Status Updates From The Power of Money: How Ide...

People still believe in bachi: if you suffer a misfortune, you check first to see what you may have done wrong. It is part of the tradition of Buddhist philosophy shared by many Eastern peoples: ‘actions have consequences’.

It is worth pausing for a moment to register this: ‘what is money is determined by the workings of the economy’. Money is not always and everywhere the same thing. The economy has a number of different types of money: ‘everyone can create money; the problem is to get it accepted’

But in truth, what is money is determined by the workings of the economy, and usually there is a hierarchy of monies, with special money instruments for different purposes. (Minsky 1986)

Graeber is an angry anarchist, and his vision unrealistic, yet his analysis and historical insight shed  new light on our current dilemmas. 

Graeber says they invest in US bonds as a tribute owed to its power. Historically, the main buyers of US treasury bonds have been countries that are or have been under US military occupation, such as Germany and Japan. All countries other than the United States have to repay their debts on the nail or face ruin. The dollar as the dominant  global currency is rooted in military might.

According to Graeber, the usual story of money and banking is a fairy tale. T hey did not emerge naturally from voluntary cooperation and barter. Modern money emerged to finance warfare. Central banks represent the institutionalisation of the marriage between the interests of the warriors and financiers.

Yet this theory fits into the mindset of our time. It repackages Keynesian remedies in modern language—and it is no accident that this language is monetary. The world’s problems can be solved by a sufficient injection of money.

MMT attempts to repackage and resurrect the discredited Keynesian policies of the 1960s and 1970s. MMT’s assertions that (1) ‘Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt;’ and (2) ‘Countries that borrow in their own currency can finance as much real government spending as they want by creating money.’

how to issue, lend, and spend money come down to politics, values, and convention, whether the goal is reducing inequality or boosting entrepreneurship. Inflation can be controlled through taxation, and only becomes a problem at full employment. The state can guarantee a job to anyone who wants one, lowering unemployment and competing with the private sector for workers, raising standards and wages across the board.

Governments may spend as much as they need to in order to guarantee full employment and other social goods. A state never runs out of money. It isn’t a scarce commodity like silver or gold. Its value is determined by the difficulty of obtaining it—something that the state, as monopoly issuer, can decide.

The sovereign government alone has power to determine the money of account it will recognise for official accounts, and modern governments alone are invested with the power to issue currency denominated in its unit of account.

‘The government first creates a money of account (the dollar, the pound, the euro) and then imposes tax obligations in that national money of account’ ….other uses of money are subsidiary, deriving from government’s willingness to accept its currency in tax payments. Wray often quotes his mentor Hyman Minsky to the effect that: ‘Everyone can create money; the problem is to get it accepted.’

An Ambitious ‘Modern’ Theory
Randall Wray in his interpretation of the state theory of money (derived from Keynes’s classic account, which in turn owes much to Knapp). Wray makes large claims for his synthesis: ‘To put it simply, we have uncovered how money “works” in the modern economy’

The IMF was prohibited from choosing gold as the common denominator of a new exchange rate system. The definition of the SDR in terms of gold was abolished, along with any notion of an official price for gold and all obligations on members to make payments to the IMF in gold. The SDR replaced gold as IMF’s unit of account.

The global culture with its liability to Money Delusion naturally encourages an excessive build-up of debt and subsequent collapse. It celebrates money-making without ethics, offers no barrier to the advance of crony and corrupt capitalism and consigns opponents and outcasts to the modern equivalent of Victorian workhouses.

America chooses inflation to finance a war: The inflationary financing of the Vietnam War undermined the global monetary system. Devaluation of the dollar cut the anchor holding all currencies together, inviting others to follow suit and float their currencies against the dollar.  It became a ‘permissive society’ in personal morality and increasingly in money and banking.

late 1970s the Marxist attack on capitalism had been successfully resisted  politically but, as an ideology, Marxism  still pervaded cultural studies and the  attitudes  of Western intellectuals. Right-wing also attacked  what they saw as US money centrism. From the conservative  Right, it was viewed as vulgar and as a threat. For the Marxist Left, it was as an instrument  of the US capitalist takeover of the world.

In The Affluent Society (1958), one of the most influential texts of popular economics of the twentieth century, Galbraith attacked inequality and the fact that public services and public spending on infrastructure had lagged badly behind private consumption: ‘Here, in an atmosphere of private opulence and public squalor, the private goods have full sway’

America’s determination to avoid a repeat of the chaos following World War I was clear. Their response: craft a new idea of money and a new role for it, together with new institutions. As ever, beliefs and passions came first. Americans  would save the world and make money in the process.

Money’s power was curbed by social attitudes; government policy recognised and reflected that. Rigid control over interest rates, credit,  international  capital f lows and nationalisation of banks were possible because people’s social and political views favoured them. People had come to believe that money must be controlled at almost any cost, and so it was.

two influential and contrasting interpretations of the interwar swing to the political Left with its backlash against markets and money. The first is that offered by Karl Polanyi in The Great Transformation the second is The Road to Serfdom, by F.  A. Hayek, with its warnings of the new dangers of putting power over money into the hands of state officials

T he term neoliberalism was coined in 1938 at the Walter Lippmann Colloquium. It was chosen to distinguish the group from classical liberalism which was widely seen as discredited by the Great Depression. This group did not hold to utopian beliefs about the virtues of free markets. Markets were not seen as natural but as requiring explicit effort and social agreement

T his group was sensitive to the social ills experienced as side-effects of a dynamic market system, including the decay of social order and personal strains of isolation, loneliness and alienation experienced by individuals under capitalism. They rejected laissez-faire, individualism and the ideal of a small state dedicated to defence and law. They emphasised the importance of institutions

Walter Eucken and Franz Bohm, founders of the influential brand of liberal thought known as ordoliberalism. This school was to influence events also through the way the Deutsche Bundesbank was made independent bank from its foundation in 1957 and though the influence of the ‘Bundesbank model’ on  the design of the European Central Bank (ECB).