The Production of Money: How to Break the Power of Bankers

by Ann Pettifor

What is money, where does it come from, and who controls it?

In this accessible, brilliantly argued book, leading political economist Ann Pettifor explains in straightforward terms history’s most misunderstood invention: the money system. Pettifor argues that democracies can, and indeed must, reclaim control over money production and restrain the out-of-control finance sector so that it serves the interests of society, as well as the needs of the ecosystem.

The Production of Money examines and assesses popular alternative debates on, and innovations in, money, such as “green QE” and “helicopter money.” She sets out the possibility of linking the money in our pockets (or on our smartphones) to the improvements we want to see in the world around us.

Genres: Economics, Nonfiction, Politics, Money, Finance, Academic, Philosophy

172 pages, Hardcover

First published February 7, 2017

About the author

Ann Pettifor is a director of Policy Research in Macroeconomics (PRIME), Honorary Research Fellow at the Political Economy Research Centre at City University (CITYPERC), and a fellow of the New Economics Foundation, London.

She is best known for correctly predicting the Global Financial Crisis in several publications including The New Statesman (Coming soon: the new poor) and her 2006 publication The Coming First World Debt Crisis.

Pettifor's background is in sovereign debt. She was one of the leaders in the Jubilee 2000 debt campaign which succeeded in writing off $100 billion of debts (in nominal terms) owed by 35 of the poorest countries. She is also Executive Director of Advocacy International, which advises governments and organisations on matters relating to international finance and sustainable development.

She recently published Just Money: How Society Can Break the Despotic Power of Finance.

Reviews

[The Conspiracy is Capitalism · Rating 4 out of 5]

Money 101?

Preamble:
i) Topic: 5 stars, of course!
ii) Accessibility: 3 stars; I had higher expectations here, given Pettifor’s stated goal, i.e. “accessible to a much wider audience, especially to women and environmentalists”, and from her public speaking.
iii) Framework: 3 stars; I felt the foundations of money were rushed. The political framing also had a wide range, which is expected when the key reference is Keynes (the most influential 21st century economist); a related issue is vague definitions of “capitalism”/“socialism”/ “development”/(“imperialism” is not named).
…The key lenses which I always look for (usually missing/censored) are (i) geopolitical economy, and (ii) class analysis.
…Keynes, despite all his technical brilliance (which we should definitely learn from), was still situated as a British empire technocrat (although by then Britain was succumbing to WWI/WWII’s destruction/war debts to the rising US empire). Ex. Kalecki’s caution of Keynes on class conflict. Pettifor’s technical focus does not alleviate this issue: “This book cannot explore the problem of mobilising political will: that is for others far more qualified.”

Highlights:

1) Money 101:
--On accessibility:
i) Yes, we often start with catchy lines to attract wider attention; ex. this book: did you know some 95% of money is actually created by private banks (in the form of credit), whereas the government Central bank only creates the remaining 5%? (Also see the documentary 97% Owned, featuring Pettifor).
ii) …before we can reframe the topic with a structural dive; I felt the foundations of money were rushed, so I’m adding quite a bit to this section.
--“Money” is a social relation, a promise for something else, i.e. money as a means rather than an end in itself (well, until capitalism), as money has few uses by itself.
--Money functions as:
i) Means of exchange (esp. between strangers)
ii) Store of value (can be accumulated rather than remaining in market circulation).
--A fascinating place to start is a synthesis of anthropology with world-systems analysis in Graeber’s magnum opus Debt: The First 5,000 Years (which Pettifor also cites). Omitted by Pettifor is Graeber’s framing of “capitalism” as the synthesis of markets with State violence, creating armed merchants and profit-seeking States. This framing is also shared by Indian economic historian Bagchi’s Perilous Passage: Mankind and the Global Ascendancy of Capital.
--Thus, capitalist profit-seeking violently expanded to displace other social relations (Polanyi: reciprocity/redistribution/autarky), creating an increasing demand for money by both direct rulers (kings/States) and the public (now wage labourers/commodity consumers, dispossessed from their means of subsistence).
--Pettifor focuses on how the rich (with surplus money) could use their money to earn more money by lending it while charging high interest (“usury”); thus, the financiers (“vested interests”/“rentier class” i.e. rent-seeking, making money from money/“robber barons” in the feudal rent-seeking sense) and their incentive to monopolize money creation (enforcing scarcity).
--Pettifor adds the crucial distinction between:
a) Usury’s growth of private debts: mathematical growth, i.e. infinite and often nonlinear (compound interest).
b) Real world resources/cycles: thermodynamics/finite/consumed/decay/nature’s limited growth.
--Let’s add Marx’s distinction between:
a) Simple market exchange: C-M-C (Commodity exchanged via Money for another Commodity), where trading for another commodity is the end, and money is just the intermediary means.
b) Industrial capital: M-C-M’ (Money invested in Commodity production to be sold for more Money), where (more) money (i.e. profits) becomes the end in itself. (Note: If consumers do not have enough money (purchasing power) to keep up with capitalism’s cost-cutting cancerous growth of commodities, then there are no profits and this logic crashes: see the vivid prose depicting the Great Depression in The Grapes of Wrath).
c) Interest-bearing capital: M-M’ (Money lent out for more Money via charging interest), without direct involvement in Commodity production. Also called “usurer’s capital”/“finance capital”.
--Let’s add Varoufakis’ “Great Reversal”:
a) Pre-capitalism (ex. feudalism): production – distribution – finance (i.e. peasants farm the land, then lords take their share, and finally the residual not consumed by the lord is sold for money to pay for services/issue loans).
b) Capitalism: finance – distribution – production (i.e. finance comes first with credit/debt for investments, followed by costs of rent/wages/materials determined before finally the commodity production process). The focus with this framing is the initial “black magic” of credit, which is expectations of future productivity growth brought to the present (credit money created out of thin air) in order to fulfil the prophecy of profits/growth. Thus, the boom/bust of euphoric/depressed expectations.
--Pettifor only partially mentions Polanyi’s distinction between:
a) “Real commodities”: goods/services traded on markets, with direct costs of production/service (which are supposed to correlate with market prices; capitalists compete to lower their costs).
b) “Fictitious commodities”: capitalism’s peculiar markets of labour/land/money, featuring humans/nature/purchasing power which are not “produced” (with direct costs of production for capitalists) just for market exchange. Thus, forcing market prices onto these creates all sorts of contradictions.
…Pettifor emphasizes here that money does not just circulate as an intermediary in market exchange; money is “produced” and adds purchasing power needed for investment/employment/income/social services, etc.
--On money/credit creation, Pettifor stresses that banks create credit money out of thin air, rather than distributing others’ savings (banks as just intermediaries) or relying on fractional reserves with the Central bank. Pettifor adds the distinction between:
a) Non-financial savings: things (ex. real commodities) one saves, with no direct effect on others.
b) Financial savings: assets/liabilities, i.e. financial relationships that affect others (claims on others).

2) Regulating Private Credit:
--Pettifor skips ahead to praise the rise of State regulation against usury, to lower interest rates and democratize access to credit. Starting with a brief mention of ancient debt forgiveness (periodic “debt jubilee”, to wipe away private debts), the focus here is mostly on the creation of central banks up to Keynes (during WWI/WWII):

While it is controversial in some circles to assert this, it is my view that monetary and financial systems are among human society’s greatest cultural and economic achievements. The creation of money by a well-developed monetary and banking system, first in Florence, then in Holland, and finally in Britain with the founding of the Bank of England in 1694, can be viewed as a great civilizational advance. As a result of the development of these sound monetary systems, there was no longer a shortage of finance for private enterprise or for the public good. Bold adventurers did not need to rely on rich and powerful ‘robber barons’ for finance. Instead bankers disbursed loans on the basis of a borrower’s credibility. […]

Creative artists and designers, risk-taking entrepreneurs and innovators no longer had to pay usurious rates for finance to fund, for example, a scientific breakthrough or the staging of a new opera. […]

[…] Mark Carney, governor of the Bank of England [and current Prime Minister of Canada via the Liberal Party], defined the motive behind the establishment of the Bank of England in 1694 as raising money ‘to carry on the war’ with France. Not so. While financing the war was important, the authorities at the time were more concerned with establishing a bank-money system like that already established by the prosperous Dutch, and along the lines of that described by the Bank of England staff today. Back in 1694 the goal of the Bank of England was to mimic Holland in reducing the rate of interest paid by Dutch commercial firms, and to bring English interest rates into line with those that prevailed in the financially more advanced Netherlands.

…Now, Pettifor is known for her work on Global South debt forgiveness, so she is obviously aware of economic imperialism. However, I cannot help thinking of Keynes’ British empire technocrat baggage in Pettifor’s framing here of British economic development via Bank of England/omission of imperialism (we can compare with the aforementioned critical Indian economic historian.
--Let’s do a quick summary of the modern monetary system:
i) Central bank:
--Without getting bogged down by the national treasury/mint, let’s simplify and consider the Central bank as providing reserves specifically for private commercial banks to settle their inter-bank balance sheets, with an interest rate (base rate) for banks. Key here is the reserves/base rate are separate from what private commercial banks provide to the public.
--Notes/coins are far less common than credit; private commercial banks cannot create these and must request these from the Central bank, with minimal regulations.
ii) Private banks:
--With the “formal banking” the public participates in, the loan application comes from the public, which the private commercial bank reviews. The borrower offers collateral (property/other assets; this is not required for credit cards, but future income flows are assessed and higher interest is charged)/agrees on interest rate. If the bank approves, a contract is signed and the bank creates credit-money digitally for the borrower (with currently minimal regulation).
…Pettifor stresses the role of the borrower in initiating this process (demand for credit) with the private bank, framing this as a “bottom-up process”/“in a sense democratic”/“public involvement at a micro level in the creation of a nation’s money supply”.
…Pettifor also mentions the deregulated “shadow banking” side, where these contracts (longer-term promises to repay) are bundled up and turned into short-term “financial products” to gamble with.

--Pettifor’s praised regulations peaked during post-WWII until 1971 (Nixon Shock), calling this the “Golden Age of economics” (often called the “Golden Age of Capitalism”, ex. Ha-Joon Chang: Economics: The User's Guide).
…Furthermore, Pettifor praises Keynes’ proposals for geopolitical regulations which were rejected by the ascendant US empire. Pettifor writes:

As to the policies needed to subdue finance capital, these are known […]. We do not have to reinvent the wheel. We do not need a social revolution. We simply have to reclaim knowledge and understanding of money and finance – knowledge that has been available to society for many centuries.

…Such regulations include:
i) Quality of private credit:
--Discourage loans for short-term speculation (M-M’), encourage long-term productive investments (M-C-M’).
--Specifically: “macroprudential tools” to monitor private bank credit growth vs. real economy (ex. GDP), standards for debt-to-income ratios/leverage caps/loan-to-value ratios, etc. US’s Glass-Steagall Act also separated commercial banking (government-guaranteed retail deposits) from investment banking (riskier).
--Credit should be:
(i) “tight” in the sense of regulated/high-quality productive/repayable, rather than “easy” (quantity over quality/unregulated/predatory/unpayable/speculative).
(ii) “cheap” in the sense of repayable (low interest rate, accessible to the public/social needs), rather than “dear” (artificial scarcity via high interest rate).
…while “easy” and “dear” credit sounds contradictory, it is the disastrous combination favoured by rentiers.
…Note: Pettifor does not want to abolish the power for private banks to create credit-money, only to better regulate this power. She wants to keep the “bottom-up process” between borrowers and private banks. The alternative she critiques is for the Central bank (centralized technocrats) to take over the entirety of money-creation. So, the bipolar option of market vs. State. There is zero mention of various levels of “public banks”; alternatives are considered insufficient as they are assumed to lack money-creation powers:

The small, individual pools of money from savings accounts, credit unions or crowdfunding would be woefully insufficient for the Herculean task of transforming the economy away from fossil fuels.

ii) Decrease private debts:
--I.e. liabilities of consumers/industrial capitalists; profits of M-M’.
--Debt forgiveness/jubilee via write-offs/de-leverage/restructure. This is crucial because the aforementioned infinite growth of private debts (esp. predatory loans monopolizing access to social needs, i.e. housing/healthcare/education/transportation, etc.) is a parasitic overhead cost on the entire productive economy, making it less competitive; money is spent paying predatory interest rather than invested productively/spent on goods, creating debt deflation shrinking the productive economy.
…Pettifor references my go-to on this, Michael Hudson:
-The Bubble and Beyond: Fictitious Capital, Debt Deflation and Global Crisis
-Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy
iii) Public spending financed by loan issuance via government bonds:
--Low interest rates/different maturities for varied needs/prudent financing rather than “deficit financing” (permanent government overdrafts).
iv) International Clearing Unions (ICU):
--Keynes’ key geopolitical regulation proposal was rejected by the US empire; Keynes proposed an international Central bank (ICU) to manage money flows between states, using a new neutral currency (instead, the US implemented their US dollar), with regulations to deter states from large surpluses/deficits, regulate exchange rates, etc. For the full geopolitical economy of the US’s rejection, see:
-The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy
-Super Imperialism: The Origin and Fundamentals of U.S. World Dominance
…For pushing Keynes’ vision much further than Pettifor’s book: Another Now: Dispatches from an Alternative Present

…see comments below for rest of the review…

[j · Rating 3 out of 5]

While Pettifor rightfully addresses the need for a return to Keynes and accurately diagnoses many of the problems in our financial and economic system, her prescriptions are vague. This is because she tries, in a very British way, to sell her book as the most reasonable thing in the world, and not the radical call to action that it actually is.

For instance, she recommends that "we must demand the transformation of our financial systems, to render the finance sector servant, not master, of both domestic economies and the global economy." One struggles to imagine how this could be achieved without the force of arms in the world we now inhabit, but Pettifor's tone throughout is almost condescendingly retiring. She doesn't want to be associated with the rabble who call for wholesale revolution, and she seems to identify more with the technocrats that she vilifies than the activists whom she fetes.

That said, this book shed light on a number of issues that I, as an economic naif, am trying to understand. It also points the way to further research with a wealth of useful citations that I fully intend to read some day.

[Oscar · Rating 5 out of 5]

A necessary read. Ann Pettifor produces a relatively easy to read book about the influence and function of money in our modern society.

Many of these points are often counterintuitive and startling, exposing the stark illiteracy of politicians and the press in how they influence public debate.

The book is balanced, and not simply a polemic against banking, instead, it describes the function that it provides, and describes the world prior to its invention. Nonetheless, Ms Pettifor proceeds to tear apart how the function of finance has distorted into modern robber barons.

Ann Pettifor produces a vision for a functioning system that serves the needs of the population. The sad truth, however, is that a lot of these innovations are from Keynes, whose theories accurately explain the outcomes of the policies taken in the current financial crisis. These choices have been made at the expense of populations.

[Adam McPhee · Rating 2 out of 5]

Wielding the weapon of interest, finance capital effectively holds societies, governments and industries, but also the entire ecosystem, to ransom over repayment of its loans. This predicament is particularly tragic given that, in theory, the development of banking and of sound monetary systems should have ended the power of any elite to extract outsized returns from borrowers. Today, just as in earlier pre-banking eras, interest rates remain high in real terms, even in rich countries. However, this is only because these societies, elected governments and industries have conceded such despotic power to finance capital.


Okay, so if I understand this right, the orthodox view is that money is created at a central bank, I guess in the clearing process they perform for commercial banks, and they see it as another commodity? But actually money is not a commodity and is created through the lending process of commercial banks, i.e. when you take out a loan or mortgage or whatever. The orthodox view doesn't see that there is a problem, while sovereign money people want to use democracy/technocracy to restrict a bank's lending ability. But this is wrong because a) they'll accidentally re-create money scarcity like during the gold standard years, and that's just going to keep the rich rich. B) and because banks don't create money from scratch, they need consumer demand to take out loans in the first place. What we actually need are a return to a highly regulated market (with borrowers for productive purposes paying lower interest rates that speculators) and the creation of capital controls, with democracies educated about how money works.


The myth of where money comes from: One of the most serious is the often repeated accusation that central banks ‘print money’ and thereby cause inflation. While it is true that central banks are responsible for both the issue and the maintenance of the value of the currency, they are not responsible for ‘printing’ the nation’s money supply. As the then-governor of the Bank of England Mervyn King once explained, it is the private commercial banking system that ‘prints’ 95 percent of broad money (money in any form including bank or other deposits as well as notes and coins) while the central bank issues only about 5 percent or less.3 In a lightly regulated system, it is private commercial banks that hold the power to dispense or withhold finance from those active in the economy.4 Yet neoliberal economists largely ignore private money ‘printing’ and aim their fire instead at governments and state-backed central bankers whom they regularly accuse of stoking inflation.

Where money comes from part 2: When young people leave school, obtain a job, and at the end of the month earn income, they wrongly assume that their newfound income is the result of work, or economic activity. This leads to the widespread assumption that money exists as a consequence of economic activity. In fact, with very rare exceptions, it is credit that, when issued by the bank and deposited as new money in a firm’s account, kick-starts activity. It was probably a bank overdraft that helped pay the wage she earned in that first job. Hopefully, her employment created additional economic activity (because, for example, she helped produce and sell widgets) which in turn generated income and savings needed to reduce the overdraft, repay the debt and afford her wage.


Financiers have made vast capital gains by siphoning rent (interest) from debt, but also by effortlessly draining rent from pre-existing assets such as land, property, natural resource monopolies (water, electricity), forests, works of art, race horses, brands and companies. As Michael Hudson writes, ‘the financial sector’s aim is not to minimize the cost of roads, electric power, transportation, water or education, but to maximize what can be charged as monopoly rent.’

It's not a commodity: The orthodox or neoclassical school of economists ... also conceive of [money] as akin to a commodity. Money, in their view, is representative of a tangible asset or scarce commodity, like gold or silver. As with any commodity, for example corn, money in the orthodox view can be set aside or saved, accumulated and then loaned out. Savers lend their surplus to borrowers, and bankers are mere intermediaries between savers and borrowers.
While it is true that some institutions (savings banks, credit unions, British building societies of old, today’s crowdfunders) collect savings and lend these out, commercial bankers have not acted as intermediaries between borrowers and savers, between ‘patient’ borrowers and ‘impatient’ lenders, since before the founding of the Bank of England in 1694.
Furthermore, because neoclassical economists conceive of money as having (like gold or silver) a scarcity value, they theorise as if money is subject to market forces, as if money’s ‘price’ – the rate of interest – is a consequence of the supply of and demand for money. Many argue that like commodities, money or savings can become scarce.
But money is not like a commodity, and to define it as such is to create a ‘false commodity’ as Karl Polanyi argued.1 On the contrary, with the development of sound monetary systems in developed economies, there is never a shortage of money for society’s most important needs. Instead the relevant question is: who controls the creation of money? And to what end is money created?
...
A small group of distinguished economists all understood that money as part of a developed monetary system is not, and never has taken the form of a commodity. Instead money and the rate of interest are both social constructs: social relationships and social arrangements based primarily and ultimately on trust. The thing we call money has its original basis in belief. Credit is a word based on the Latin word credo: I believe. ‘I believe you will pay, or repay me now or at some point in the future.’ Money and its ‘price’ – the rate of interest – became the measure of that trust and/or promise. Or, if trust is absent, the measure of a lack of trust. If the banker does not fully trust a customer to repay, they will demand more as collateral or in interest payments.
Money in this view is not the thing for which we exchange goods and services but by which we undertake this exchange, as John Law famously argued in 1705.3


The miracle of a developed monetary economy is this: savings are not necessary to fund purchases or investment. Those entrepreneurs or individuals in need of funds for investment need not rely on finance from individuals that set aside their income in a savings bank or under the mattress. Instead they can obtain finance from a private commercial bank. This availability of finance in a monetary economy is in contrast to a poor, under-developed, non-monetary economy where savings are the only source of finance for investment, and where inevitably, there is no money for society’s most urgent needs. ...To sum up: in a monetary economy saving is different from the business of building up a surplus of corn, and then lending it on. The corn can be saved without it ever affecting others. However, saving in an economy based on money always ‘affects others’ because it is always an act that sets up a financial relationship with others: a claim. Claims can take the form of an asset or a liability. So for example, when a central bank issues a dollar bill to a private bank, it has a duty (liability) to deliver the value of that currency to the bank that applies for it. The bank then has an asset (the dollar bill), but also owes something (a liability) to the central bank. When a commercial bank makes a deposit in a client’s account, it has a duty to disburse money to the person that applied for a loan (sometimes in the form of cash). The borrower has an asset, the money deposited, but also a liability, a duty to pay back the loan, and so on. These are the relationships – of credit and debt, between owners of liabilities and assets – that are fundamental to a monetary economy, and that generate the income and savings needed for investment, employment and all manner of useful and important activities.

The nature of money (according to Mark Carney?): Bank of England published two articles on the nature of money in their January 2014 Quarterly Bulletin. The articles were met with delight by monetary reformers and indifference by many mainstream economists.
The Bank’s economists made clear that most of the money in the modern economy is ‘printed’ by private commercial banks making loans – and is not created by central banks. In other words, almost all money in circulation originates as credit or debt in the private banking system. Rather than banks acting as intermediaries and lending out deposits that were placed with them, it is the act of lending itself that creates deposits or bank money, and is also a debt, the Bank’s staff explained. Of course this bank money is not actually printed by the private bank; only the central bank has the legal authority to print money and mint coins. The money created by a loan – bank money – is simply digitally transferred from one private bank account to another. The only evidence of its existence is in the numbers printed on a bank statement. Of the total amount of money created, only a tiny proportion is normally converted into tangible money in the form of notes and coins, or cash.
For private commercial bankers operating within a monetary economy, the relevant consideration is not the availability of existing savings, but the viability of the borrower, her project, her collateral and the assessment of whether the project will generate income with which she can repay the credit/debt.
And yes, the Bank of England confirmed that in a monetary economy the money multiplier (the percentage of deposits that banks are required to hold as reserves against lending) is an incorrect account of the lending process. Bank lending is not constrained by ‘reserves’. The assumption that banks hold reserves equal to a fraction of their lending – ‘fractional reserve banking’ – is wrong. Bank ‘reserves’ are not savings in the sense we understand them. They are resources (resembling an overdraft) made available only to the bankers licensed by the central bank. They are used to facilitate the ‘clearing’ process for settling deposits and liabilities between banks at the end of each day. Central bank reserves never leave the banking system to enter the real economy. While central bank reserves may help to free up the balance sheets of banks and other associated financial institutions, they cannot be used to lend on to firms or individuals in the non-bank economy.
...
The Bank’s economists confirmed that most of the money in the modern economy is created by private banks making loans. Moreover, the Bank emphasised that this was ‘the reverse of the sequence typically described in textbooks’. Let us be clear here: this was not a failure of some textbooks; it was a failure of virtually all economics textbooks.
As a result, economics students were and are still taught a fallacious theory of money. And this failure of teaching was and is symptomatic of an even greater failure: the failure of the academic economics profession itself, of its learned discussions, conferences, published papers and contributions o policy. And let us not beat about the bush: as the liberal John Hobson (1858–1940), an English economist and social scientist, observed over a hundred years ago:
The selection and rejection of ideas, hypotheses and formulae, the moulding of them into schools or tendencies of thought, and the propagation of them in the intellectual world, have been plainly directed by the pressure of class interests. In political economy, as we might well suspect, from its close bearing upon business and politics, we find the most incontestable example.6
The ‘moulds of schools of thought’ now dominant in both economics and wider society have led to vast capital gains for financial elites, and to a prolonged failure of the global economy and rising inequality. But thankfully, the triumph of class interests is not universal. The Bank of England rightly credits the handful of scholars that have railed against mainstream academia’s understanding of money.

Blame protestants for debt and climate change: In time, Christianity’s prohibition of usury was to be modified by John Calvin (1509–64) and other Christian leaders. On the four-hundredth anniversary of Calvin’s birth the Financial Times noted that Calvin’s escape from French Catholic rule, and his arrival in Geneva led to ‘a huge influx of protestants from France, following in Calvin’s footsteps [who] brought … skills to Geneva while the lifting of the Catholic Church’s ban on usury paved the way for the city’s pre-eminence in private banking.’2
Usury is today widely accepted as normal in western economies whose monetary systems have been weakened by the parasitic grasp of finance capital, and enfeebled by heavy burdens of debt. This acceptance blinds society to the way in which usury exacerbates the destructive extraction of assets from the earth. This happens because, as the English radiochemist, Professor Frederick Soddy (1877–1956) once explained,
Debts are subject to the laws of mathematics rather than physics.
Unlike wealth which is subject to the laws of thermodynamics, debts do not rot with old age and are not consumed in the process of living … On the contrary (debts) grow at so much per cent per annum, by the well-known mathematical laws of simple and compound interest … which leads to infinity … a mathematical not a physical quantity.3
By contrast, earth and its assets are finite and subject to the process of decay. Nature’s curve for growth is almost flat; the rate of interest’s curve is linear. Compounded interest’s curve is exponential.


global financial markets are bad: Professor Rey is not the first to note the lack of evidence that global capital mobility brings economic benefits. Back in 1998 an equally distinguished orthodox economist, Professor Jagdish Bhagwati, argued persuasively (in a paper that has also become famous) that we had been ‘bamboozled’ into believing that the central pillar of globalisation – capital mobility – should be celebrated. He noted that China and Japan,
different in politics and sociology as well as historical experience, have registered remarkable growth without capital account convertibility. Western Europe’s return to prosperity was also achieved without capital account convertibility …
In short, when we penetrate the fog of implausible assertions that surrounds the case for free capital mobility we realize that the idea and the ideology of free trade and its benefits … have been used to bamboozle us into celebrating the new world of trillions of dollars moving daily in a borderless world.12
Just as a well-managed banking system ends society’s dependence on robber barons at home, so should a well-developed and sound banking system end society’s and the economy’s reliance on international, mobile capital. With a managed domestic banking system, operated in the interests of both industry and labour, then government, industry and labour need not depend on, or fear, ‘bond vigilantes’ or ‘global capital markets’.
Our society’s subjection to the predations of these markets is a tragedy entirely of our own making. We, or at least our elected representatives and public authorities, including central bankers, allowed the capital mobility genie to escape from the bottle of domestic regulation. By doing so, we, or they, were ‘bamboozled’ into allowing a small financial elite to create colossal quantities of private wealth while burdening the world with debt, volatility, crises and rising rates of inequality.


This sounds like a good idea but implementation tricky: Keynes proposed a scheme at the 1944 Bretton Woods conference that would act as an incentive for both rich and poor countries to converge towards balance in financial, trade and labour flows. He called it an International Clearing Union (ICU). Its workings would resemble those of a domestic banking system. Just as in banking, at the heart of the ICU proposal would be the equivalent of a central bank: in this case, the master of all central banks.
The key role played by this new international central bank – the ICU – would be to manage flows of money between states, and to use a new currency, bancor, as the relevant currency. (In other words, a neutral currency, not the currency of one imperial power.) Like any other central bank (or indeed ordinary bank) the ICU would ‘clear’ deposits and withdrawals between trading states. And like any bank, the ICU would provide an ‘overdraft’ to debtor countries, enabling them to continue trading. However, it would penalise countries moving into deficit by applying punitive interest rates on that country’s ‘overdraft’ with the ICU.
But the proposed ICU differed from other central banks in one critical respect: it would also penalise countries that built up a surplus. In other words, countries that accumulated profits from trade, and deposited those profits in the ICU would be charged punitive rates of interest on the surplus.
Keynes argued that this was necessary because imbalances – like those between indebted Greece and profitable Germany – are dangerous. They lead to economic failure for the debtor and, with it, political hostility. Adjustment to restore balance between trading nations is therefore necessary if we are to prevent trade or currency wars, but also militarised war. However, under the current system (and within the Eurozone) the adjustment to those imbalances is compulsory for the debtor (for instance, Greece or Mozambique), but only voluntary for the creditor (like Germany or the United States). If trade between nations is to be fair, and not lead to rising tensions, then it will be necessary for both the debtors like Greece, and the creditors like Germany, to manage their trade in the interests of balance and stability.
The effect of this scheme would be to force both countries to import and export less. Instead, they would focus on expanding their domestic economies, to become more self-sufficient – a framework that would reduce toxic emissions from transporting freight across the world, helping restore balance to the ecosystem, too.

[Steffi · Rating 3 out of 5]

Cute, cute. Thinking back, ten years, ago, 15 September 2008 when the Lehman Brothers collapsed and comrade J and I discussed that this is probably the end of global financial capitalism. A few months later Obama got elected and we also thought that this is the end of US imperialism and neoliberalism. The joke’s on us since it then was Obama who rescued neoliberal capitalism and expanded US imperialism. LOL. It was also a good learning curve in terms of understanding that this was the outcome of decades of systematic deregulation of the banking system and that it was, again, the centre-left (Bill Clinton) who finally repealed the Glass-Steagall Act in 1999. So Obama then stacking half his cabinet and team of advisors with former Goldman Sachs and other bankers made only sense. By March 2019, the federal reserve already committed $7.77 trillion tax-payer backed money to rescuing the financial system. According to some estimates, this number has gone up to US$ 29 trillion, while free healthcare, of course, remains an unaffordable pipeline.

Anyway, the ten year Global Financial Crisis (GFC) anniversary is an excellent opportunity to try again to get to the bottom of monetary theory and strategies for a progressive and democratic financial system. The ‘Production of Money How to Break the Power of Bankers’ (VERSO, 2018) explores some concrete ideas in which democracies could reclaim control over money production and restrain the out-of-control finance sector so that it serves the interests of society and the environment. What I found problematic and what I will now investigate some more over the coming months is the author’s discussion of Keynes’s monetary theory. While the centre left historically referred to Keynes’s fiscal policies, his monetary theories, which are less well understood, could provide the basis for a democratic financial system. However, this is, if I understand it correctly, essentially based on a critique of global financial capitalism where the primary contradiction is not between capital and labour but between the (national) productive economy (‘good capitalism’) and the (global) financial sector (‘bad capitalism’) which then opens all sorts of right-wing and anti-Semitic ideological doors. Anyway, more on this in a wee weeks’ time 

[Rob M · Rating 4 out of 5]

Going out on a limb, I’d guess that most people who don’t work in the banking sector (and maybe even some that do!) don’t actually understand what “monetary policy” actually is. I certainly didn’t.

In The Production of Money, Ann Pettifor painstakingly spells out the need for the layperson to have a basic working knowledge of monetary policy, especially if we are to save our democracy from the despotism of global finance. She observes that the financial elite – and many of the academic economists who enable them – deliberately propagate a distorted view of the money system, as if it’s behaviour was an immutable law of nature, rather than a carefully rigged arrangement designed to maintain the dominant position of finance over governments, industry and workers.

She dispels the myth that credit is the loaning out of existing, hoarded wealth as if we still lived in the age of robber barons sitting on piles of gold. Money is debt, and credit is the production of debt from thin air. A calculated gamble that it will generate enough new value in order to pay itself back and more.

In a healthy economy, each unit of money conjured up goes towards generating value – by creating employment and enabling productive activity. Thus, the invented credit money has truly become real value.

In an unhealthy economy, dominated by the desire of financial speculators to generate profits at maximum speed with minimum risk, this credit will be used to inflate the value of assets and the ability to extract the highest rent or interest from them. After a given point, if enough of the money in the system hasn’t generated any value in the real economy via productive enterprise, then a simple default at the bottom of the chain of rent generating assets causes the entire scheme to collapse.

You won’t be surprised, then, to hear that Ann Pettifor is one of the few economists who predicted the great financial crash of 2007/8.

Monetary policy relates to the rules set by governments, implemented through a central bank, that control the creation of new money via the issuing of credit by private banks, as well as the rate of interest offered on government debt or loans.

Pettifor argues that the best way of directing monetary policy for the greatest social good is by making credit relatively hard to get, but very cheap (i.e. at low rates of interest). This “tight but cheap” money will mainly be dished out as loans to people with a believable plan to invest it in a productive fashion, and its cheapness will enable that productivity to more easily become profitable.

She argues that we live in an age were the opposite is true – in which we have access to “easy but costly” credit. This means it is easy to become indebted by using accessible credit for consumption or to purchase assets (mortgages and credit cards for example). Credit issued in this way directs people to invest in property instead of business or industry, so they can begin to charge rent immediately in order to pay off the interest, which is in itself a form of rent (you pay rent to the owner of your house, who pays rent to the owner of his debt, and so on). The growth generated by the extension of this easy but expensive credit enriches those with large asset portfolios, but does nothing to improve the economic situation of workers, entrenching inequality.

She also argues that the free movement of capital, which bankers have so very carefully branded as a progressive development for humankind, is nothing of the sort. It has in fact simply made it easier for financiers to invest their money anywhere in the world where rent seeking is most profitable. This means draining potentially productive capital from developed economies to exploit poor – or “sub-prime” – borrowers who can be charged inflated interest as security against their lack of collateral. This sub-prime borrower might be a poor homeowner in Detroit, or an entire nation without a sound financial and industrial infrastructure of its own. Alongside “tight, cheap credit”, dis-incentivising the free movement of capital by taxing it when it moves across borders (“capital controls”) will promote the reinvestment of a greater share of the wealth generated in a particular country into its own real economy, giving greater power to democracies to direct their own development for the greater good.

The Production of Money is a fantastic, informative guide for anyone on the left looking to boost their understanding of money, interest and credit – especially if they already have a fair grasp of more tangible economic activity such as taxation and public spending. However, it doesn’t go much in for visual metaphors or allegory. Although it breaks down complicated financial concepts to an extent, it assumes a fair bit of prior knowledge from the reader.

Pettifor does not hide that she is attempting rehabilitate the the theories of legendary British economist John Maynard Keynes and demonstrate their particular applicability in the post 2008 world. Neither does she shy away from attacks on “orthodox” or “classical” economics, which she regards as a great sham perpetrated by a combination of ruthless vested interests and academic useful idiots. This book is therefore quite a difficult read if you’re not already comfortable enough with the premises behind Keynesianism or Classical Economics to know why they need scrutiny! Although the book is concise, it could possibly use a few primer chapters at the beginning to get the reader up to speed on what it is they are learning to oppose.

If you’ve come to enjoy the good humour of economics heart-throb Yanis Varoufakis, Ann Pettifor’s no-fucking-around intellectualism is going to feel like a slap to the face. However, The Production of Money is no dry economics text book; it’s a furiously argued, passionate polemic, full of burning rage at the criminality of the financial class and a desperate desire to empower regular people with the knowledge to take back control of a society subjugated by the tyranny of global finance.

[Leo · Rating 2 out of 5]

A very introductory book which repeats itself in the last few chapters, despite being 160 not very big pages. At its best when outlining a (Keynesian) theory of money and credit creation.

It usefully clarified for me that the Keynesian monetary position is also an argument for an alliance between 'industry' and 'labour' against exploitative 'rentier' finance. The constant opposition in the book is between rentiers, 'finance' and 'speculation' on the one hand, and 'productive activity' on the other. Asserting public control over credit creation is held as they key to gearing the economy back towards productive activity, though the proposals advanced in the book don't go very far. (Pettifor is particularly resistant to the idea of public banks - on the idea of those, see here: https://thenextsystem.org/learn/stori...)

Pettifor never examines the 'industry-labour' relationship, though. Can industry exploit labour? What accounts for industrial activity being 'productive'? This is never addressed. That is to say, Pettifor has a complete blind spot for Marxist political economy. Marx's theory of money isn't discussed at all - to all intents and purposes it seems Pettifor isn't familiar with it. This omission becomes all the more glaring when Pettifor offers an explanation for the prevalence of flawed monetary theories in terms of the interests of financial capital. At times, she lapses into comical commodity-fetishism of the kind Marx identified in 'Capital': "...money does not just 'circulate'. Instead it helps achieve things of immeasurable value: healthy communities and ultimately a health society. Money can help create employment. In doing so, it does not just 'circulate'. It helps create activity - artistic, scientific, practical or therapeutic." Marx talks somewhere in Capital about how capital makes the productive powers of human labour appear as though they were powers of capital, and Pettifor seems at times to be lost in that world of appearance.

Pettifor consistently romanticizes a 'golden age' of postwar 'democratic, regulated' capitalism, when Keynesian fiscal and monetary policies reigned supreme, and she thinks pretty much everything wrong with the present world economy stems from the fact that postwar order gave way to the rule of financial capital from the 1970s onwards. Yet she is unable to explain satisfactorily why the first era gave way to the second, except with reference to a story about an elite conspiracy between neoliberal intellectuals and their alleged financial backers to discredit Keynes's ideas and hijack democracy (which just serves to raise more questions than it answers about how democratic postwar 'democracy' really was). She also offers no real empirical evidence for the links between financiers and neoliberals her story is based on, or for their determining influence on key government policy decisions.

A book like Ralph Miliband's 'The State in Capitalist Society', written in 1969, goes a long way towards refuting Pettifor's view of the postwar world as one where public, democratic authority reigned supreme, and only later was economic power 'transferred' to 'private wealthy elites'. Pettifor seems to equate the weakness of financial capital with the rule of democracy, which to me seems to confuse a necessary condition for a sufficient one.

Geoffrey Ingham's 'Capitalism Divided?' paints a very different picture of Britain's political economy in the postwar period - he argues the City has been the hegemonic fraction of British capital going back over a century. I found it odd Pettifor didn't address that argument, since she says in the acknowledgments she owes "a particular debt to Geoffrey Ingham, author of 'The Nature of Money', a book very important to me because of its clear and forensic analysis of money and the monetary system."

I still found its first few chapters an interesting discussion of credit creation, attack on monetarism, and critique of the role of rentier interests in the modern financialised economy, but it left me wanting to read something else more in-depth, comprehensive and radical.

[Don · Rating 4 out of 5]

Pettifor takes up the cudgels on behalf of J.M. Keynes and his theory of money and pitches in with a fierce polemic against the neoclassical school.

Her argument hinges on Keyne’s great insight that all money is debt, even when it takes the form of a banknote (“I promise to pay the bearer on demand’, etc). Whilst the orthodox mainstream see little that is worthy of note about the phenomenon, being just a means to mediate exchanges between the provider of a good or services and a consumer, Pettifor sets out the view that the bond of social trust that money represents is crucial to understand why economies either flourish or flounder.

She is good at tackling the misunderstandings that are very common about the nature of money. For example, very little of the stuff that facilitates the countless exchanges that take place every day takes the form of the physical stuff that bears the imprimatur of the body which has a monopoly on producing money – the national bank. Ninety-five percent of the medium of exchange is conjured up on bank ledgers, with balances being reported nowadays by the computers that tell you how much spending your bank account will let you do. When a bank official tells you, yes, your can have that £10,000 loan it does not involve the shifting of wads of physical money from its reserves to wherever you wish to store the cash – it figures simply as a plus sign shown on your account report that your spending limit has increased by that amount.

Pettifor believes that this pricks the bubble of falseness which tells us that there is ‘magic money tree’. In truth we do not have to invoke the supernatural to explain where this money comes from; it is robust and perfectly rational social science that tells us it pops into existence whenever there is the prospective of useful work to be done.

The key to understanding money it seems lies with the nature of trust and what needs to exist in society in order that it is sustained. The bank official will not – or should not – grant me £10,000 if there was not collateral behind me which established the fact that I was a plausible and trustworthy person, and that my proposed use of the money would add value to whatever project I was involved in. This might take the form of a new piece of machinery that increased the productivity of the workers in my factory, or an increment to the value of a piece of property consequent to putting in a new extension. The banker would be doing her job is she considered all of these factors in their appropriate depth and reached a conclusion as to whether grant or refuse the credit based in this appraisal.

In this way banks can create billions of amounts of money every day and is licensed to do so by the fact that they have an account with that great bank of all banks, the national bank. At the end of each day they report the high street bank reports its trading activity to the national bank and it agrees to cover them for the liabilities they have entered into as a result of granting loans. National banks can do this because they have the authority of the state behind them, and as long as the state is able to produce its own currency, it can never go bankrupt.

With this much explained we get to understand the full extent of the folly that produced the credit crunch crisis of 2007, which morphed into the sovereign debt crisis, which continues until today. What we have no come to term the ‘financialisation’ of approaches to banking and the provision of financial services had overwhelmed what has been considered the good practices of the old high street bank, which required the bank manager to know her customers and to understand their level of creditworthiness. The panoply of exotic credit instruments that had come into existence in the years preceding the crunch has encouraged the finance industry to think that risk had been eliminated from the business of lending and that money could be ploughed in unlimited amounts into problematic areas like the subprime mortgage market. When this bubble burst so dramatically all sense of anything or anyone being trustworthy vanished, and the heavily bailed-out banks stopped lending to just about anyone, including the businesses that were supposed to be sustaining the growth and prosperity of the nation.

Pettifor’s short book is essentially an appeal to return to a full appreciation of both the nature of money, as credit on one side of the ledger and debt on the other, and the wonders that it can perform when we have a solid theory on how it can function providing sufficient trust is maintained in the social processes which oversee its production.

Her argument becomes radical because it makes democracy central to these processes of money production. The central bank needs to operate with a mandate which covers the social good of full employment in its remit, alongside keeping a wary eye on levels of inflation. Providing that its daily work is properly monitored by the representatives of democratic society, and it is not permitted to captured by self-interested elites chasing the quick bucks that come from inflated share-holder value and suchlike, then the line will be held against the demoralising, destructive tendency towards austerity and other ways to squeeze the public realm.

All-in-all, this is a short book that helps to set out some solid thinking about the true nature of money, and how, in the hands of a democracy determined to promote the welfare of the entire population, it can become something that resembles the magic tree which the politicians are so keen to disaparage.

[meandermind · Rating 1 out of 5]

I had such a hard time with this. Pettifor says she wants to make macroeconomic theory accessible to feminists and environmentalists. Let's just process that for a minute. Feminists and environmentalists? Can't they understand economics? Of course not, they're all stupid. (irony)
Also, she doesn't really do that. Environment, sure, she squeezes in a little consumerism and capitalism every now and then, but feminism? Nope. On the next to last page she mentions feminism and equality but that's not enough to call this feminist.

Okay so let's leave the feminist bit aside, I can do my own feminist analysis of the text another time. So we're supposed to get to understand banks? And money? Well, I guess I understand a bit more, but it wasn't exactly because Pettifor explains wonderfully. SO MANY TERMS. Couldn't there have been like a phrase list at the end, or at least couldn't the author explain some terms? It took me half the book to get what "guldmyntfot" is (i read it in Swedish, have no idea what the English term is) and I'm still not sure! I guess it's money value being tied to gold value?

What I took away from this book was that yes, we can afford it. We can afford healthcare, schools, retirement homes etc. There is always money. And also the face that lending is a good thing because it generates more money, that's actually something I hadn't thought of before. Also because most loans today are for houses, which isn't exactly a business that helps the world - but that's not something Pettifor brings up, not nearly enough!

What she does explain thoroughly are things that don't really need explaining. There is an imbalance in the writing, it's like half an article for other finance people and half a book for idiots but also written by one. "imagine if all the water stations were owned by a few people. They would have clean water but all the other people would have a hard time getting clean water. That's what it's like with money. " Im paraphrasing but that's the level on which she uses similies, but the speculation things, the whole state bank vs private bank's interests, those she just dumps on us.

What I'm missing is a good, solid explanation of how it works, how it's supposed to work, and what we should do instead. The how it's supposed to work is missing. I mean, somewhere someone is realising the "invisible hand" isn't doing it's job, even if you haven't studied keynes in school. The current system has to have a PoV, right? Now we just know it's not working, and anyone with eyes can understand THAT bit.

Oh, and the names. Aaaall the names. Everyobe who ever had a thing to do with banks are mentioned here, without really it adding to the read in any way. Seriously, there is a part where she goes through a bunch of different "rescue the economy"-ideas and does a whole thing about mentioning BY NAME everyone who thought of an idea. But the explanation of the ideas is basically "yeah sorry, you're wrong and all of these are really the same" GAH!

So sandwiched in between all the annoyances lies a small truth to why this book was written: john maynard keynes is the most wonderful and beautiful person who ever lived. Seriously, this book adds so many adjectives to Keynes it gets ridiculous. Explain his theory, not his "groundbreaking" and "sadly distorted in schools today". Skip the value words! And also, get a room with Keynes and leave me out of it.

[Mat Davies · Rating 4 out of 5]

This is an important book. I am familiar with the author’s work. However, this book explains her analysis and policy recommendations clearly. The Bank of England confirmed that most money (95%) was, and is created by private banks when a person takes out a loan. That matters. Let me repeat. That matter a F***ton.

This revelation is very important. Firstly, because all the political discussion around public sector savings and balancing the books, in addition to Thatcher’s philosophy of treating public spending like we treat our personal finances, as unquestionably wrong - and yet, a way of seeing the world that can be heard in any watering hole.

Secondly, because it means that pretty much every economic textbook written and taught in schools was intrinsically false. We have been teaching A-Level, IB, Senior High School Tests, and university economic courses with false information. That means that we have an entire population of economists who have applied false models and philosophies to their analysis.

I say again – the explanation of what money is, how it is created and therefore what most people think is wrong. According to the Bank of England, ‘the reverse of the sequence typically described in textbooks’ Forget Thatcher. Forget American financiers who justify economic enslavement for their population.

Why and how could this happen? The book explores this by drawing on a lot of important economists, but primarily Keynes. There is also a fair amount of analysis concerning international institutions such as the IMF, and actually, a lot of pragmatic policy suggestions that do what many critical books don't.

Offer solutions.

Some of those solutions are old. Such as Keynes’ concerning an international organization that incentivizes and disincentives saving and spending. And various other ideas that were smashed by the American government at the end of WW2 – immediate power overshadowed long term solutions. A mistake that one cannot see being easily reversed with Captain. Trump in the White House.

There are a few very good NGOs out there that are challenging and offering policy recommendations such as the New Economics Foundation and Positive Money. Y concern is that they will bicker among one another to much and forget that actually, at this point, most of them have good ideas about financial reform.

What Anne Pettifor does, is link the contemporary right wing movements with the economic frustration that people feel. As a Welshman, I am annoyed that Wales voted for BREXIT. However, I sympathise with the frustration people feel. The author does a good job of linking those examples to finance.

At times the book can feel dry because the subject is at times. But there is so much in it that is incredibly smart, including, but not reduced to, its analysis, policy ideas, and social pointers such as women in work, and the environmental movement.

Good stuff.

[Quitehumerus · Rating 4 out of 5]

Terve kaikille, mun lukutavoite on tässä vähän kärsinyt mutta here we go again.

Luin The Production of Money alunperin vaihdossa mutta unohdin kyllä kaiken tästä sen jälkeen. Tuntui silti että tässä oli suht tärkeä viesti ja toisen lukukerran jälkeen oon samaa mieltä. Tästä rebyystä tuli vähän pitkä, mutta jäsennän tässä samalla vähän omia ajatuksia pankeista ja tuloeroista koska tuntuu että tää opus antoi ihan hyödyllistä lisätietoa.

Mun korviin on viime aikoina kantautunut paljon juttua että jotain on vialla talouden kanssa: rikkaat rikastuu, työttömyysasteet ovat korkealla ja talouskasvua ei ole vaikka keskuspankin korot on nollissa. En kuitenkaan oo saanut pin down niitä mekanismeja miksi näin on.

Taloustieteen perusteoriat eivät tunnu oikein ottavan kantaa tuloeroihin ja tarkastelua vaikeuttaa (syystäkin) vihaiset maallikot jotka sanovat "capitalism bad" ilman sen suurempaa substanssia.

Ann Pettifor valottaa ainakin yhtä mahdollista/todennäköistä syytä yllämainittuun kehitykseen: pankit. Tää nyt ei tietenkään tuu kellekään yllätyksenä että pankkiireilla on kyseenalainen maine, jo muinainen Aivovuoto sen totesi. Pankeille on nyky-yhteiskunnassa suotu yksi väline jonka väärinkäytöstä tulee ongelmia: valvomaton lainananto.

Perus talousteorioiden mukaan pankit vain välittävät säästäjien ylimääräiset varat lainojen muodossa niille jotka tarvitsevat rahoitusta. Tällöin rahan hinta eli korko määräytyy kysynnän ja tarjonnan mukaan normaalilla markkinamekanismilla: talouskasvun kiihtyessä rahan kysyntä ja korot kasvavat.

Pettifor argumentoi edesmenneen J. M. Keynesin tapaan että asia on päinvastoin: korkotaso määrittää taloudellisen toiminnan määrää. Toinen Pettiforin pääargumentti on, että pankeille on annettu liikaa valtaa korkotason määrämiseen.

Reaalimaailmasta tiedetään että pankit ovat myös omaa etuaan ajavia yrityksiä, mikä on ristiriidassa talousteorioiden kanssa. Pettiforin mielestä pankit siis asettavat korot reaalimielessä liian korkeiksi, mikä heikentää taloudellista toimintaa niiden keskuudessa, joilla ei ole valmiiksi vakuuksia, kuten yrityksen perustajat.

Pankit tietävät että markkinoilta löytyy niitä jotka pystyvät maksamaan korkeat korot jotka ovat tietenkin rikkaat. Heillä on antaa vakuuksia ja maksukykyä löytyy, mutta heidän rahankäyttötarkoituksensa ovat useammin spekulatiivisia, osakkeita ja sijoitusasuntoja, mikä usein johtaa hintakuplien muodostumiseen (ks. Helsinki).

Tavanomaisessa markkinamekanismiin perustuvassa koron määräytymisen mallissa ei ole siis mitään järkeä koska fraktionaalisen pankkijärjestelmän ja lepsujen reservivaatimusten takia pankkien mahdollisuudet tarjota lainaa ovat loppumattomat. Käytännössä rahaa riittää jokaiselle lainaajalle, mutta pankit asettavat korkonsa houkutellakseen rikkaita lainaamaan spekulatiivisiin tarkoituksiin. Eihän se ole mikään vitun yllätys että yksityisyritys toimii oman eikä yleisen edun mukaisesti.

Ei ole myöskään yllättävää että pankkien edutavoittelu on talouden pullonkaula: korkeiden reaalikorkojen takia rikkaat syytävät rahaa bitcoineihin samalla kun hyödylliset ja merkitykselliset kohteet kuten tiede, taide, pienyritykset ja työpaikat jäävät rahoittamatta.

Bottom line: rahan tarjonta modernissa yhteiskunnassa on käytännössä loputon. Se ei meinaa että pitäisi olla vitun tyhmä mutta suoraan sanottuna nykymenosta ei oikein typerämmäksi enää pääse. En tässä edes koskenut kuinka keskuspankkien tiukat inflaatiotargetoinnit ja valtioiden säästöpolitiikat hyödyttävät lähinnä lainanantajia.

[Leif · Rating 3 out of 5]

At first I was thrown off by the mediocre writing and the constant, near-hagiographic veneration of Keynes. Chapter after chapter flew by without making too much of an impression: Pettifor both repeats herself and is clear about her central points, making a short text that much shorter. But I'm glad I stuck around to the finish line, because the final substantive chapter is a set of policy proposals that make the book's aims and narrative, and not just its quarrels with other economists, much more realized. Here's Pettifor in a sketch:

As the world appears to hurtle towards an era of chaotic protectionism and the threat of war, how can democratic societies alter this disastrous course of events? I would argue that first and foremost, we must demand the transformation of our financial systems, to render the finance sector servant, not master, of both domestic economies and the global economy. The management of financial flows would begin to end the asymmetry caused by the absolute advantage that finance has enjoyed over the comparative advantages of trade and labour.

Most of it is there: the assault on the oligarchal, mostly technocratic finance capitalists, the implicit trust in democratic systems of governance, and the movement to regulation and Keynesianism that both precedes and follows this.

Another key component of Pettifor's argument is monetary theory and the role of credit, which she views as an immense public power that has been usurped by the small elite of finance capitalists and buttressed by lobbying and corruption. As she clarifies, in one of her few explored metaphors,

The impact of the finance sector's power-grab for our monetary system can only be fully grasped if we compare it to a power-grab for the public sanitation system. Were the sanitation system to be captured in the same way, we would live in a world in which a small elite abused a great public good. That elite would grow fit and healthy because they would be protected from dirty water and disease, while the rest of society would be weakened by only occasional access to clean water and hygienic sanitation. That is effectively what has happened in economic terms since the finance sector made a power-grab for the money system in the late 1960s and '70s. Financial elites have grown wealthy beyond imagining; the middle classes and the poor have grown poorer as inequality has skyrocketed, and the labour movement has been shackled. This has led to economic failure, and social and political unrest.

In small doses such as this, Pettifor is illuminating. And her predictions are generally well evidenced and, to judge from previous successes in prophesizing the financial crisis of 2007/8 and the brokenness of the international finance system, she is always right on the money. But it's not easy to move from these blocks of text to practical or pragmatic actions.

The audience of this isn't quite clear to me. It's certainly more dense than a casual reader would be prepared for, many of its arguments seem aimed at a small group of economists, and its politics relegate it to a (sadly) limited but appreciative audience willing to countenance the repeated use of "robber barons" to refer to major capitalists -- not inaccurate, I have to say. But the prescriptions are governmental and state-level, and thus it's a confusing proposition across the board.

Lastly, one area in which Pettifor shines is in her short conclusion's arguments for the relevance of feminism and environmentalism. As she points out in a sharp drive-by on the financial sector, "At present the networks that dominate the financial sector are overwhelmingly male, and often shockingly sexist." I wish that she had foregrounded this earlier and built it up through her critique, but I also see why she did not. Similarly, her prognosis of environmentalists is equally short and equally tantalizing.

Whether these arguments are enough to sway the public from the authoritaritan fancies that are presumably the refuge of the fearful is, of course, a moot question: in their present form, they are not. Nor is this approach likely to sway the vast course of modern business school financial ideology with its endemically toxic masculinity. But it is something.

[Andy · Rating 4 out of 5]

A small but important book, exploring how money is created by private banks, and how our current financial system has permitted the tail to wag the dog. Looking at the influence of neoliberal dogma since the 1970s and how our bloated financial sector has become almost entirely divorced from the real economy. Clearly argued and well backed up and referenced.

[Catie · Rating 4 out of 5]

"In a well-managed financial system, money provides the catalyst, the finance model needed for innovation, for production and for job creation. In a well-managed economy, money is invested in productive, not speculative, economic activity. In a stable system, economic activity (investment, employment) generates profits, wages and income that can be used for repayment of the original credit."

"The experience of financial deregulation has shown that capitalism insulated from popular democracy degenerates into rent-seeking, criminality and grand corruption."

"Money and the rate of interest are both social constructs: social relationships and social arrangements based primarily and ultimately on trust. The thing we call money has its original basis in belief."

"Austerity effectively punishes those innocent of causing the crisis - those dependent on state welfare - while deflationary pressures increase the value of assets owned by those responsible for the crisis."

"Employment (as we know from direct experience) generates income. If it is regular employment, it also generates tax revenues - with which to repay the debt."

"Borrowed money does not just 'circulate.' It creates purchasing power that gets used up as investment and in the creation of employment, economic activity and income. Above all, it provides purchasing power that can, if well used, generate additional income."

"Society's social relationships, its values and standards cannot be bought and sold like commodities, finished goods or services. They can only be upheld through the setting of democratically agreed standards, oversight and regulation."

[Milk Booman · Rating 4 out of 5]

Pettifor offers a very good analysis of the concept of Money and a prescription for the recurring Economic crises blighting Western Economies since the 80s.
The topics discussed have become ever more relevant amidst the politico-economic environment of "Bond vigilantism" holding sovereign government to ransom.

Pettifor explains why these state of affairs, for the prospect of a more equitable and sustainable future, can not continue. Furthermore, within the book is outlined a number of straightforward (but astonishingly radical in contemporary politics) policy prescriptions to achieve this and return the private finance sector to obeying the interests of public society.

[Georg Sagittarius · Rating 4 out of 5]

Kurzmeinung: Top & ohne Chance: "den Banken die Macht d. Geldschöpfung zu entziehen &…öffentl. Kontrolle über schuldenfreie Geldversorgung herzustellen”!

Verdienstvolle Friedens- & Schuldenerlaß-Streiterin! Beachtenswert! Aber die Vorschläge sind m.E. ohne Chance: Macht(vergrößerungsbestreben), Egomanie, Negativ-Konformismus, Geld(Schöpfung) von Banken, Milliardären, "Deep State"/"Tiefer Staat" (Ullrich Mies)... & "gänzliche Entartung der Menschheit" (Jakob Lorber) sind zu weit fortgeschritten & der laut Christus nicht mehr verhinderbare 3.Wk ("extremistische USA" laut Noam Chomsky) steht bevor (m.E. 2026, Kurt Eggenstein, M Kahir), gefolgt von den "letzten sieben Jahren der Erde" (Bertha Dudde, Gerd Gutemann, Daniel/AT)!

Meine komplette & aktuelle Rezension ist hier zu finden:
https://www.lovelybooks.de/autor/Ann-...

1) Fazit: a) "Pettifor [de.wikipedia Ann_Pettifor] wurde umfangreich ausgezeichnet, v.a. für ihre Bemühungen um Frieden & Schuldenerlaß für arme Länder & für dieses Buch mit dem Hannah-Arendt-Preis 2018 ausgezeichnet."

b) Beachtenswert! Aber die Vorschläge sind m.E. ohne Chance:
b1) Macht(vergrößerungsbestreben), Egomanie, Negativ-Konformismus, Geld(Schöpfung) von Banken, Milliardären, "Deep State"/"Tiefer Staat" (Ullrich Mies)... & "gänzliche Entartung der Menschheit" (Jakob Lorber) sind zu weit fortgeschritten &
b2) der laut Christus (Jakob Lorber, Bertha Dudde) nicht mehr verhinderbare 3.Weltkrieg (Daniele Ganser! "extremistische USA" laut Noam Chomsky) steht bevor (m.E. 2026, Kurt Eggenstein, M Kahir), gefolgt von den "letzten sieben Jahren der Erde" (Bertha Dudde, Gerd Gutemann, Daniel/AT, Walter Lutz!
Siehe auch Hannelore Winkler! Max Seltmann! Gottfried Mayerhofer, Michael Nolten)!

c) 7 S. Literaturverzeichnis
Keine Fuß- oder Endnoten,, kein Sach- & Personen-Register!

d) youtu.be: LSE Events | Ann Pettifor | The Production of Money: how to break the power of bankers
youtube Ann+Pettifor+

2) Hilfreiches
a) Inhaltsangabe:
a1) 17 S. Leseprobe mit IHV: bpb.de
a2) deutschlandfunk.de: Katja Scherer, 2018: siehe Punkt 3
a3) wikipedia Die_Produktion_des_Geldes:
"Das Buch besteht aus drei Teilen.
- Im ersten Teil wird das bestehende System der Geldschöpfung und dessen Krisenanfälligkeit beschrieben. Problematisch am bestehenden System sei demnach „erstens die Möglichkeit, Kredite ohne wirksame Kontrolle und Regulierung zu schaffen, zu bepreisen und zu vergeben und zweitens die Möglichkeit, die globalen Geldflüsse über Grenzen hinweg zu ‚managen‘ – ohne dass regulatorische Instanzen sich darum kümmerten“.
- Im zweiten Teil wird die fehlende Wirksamkeit bestehender Reformansätze erörtert. So kritisiert die Verfasserin die Forderungen der Vollgeld-Bewegung, das Recht zur Schaffung von Krediten von den Banken an die Zentralbank zu übertragen: Die Macht „auf ein kleines Gremium von Personen an der Spitze einer Zentralbank zu übertragen, wäre nach meinem Dafürhalten ein Schritt auf dem Weg in eine Autokratie“.
- Im dritten Teil werden neue Lösungsvorschläge aufgezeigt. Sie weist hierbei auf die Lehren John Maynard Keynes’ hin, indem sie ein Ende einer Sparpolitik fordert, „zum Beispiel für sinnvolle, sichere Arbeit; für die Energiewende weg von fossilen Brennstoffen; für die Herausforderungen sehr junger, aber auch alternder Gesellschaften“. Eine Kernforderung Pettifors ist die Beschneidung der Rechte des Finanzsektors mit dem Ziel einer „Wiederherstellung eines gerechten Geldsystems, das den Finanzsektor nicht länger Herr der Wirtschaft sein lässt, sondern wieder in die Rolle des Dieners verweist“. "

a4) bpb.de: "Die meisten Ökonomen haben die Flutwelle übersehen, die zwischen 2007 und 2009 viele Banken und andere Finanzinstitute überrollte und Volkswirtschaften ins Wanken brachte. Die meisten politischen Entscheidungsträger würden, so der Eindruck Pettifors, auch zukünftige Blasen, Finanzkrisen und Währungskollapse eher hinnehmen, statt umfassende Reformen durchzuführen, um so die Wirtschaft zu stärken, die Demokratie zu schützen und eine ökologisch nachhaltigere Welt zu ermöglichen. Daher müssten die Bürger vorangehen, um Reformen des Geldsystems auf den Weg zu bringen und die Macht des Finanzkapitals dauerhaft zu bändigen. Voraussetzung dafür wäre, besser zu verstehen, wie das Bankengeld-System funktioniert – und welche anderen Systeme denkbar sind."

b) Auszeichnungen (de.wikipedia Ann_Pettifor)
b1) Ann Pettifor wurde 1999 von der Stadt Callao in Peru für ihren Einsatz zum Schuldenerlass für Peru geehrt.
b2) 2000 erhielt sie gemeinsam mit Laura Vargas den Internationalen Friedenspreis Pax Christi.
b3) Im Jahr 2001 wurde ihr die Ehrendoktorwürde der University of Newcastle verliehen.[3]
b4) Vom Erzbischof von Canterbury wurde sie im selben Jahr mit einem Lambeth Degree ausgezeichnet.
b5) Der Präsident Nigerias, Olusegun Obasanjo, machte sie zum Mitglied des Ordens des Niger (MON) für ihre Kampagne zum Schuldenerlass für die ärmsten Länder Afrikas.
b6) Für ihr Buch Die Produktion des Geldes erhielt sie 2018 den gemeinsam von der Heinrich-Böll-Stiftung und dem Bremer Senat vergebenen Hannah-Arendt-Preis.[2]

3) Rezensionen
a) deutschlandfunk.de: Katja Scherer, 2018: "Die letzte Finanzkrise hat weltweit zu Verwerfungen geführt – und gezeigt, wie anfällig unserer globales Finanzsystem ist. Für die britische Analystin Ann Pettifor liegt das vor allem an zu vielen Freiheiten im Finanzsektor. Für Ann Pettifor krankt das Finanzsystem an einem grundlegenden Strukturproblem: Die Finanzindustrie sei nicht mehr Diener, sondern längst Herr der Gesellschaft, schreibt sie. Daran habe sich auch nach der Finanzkrise kaum etwas verändert:
„Zehn Jahre nach Beginn der Rezession im Jahr 2007, während die Ungleichheit Gesellschaften spaltet, wird die Welt von einem Oligopol beherrscht, das gierig Reichtum in einem obszönen Ausmaß anhäuft.“
Mit ihrem Buch will die Ökonomin einen Anstoß liefern, das zu ändern. „Die Produktion des Geldes“ ist in drei Teile gegliedert. Im ersten Teil erklärt die Autorin, wie das heutige System der Geldschöpfung funktioniert und warum es so krisenanfällig ist. Im zweiten Teil ihres Buches erläutert sie, warum Reformansätze wie die Vollgeldbewegung ihrer Ansicht nach nicht zielführend sind. Und im dritten Teil präsentiert sie ihren Lösungsvorschlag.

Problematisch am heutigen Finanzsystem ist nach Pettifors Ansicht vor allem, dass der Staat privaten Geschäftsbanken zu viel Macht übertragen habe:
„... erstens die Möglichkeit, Kredite ohne wirksame Kontrolle und Regulierung zu schaffen, zu bepreisen und zu vergeben und
zweitens die Möglichkeit, die globalen Geldflüsse über Grenzen hinweg zu ‚managen‘ – ohne dass regulatorische Instanzen sich darum kümmerten.“ Geld für andere Zwecke bewilligen.

Die Autorin beschreibt, wie Privatbanken Kredite vergeben, also Geld erschaffen, einfach, indem sie Zahlen in den Computer eintippen. Und sie kritisiert, dass Banken weitgehend frei entscheiden können, wem sie zu welchem Zins Geld leihen. In der Tendenz fließe daher Geld vor allem in spekulative und renditeträchtige, wenig aber in gesellschaftlich sinnvolle Projekte.
Eine Ursache dafür ist für Pettifor das Versagen der Ökonomie: Die große Mehrheit der Ökonomen und Politiker befasse sich entweder gar nicht mit dem Geldsystem oder übernehme unkritisch die orthodoxe Lehre des freien Marktes, kritisiert sie. Die Finanzindustrie wiederum nutze dieses Vakuum für gezielte Lobbyarbeit:

„Banker_innen und Hedgefonds-Manager_innen an der Wall Street und in anderen Finanzzentren haben sich sehr bemüht, die demokratischen Institutionen zu schwächen. Sie haben sich für die Aufweichung von Regulierungsvorschriften, für Steuersenkungen auf Kapitalerträge und für die Rücknahme fortschrittlicher Besteuerungsregeln eingesetzt.“
Im zweiten Teil ihres Buches geht die Autorin auf verschiedene Reformvorschläge für das Finanzsystem ein, etwa das sogenannte Vollgeld. Anhänger dieser Bewegung wollen unter anderem den Banken das Recht nehmen, Kredite und damit Geld zu schaffen, und dieses Recht allein den Zentralbanken übertragen. Pettifor hält das für keine gute Lösung. Denn:
„...die Macht [...] auf ein kleines Gremium von Personen an der Spitze einer Zentralbank zu übertragen, wäre nach meinem Dafürhalten ein Schritt auf dem Weg in eine Autokratie.“

Pettifor fordert Ende der Sparpolitik
Stattdessen fordert die Autorin eine Rückkehr zu den Lehren von Keynes, dessen ökonomisches Werk sie für stark verkannt hält. Konkret fordert sie eine Abkehr von der staatlichen Sparpolitik, die insbesondere nach der Finanzkrise zum Standard erhoben wurde.
Durch die lockere Geldpolitik der Europäischen Zentralbank habe sich bisher zwar die Finanzwelt erholt, der private Sektor aber kaum. Daher müsse der Staat einspringen und Geld ausgeben:
„...zum Beispiel für sinnvolle, sichere Arbeit; für die Energiewende weg von fossilen Brennstoffen; für die Herausforderungen sehr junger, aber auch alternder Gesellschaften.“
So könnte laut Pettifor auch die Kreditvergabe für gesellschaftlich sinnvolle Projekte gestärkt werden.
Zudem fordert sie strengere Kontrollen für die Finanzindustrie: Klarere Vorgaben für die Kreditvergabe im privaten Bereich. Und internationale Kapitalverkehrskontrollen – also eine Art Steuer auf grenzüberschreitende Kapitalflüsse – unter anderem, um die Zinssätze auf heimischen Märkten besser kontrollieren zu können. Eine Voraussetzung für all das:
„Die große Wende ist nur möglich, wenn wir uns mit einem umfassenden, angemessenen Verständnis für die Kapitalmobilität, für Geldschöpfung, Bankengeld und Zinsen wappnen – und dann Reformen fordern sowie die Wiederherstellung eines gerechten Geldsystems, das den Finanzsektor nicht länger Herr der Wirtschaft sein lässt, sondern wieder in die Rolle des Dieners verweist.“
Pettifors Argumentation wirkt oft plakativ, teils einseitig und ist dementsprechend streitbar. Unstrittig ist aber wohl ihr Hinweis, dass eine bessere Kenntnis des Geldwesens und klarere Regeln für den Finanzsektor zu faireren Ergebnissen für die Gesellschaft insgesamt führen würden."

4) Zitate aus dem Rezensionsbuch
S. 139: "Die Ziele der Initiative Oberstes Ziel der Geldreformer ist es, den Banken die Macht der Geldschöpfung zu entziehen und stattdessen, wie die Soziologin Mary Mellor schreibt, »öffentliche Kontrolle über eine schuldenfreie Geldversorgung« herzustellen. Die Krise, so Mellor, »zeigt, dass die souveräne Macht der Geldschöpfung in den Dienst des Bankensystems gestellt wurde statt in den Dienst des Volkes.
Die Zeit ist reif, dass das Volk dieses souveräne Recht zurückfordert und Schulden durch Demokratie ersetzt.«5
Die Nichtregierungsorganisation Positive Money geht in ihrer Veröffentlichung Creating a Sovereign Monetary System noch weiter:
»Die Zentralbank wäre ausschließlich dafür verantwortlich, so viel neues Geld zu schöpfen, wie nötig ist, um inflationsfreies Wachstum zu unterstützen. Sie würde die Geldschöpfung direkt kontrollieren, statt über die Zinssätze die Kreditaufnahme und die Geldschöpfung der Geschäftsbanken zu beeinflussen (wie es gegenwärtig der Fall ist). Entscheidungen hinsichtlich der Geldschöpfung würden [in Großbritannien A. P.] unabhängig von der Regierung durch einen neu zu gründenden Geldschöpfungsausschuss getroffen (oder durch den be
stehenden geldpolitischen Ausschuss). Dieses Gremium wäre dem Finanzausschuss des Unterhauses rechenschaftspflichtig, einem parteiübergreifenden Ausschuss von Parlamentsangehörigen, die die Handlungen der Bank of England und des Schatzamts überwachen. Der Ausschuss würde nicht länger Zinssätze festlegen, sie würden sich künftig auf dem Markt bilden.«6

Mary Mellor, die mit den Anhänger_innen von Positive Money übereinstimmt, schreibt:
»Der einfachste Weg, von den Banken geschaffene Schulden und ihre Wachstumsdynamik zu überwinden, besteht darin, dem Bankensystem das Recht zu entziehen oder stark zu begrenzen, dass es neues Geld in der nationalen Währung ausgibt. Die Banken würden wieder auf das beschränkt, was sie nach der Einschätzung der meisten Menschen tun: das Geld von Sparer_innen an Kreditnehmer_innen auszuleihen. Statt durch von der Bank ausgegebene Schulden Geld zu schaffen, sollte neues Geld durch staatliche Geldbehörden ausgegeben werden, ohne Schulden und direkt an die Wirtschaft zur Befriedigung öffentlicher Bedürfnisse.«7

Doch anders als die Initiative Positive Money plädiert Mary Mellor für eine stärker »partizipatorische und deliberative Demokratie«:
»Die ausschließliche Kontrolle über das öffentliche Geld darf nicht in den Händen der amtierenden Regierung oder des Staatsapparats liegen. Weder der öffentliche noch der private Finanzbereich ist vor Unterschlagung und Korruption gefeit.'
Die Schöpfung von staatlichem wie von kommerziellem Geld muss transparent und nachprüfbar sein. Die Wirtschaftsdemokratie muss mehr umfassen als die amtierende Regierung […]. Die Beteiligung der Öffentlichkeit an Entscheidungen über die Allokation von Geld wäre eine Zeitenwende im Hinblick darauf, was Demokratie bedeutet.«8

In Anbetracht der Bedeutung ihrer Mission ist es bedauerlich, dass die Lösungen, die die Befürworter von Vollgeld anbieten, auf die
überholte »Quantitätstheorie des Geldes« zurückgreifen, die Jean Bodin 1560 entwickelt hat und die von David Hume, John Stuart
Mill und anderen weiter ausgearbeitet wurde. Joseph Huber, der die Reformvorstellungen der NRO Positive Money unterstützt,
schreibt auf seiner Website:

b) welttrends.de: Ulrich Busch (S. 144-146); : Berliner Debatte Initial. Nr. 3, 2018, S. 144–146

141 "»Die Quantitätstheorie des Geldes, eines der ältesten und am besten belegten Elemente der Ökonomie, ist so wichtig wie eh und je. Ihr zufolge ist die Kontrolle der Geldschöpfung der Schlüssel zu einem soliden Geldsystem und stabilen Finanzen […] Die Aufgabe des Vollgelds ist die vollständige Kontrolle über die Geldschöpfung, um dafür zu sorgen, dass sich eine dem Wachstum angemessene Menge Geldes im Umlauf befindet, und die Klippen einer Inflation durch lockeres Geld/Vermögenspreisinflation auf der linken Seite des politischen
Spektrums ebenso zu vermeiden wie die Untiefen einer Deflation infolge knappen Geldes auf der rechten Seite."

[Tgoose · Rating 2 out of 5]

does well at explaining how money can "appear out of thin air", does bad for being a treatise for Keynesianism.

[Soph Nova · Rating 4 out of 5]

I still don’t fully understand how to break the power of bankers after reading this, but I am beginning to understand Keynes and the ways that different schools of thought are approaching the creation of money. The most important lesson from this book is that finance should be more regulated by publicly elected officials, towards the creation of real public goods. And I certainly agree with that.

[Peter Harrison · Rating 4 out of 5]

Ann Pettifor's basic approach in this book is to reassert the relevance of JM Keynes analysis and prescriptions for public policy. In particular, she stresses the oft forgotten approach to monetary policy over and above the well-remembered (and often vilified) fiscal policy.

Pettifor's goal is to begin a process of raising public awareness about the role of banking and money creation in the modern economy. She is particularly keen to challenge the orthodox view of money as a neutral intermediary between savers and borrowers which can safely be left to private bankers and the market to manage. She explains how this has almost wholly delivered enormous wealth for private financiers to the detriment of the wider productive economy.

Pettifor believes that the creation and management of money should be controlled for the benefit of the productive economy. Specifically that money is not limited by the volume of available savings but is rather created in response to the need for borrowing. There is an echo of Marx in her discussion of debt as a social relation between lender and borrower, and in the need for debt to drive a capitalist economy - rather than something inherently problematic as presented by much of the modern media. But her goal is not revolution but to make the existing system work under democratic control, reducing the power of the private banks to control the creation of money.

The book is short, and sometimes feel like it drifts around the subject a little. Overall an interesting short challenge to the orthodox view of the management of money in the economy.

[Zolani Stewart · Rating 4 out of 5]

An extremely useful and needed education about the truth of financial capitalism, money, and banking, technically sound with the necessary political context of the world heading to another crisis due to unchecked wealth, greed and corruption.

Author has a lot of admiration for Keynes which is well justified but virtually no mention of Karl Marx outside of a blurb, codified into a passage where she essentially views Labour and "Industry" as on the same side against Finance. I think that's a bit strange, because although bankers make enormous profits over speculation, abuse of the interest rate and capital movement, industry is still capturing the surplus value of labour, and exploiting and abusing labour to build the capital that is then captured in the financial market. This is very bad, as much as it was before finance became an industry, is very likely still the root cause of all of this mess, and so it doesn't make a lot of sense to ignore labour's incompatibility with private capital on the basis of existing as "productive activity", separated from unproductive speculation. This splits Capital into two 'Capital's, good and bad capital, which in any far left perspective isn't exactly correct or necessary, because Capital is Capital and all Capital should be subdued whether financial or industrial.

Despite this overlook the book in its area of expertise is so far the best I've read on the subject.

[Warren Mcpherson · Rating 4 out of 5]

Solid exploration of a critical topic
This book seeks to demystify the creation of money. It talks about interest rates, the financial crisis, class interests. The discussion of the inherent positions of feminists and environmentalists is interesting. It rejects crude arguments for taking the power of private money creation away from the banks. This rejection of further centralization struck me as wise counsel. Implications of finance and monetary policy on democracy itself again made an important point. The reflections on Keynes were provocative, I will have to read a little more about him.
At first, I felt the book seems heavy on opinions and editorializing. I still feel it would be more powerful if it let the reader draw her own conclusions to a greater extent. However, the bulk of the book was a well-researched exploration of key themes. Some of the key elements of the analysis presented here are understated. The examination of bitcoin and specific environmental issues were predictably a bit weak. The core thesis that we would be better off as a society is there was greater general knowledge of money creation and management is clearly legitimate.

[Hanna · Rating 4 out of 5]

Pettifor is doing a great job in explaining how our financial system currently works and how neoliberalism has created a mindset about money production that has nothing to do with possible realities.
Unfortunately she sometimes tends to repeat herself, which can be annoying from time to time, but given the complexity of the topic it tended to be helpful, too.
I would have wished she were more concrete on possible strategies to overcome the current system. In any case a highly recommendable read.

[Abigail · Rating 4 out of 5]

Ensayo bastante accesible que plantea, no solamente un análisis de la situación, sino alternativas realistas, explicadas desde la ciencia económica. Libros como este, deberían ser de lectura obligatoria en secundaria.

[Robert Smith · Rating 4 out of 5]

I found the book to be eye opening in terms of the major impacts to society all caused by simple misconceptions in the way economics is taught. The author sometimes gets a bit technical and uses jargon which makes it a little tough to follow. I found it to be a rewarding read overall.

[Tim · Rating 3 out of 5]

Others have summarized the main arguments. While the outline of how money comes into being was quite clear, the prescriptions were not particularly convincing, nor particularly radical. At times it seems hastily written, with a reliance on cliché, but it's worth reading.

[Vuk Trifkovic · Rating 3 out of 5]

Pamphlet-like, in a "straight to the point" kind of way. It is probably the most clearly written and straightforward book I've ever read from Verso.

[Charlie Sanjaya · Rating 4 out of 5]

This is a book that convinces me that The Left should study finance.

[Lee Humphries · Rating 5 out of 5]

Whist the book is presumably aimed at the layperson judging by Ann's conclusion, there are many economic terms which an index of these terms & their meaning would have been useful without having to look them up separately.

Ann is very vocal about how most orthodox economists (especially those who teach in our universities), ignore how money is created and money's role within our economy; as well as debt and the banking system. It is not the central bank that prints most of our currency it is the private banks (as the Bank of England have stated), that issue money in our economy. So while neoliberal thinking takes aim at how high public-debt may be those same people choose to completely ignore how much higher private-debt is and thus perpetuate the ideology of public bad, private good.

The title of this book is taken from what John Maynard Keynes called, 'the elastic production of money'. As Ann writes, "there need never be a shortage of money to solve the great scourges of humanity; poverty, disease & inequality; to ensure humanity's prosperity & well-being; to finance the arts & wider culture; & to ensure the 'livability' of the ecosystem". Credit is what enables an economy to work productively if used correctly. If credit is only used for speculative means such as in 'casino banking' (speculation), and inflating asset prices such as houses, then this posses a huge risk to any country's economy due to causing systemic risk and deflation as witnessed in the crash of 2007-08. However if credit is used for creating jobs in the real economy it helps to boost production, employment, by producing goods and services, spending in shops, thus enable savings and the public debt is repaid at the same time via taxation.

The Bank of England still controls the flow of notes and coins and the BoE also funds government spending. Our government can borrow what it likes to use for economic productive methods such as on infrastructure, funding our NHS, creating employment, welfare payments, etc, and this can be controlled by fiscal policy. Fiscal policy enables a government to control the supply and demand of money in circulation e.g. it can stimulate growth during a recession, keep inflation low, stabalise our economy to avoid boom and bust cycles, and tax accordingly to reduce the money borrowed and reduce inflation.

Except for not knowing all the economic terminology this book (compared to other books on economics), is much more accessible for understanding the nature of money, credit, debt and how it can be put to good use rather than the mess we are currently in. Ann also addresses the ideological disaster of austerity introduced by the coalition government has been and continues to be and the knock-on effects this causes.

Ann concludes in her book that it is imperative that both women and environmentalists should learn more about how our economy works and they should be leading the debates around it as it effects them the most. However, I would go further to say everyone should read this book and start to discuss how our economic system works, and can work as our economy controls every aspect our lives down to small & medium business struggling to stay afloat on the high street, homeless people on the street, the high cost of raising children, public transport, the destruction of our environment and so much more.

[Pedro L. Fragoso · Rating 5 out of 5]

Like everything Ann Pettifor ever wrote, this contribution is timely, urgent, intelligent, cogent and important. The book is brilliant.

The true nature of "money" and "credit" is baffling. It has also been made into the ultimate con job. As Satyajit Das once wrote (this is quoted in the book): "Modern finance is generally incomprehensible to ordinary men and women… The level of comprehension of many bankers and regulators is not significantly higher. It was probably designed that way. Like the wolf in the fairy tale: ‘All the better to fleece you with.’"

Ann Pettifor, in an exceptional piece of public service, lifts the veil over reality and explains it competently, which in the case is a tall order indeed (although it turns out that the truth of the matter is more believable than Trump's current performance as POTUS) .

It must be pointed out that we are being served a manifest: "To be armed with knowledge and understanding is not enough. We must go further. We must reinvigorate our political and democratic institutions because they are the vehicles by which society collectively and democratically agrees to legislative and regulatory change. We must understand that if our democratic institutions have been hollowed out by liberalisation and privatisations; if our politicians have been co-opted or captured, stripped of policy-making powers and of the power to allocate resources, then that is not accidental but the deliberate result of finance capital’s actions, its lobbying and its consequent power over us all. To challenge finance, it is essential that we engage in, rebuild and strengthen democratic political parties and institutions; that we participate in political debate and in elections, and in loud, open discussion about issues that have a profound impact on our lives. (...) With an understanding of what constitutes just money, a monetary system that meets all of society’s needs, we – as women, environmentalists, trades unionists, producers, creators, businessmen and women, designers, activists, farmers – can lead our leaders into once again doing the right thing. Namely, adopting straightforward and well-understood monetary reforms that will bring offshore capitalism back onshore, and break the despotic power that finance capital exercises over us all."

I have issues with the reasoning being pursued, but I'm letting those stay with me, as my objections aren't all that relevant; what is truly relevant is to buy and read and discuss this book.

"(...) we need wider public understanding of where money comes from and how the financial system operates. Regrettably these are areas of the economy gravely neglected by many progressive and mainstream economists – a convenient blind spot that is no doubt welcome to the finance sector. This new book – The Production of Money – is an attempt to simplify key concepts in relation to money, finance and economics, and to make them accessible to a much wider audience, especially to women and environmentalists. It expands on my book Just Money (2015) and hopefully adds greater content and clarity to a subject that is not easy to write about. Nevertheless I will persevere, as I am convinced that only wider public understanding of money, credit and the operation of the banking and financial system will lead to significant change." Amen to that!

[Jude Nonesuch · Rating 4 out of 5]

This is a really clearly-argued and accessible explication of what I take is the Keynesian theory of money – it’s really quite mind-opening and revolutionary to conceive of for the first time, but very much intellectually satisfying, and, having known nothing of it before reading this book, I would say I ascribe to Keynes’s ideas. Central to this is the idea that once a banking system, empowered to create money by raising a debt on one side of a balance sheet & paying out a deposit on the other side - i.e. through loans, is established and sufficiently backed up by a civil society with a rule of law (particularly, enforceable contracts), then money is not a exchangeable, transferrable substitute for valuable assets, but instead is a token of trust between human beings – that what is given will be returned. (this may bear no relation to Keynes’s theory of money whatever, but.. allow it...)

The style of the book is a little bit not-exactly-to-my-preference – it’s got quite a “accessible primer for activists” feel to it, which is a v. noble endeavour but makes the feel of reading it a little less “hardcore” than I like – but on the other hand, it foregrounds the immediate issues that these ideas need to be used to tackle, which gives it a kind of motivational drive that works to its credit.

I have two further half-negative points - half cos their not really the author or the book’s fault: you go through the whole book feeling the arguments are reasonable, the explanations convincing, and so that the political prescriptions that follow are right and the best course of action; only to learn about the other, clashing political prescriptions from other similarly well-motivated and, you would think, well-informed/smart-and-clever people or groups. So then you have to make your mind up about who you believe, which, as I see it, would entail becoming as well-informed, or well-learned in the particulars of the economics at question, as the people putting forward the prescriptions in the first place. Which, maybe, is the way of the world and is true about everything. But, it is a little daunting/demoralising. Then the other side is how grimly WRONG the entire field of academic economics as it currently stands comes across, in sharp contrast to how intellectually satisfying the theory taken by this book (that is, presumably, by Keynes) is. & it’s like, “why, mainstream field of Economics, would you persist in being wrong when you could just find about this other theory that does so much of a better job than your shit efficient markets wackness does?”. Again... disheartening.

So I guess in summary the tension present in this book is that between theorising the world&practical prescriptions to change the world for the better – and I’m sure that’s exactly what the author wanted. And it certainly succeeds in being what I suppose it aims to be, and I will be recommending it to everyone. But, just in odd ways here and there, a slightly unsatisfying read.