basic business model of being able to balance short-term payments against long-term debt, the Fed’s printing of money merely supported them with liquidity. It was the banks who had, in effect, printed the money in the first place. Thus we have two worlds: economics “money is irrelevant”, and finance, “manipulation of money”, each living in their separate worlds.

There were a lot of deeply scary historical vignettes, plumbed in their intricacies, which intricacies I often glazed over. But then there was the last chapter, which very helpfully summed up his whole argument in the form of an imagined attempted refutation by his (likely fictional) entrepreneurial friend. To my lasting pride, I had indeed grasped most of the essential points and examples. The entrepreneurial antagonist echoed my skepticism about the relevance of ancient Greece.

Martin knows his thesis will strike many as absurd, since societal structures and our thought patterns are mostly built on Lockean thinking about money. He draws an analogy from the late nineteenth century, when a new scientific fashion emerged known as “positive criminology”, which claimed that felons could be identified by their physical attributes. It sounds bizarre today that anyone could believe that you could tell an anarchist by his ears, or a thief by the shape of his nose. The point is that the people who believed all this had no particular vested interest in locking up people with unusual faces – they simply believed in the naturalistic explanation of criminality as a product of physiological factors. Likewise, scientific racism was widely accepted as the truth in nineteenth century America. … naturalistic reasoning in the social sciences, claiming to explain social phenomena as objective truths of nature, is self-reinforcing. It spins social and political prejudices into a web of fake facts, and once the web has been spun, it is virtually impossible to escape. In terms of the Chinese proverb, naturalistic reasoning, like Locke’s understanding about money, is what fills the fishbowl with water.

Martin’s closing idea doesn’t seem overly actionable. He closes with this question and response: “who is in charge of money? YOU ARE. And everyone else who uses it. If we are really going to reform money, it will come down to ourselves.”

[Noufal · Rating 4 out of 5]

This was an excellent book. I highly recommend it to anyone who wants to understand how money (as a social technology) works.

Martin builds up the knowledge one needs to understand his thesis very systematically. His explanations along with the historical sources for them are quite solid and one can follow through the book quite satisfyingly. By the time you're done, you'll have a good grip of his ideas. He's also good at the craft of writing. Most of the chapters end with a little cliffhanger which kindles an interest in what's going to happen in the next. There's just enough repetition in the book to drive home the important ideas without being too boring. The book is bracketed by a conversation between the author and his (perhaps fictional) friend. The beginning serves as a taste of things to come and the final one is a good summary of the large ideas.

I found this doubly useful since it served as a starting point for various ideas and concepts in economics that I wasn't used to.

The final one third of the book is weaker than the rest. Partly because the ideas presented are subtle and complicated to a layman like me. However, it also feels a tad rushed. The relaxed but tight pacing of the initial parts of the book is missing here. This could also be because of my lack of familiarity with the material. These parts deal with the banking system which has always been opaque to me.

On the overall, a very useful book not just to read but to own given the way money is changing so much in our lives.

[Karel Baloun · Rating 5 out of 5]

Ends with a delightfully direct explanation for financial crises: a lack of demand, which turns into a lack of confidence in the value of business and credit. Money is just trusted credit, and pretending it is hard (specie, metals) is an easy to explain fraud, used to buttress the current power and control of those who have money.

Explains why QE^n is likely to continue, globally, until demand is adequate to enable near full employment. Technical automation and increasing productivity just add pressure to inflate currency, since the volume of "consumer surplus" increases, without enabling demand from underemployed members of society.

The increasing income&asset gaps along with the control of democratic politics by the monied elite, threaten stability. fortunately, reforms will come, and until them monetary policy will force inflation.

Can our natural environment and its free services sustain itself until necessary reforms happen?

The final chapter, itself even alone, is brilliant.

[Katherine Rupley · Rating 4 out of 5]

Fascinating book. Worth a read.

[Richard Burt · Rating 2 out of 5]

To be honest, I struggled through this book. The topic was interesting, and the history enlightening, but the author's writing voice was extremely dry and often condescending. The sections which delve into the history of money itself are quite interesting, though often peppered with economic theory. Despite often agreeing with the author's conclusions, their tone was reminiscent of a headmaster lecturing a young student, which nearly led me to abandon the book on several occasions.

My recommendation would be to read Chapter 16 first to see if you like the tone and style, as well as to see if his economic arguments (while interesting, less so than the comprehensive history of money story this could have been) strike your interest. If not, you'll have gotten the gist while saving yourself a lot of time.

[Andrew Davis · Rating 4 out of 5]

An interesting account of money and its role throughout the ages. It starts with demolishing a popular theory that people utilised barter before the money economy. It then proceeds to describe a system of public finances that operated in England between the twelfth and the late eighteenth century, and based on the wooden sticks. The history of money follows from its introduction around sixth century BC, till the modern era. This then leads to a discipline of economics and its founding fathers. One of the interesting practicians - Walter Bagehot is introduced and his views on money are discussed. Finally, the problems with the modern macroeconomics are identified, especially its oversight of finance, which is argued led to the 2008 crash.

[Iamreddave · Rating 5 out of 5]

This is the best book I have read so far this year. One by one all the stories I was told about money in school are dismissed using history and anthropology. Barter happened first, Money has to be transportable tokens. Money was always precious metals etc. Are gone through one by one.

Then follows various rogues, scammers and incorrigible bankers in a really entertaining and persuasive book.

In terms of similar and good books I have read. A more conventional view is The Undercover Economist Strikes Back: How to Run—or Ruin—an Economy by Tim Harford.
And a book on the social aspects of something i hadnt thought of as social is What Technology Wants by Kevin Kelly

[Douglas · Rating 5 out of 5]

Economists don't even know what money is. This book will open your mind to a rich world of money theory, philosophy and reality.
In places it is dense like a textbook, but well worth reading if you want to truly understand the amazing world we have created with this virtual medium of human exchange.

[Ash · Rating 1 out of 5]

Didn't finish it. COULDN'T finish it.

[David · Rating 4 out of 5]

An infotaining romp across the history and theory of money, ending in some questionable conclusions.

[Maria Pelaez · Rating 1 out of 5]

Could not get through the first 10 pages. The writing was very technical and historical. Way too detailed for what I was looking for.

[Esteban · Rating 3 out of 5]

Una crítica a las recetas de Basilea III, desde una idea poco desarrollada del carácter crediticio del dinero.

[Klaus Mattes · Rating 3 out of 5]

Wenn man das Buch des englischen Wirtschaftspublizisten Felix Martin zu lesen beginnt, „über den blinden Fleck des Kapitalismus“ soll es anscheinend gehen, sagt jedenfalls der Untertitel, und dann auch weiter, über ein Drittel des Gesamtumfangs und die Seite 100 hinaus, ahnt man noch gar nicht, dass der Autor die ganze Zeit schon auf das große Duell zweier angelsächsischer Ökonomen zuschreibt. Das Duell fand schon am Beginn des 18. Jahrhunderts statt. Zwischen dem, uns als Aufklärungsphilosophen noch immer erinnerlichen John Locke und dessen schottischem Kollegen John Law, den der französische König zum Generalkontrolleur seiner Finanzen ernannt hatte. Die beiden sollten dem König erklären, was Geld eigentlich ist. John Locke hat damals gewonnen, sagt Martin, dabei hatte er Unrecht. Später habe sich herausgestellt, dass die Wirtschaft eher nach den Vorstellungen des Schotten Law, der damals pleite ging, läuft.

Im Kern ging es um die Frage, ob Geld ein Medium zur Aufbewahrung von Werten ist, oder ob es, wie Martin meint, eine Maßeinheit ist. Einheiten sind ohne Wert! Ein Zug, der in einer Stunde 200 Kilometer fährt, dieser Zug ist schnell. Aber „200 km/h“ sind nicht schnell, sondern ein Größe, mit der man etwas Gemessenes anzeigt: das Verhältnis zwischen einer gewissen Strecke und einer gewissen Zeitdauer, die vergangen ist.

Felix Martin ist eine Art Wunderknabe von der Eliteschule, eine Form von Publizist, die es in Kontinentaleuropa nicht gibt. Glaubt man dem Foto der DVA-Ausgabe, ein schnittiger, attraktiver, sympathischer Herr, der uns auch Anlagetipps verkaufen oder noch für die Weltbank arbeiten könnte, wo er mal gewesen ist. Rhetorisch brillant arbeitet er, der außer Ökonomie auch Altphilologie studiert hat, für „Financial Times“ und „New Statesman“. So einer weiß dann auch, was zahlreiche Journalisten, die sich in Deutschland zu Fragen der Volkswirtschaft vernehmen lassen, wohl immer noch nicht wissen: Das sich das Wohlbefinden eines Volkes durchaus nicht dadurch erhöhen lässt, dass man Staatsschulden abbaut, indem man Sozialtransfers reduziert und zugleich ganz viele Maschinen an Italien und Spanien verkauft, die sie in einer Währung bezahlen, die sie, entsprechend des Zustands ihrer eigenen Volkswirtschaft, nicht abwerten dürfen, damit Kapital an deutsche Kapitalisten transferieren, für die es sich nicht lohnt, es in die deutsche Produktion zu stecken, weil der heimische Konsum zu träge läuft, weil die Leute nicht genug Einkommen haben, sie es folglich in den Kapitalmarkt einspeisen, der es in Staatsverschuldungen schlechter laufender Südländer umwandelt, die der deutsche Steuerzahler dann päppeln muss, damit die Kredite der nordeuropäischen Finanziers gerettet werden können.

Felix Martin ist ein Erforscher des Geldes, der weit zurück zu den archaische Gesellschaften der Menschheit blickt und seinen Bogen aus Kapiteln mit Cliffhanger-Schlüssen bis eben ins 18. Jahrhundert schlägt. Das Buch ist eine intellektuelle Herausforderung und amüsiert uns auch. Bis dann das Duell dieser zwei britischen Aufklärer kommt!

Von da ab und bis hin zur globalen Finanzkrise der Jahre 2007 bis 2011, die ein 2013 publiziertes Buch natürlich in Rechnung stellen muss, rutscht ihm sein Werk immer mehr aus der Hand und versinkt in den trüben Untiefen der Populärwissenschaft. Man spürt, was er am liebsten täte: Hat er uns nicht in mühevoller Kleinarbeit die vergessenen Sitten und Gebräuche von Markt und Finanzwirtschaft der sogenannten „einfachen Völker“ erklärt, den Unterschied zwischen Wert und Wertmaßstab klar gemacht? Kann er daraus nicht ableiten, was heute in der Krise zu tun wäre? Er kann es nicht. Jedenfalls tut er das nicht. Je mehr wir uns dem Ende nähern, desto mehr wird das eingangs fesselnde Buch von einem Nebel aus schön klingender Rhetorik und schwabbeligen Appellen verschlungen: „Es ist an der Zeit für einen Wandel.“ A ha, a ha.

Zuerst hat er uns von den Geldsteinen auf der Insel Yap im Pazifik (zwischen Philippinen und Guam) erzählt. Große runde, in der Mitte gelochte Steine, den späteren Mühlsteinen ähnlich, symbolisierten damals den Wert. Einmal fällt so ein Stein beim Transport von Insel zu Insel ins Wasser, verschwindet also aus dem System. Staunend lernen wir, dass dies nichts ausmacht. Keiner dieser „einfachen Leute“ war je so einfach zu glauben, ein hohler Stein wäre wirklich viel wert. Er war ein Zeichen, das für den Reichtum einer Familie stand. Diese Familie blieb gleich reich, man wusste doch, den Stein, den gibt es noch, er ruht im Meer. Der Punkt ist, unser Geld hat im Grunde keinen Wert, egal ob es aus Papier, Daten im Computer oder Gold ist. Es ist eine Chiffre für etwas Abstrakteres, Systemisches, Umfassendes, was Wert hat. Die deutsche Volkswirtschaft hat mehr davon, die der Griechen oder Ukrainer weniger. Und zwar egal, wie viele Schulden im Haushalt unserer Regierungen stehen oder nicht (mehr). Solange alle anderen Menschen auf Yap akzeptieren, dass diese eine Familie den Kredit des Steins hat, hat sie ihn. Würden sie es anzweifeln, wäre der Wert weg, auch wenn es den Stein weiterhin gäbe.

Merkwürdig muss es einem wie Martin dann erscheinen, wenn, angeblich, im Vereinigten Königreich seit geraumer Zeit der wirtschaftliche Sektor mit den höchsten Zuwächsen, dem best ausgebildeten und höchst dotierten Personal, der steilsten Wertsteigerung der Finanzsektor sein soll. Also das Herumschippern von Mühlsteinen zwischen Inselchen! Ohne Öl und Finanzmarkt würde London in derselben Liga wie Portugal und Griechenland spielen. Felix Martin amüsiert sich königlich über den Bank-Sprech und seine „Produkte“, die er so regelmäßig neu hervorbringt. Ein Acker bringt Kartoffeln hervor, der gelochte Stein von Yap nicht eine einzige Seegurke.

Nachdem Felix Martin Sumerer, Babylonier, Griechen, Römer, Chinesen und norditalienische Bankiers gestreift hat, langt er bei den absoluten Herrschern der frühen Neuzeit an und bei ihrer Seigniorage. Die Könige legten die Preise für den Ankauf von Edelmetallen fest, reduzierten, wenn Not am Mann war, deren Gehalt in der einzelnen Münze, schnitten oder feilten die Ränder weg. Und sie sollten noch dasselbe wert sein. Solche Tricks verhinderten weder Depressionen noch Staatsverschuldung oder Inflation. Letztere nahm seit der Renaissance ständig zu, weil man nicht durchschaut hatte, das die Ausweitung der Silber- und Gold-Menge (von Südamerika her) den Ländern Europas einen Reichtum herbeizauberten, den sie faktisch nicht besaßen.

Gegen 1700 entstand in London, was Martin die „Große Monetäre Übereinkunft“ nennt, die Schaffung einer unabhängigen Schatzbank, welcher fiskalische Souveränität zugebilligt wurde. Der König überließ den Finanzmarkt von nun an sich selbst, stellte seine Seigniorage ein, bildete mit dem Gold der Krone jedoch immer noch den Rückhalt der aufs Papier gedruckten Werte. Mitnichten rät Felix Martin zur Rückkehr zum Goldstandard. Mit Gold mag man mehr tun können als mit dem Stein von Yap. Dass Allermeiste kann man aber nicht damit tun. Was man mit Gold tun kann, das kann man, in fast allen Fällen, auch mit anderen Metallen machen.

Wenn morgen ein Bev Jezos allen Reichtum dieser Erde in Form von Barren in seinem Keller lagern hätte und wir anderen, da wir nichts mehr haben, keine Rechnungen und Mieten mehr zahlen, keine Brote und Betten kaufen, dann wird Bev Jezos genauso arm verrecken wie wir alle. Geld ist kein Wert. Geld ist etwas anderes. Geld ist mein Vertrauen, dass dieser andere Wirtschaftsbeteiligte morgen und übermorgen noch so reich sein wird, dass er mir dann immer noch für meine Arbeit einen Lohn geben kann, der mir weiterhin erlauben wird, dies und das zu kaufen und zu verbrauchen. Vertrauen kann man nicht designen, als Produkt verpacken, mit einer garantierten Rendite versehen.

Das eigentliche Ziel der Geldpolitik sind nicht Geldwert- oder Finanzmarktstabilität, sondern eine gerechte Gesellschaft und allgemeiner Wohlstand; und ganz gleich, wie weit dieses Ziel vom Alltagsgeschäft der Entscheidungsträger in den Zentralbanken entfernt sein mag, stellt es doch den einzigen verlässlichen geldpolitischen Leitfaden dar. Also ja, ich glaube, dass es an der Zeit ist, den Kult der direkten Inflationssteuerung aufzugeben und die Geldpolitik wieder auf ihre eigentlichen Ziele auszurichten - und den Zentralbanken zu erlauben, ein größeres Instrumentarium einzusetzen, um diese schwieriger zu erreichenden Ziele zu realisieren.

[Zihad Azad · Rating 3 out of 5]

I am at a loss about how to rate this book since the utility it offers is highly skewed on one side while it tapers off pretty quickly towards the end.
"Money: an unauthorized biography" is the definitive book on the origin of money and how monetary society deposed traditional society. It pits the conventional Smithian view of money as a mere commodity medium of exchange against the alternative view of money as a social technology. The conventional view holds that money gradually came about to ease the burden off of barter economy. But as the book points out, there's a resounding lack of evidence to substantiate this claim. Rather, money, as a social phenomenon, can be viewed to comprise of three components: an abstract unit of value in which money is denominated, a system of accounting and the tranferablity of credit. In short, money is the unit of measurement that reckons a universal economic value, much in the same way a meter is a unit of linear extension which measures heights and depths.

The first 10 chapters delineates this monetary theory in a cogent, albeit somewhat abstruse, manner. The first challenge is to set a monetary standard. And herein lies the beef between the traditionalists and the radicals. And the bulk of the blame has been heaped upon John Locke and his stubborn insistence to peg the pound to gold so that the sovereign has zero control over the monetary standard. He did so out of a misplaced sense of political liberalism, applied unfashionably to financial economics. And the book goes on great length to show that how this conventional way of perceiving money as a mere commodity rather than a social technology had a pervasive influence over the entire monetary society.
All these were very convincing. However, I balked when I saw that he was trying to transfer the blame of the 2008 financial crisis on this conventional monetary theory. Although he did emphasize the importance of regulating the banking sector, his hollow insistence that a misplaced monetary theory caused the housing bubble is, and I say this seriously, utter bullshit. And this is where the book started to lose me. If he finished off the book at the turn of the 18th century when Locke won his crusade over Lowndes, I would have given it a 5 star rating. But sadly, the writer continued, only to reveal his true identity. And this only backstopped my belief: Center right economists are the most dangerous kind!!

[Don · Rating 3 out of 5]

This is a deep take on what the brilliant Felix Martin identifies as the real economic problem in the world: a near-universal misunderstanding of what in the hell money really is.

The biographical aspects of money are the strength of this story, but along the way there is a fair amount of jargon, inside baseball, and what hit me as just showing off. Some of the philosophical and theoretical threads were just too arcane for me ... although that could be my fault, I don't think so.

One problem was that the whole book came across as a definitive repudiation of what he described as a universal misunderstanding of the definition of money ... Except that the definition he subscribes to is one that I had no idea is such a minority view. He does a nice job of tying it to our recent unpleasantries and showing that banks really ought go stay in the business of banking rather than performing financial gymnastics while the public props them up no matter the risks.

His argument reminds us that sovereign support for money also comes with sovereign power to manage -- yes, even regulate -- the markets represented by that money.

He cites "ignored geniuses" such as Polish economic theorist Witold Kula, previously discredited Scottish. economist John Law, 1840s Economist writer Walter Bagehot, and John Maynard Keynes, and that understanding these guys provides a clearer opportunity to understanding the role of money in a society. Alrighty then.

He might also have pointed to contemporary Nobel Prize winner Paul Krugman, who writes about this ongoing struggle with the titans of industry and government in his books and NY Times column.

By the way, the gist is that money, in and of itself, is not the thing, but merely represents the promise of an agreed upon value of goods and services in a society. Promise" is the key word, not "representative" of some other tangible object. Various wonderful anecdotes and historical fragments help to tell the story, but I wanted more of that and less of Martin arguing with the classical school of economics that traditionally tied money to the gold or silver standard.

By and large, this is a good, interesting idea and book that might have been meant for a deeper financial and economic thinker ... But even though I couldn't quite dance to it, it had a good beat, and so I give it a three.

[Andrew Bailey · Rating 4 out of 5]

This book appealed to me as it's a mixture of history, philosophy, and economics. Like the proposed interlocutor at the start, I too had a notion that money emerged from a barter economy over time. Not so, says Martin. In fact, he claims, money is a social technology that's much more to do with confidence in others than it is with any intrinsic value to coinage.

I think he's right. I've thought about this over the years since I first started reading the book (I started it the year it came out in 2013), and I've continued to hold this belief. Seeing value as something that is projected by people makes a lot of sense and seems to be an accurate account of the underlying reality. As a result, this book has been very influential on my thinking about money. I largely agree that it is a social technology with no intrinsic value of its own and also that our approach to economics needs to consider the social and moral angles as well as the purely economic.

I read the first four-fifths of this book when it came out and then finished the final few chapters nine years later in 2022. Having this gap means that the concluding chapters have a slightly different resonance. It was written as a perspective on the fallout of the financial crash of 2007-2008, but I read the recommendations in the light of Brexit, Trump, and Covid. Martin recommends radical changes in how we handle money due to rising inequality and declining standards of living for ordinary people. He claims that to not be radical now risks a radical revolution being forced upon us. Nine years later and the inequality and living standards have only gotten worse, but there's no revolution to speak of yet. What has happened is Brexit and Trump though, and the associated movements, so maybe there is a link to all this.

It's still worth a read, as much for the historical account of money. I can't say of the ideas hold up because I don't understand finance well enough but having read this I have more of a sense than I did before.