Economics As If People Really Mattered

Week Two – What is Money?

Mechanics Institute, Limerick

May 2013

EBRD – European Bank for Reconstruction and Development

The purpose of capitalism is self-expansion – capital begets capital – and it does so by monetizing social value and human labour. This is a circuit of transformation.

“Historical capitalism involved therefore the widespread commodification of processes – not merely exchange processes, but production processes, distribution processes, and investment processes – that had previously been conducted other than via a ‘market’. And, in the course of seeking to accumulate more and more capital, capitalists have sought to commodify more and more of these social processes in all spheres of economic life.”

Immanuel Wallerstein, Historical Capitalism (London: Verso, 2011), 15.

Alfred Mitchell Innes. ‘What is Money?’ Banking Law Monthly (May 1913)

--- ‘The Credit Theory of Money.’ Banking Law Monthly (Jan 1914)

http://dublinopinion.com/2012/07/08/mary-mellor-the-future-of-money-referenced-articles-from-chapter-one/

David Graeber. Debt: The First 5,000 Years. Brooklyn: Melville House, 2011

Far from being a precious commodity that had become readily accepted through trade as the barter theorists thought, money as coin has generally been accepted by fiat, that is, issued and guaranteed by an authority, such as a powerful leader, an office-holder or a religious organisation.

Far from being a precious commodity that had become readily accepted through trade as the barter theorists thought, money as coin has generally been accepted by fiat, that is, issued and guaranteed by an authority, such as a powerful leader, an office-holder or a religious organisation.

Making coin out of a precious metal confuses the role of money as a measure of value with the value of the coin itself.

Far from being a precious commodity that had become readily accepted through trade as the barter theorists thought, money as coin has generally been accepted by fiat, that is, issued and guaranteed by an authority, such as a powerful leader, an office-holder or a religious organisation.

Making coin out of a precious metal confuses the role of money as a measure of value with the value of the coin itself.

Gold can change value both as a commodity and as a coin in terms of purchasing power. Therefore gold/silver as a commodity does not ‘have’ a value. It is valued, but at any point in time the exact value will vary and will need to be designated in some other form of commodity or money, such as silver or dollars.

Money is more helpfully seen not as a ‘thing’ but as a social form.

‘Sound money’ is a product of society, not of nature.

Money is more helpfully seen not as a ‘thing’ but as a social form.

‘Sound money’ is a product of society, not of nature.

When we say people trust in money we mean that they are trusting in the organisations, society and authorities that create and circulate it, other people, traders, the banks and the state.

Money is more helpfully seen not as a ‘thing’ but as a social form.

‘Sound money’ is a product of society, not of nature.

When we say people trust in money we mean that they are trusting in the organisations, society and authorities that create and circulate it, other people, traders, the banks and the state.

Money, whatever its form, is a social construction, not a natural form.

Money is more helpfully seen not as a ‘thing’ but as a social form.

‘Sound money’ is a product of society, not of nature.

When we say people trust in money we mean that they are trusting in the organisations, society and authorities that create and circulate it, other people, traders, the banks and the state.

Money, whatever its form, is a social construction, not a natural form.

It has not inherent value but it has vast social and political power. (p.11)

money rests upon a social and political base, a combination of social conventions, banking systems, public trust and state authority.

[In monetary economics textbooks] money circulation through the financial system is seen as the outcome of private economic acts, not as a function of social relationships and public authority. P.2

Legal tender means that the state will accept a designated form of money in payment of taxes and the state also demands that everyone else has to honour that form of money when it is presented as payment for goods or debts.

Legal tender means that the state will accept a designated form of money in payment of taxes and the state also demands that everyone else has to honour that form of money when it is presented as payment for goods or debts.

In the contemporary money system, state authorised money is seen as ‘high-powered money’.

Legal tender means that the state will accept a designated form of money in payment of taxes and the state also demands that everyone else has to honour that form of money when it is presented as payment for goods or debts.

In the contemporary money system, state authorised money is seen as ‘high-powered money’.

It is the money of final payment within the money system.

Legal tender means that the state will accept a designated form of money in payment of taxes and the state also demands that everyone else has to honour that form of money when it is presented as payment for goods or debts.

In the contemporary money system, state authorised money is seen as ‘high-powered money’.

It is the money of final payment within the money system.

The basis of high-powered money is the capacity of the state to raise taxes and, behind that, the productive capacity of the national economy. (p.18)

IV. Money, society and the ‘real economy

- MONEY SYSTEMS AS REPRESENTED IN RENTS, TAXES AND WAGED LABOUR HAVE BEEN IMPOSED ON PEOPLE WHO HAVE BEEN FROM SUBSISTENCE COMMUNITIES AND WHO HAVE BEEN FORCED OFF THE LAND.

IV. Money, society and the ‘real economy

- MONEY SYSTEMS AS REPRESENTED IN RENTS, TAXES AND WAGED LABOUR HAVE BEEN IMPOSED ON PEOPLE WHO HAVE BEEN FROM SUBSISTENCE COMMUNITIES AND WHO HAVE BEEN FORCED OFF THE LAND.

- AS ECONOMIES BECAME MONETISED, PEASANT POPULATIONS WERE FORCED TO SELL THEIR LABOUR AS LANDS WERE ENCLOSED AND PRIVATISED, AND OFTEN MORTGAGED.

IV. Money, society and the ‘real economy

- MONEY SYSTEMS AS REPRESENTED IN RENTS, TAXES AND WAGED LABOUR HAVE BEEN IMPOSED ON PEOPLE WHO HAVE BEEN FROM SUBSISTENCE COMMUNITIES AND WHO HAVE BEEN FORCED OFF THE LAND.

- AS ECONOMIES BECAME MONETISED, PEASANT POPULATIONS WERE FORCED TO SELL THEIR LABOUR AS LANDS WERE ENCLOSED AND PRIVATISED, AND OFTEN MORTGAGED.

- FOR THOSE WITHOUT LAND, JOINING THE MONEY ECONOMY MEANT OBTAINING SUSTENANCE THROUGH WAGED LABOUR – THE CIRCULATION AND USE OF COIN FROM THE EARLY MIDDLE AGES ENABLED RICH LANDOWNERS TO EXTRACT MORE FLEXIBLE WEALTH FROM THEIR FEUDAL POPULATIONS. (P.19)

- Rather than extracting produce or labour, they began to demands money from their peasant populations.

- Money systems also enabled the emergence of finance capital which enabled exploitation and the extraction of profit. (P.19)

- Rather than extracting produce or labour, they began to demands money from their peasant populations.

- Money systems also enabled the emergence of finance capital which enabled exploitation and the extraction of profit. (P.19)

- Money can be an instrument of speculation and a tool of empire.

- Rather than extracting produce or labour, they began to demands money from their peasant populations.

- Money systems also enabled the emergence of finance capital which enabled exploitation and the extraction of profit. (P.19)

- Money can be an instrument of speculation and a tool of empire.

- Which conventional economics and much of marxist theory sees money as being a reflection of the ‘real economy’ of production and exchange, social analyses of money see it as being a phenomenon that has its own political dynamics.

- Rather than extracting produce or labour, they began to demands money from their peasant populations.

- Money systems also enabled the emergence of finance capital which enabled exploitation and the extraction of profit. (P.19)

- Money can be an instrument of speculation and a tool of empire.

- Which conventional economics and much of marxist theory sees money as being a reflection of the ‘real economy’ of production and exchange, social analyses of money see it as being a phenomenon that has its own political dynamics.

- Money cannot be neutral; it is the most powerful of the social technologies. (P.22)

The argument of this book is that as money is such a critical force in the circulation of goods and services and therefore provisioning, it is vital to question how money is issued and circulated, owned and controlled. From this perspective money is more than just a reflection of value in the ‘real’ economy. (p.22)

The argument of this book is that as money is such a critical force in the circulation of goods and services and therefore provisioning, it is vital to question how money is issued and circulated, owned and controlled. From this perspective money is more than just a reflection of value in the ‘real’ economy. (p.22)

The so-called ‘real economy’ – (the economy of capitalist production and exchange) – is in reality an economy determined by capitalism and by patriarchy. Outside its boundaries lie the natural world and the un-monetised labour and needs of women, children and the poor, as well as non-monetised subsistence economies.

vi. Bank credit and fresh air money

The most important aspect of the shift to money issue through bank debt is that bank can lend money they don’t have.

vi. Bank credit and fresh air money

The most important aspect of the shift to money issue through bank debt is that bank can lend money they don’t have.

Money creation is effectively in private hands through commercial decisions in the banking system, while the state retains responsibility for managing and supporting the system, as has become clear through the financial crisis.

vi. Bank credit and fresh air money

The most important aspect of the shift to money issue through bank debt is that bank can lend money they don’t have.

Money creation is effectively in private hands through commercial decisions in the banking system, while the state retains responsibility for managing and supporting the system, as has become clear through the financial crisis.

While society collectively bears ultimate responsibility for the failures of the commercial money creation system, there is no direct influence on the overall direction od how finance is invested or used.

vi. Bank credit and fresh air money

The most important aspect of the shift to money issue through bank debt is that bank can lend money they don’t have.

Money creation is effectively in private hands through commercial decisions in the banking system, while the state retains responsibility for managing and supporting the system, as has become clear through the financial crisis.

While society collectively bears ultimate responsibility for the failures of the commercial money creation system, there is no direct influence on the overall direction od how finance is invested or used.

Far from being a social resource, money is currently being mainly created and harnessed by the capitalist sysytem. (p.27)