The Case for Monetary Diversity (original) (raw)
Related papers
Going beyond monetary constitutions: The congruence of money and finance
We extend the literature on 'monetary constitutions' by arguing that binding rules must go beyond specifying the behavior of the monetary authority. Instead, a genuine monetary constitution must also be a financial constitution: it must take into account the natural and evolved links between money and banking, treating them as a single institution. We present a unified conception of money and banking, show how modern monetary institutions have severed the traditional links between money and banking, and discuss how macroeconomic stability is an unintended result of a self-enforcing constitution for the money-and-banking system. Finally, we conclude by discussing the implications of our argument for reorienting the conversation on post-financial crisis stability towards genuinely institutional solutions.
Monetary theory texts teach that governments create money and control monetary policy. Researchers at the Bank of England, IMF and many others show that fractional reserve banking allows the private sector to create money. Most money currently in existence is created by the private sector, through the process of lending on interest. Thus creation of interest based debt is intimately connected to the process of money creation in the modern financial system. It should be obvious that giving the privilege of money creation to private parties motivated by the profit motive would lead to massive concentration of wealth. We provide historical evidence to show that this is indeed the case. This system of money creation is inherently unstable, and has led to numerous financial crises. Any reasonable evaluation of costs and benefits of the current system of money creation by private banks would lead to the conclusion that the costs have tremendously outweighed the benefits. Current efforts to adapt the Sharia’ (Islamic Law) to allow for modern banking are harmful, since modern banking itself is harmful to economies. The Chicago Plan was devised to return the privilege of money creation to the government where it properly belongs. We show that this plan can be adapted to create Islamic financial institutions which would be substantially different from current western financial institutions. These would be differentiated and specialized, and also provide real world services in addition to financial ones. We discuss the numerous advantages that adherence to Islamic principles would produce. Among these we would list elimination of banking crises, stabilization of economy, reduction of income inequalities, provision of economic justice, and greater investment in projects of high social benefit, rather than private benefits.
Dissertation- University of Pretoria, 2018
The agenda of this research dissertation is the exploration of a “third way” for theorisation in monetary theory and a study of the implications of this for contemporary deliberations on the effects of monetary policy on the global political economy. Traditionally, such questions are polarised according to the traditional ideological and paradigmatic positions, emanating as they do from academic debates between orthodoxy and heterodoxy. These academic debates similarly revolved around money and its origins. In many ways, the results of the “Methodenstreit” or “method debate” represent one of the great deceptions of the twentieth century. Humanity is presented with two oppositional arguments. The logic of the state and the logic of the market. The logic of the state begins from a position of debt, where society is constituted by groups and individuals indebted to one another, with no hope of ever repaying this. The logic of the market begins from a position where all are individuals and none indebted to anybody. These arguments are mutually exclusive, incompatible and oppositional. Similarly, as presented, each claims sole ownership of any real prospects for human organisation. But this dichotomy is false and moreover historically inaccurate, resting on nothing more than fictions. The project of this dissertation is to locate theories, paradigms and ideologies which fall between such arguments and look to actual historical and market practices, worldwide, for a more realistic depiction of the production, circulation and historical origins of one of the most important institutions in the modern world, money. Beginning with a critique of traditional conceptions of its origins and governance, the research will explore alternative theories of money, often marginalised, and the production of value to find theoretical consistency with an ideology that has, since its inception, pursued a “third way” between the liberal and socialist traditions which influenced orthodoxy and heterodoxy, respectively. Furthermore, this research will also present alternative forms of money which emanated directly from this positive anarchist tradition in economic theorisation. Keywords: International political economy, international monetary and finance structures, anarchist economics, monetary theory, central banking, complementary currencies
The euro crisis: an episode in the global history of money
Jens Adam et al., Europa dezentrieren. Frankfurt: Campus, 2019
The mistakes that led to the euro crisis are irreversible and fatal. The author was convinced in 2009/10, as were many commentators, that the euro would collapse under the weight of its contradictions. It did not because the European Central Bank, strongly supported by Germany, sacrificed the European economy to save the currency. Greece was crushed in 2015 pour encourager les autres. None of the basic problems have been addressed: the permanent deflationary bias, the German export surplus, the absence of appropriate fiscal institutions, political protection of French and German banks, the crippling division between North and South Europe. The truth is that national currencies were replaced by a single currency when the world was moving back to plural monetary instruments. There is no way that a single currency can meet the needs of over 300 million people living under such diverse circumstances. The crisis has been postponed, but not resolved. The Americans fought a civil war in order to unify their currency; the Europeans hoped that economic centralization would lead to political union. They got it the wrong way round. The paper reviews the specific history of the euro while drawing on critical commentary made by the author in 2002. This is not a financial crisis of credit and debt, but an episode in the history of money shaped by the collapse of national capitalism under pressure from a money circuit that is both global and lawless. The argument considers work by Smith, Polanyi, Mauss, Marx and Simmel and asks how money might be approached from a perspective of human economy.
Money, Financial Institutions and Macroeconomics
1997
Glaze prepared the camera-ready copy of the manuscript with extraordinary skill, dedication and good grace. We would also like to thank Warren Samuels and William Darity for encouraging the project, and Zachary Rolnick at Kluwer for his support and patience. This collection of papers aims to present a comparative and international perspective on the current state of research in monetary theory, and the application of monetary theory to important policy issues. The main emphasis is on views stressing the importance of credit creation in the monetary process, in a tradition which arguably encompasses Wicksell, the later Swedes and the Austrians, through the later Hicks, the circuit school and contemporary Post Keynesians. In addition, however, there are distinguished contributions from economists with a more 'mainstream' approach to the issues.
An Appraisal of the Financial Monetary System
2021
This chapter assesses the financial monetary system on the basis of four characteristics: (1) its economic contribution; (2) its stability; (3) its fairness in the distribution of benefits, costs and risks; and (4) its legitimacy. Based on this analysis, we highlight key problems in the current system. Our analysis points to two underlying problems: the unbalanced and uncontrolled growth of money and debt; and a distorted balance between public and private interests.
The Financial Crisis and the End of All-Purpose Money
economic sociology_the european electronic newsletter, 2011
By taking a broader view of money than its current identification with finance, I aim to historicize the present by placing it within a long-term process of social development, in the process offering a new explanation for our economic problems. I take the financial crisis to mean the fall of Lehman Brothers in September 2008 and the subsequent attempts of leading governments to stave off economic collapse by using taxpayers; money to save the banks. the current break in history goes far deeper than the recent replacement of social democracy by neoliberalism. We are witnessing the end of the social form that has dominated the twentieth century. I call it “national capitalism” and its origins lie in the political and technological revolutions of the 1860s. Its historical trajectory includes two phases of financial imperialism each lasting three decades, from the 1880s and the 1980s. The former ended in the First World War, so we had better watch out! I argue that the financial crisis is only superficially a question of credit boom and bust. At bottom the social organization of national money that the world has come to live by since its inception a century and a half ago is coming to an end.
In the analysis of the present day crisis, the paper considers a result of commercial banks deregulation: blowing financial transactions, widespread new Keynesian flow of marginal monetary basis, jumpstarting financial instruments, short-term based financial program trading speculation. In this way, the research starts from the last market bubbles collapsed in the years 2000 and 2007-2008: dot-com, subprime and derivatives. Its results confirm the effect of the general persistence of wrong monetary policies, triggering irreversible liquidity, fiscal and interest zero rates traps. The conclusion is that an everlasting crisis is not the consequence of some isolate deregulation of some institution and markets activity in general, neither likely due to some new financial innovative product fallout. On the contrary, what surfaces in August 2007, is the result, after 40 years of monetary debasement and quantitative mismanagement, excessive faith in macroeconomics dangerous ideas and disregard of minor micro-economic laws, associated with the appearance of the huge Eastern competing world, once frozen in the planned economy, a global market oriented environment. The Western welfare State seems likely to finally collapse in a completely free surfacing new market economy. The present paper explores the history and grounds of recent monetary turmoil considering some preliminary factors affecting the debasement of the US dollar in the year 1971 and the unexpected consequences arising from such a controversial decision. After World War I and 30 years of unsuccessful efforts to reach a stable international payment system, the recurring clearing agreements, the final establishment of the Bank for International Settlements in Basel, the GATT and the World Bank, Europe seemed to be finding an alternative solution to the autarchy and tight custom barriers, which led to World War II. Several monetary plans, drawn and discussed at Bretton Woods in July 1944 and, after World War II: the European monetary union, the Werner plan, the issuing of the European Currency Unit (ECU), the final financial markets liberalization in the year 1990 culminated in the EMS and the Euro project. The European monetary system led to the issue of the Euro that made likely a debased monetary instrument as final unique solution, within the Single European Payment Area run over the Swift—Target platforms. According to the Mario Pines, full professor,
Springer eBooks, 2021
The previous chapter described how money creation works in our current system. We saw that the lion's share of money today consists of bank depositsnumbers on the balance sheets of commercial bankswhile a much smaller proportion consists of cash (banknotes and coins). The dominance of deposit money means commercial banks play a leading role in money creation. This chapter puts this situation in a historical context. The functioning of our financial monetary system and the role of banks have changed fundamentally over time. The chapter reveals that what we take for granted today was often far from self-evident yesterday. Today we consider banknotes to be as secure as coins. But well into the nineteenth century, the Dutch were wary of banknotes issued by the central bank. The historical perspective also illustrates the path-dependency of the financial monetary system. There was never an opportunity to redesign the system from scratch: reforms and innovations required public and private actors to work within historically given constraints and often came with unintended and unforeseen consequences. We also see the recurrencealbeit in different guisesof fundamental issues and debates about the financial monetary system. The current debate on private money creation, for example, echoes nineteenth-century discussions in the United Kingdom and the United States on whether banks should be allowed to issue their own banknotes. A historical perspective challenges what we now take for granted and allows us to draw lessons from the past. This may help us to better understand contemporary challenges. We focus on the period from the early nineteenth century. This was when governments advanced explicit strategies to govern their national financial monetary systems and banks began to play greater roles in facilitating economic development. We discuss four periods in turn: (1) the 'long nineteenth century' up to the First World War, with an emphasis on the 1870-1914 period, (2) the interwar period (1918-1939), (3) the Bretton Woods period (1944-1973) and (4) the decades leading up to the latest crisis (1973-2008). Although our focus is on the Netherlands, we mention developments in other countries as well as global trends that have left their mark on this country. For each
2020
As the recent financial crisis has revealed, the state is central to the stability of the money system, while the chaotic privately-owned banks reap the benefits without shouldering the risks. This book argues that money is a public resource that has been hijacked by capitalism. Mary Mellor explores the history of money and modern banking, showing how finance capital has captured bank-created money to enhance speculative ‘leveraged’ profits as well as destroying collective approaches to economic life. Meanwhile, most individuals, and the public economy, have been mired in debt. To correct this obvious injustice, Mellor proposes a public and democratic future for money. Ways are put forward for structuring the money and banking system to provision societies on an equitable, ecologically sustainable ‘sufficiency’ basis. This fascinating study of money should be read by all economics students looking for an original analysis of the economy during the current crisis