Notes

Money is central to capitalism and to our many sustainability crises. This book nuances this, by now, commonplace knowledge by arguing that it is not money per se but its architecture – its internal design and governance structures – that is at the root of our variegated civilisational challenges. Yet, history shows, money’s internal architecture can take many forms and, with them, be conducive to different social and economic dynamics. Building on this insight, monetary entrepreneurs – grassroots groups, municipalities and radical crypto-entrepreneurs – are reclaiming, reorganising and remaking money to advance a sustainable future.

Approaching money as a sociotechnical arrangement with infrastructural effects, the book examines past and present monetary initiatives to unfold their architecture and trace the connection between monetary design and the behaviour of the money so designed. It finds three principles along which money is designed and organised – the market, the state and the commons – each shaped by a distinct imaginary of money. It also finds that each organising principle incites particular individual relations towards the collective, resulting in different community dynamics. This has implications for markets’ role in the economy and the health of our democracies. The book concludes that in remaking money, monetary entrepreneurs are opening up new horizons to build new civilisational forms.

Prelude

1

Names have been changed for the sake of anonymisation.

2

For a discussion of the similarity of Keynes’ and Polanyi’s approach concerning the power of monetary ideas in shaping the international world order, see K. Polanyi Levitt. 2013. Keynes and Polanyi: The 1920s and the 1990s. In From the Great Transformation to the Great Financialization: On Karl Polanyi and Other Essays. Fernwood Publishing.

Chapter 1

1

Bible verse (1 Timothy 6:10).

2

See, for instance, W. Goetzmann. 2017. Money Changes Everything: How Finance Made Civilization Possible. Princeton University Press. For a discussion on how the industrial and urban development of the European Middle Ages was accompanied by a shift from spiritual to commercial values in society, see J. Le Goff. 2005. From Heaven to Earth: The Shift in Values between the 12th and the 13th Century in the Christian West. Royal Netherlands Academy of Arts and Science.

3

While such prohibitions have disappeared in countries with Christian and Judaic histories, some Muslim countries retain the approach still today. The most prominent feature of Islamic banking is the prohibition to collect interest. Its advocates argue that interest-free loans make banking practice less prone to risk and banks more stable; see, for instance, P. Abedifar, P. Molyneux and A. Tarazi. 2013. Risk in Islamic banking. Review of Finance, 17(6): 2035–2096. Critics, however, argue that Islamic banks have come around the prohibition by implementing other banking practices and that, as a result, Islamic banking is indistinguishable from conventional banking; see F. Khan. 2010. How ‘Islamic’ is Islamic banking? Journal of Economic Behavior & Organization, 76(3): 805–820.

4

M. Hudson. 2002. Reconstructing the origins of interest-bearing debt and the logic of clean slates. In Hudson, M. and Van de Mieroop, M. (eds) Debt and Economic Renewal in the Ancient Near East, CDL Press, pp 7–58.

5

According to Albert O. Hirschman, it was Francis Bacon who first proposed the idea of the countervailing passions. In his wonderful little book, The Passions and the Interests, Hirschman traces the concerns that fed discussions on the benefits of commerce and industry for the government of human passions and peoples at large. With inquisitive historical curiosity, he recovers the transformation of the sinful ‘self-love’ into the aseptic ‘self-interest’ that tamed capitalists into gentle productive men. A.O. Hirschman. 1977. The Passions and the Interests: Political Arguments for Capitalism Before its Triumph. Princeton University Press.

6

A. Smith. 1776. The Wealth of Nations. Metalibri, book IV, ch II, p 349. Emphasis added.

7

Another renowned analyst of capitalism, Joseph Schumpeter, similarly praised markets for their role in the betterment of the many, which he illustrated with a brief history of stockings. ‘It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of the factory girls in return for steadily decreasing amounts of effort.’ J.A. Schumpeter. 2003 [1943]. Capitalism, Socialism and Democracy. Routledge, p 67.

8

Smith, The Wealth of Nations, p 318.

9

The day of the year on which the world community, as a whole, has consumed an amount of natural resources equal to the amount nature can replenish arrives earlier each year. Earth Overshoot Day is the day of the year on which the world has consumed as much as the Earth can regenerate. In 2019, Earth Overshoot Day fell on 29 July. In 2022, Earth Overshoot Day fell on 28 June. For scholars relating our current climate predicament to the capitalist profit motive behind the pursuit of exponential growth, see, for instance, T. Jackson. 2009. Prosperity Without Growth: Economics for a Finite Planet. Earthscan.

10

See, for instance, M. Harvey. 2019. Slavery, indenture and the development of British industrial capitalism. History Workshop Journal, 88: 66–88.

11

Thomas Piketty has made this point with force. In his Capital in the 21st Century, he offers a detailed analysis of the development of income as compared to that of the return on capital. In a system where the rate of capital return exceeds the rate of growth, inherited accumulated wealth always grows faster than earned income. This leads to increasing levels of inequality that become incompatible with social justice and democracy. T. Piketty. 2014. Capital in the Twenty-First Century. Harvard University Press.

12

Schumpeter, Capitalism, Socialism and Democracy, pp 67–68.

13

K. Marx. 1976 [1867]. Capital: A Critique of Political Economy. Translated by B. Fowkes. Penguin Books, p 601.

14

The latter base much of their argument on the unintended harmful effects in conditional welfare policies. See P. Dwyer’s edited volume Dealing with Welfare Conditionality: Implementation and Effects. Policy Press. See also D. Etherington. 2021. Austerity, Welfare and Work: Exploring Politics, Geographies and Inequalities. Policy Press.

15

G. Standing. 2011. The Precariat: The New Dangerous Class. Bloomsbury Academic. For an updated discussion of the forms and dimensions of precarity, see J. Choonara, A. Murgia and R.M. Carmo. 2022. Faces of Precarity: Critical Perspectives on Work, Subjectivities and Struggles. Bristol University Press.

16

A large number of economists are raising concerns about the relationship between the large levels of economic inequality and social and political and economic instability. For some, see J.K. Galbraith. 2012. Inequality and Instability: A study of the world economy just before the Great Crisis. Oxford University Press; P. Krugman. 2007. The Conscience of a Liberal. W.W. Norton & Co; or J. Stiglitz. 2012. The Price of Inequality: How today’s divided society endangers our future. W.W. Norton & Co. The unusual interest in an economics book such as Piketty’s bestseller, Capital in the Twenty-First Century, attests to the extent to which inequality has come to the forefront of the discussion.

17

Marx, Capital, volume 1, p 353.

18

As Karl Marx put it in Capital: ‘Commodities are thus sold not in order to buy commodities, but in order to replace their commodity-form by their money-form. … this change of form becomes the end in itself. … The money is petrified into a hoard, and the seller of commodities becomes a hoarder of money’ (pp 227–228).

19

For a development of these examples, see M. Amato and L. Fantacci. 2012. The End of Finance, Polity Press; C. Desan. 2014. Making Money: Coin, Currency and the Coming of Capitalism. Oxford University Press.

20

Amato and Fantacci play with the dual meaning of ‘end’ in their insightful book The End of Finance. A central argument in that book is that finance – or the quick profits it rewards through the transformation of debt into assets in liquid financial markets – has become an end in itself. They call for the end of such liquidity-based financial system and for the structuring of finance along a clearing principle. Chapter 4 of this book explains how such a clearing principle works through the example of grassroots experiments organising money along that principle.

21

C. Desan. 2017. The constitutional approach to money: Monetary design and the production of the modern world. In Bandelj, N., Wherry, F. and Zelizer, V. (eds) Money Talks: Explaining How Money Really Works. Princeton University Press, pp 109–130.

22

Desan, Making Money; D. Graeber. 2014 [2011]. Debt: The First 5,000 Years. Melville House.

23

For an authority in this topic, see B. Eichengreen. 1992. Golden Fetters: The Gold Standard and the Great Depression, 1919–1939. Oxford University Press; and B. Eichengreen. 2019. Globalising Capital: A History of the International Monetary System. Princeton University Press.

24

For a detailed account of the process leading to the financial collapse of 2008 and its subsequent development, see A. Tooze. 2019. Crashed: How a Decade of Financial Crises Changed the World. Penguin Books.

25

For an in-depth analysis of Adam Smith’s and Karl Marx’s understanding of money as commodity, see G. Ingham. 2004. The Nature of Money. Polity Press.

26

The fact that securities work as a special kind of money is related to the hierarchy of money. See S. Bell. 2001. The role of the state and the hierarchy of money. Cambridge Journal of Economics, 25: 149–163; P. Mehrling. 2013. The inherent hierarchy of money. In Taylor, L., Rezai, A. and Michl, T. (eds) Social Fairness and Economics: Economic Essays in the Spirit of Duncan Foley. Routledge, pp 394–404.

27

Amato and Fantacci find in the dogma of liquidity the reason for our relation to money and securities (and other financial assets) as commodities to be sold. In Saving the Market from Capitalism, they argue that it is the organisation of financial markets along the liquidity principle that is at the root of capitalism’s repeated booms and busts (M. Amato and L. Fantacci. 2014. Saving the Market from Capitalism. Translated by G. Sells. Polity Press). Hence, instead of pointing at the market mechanism for the failings of the economy, they argue that it is the extension of the market mechanism to the organisation of finance that is to be blamed. In this sense, their argument is parallel to Karl Polanyi’s, who also found the root of the violent tragedies of the 20th century in the extension of the market mechanism to the organisation of money, along with the coordination of land and labour. K. Polanyi. 2001 [1944]. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press.

28

For an incisive unravelling of the money commodity understanding buried in orthodox economics see Ingham, The Nature of Money.

29

K. Polanyi. 1947. Our obsolete market mentality: Civilization must find a new thought pattern. Commentary, 3: 109–117, at p 111.

30

Polanyi, Our obsolete market mentality. For a detailed analysis of one of the common-law texts that regulated the use of land in England until the mid 18th century, see G. Standing. 2019. The Plunder of the Commons: A Manifesto for Sharing Public Wealth. Pelican. Standing builds on that common-law text to develop a manifesto for protecting the natural commons in the 21st century.

31

K. Polanyi. 2001 [1944]. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press, p 76.

32

In Polanyi’s own words: ‘Both enclosures of the common and consolidations into compact holdings, which accompanied the new great advance in agricultural methods, had a powerfully unsettling effect. The war on cottages, the absorption of cottage gardens and grounds, the confiscation of rights in the common deprived cottage industry of its two mainstays: family earnings and agricultural background. As long as domestic industry was supplemented by the facilities and amenities of a garden plot, a scrap of land, or grazing rights, the dependence of the laborer on money earnings was not absolute; the potato plot or “stubbing geese,” a cow or even an ass in the common made all the difference; and family earnings acted as a kind of unemployment insurance. The rationalization of agriculture inevitably uprooted the laborer and undermined his social security.’ Polanyi, The Great Transformation, p 96.

33

Polanyi, The Great Transformation, p 138.

34

Polanyi, The Great Transformation, p 136.

35

Polanyi, Our obsolete market mentality, p 110.

36

Polanyi, Our obsolete market mentality, p 111.

37

Polanyi, The Great Transformation, p 75.

38

Polanyi, Our obsolete market mentality, p 114.

39

B. Latour. 2005. Reassembling the Social: An Introduction to Actor-Network Theory. Oxford University Press, p 39.

40

Latour, Reassembling the Social, p 39.

41

In choosing the verb ‘provoke’, I follow Fabian Muniesa’s book The Provoked Economy: Economic Reality and the Performative Turn. Throughout that book, Muniesa explores how economic formulas and analytical tests we most often take to simply reflect reality do in fact enact the reality of which they speak. He shows performance indicators, valuation formulas, consumer tests, stock prices or financial contracts that business schools teach as ways to analyse an external economic reality do however provoke that reality into existence, actively reproducing and continuously transforming it. Far from neutral intermediaries, such analytical tools behave as mediators actively performing the economy. F. Muniesa. 2014. The Provoked Economy: Economic Reality and the Performative Turn. Routledge.

42

For lists of economists and economic theories forgetting money, see, for instance, F. Martin. 2014. Money: The Unauthorised Biography. Vintage Books, ch 12; Graeber, Debt, pp 23–24. See also S. Keen. 2011. Debunking Economics: The Naked Emperor Dethroned? Zed Books.

43

For some examples of this line of reasoning, see T. Skotnicki. 2021. The Sympathetic Consumer: Moral Critique in Capitalist Culture. Stanford University Press; Jackson, Prosperity Without Growth; E.F. Schumacher. 2010 [1983]. Small Is Beautiful: Economics as if People Mattered. Harper Perennial; A. Reichel, M. De Schoenmakere and J. Gillabel. 2016. Circular economy in Europe: Developing the knowledge base. European Environment Agency Report 2/2016; K. Raworth. 2017. Doughnut Economics: Seven Ways to Think Like a 21st Century Economist. Random House.

44

For an example, see J. Earle, C. Moran and Z. Ward-Perkins. 2017. The Econocracy: The Perils of Leaving Economics to the Experts. Manchester University Press.

45

See, for instance, Goetzmann, Money Changes Everything. See also Chapter 2 in this book.

46

In building the argument of this section, I am inspired by the later Ludwig Wittgenstein’s philosophy of language. He contended that many of philosophy’s traditional questions are derived from language confusion. In attempting to find the meaning of a word, Wittgenstein observed, we either try to find an object in the world or a subjective reality in the mind of the speaker the word seems to point to. It is like when we teach the meaning of a word to a foreigner by pointing at the object in the world the word refers to. This amounts to a referential theory of language where words and meaning neatly correspond. But, Wittgenstein continued, language does not work like that. Think of statements like ‘Water! Away! Ow! Help! Fine! No! Are you inclined still to call these words”‘names of object”?’ (§27). ‘For a large class of cases’, he concluded, ‘the meaning of a word is its use in the language’ (§43). More than a philosophical lesson, this is a pragmatic piece of advice for those of us trying to understand how communities are organised. Instead of looking for the thing corresponding to a name – hoping to find meaning in the outside material world or in the realities inside someone’s heads – he advises us to look at the use of words by speakers in specific contexts and we will find a form of life. He condensed the philosophical lesson in the methodological advice ‘Don’t think, but look’ (§66). L. Wittgenstein. 1953. Philosophical Investigations. Translated by G.E.M. Anscombe. Blackwell.

47

Graeber, Debt. For an elaboration of this topic, see Chapter 2 in this book.

48

For a few examples, see Desan, Making Money; Goetzmann, Money Changes Everything; Graeber, Debt; Martin, Money.

49

J.C. Davies. 2017. From Head Shops to Whole Foods: The Rise and Fall of Activist Entrepreneurs. Columbia University Press.

50

P. Vigna and M.J. Casey. 2015. Cryptocurrency: The Future of Money? Vintage.

51

For a couple of well-known studies of these, see P. North. 2007. Money and Liberation: The Micropolitics of Alternative Currency Movements. University of Minnesota Press; B. Maurer. 2005. Mutual Life, Limited: Islamic Banking, Alternative Currencies, Lateral Reason. Princeton University Press.

52

J. Ryan-Collins, T. Greenham, R. Werner and A. Jackson. 2011. Where Does Money Come From? A Guide to the UK Monetary and Banking System. New Economics Foundation.

53

E. Barinaga. 2020. A route to commons-based democratic monies? Embedding the production of money in traditional communal institutions. Frontiers in Blockchain, 3: 575851. doi: 10.3389/fbloc.2020.575851

54

For a discussion of the difference between Polanyi’s notion of countermovement and Marx’s notion of class struggle, see F. Block and M. Somers. 2016. The Power of Market Fundamentalism: Karl Polanyi’s Critique. Harvard University Press.

55

In studying various monies as they work and are made to work, I am suggesting, as it were, a rather Polanyian approach to the study of money, one that is based on substantive analyses of the practices of those whose activities make money. As Karl Polanyi argued in ‘The economy as instituted process’, ‘only the substantive meaning of “economic” is capable of yielding the concepts that are required by the social sciences for an investigation of all empirical economies of the past and present’. K. Polanyi. 1957. The economy as instituted process. In Polanyi, K., Arensberg, C.M. and Pearson, H.W. (eds) Trade and Market in the Early Empires. Henry Regnery Company, pp 243–270, at p 244.

Chapter 2

1

B. Latour. 2005. Reassembling the Social: An Introduction to Actor-Network Theory. Oxford University Press, p 48.

2

J.M. Keynes. 1936. The General Theory of Employment, Interest and Money. Macmillan, ch 24, section V, p 383.

3

Because ideas of money mould relationships between trading partners as well as between people and larger sociocultural institutions, Lana Swartz discusses imaginaries of money as theories of money that have material world-making effects. As she puts it: ‘Money, as technological arrangement, performs a relation between people in a moment of transaction as well as relations between individuals and the larger imaginaries we call “society”, “the state”, and “the economy”. Money is a creature of network effects: it requires a community of shared belief to “work”, to exist as something recognisable as money. These beliefs are reflexively produced in the technologies of money, which are instantiations of these shared expectations. A theory of money, then, is a techno-economic imaginary, a theory of the larger social order (or a challenge to it) and a way of materially enacting that theory’ (p 623). L. Swartz. 2018. What was Bitcoin, what will it be? The techno-economic imaginaries of a new money technology. Cultural Studies, 32(4): 623–650.

4

Each of the two main imaginaries of money bear an implicit division of gender roles and, even if the gendered implications of money imaginaries won’t be discussed in the book, they do deserve further research. I will here have to make do with a footnote. Building on feminist insights, Ann L. Jennings argues that monetarists’ understanding of money as a veil over productive activity elevates remunerated pursuits to social contributions while finding non-remunerated contributions as nonproductive activity. Remunerated and non-remunerated activities tend to follow gender lines and thus, a monetarists’ understanding of money ignores the extent to which inequality of access to money entrenches a gendered and class description of who contributes to society, who merits accumulating money, and who is granted highest social status. Jennings argues that, in their efforts to render Keynes compatible with orthodox barter models, New Keynesians commit the same mistake. And, though replacing barter models with a monetary theory of production lead post-Keynesians and Institutionalists to place money at the centre of macroeconomics, the relationship between money and capitalism’s gender hierarchy goes often undiscussed. Though feminism has increasingly influenced heterodox economics since Jennings’ article, there is still little written about how theories of money in capitalism contribute to encroach gendered divisions in society. A.L. Jennings. 1994. Toward a feminist expansion of macroeconomics. Journal of Economic Issues, 28(2): 555–565. See also R. McCaster. 2018. Does post Keynesianism need a theory of care? In Dow, S., Jespersen, J. and Tily, G. (eds) Money, Method and Contemporary Post-Keynesian Economics. Edward Elgar, pp 160–173.

5

William Stanley Jevons is allegedly the first to frame the analysis of barter through the problem of the double coincidence of wants in his book, from 1896, Money and the Mechanism of Exchange. D. Appleton and Co, p 3.

6

A. Smith. 1776. The Wealth of Nations, book 1, ch IV, p 37. Edited by S.M. Soares. MetaLibri Digital Library, 29 May 2007.

7

Smith, The Wealth of Nations, p 44. Emphasis added.

8

Smith points at the qualities that make precious metal particularly practical for use as a standard medium of exchange: portability, durability, uniformity, divisibility and malleability. Although that very passage hints at the practical and logical impossibility of barter as predecessor of money, Adam Smith seems to have been blind to the cognitive bias. The passage reads as follows: ‘Metals can not only be kept with as little loss as any other commodity, scarce anything being less perishable than they are, but they can likewise, without any loss, be divided into any number of parts, as by fusion those parts can easily be reunited again; a quality which no other equally durable commodities possess, and which more than any other quality renders them fit to be the instruments of commerce and circulation. The man who wanted to buy salt, for example, and had nothing but cattle to give in exchange for it, must have been obliged to buy salt to the value of a whole ox, or a whole sheep at a time. He could seldom buy less than this, because what he was to give for it could seldom be divided without loss; and if he had a mind to buy more, he must, for the same reasons, have been obliged to buy double or triple the quantity, the value, to wit, of two or three oxen, or of two or three sheep. If, on the contrary, instead of sheep or oxen, he had metals to give in exchange for it, he could easily proportion the quantity of the metal to the precise quantity of the commodity which he had immediate occasion for.’ Smith, The Wealth of Nations, ch 4, p 23.

9

Smith, The Wealth of Nations, p 23.

10

Smith, The Wealth of Nations, p 24.

11

Charles Goodhart refers to this problem as the ‘identification costs’ problem. C. Goodhart. 1998. The two concepts of money: Implications for the analysis of optimal currency areas. European Journal of Political Economy, 14: 407–432.

12

Smith, The Wealth of Nations, ch 4, p 24.

13

Smith, The Wealth of Nations, pp 25–26. Seignorage refers to the difference between the nominal value of money and the cost of producing it, which, for metal money, includes the value of the material it is made of.

14

The political stance for government to remain detached from any monetary policy is accompanied by an understanding of value as intrinsic to the money-commodity and of markets as the natural places pricing such value. In the chapter on bitcoin, Chapter 6, we will see how these twin ideas persist in today’s crypto monetary space.

15

Smith, The Wealth of Nations, p 26. Emphasis added.

16

C. Menger. 2009 [1892]. The Origins of Money. Ludwig von Mises Institute, p 11.

17

G. Ingham. 2004. The Nature of Money. Polity Press.

18

Adam Smith argued that the more intrinsic value a good had and the lesser its utilitarian value, the larger the agency of that good on the exchanges it enabled. The following passage is explicative: ‘The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called “value in use”; the other, “value in exchange”. The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.’ Smith, The Wealth of Nations, p 26.

19

For an early critique of the logical flaw of the barter story, see A. Mitchell Innes. 1913. What is money? Banking Law Journal, pp 377–408. He writes: ‘A moment’s reflection shows that a staple commodity could not be used as money because ex hypothesis the medium of exchange is equally receivable by all members of the community. Thus if the fishers paid for their supplies in cod, the traders would equally have to pay for their cod in cod, an obvious absurdity.’ For a more recent staunch critique on the basis both of its logical incoherences and the lack of empirical substantiation, see D. Graeber. 2014 [2011]. Debt: The First 5,000 Years. Melville House.

20

Karl Marx assumed a commodity understanding of money, but adapted the intrinsic value of money to his labour theory of value. For Marx, the value embodied in the coin resided on the labour involved in mining the gold and minting the coin. See G. Ingham. 2020. Money: Ideology, History, Politics. Polity Press. See also K. Polanyi. 2001 [1944]. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press, p 26.

21

Frustrated, anthropologist David Graeber offers a list of current economics textbooks presenting the origin of money in make-believe lands of ancient times. Graeber, Debt, pp 23–24. For an overview of the controversies concerning this economics tradition, see J. Smithin. 2003. Controversies in Monetary Economics. Edward Elgar.

22

Suffice to mention Christine Lagarde, President of the European Central Bank (ECB). Writing about the future of money in an article for the magazine of the French School of Public Administration ENA (École National d’Administration), Lagarde traces the emergence of money ‘to overcome the limitations and inefficiencies of bartering’, as an ‘universal medium of exchange needed to facilitate [trade]’. C. Lagarde. 2020. The future of money – innovating while retaining trust. L’ENA hors les murs, 501.

23

Graeber, Debt, p 24.

24

I take the concept from John Quiggin’s book from 2010, Zombie Economics: How Dead Ideas Still Walk among Us. Quiggin does not explicitly identify barter as one of those zombie ideas, but does identify other ideas related to that original myth of economics, such as the ‘efficient market hypothesis’ and ‘general equilibrium’

25

See G. Ingham. 2000. Babylonian madness: On the historical and sociological origins of money. In Smithin, J. (ed) What is Money? Routledge, pp 16–41.

26

J.M. Keynes. 1930. A Treatise on Money. Cambridge University Press, ch 1. Emphasis in the original.

27

In reconstructing the Babylonian origins story, I build on M. Hudson. 2004. The development of money-of-account in Sumer’s temples. In Hudson, M. and Wunsch, C. (eds) Creating Economic Order: Record-keeping Standard and the Development of Accounting in the Ancient Near East. CDL Press, pp 303–329; and M. Hudson. 2004. The role of accounting in civilisation’s economic takeoff. In Hudson, M. and Wunsch, C. (eds) Creating Economic Order: Record-keeping Standard and the Development of Accounting in the Ancient Near East. CDL Press, pp 1–22. I also build on K. Polanyi. 1957. Marketless trading in Hammurabi’s time. In Polanyi, K., Arensberg, C.M. and Pearson, H.W. (eds) Trade and Markets in the Early Empires. The Free Press, pp 12–26; and A.L. Oppenheim. 1957. A bird’s-eye view of Mesopotamian economic history. In Polanyi, K., Arensberg, C.M. and Pearson, H.W. (eds) Trade and Markets in the Early Empires. The Free Press, pp 27–37.

28

In Polanyi, Marketless trading, p 16.

29

In W. Goetzmann. 2017. Money Changes Everything: How Finance Made Civilization Possible. Princeton University Press, p 34.

30

The Babylonian story starts earlier than I have made it to start here. It could go back to the development of the cuneiform proto-writing used in the temple’s clay tablets. Hundreds of thousands of small clay marbles shaped in the form of everyday objects – lambs, cows, loaves of bread, jars of oil, honey, milk, clothing, even abstract units of work – have been found throughout the Babylonian region. For long, it was unclear what they were. Children’s toys? Mystical objects? Counters? Professor Denise Schmandt-Besserat’s painstaking and systematic organisation of the clay marbles by shape and place of unearthing led her to the discovery of the iconographic link between these pieces and the pictographic writing in the tablets. The marbles symbolised the goods once stored in the temple of Inanna, the ‘holy storehouse’ in the city of Uruk, and handed by the temple to the tributing citizen as an attest of the tribute. The cuneiform script on the tablets was a written translation of the marbles into a more abstract form of recording citizens’ contributions to the temple. For more detail on the fascinating history of how writing and numbers developed from the financial organisation of Babylonian temple economies, see D. Schmandt-Besserat. 2010. How Writing Came About. University of Texas Press.

31

Mitchell Innes is often referred to by advocates of the credit theory of money told through the Babylonian story. Already in 1913, Mitchell Innes describes Babylonian clay tablets as the antecedent of medieval tally sticks and contemporary bills of exchange. All those monetary systems were based on the record of a debt that is to be cleared out in due time. Innes, What is money? See also A. Mitchell Innes. 1914. The credit theory of money. The Banking Law Journal, pp 151–168.

32

We can recognise the Babylonian origins story in Keynes’ imaginary of money when he identifies both the recording of debts and the administration of prices as enacting money. In page 3 of his A Treatise on Money, he writes: ‘A money of account comes into existence along with debts, which are contracts for deferred payment, and price lists, which are offers of contracts for sale or purchase. Such debts and price lists, whether they are recorded by word of mouth or by book entry on baked bricks or paper documents, can only be expressed in terms of a money of account.’

33

‘Proclamation’ refers to the declaration and enforcement by the state of a unit of account for the denomination of prices and debts. The notion of proclamation acknowledges that a standard unit of account to record debts and set the value of commodities does not emerge spontaneously from the interactions among individuals seeking to maximise their utility. Rather, the standardisation and inauguration of a monetary unit of account requires a central authority enforcing it to measure and record the obligations towards the authority and their discharge. This theory was best described first by George Friedrich Knapp in The State Theory of Money. 1924. Macmillan and Company Limited. Stephanie Bell puts it concisely: ‘What makes a currency valid as money is a proclamation by the state that it will be accepted at its pay offices; what makes it acceptable to its citizenry is its usefulness in settling these liabilities.’ S. Bell. 2001. The role of the state and the hierarchy of money. Cambridge Journal of Economics, 25: 149–163.

34

I find inspiration for this expression in Keynes’ analysis of the role of the state in the monetary arrangement: ‘[T]he age of chartalist or State money was reached when the State claimed the right to declare what thing should answer as money to the current money of account—when it claimed the right not only to enforce the dictionary but also to write the dictionary. Today all civilised money is, beyond the possibility of dispute, chartalist.’ Keynes, A Treatise on Money, p 4.

35

Long-distance inter-city markets appear to have been organised from trading ports – districts located outside the city walls with the main function of organising inter-city economic relations. Indeed, excavations reveal the structure of the cities of the Ancient Near East consisted of the town proper, the suburb and the extramural trading post. In Oppenheim, A bird’s-eye view. Economic historians debate, however, on the mechanism for the determination of prices for goods exchanged in these trading posts, whether administered through inter-city treaty or formed through supply-and-demand. The first would indicate central authority assisted in the organisation of long-distance trade; the later being indicative of markets as the main organisational mechanism. Such a debate has also implications for the elucidation of motives (non-economic versus economic) guiding commercial trade. On this issue, see M. Silver. 1983. Karl Polanyi and markets in the Ancient Near East: The challenge of the evidence. Journal of Economic History, 43(4): 795–829; D.C. North. 1977. Markets and other allocation systems in history: The challenge of Karl Polanyi. The Journal of European Economic History, 6(3): 703–716. Goetzmann, Money Changes Everything.

36

Though risk-free, commissioned trade was not without complexity and excitement. As Polanyi writes, ‘[a]lthough the principles of “fixed price,” “cash delivery,” “legal surety,” and “commission on turnover” obtained throughout, the trader’s job was far from simple: to make the right contacts among the natives; correctly to judge their requirement of goods; make his financial arrangements in time; conform strictly to rule and regulation; dispose with precision the goods entrusted to him; see to the quality of the wares, either way; procure funds with which to make advances to prospective suppliers, and for deposit with the government; as well as many other matters. Mistakes or omissions meant delay; difficulty in raising loans; small procurement; unnecessary expense; domestic unpleasantness; loss of authority in the family firms; trouble with colleagues and authorities; a reduced turnover. Yet, in this marketless trade there was no loss on prices, no speculation, no failure of debtors. It was exciting as an occupation, but risk-free as a business.’ Polanyi, Marketless trading, p 22.

37

Polanyi, Marketless trading, p 23.

38

The existence of public and private economic spheres tells of the mixed nature of the economies of the Ancient Near East, the balance between public and private sectors shifting through the centuries. For a detailed description of the private aspects of the Mesopotamian economy, see Goetzmann, Money Changes Everything.

39

D.H. Ehnts. 2019. Knapp’s State Theory of Money and its reception in German academic discourse. Institute for International Political Economy, Berlin School of Economics and Law, Working Paper No. 115/2019. A passage that clearly shows Keynes’ merging of his Babylonian interest with Knapp’s state theory is found in his A Treatise on Money, p 11: ‘The first State reform of the standard of weight, of which we have definite record, was the Babylonian reform towards the end of the third millennium B.C. But this was not the beginning. Earlier standards existed. And in the primitive age, before man had attained to the conception of weight or to the technical contrivance of the scales, when he had to depend for measurement upon counting barleycorns or carats or cowries, it may still have been the State or the community which determined what kind or quality of unit should be a due discharge of an obligation to pay which had been expressed by the numerals one or two or ten – as when, so late as the thirteenth century, the English government defined a penny sterling to be the weight of “32 wheat corns in the midst of the ear”.’

40

Randall Wray traces the intellectual history of today’s Modern Monetary Theory back to Knapp’s State Theory of Money and sees evidence of this form of money in Babylonian temple-centred economies. See L.R. Wray. 2014. From the state theory of money to modern money theory: An alternative to economic orthodoxy. Levy Economics Institute of Bard College, Working Paper No. 792.

41

In Mr Lowndes’ own terms, ‘a Policy constantly Practised in the mints of England … to Raise the Value of the Coin in its Extrinsick Denomination from time to time, as Exigence or Occasion required.’ For a well-written account of this episode in monetary history, see F. Martin. 2014. Money: The Unauthorised Biography. Vintage Books, ch 8.

42

For a quick overview of these debates, see R. Skidelsky. 2019. Money and Government: A Challenge to Mainstream Economics. Penguin Books, ch 2.

43

For an informative book on the background, context, details and legacies of the debate, see N. Wapshott. 2011. Keynes Hayek: The Clash That Defined Modern Economics. Scribe Publications.

44

In the epilogue of the well-informed and entertaining book Money: The Unauthorised Biography, Felix Martin similarly condenses monetary debate throughout history in two parallel questions: ‘All monetary history revolves around two fundamental questions: What are the rules governing the creation of money? And who gets to decide?’ (p 276).

45

Recall the difference between intermediary and mediator explained in Chapter 1. The next chapter details today’s process of bank money creation.

46

Comparing the fixed exchange rate credo informing the gold standard and the euro, Barry Eichengreen and Peter Temin succinctly summarise the ethos of the monetarist imaginary: ‘Its rhetoric was deflation, and its mentalité was one of inaction’ (p 378). B. Eichengreen and P. Temin. 2010. Fetters of gold and paper. Oxford Review of Economic Policy, 26(3): 370–384.

47

Economists have indeed made the argument that the analytical questions underlying policy disputes are closely related to the stance taken on the money imaginary. For a detailed development of the argument in relation to various contemporary controversies in macroeconomic policies, see Smithin, Controversies in Monetary Economics, pp 16–39.

48

Already some 40 years ago, anthropologist Keith Hart argued the importance of seeing money as simultaneously commodity and token. The following passage illustrates his reasoning (p 638): ‘Look at a coin from your pocket. On one side is “heads” – the symbol of the political authority which minted the coin; on the other side is “tails” – the precise specification of the amount the coin is worth as payment in exchange. One side reminds us that states underwrite currencies and that money is originally a relation between persons in society, a token perhaps. The other reveals the coin as a thing, capable of entering into definite relations with other things, as a quantitative ratio independent of the persons engaged in any particular transaction. In this latter respect money is like a commodity and its logic is that of anonymous markets. Heads and tails stand for social organisation from the top down and from the bottom up, epitomised in modern theory by the state and the market respectively. Most theories of money give priority to one side over the other. It is as if, not content with exploring the ambiguous unity of heads and tails, politics and markets, economists felt compelled like gamblers to toss the coin – heads or tails? – and, having opted for the one that lands up, then denied the existence of the other side, except in the minds of devil-worshippers. This Manichaean medieval impulse is deeply embedded in modern economic thought, and our century has seen the two sides inflated into an ideological struggle between state socialism and the free market that could be the death of us all.’ K. Hart. 1986. Heads or tails? Two sides of the coin. Man, 21(4): 637–656.

Chapter 3

1

A poll conducted by Positive Money in 2017 found out that as much as 85 per cent of members of the British parliament did not know who created the majority of our money, nor how money was created or what it was created for. A survey administered to 23,000 citizens in countries representing 75 per cent of the world economy – Australia, Belgium, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Netherlands, Poland, Russia, Spain, South Africa, South Korea, Turkey, United Kingdom and the United States – showed the general public was similarly ignorant. To the question of who they thought created more than 95 per cent of the money in circulation, 20 per cent of world citizens compared to 15 per cent of British parliamentarians answered ‘private/commercial banks’. Financial professionals, who directly or indirectly work with money creation, knew only slightly better, 26 per cent of them acknowledging private banks’ central role in creating most of our money. See D. Clarke. 2017. Poll shows 85% of MPs don’t know where money comes from. Positive Money; Lampert, M. and van Tilburg, R. (2016). Knowledge about who creates money low amongst international population. Publication based on Glocalities Research by Motivaction International in cooperation with Sustainable Finance Lab.

2

US: Government Printing Office. 2008. The Financial Crisis and the Role of Federal Regulators. House Hearing, 110 Congress.

3

The large fiscal stimulus packages implemented to fight the economic crisis in the United States led to government debt rising from 60 per cent of gross domestic product (GDP) in 2007 to over 100 per cent in 2013. See M. Faria-e-Castro. 2018. What are the fiscal costs of a (great) recession? Economic Synopses, 22. In the euro area, aggregated governments’ debt rose from 66 per cent of GDP in 2007 to 95 per cent in 2014. See P. Burial, C. Checherita-Westphal, P. Jacquinot, M. Schön and N. Stähler. 2020. Economic consequences of high public debt: Evidence from three large scale DSGE models. European Central Bank, Working Paper Series No. 2450.

4

W. Chen, M. Mrkaic and M. Nabar. 2019. The global economic recovery 10 years after the 2008 financial crisis. IMF Working Paper No. 19/83. S.D. Williamson. 2017. Quantitative easing: How well does this tool work? Federal Reserve Bank of St. Louis. For a central banker’s acknowledgement of the failure of macroeconomics to understand why such extraordinary injections of money were not resulting in high inflation levels, see B. Cœuré. 2019. The rise of services and the transmission of monetary policy, speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the 21st Geneva Conference on the World Economy, 16 May.

5

For a readable exposé of the extent to which macroeconomics had missed money and finance and how the crisis of 2008 prompted a rethink of the discipline, see J. Fox. 2013. What we’ve learned from the financial crisis. Harvard Business Review.

6

The argument for government saving during economic crisis is based on a misleading comparison between government budgets and family finances. For instance, House Minority Leader Republican John Boehner opposed US stimulus plans by arguing that ‘American families are tightening their belt, but they don’t see government tightening its belt’. The misconception permeated not only the discourse of right-leaning politicians with a fondness for small government. It soon made it into the speeches and party programmes of left-inclined politicians. In P. Krugman. 2015. The case for cuts was a lie. Why does Britain still believe it? The austerity delusion. The Guardian, 29 April. Misconceiving government for household economics ignores that governments that can issue debt in their own currency (as it is the case of the United States and the United Kingdom) can fund their expenses without the need to tax (earn) first. See S. Kelton. 2020. The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy. PublicAffairs.

7

See Y. Chzhen, S. Handa, B. Nolan and B. Cantillon. 2017. Children of Austerity: Impact of the Great Recession on Child Poverty in Rich Countries. Oxford University Press. T. Cavero and K. Poinasamy. 2013. A Cautionary Tale: The True Cost of Austerity and Inequality in Europe. Oxfam International.

8

D. Etherington. 2021. Austerity, Welfare and Work: Exploring Politics, Geographies and Inequalities. Policy Press.

9

With the onset of the financial crisis, the value of pension funds shrank by over five trillion US dollars. Pension funds’ losses varied across countries, Irish pensions losing 38 per cent of their value, Australian pensions 27 per cent, and US pensions 26 per cent, while German, Norwegian, Spanish and Swiss pensions lost about 10 per cent. B. Keeley and P. Love. 2010. From Crisis to Recovery: The Causes, Course and Consequences of the Great Recession. OECD Insights.

10

In S. Greenhill. 2008. ‘It’s awful – Why did nobody see it coming?’: The Queen gives her verdict on global credit crunch. Mail Online, 6 November.

11

In S. Keen. 2022. The New Economics: A Manifesto. Polity Press, p 2.

12

Philip Arestis clearly specifies one by one the implications that the ignorance of money and financial markets by dominant macroeconomics along with its Efficient Markets Hypothesis had in the design of monetary policy. P. Arestis. 2013. Economic policies of the new consensus macroeconomics: A critical appraisal. In Pixley, J. and Harcourt, G.C. (eds) Financial Crises and the Nature of Capitalist Money: Mutual Developments from the Work of Geoffrey Ingham. Palgrave Macmillan, pp 196–215.

13

In The Economists’ Hour, Binyamin Appelbaum chronicles the rise and fall of Chicago School style mathematical economics, which regression games so contributed to give a false sense of precision to the economics profession. Appelbaum argues their reputed ‘expertise’ ended in the fall of 2008 with the large bailouts needed to save the banking sector from financial collapse. B. Appelbaum. 2019. The Economists’ Hour: How the False Prophets of Free Markets Fractured Our Society. Pan Macmillan.

14

Central banks engaged in other policies to increase the money supply. These included repo operations, lowering interest rates below the zero bound, direct lending to banks with the aim of banks lending it forward to small businesses, buying corporate bonds or lending to corporations and cities, regions, and states. For a global database of central banks’ monetary responses to the COVID-19 pandemic, see C. Cantú, P. Cavallino, F. De Fiore and J. Yetman. 2021. A global database on central banks’ monetary responses to COVID-19. Bank for International Settlements, BIS Working Paper No. 934. See also M.R. Grasselli. 2022. Monetary policy responses to COVID-19: A comparison with the 2008 crisis and implications for the future of central banking. Review of Political Economy, 34(2): 420–445.

15

CBPP Staff. 2022. Robust COVID relief achieved historic gains against poverty and hardship, bolstered economy. Center on Budget and Policy Priorities, 24 February.

The rapid, robust and broad-ranged fiscal response of governments to the economic crisis brought about by global lockdowns has been credited for limiting the severity and length of the recession with the US government’s response being, by and large, the most aggressive – in the United States, fiscal support amounted to about 25 per cent of GDP, compared to 18 per cent in the UK and 10 per cent in all countries on average. Such comprehensive, determined and quick government support policies have been described as ‘an economic game-changer’. B. Yaros, J. Rogers, R. Cioffi and M. Zandi. 2022. Fiscal policy in the pandemic. Moody’s Analytics, 24 February.

16

C. Reinhart. 2022. Finance for an Equitable Recovery. World Development Report. World Bank Group.

17

A.L. Jackson and J. Schmidt. 2022. 2021 stock market year in review. Forbes.

18

J.E. Stiglitz. 2022. COVID has made global inequality much worse. Scientific American, 326(3): 52–53. V. Gopalakrishnan, D. Wadhwa, S. Haddad and P. Blake. 2021. 2021 Year in review in 11 charts: The inequality pandemic. World Bank.

19

Two misleading views on how banks work are typically subsumed under the ‘Loanable Funds’ header: the financial intermediation view of banks and the fractional reserve banking theories of money creation. See M. Gross and C. Siebenbrunner. 2019. Money creation in fiat and digital currency systems. International Monetary Fund, IMF Working Paper #WP/19/285. See also R. Werner. 2014. Can banks individually create money out of nothing? The theories and the empirical evidence. International Review of Financial Analysis, 36: 1–19. As we saw in Chapter 2, the understanding of banks as mere intermediaries between savers and borrowers is based on a commodity imaginary of money.

20

Students demanding reform of the economics curricula are organised under the ‘Post-Crash Economics Society’, the ‘International Student Initiative for Pluralist Economics’ (ISIPE) or ‘Rethinking Economics’. Their demands centre around the teaching of an economics that is more diverse and that goes beyond the exclusive focus on free-market economics.

21

S. Bowles and W. Carlin. 2021. Rethinking economics. FD: Finance & Development, spring. The CORE project is an example of a community of researchers and teachers who, reacting to their frustration over the traditional economics still taught at universities, are developing free open-access resources to transform the teaching of economics. See www.core-econ.org.

22

An approach to money as balance sheet operations that record social relations of debt–credit follows the tradition of John Maynard Keynes, Hyman Minsky and, among others today, Randall Wray. On this topic, see P. Mehrling. 2011. The New Lombard Street: How the Fed Became the Dealer of Last Resort. Princeton University Press; D. Gabor and J. Vestergaard. 2016. Towards a Theory of Shadow Money. Institute for New Economic Thinking; S. Bell. 2001. The role of the state and the hierarchy of money. Cambridge Journal of Economics, 25: 149–163.

23

D.J. Bezemer. 2010. Understanding financial crisis through accounting models. Accounting, Organisations and Society, 35(7): 676–688.

24

J. Zoltan and M. Kumhof. 2019. Banks are not intermediaries of loanable funds: Facts, theory and evidence. Bank of England, Staff Working Paper No. 761.

25

During the build up of the subprime mortgage bubble, this sort of financing operations by banks were argued as leading to the ‘democratisation of finance’ and the ‘ownership society’. Advocates claimed that such practices reduced credit risk for banks, allowing them to extend credit to individuals traditionally deemed not creditworthy. For an early critique of this set of practices and arguments, see I. Erturk, J. Froud, S. Johal, A. Leaver and K. Williams. 2007. The democratization of finance? Promises, outcomes and conditions. Review of International Political Economy, 14(4): 553–575. Some have argued that, under the mantel of ‘democratisation of finance’, the system has actually reinforced ‘the tyranny of earned income’. See J. Froud, S. Johan, J. Montgomerie and K. Williams. 2010. Escaping the tyranny of earned income? The failure of finance as social innovation. New Political Economy, 15(1): 147–164.

26

See R. Wray. 2013. What do banks do? What should banks do? A Minskian perspective. Accounting, Economics, and Law: A Convivium, 3(3): 277–311. See also L. Fantacci. 2013. Why banks do what they do. How the monetary system affects banking activity. Accounting, Economics and Law, 3(3): 333–356.

27

In The End of Finance, Massimo Amato and Luca Fantacci argue how the possibility banks have to sell in financial markets the loans they grant enables the rolling over of debts, constantly postponing the settling of accounts (payments in the short term) into the future (the long term). But that future is discounted onto the present based on optimistic expectations that things won’t change, that the future will be like the present. When these expectations fail to realise, debts cease to be rolled over, yet repayments are still not possible, leading to general crisis. These scholars name the logic that so organises financial markets ‘the liquidity principle’. M. Amato and L. Fantacci. 2012. The End of Finance. Polity Press.

28

M. McLeay, A. Radia and R. Thomas. 2014. Money creation in the modern economy. Quarterly Bulletin, Bank of England. See also M. McLeay, A. Radia and R. Thomas. 2014. Money in the modern economy: An introduction. Quarterly Bulletin, Bank of England.

29

J.M. Keynes. 1930. A Treatise on Money. Cambridge University Press, p 23. Emphasis in the original.

30

International Monetary Fund economists Marco Gross and Christoph Siebenbrunner offer a similar balance sheet example of money creation through the creation of loans by commercial banks. Gross and Siebenbrunner, Money creation in fiat and digital currency systems.

31

The money supply is described through various monetary aggregates – M0 to M4 – each sequentially including a less liquid type of money. M0, or ‘narrow money’, includes the most liquid types – paper bills and coins and central bank reserves. M1 is the aggregate most used, referring to M0 plus on-demand bank deposits. Higher aggregates include assets with a longer maturity, such as saving deposits, money market funds, repo agreements and debt securities. In describing money creation through the extension of bank loans, the chapter – along with the article from the Bank of England – is focusing on M1.

For a description on what the harmonised monetary aggregates in the euro-zone include, see ECB. 1999. Euro area monetary aggregates and their role in the Eurosystem’s monetary policy strategy. ECB Monthly Bulletin, February. These aggregates include somewhat different items in different monetary areas.

32

McLeay et al, Money creation in the modern economy.

33

Such ideas go under the mantel of the ‘Money Multiplier’.

34

McLeay et al, Money creation in the modern economy. Emphasis added. For a similar critique of the Money Multiplier myth, see J. Benes and M. Kumhof. 2012. The Chicago plan revisited. International Monetary Fund, IMF Working Paper WP/12/202.

35

Customers’ possibility to use bank’s promises to pay – the bank’s debt acknowledgement, its IOUs – to settle transactions defines money. As Keynes taught us, ‘[w]hen acknowledgments of debt are used in this way, we may call them bank money’. Keynes, A Treatise on Money, p 5. Indeed, Keynes anchors the distinction between money and debt in that money extinguishes debt. Accordingly, in a gold monetary system, the handing of gold cancels the debt. In a fiat monetary system, the state settles its debts in its own promissory notes (Keynes’ ‘proper money’). Bank deposits are a promise to convert each unit of bank money into ‘proper money’ at par on demand, an IOU acknowledging the bank’s debt/promise to pay. Because bank deposits are accepted in payment of taxes and because their convertibility into legal tender is guaranteed by the central bank, bank deposits are also accepted to settle debts. It is in this way that bank’s IOUs transform into money. See Gabor and Vestergaard, Towards a Theory of Shadow Money.

36

Ann Pettifor argues that the power of the general public over the money creation process inheres in individuals agreeing to borrow. The argument implicit in this chapter is that, in the current monetary system, the will to enter a debt–credit relationship is not so much a power the 99 per cent wields but rather a survival need. Many depend on credit-granting institutions to even pay for their basic needs. A. Pettifor. 2017. The Production of Money: How to Break the Power of Bankers. Verso Books.

37

G. Standing. 2011. The Precariat: The New Dangerous Class. Bloomsbury Academic.

38

T. Quinsom and M. Benhamou. 2021. Banks always backed fossil fuel over green projects – until this year. Blomberg Europe Edition, 19 May.

39

Hyman Minsky wrote lucidly about the credit creation process as a destabiliser mechanism endogenous to the economy that accounted for the inherent instability of capitalism. Largely ignored during his lifetime, many economists recovered his teachings in an effort to understand the process that led to the financial implosion of 2007–2009. H. Minsky. 1986. Stabilizing an Unstable Economy. Washington University Press. See also Mehrling, The New Lombard Street; Keen, The New Economics; P. Krugman. 2015. The case of the missing Minsky. New York Times, 1 June.

For a classic book on how unregulated financial markets have throughout the history of capitalism repeatedly led to instability and crises, see C. Kindleberger. 1978. Manias, Panics and Crashes. Basic Books.

40

Pettifor, The Production of Money, p 46.

41

On the imperative to grow and the extent to which compound interest is at its root, see M. Kennedy. 1995. Interest and Inflation Free Money: Creating an Exchange Medium That Works for Everybody and Protects the Earth. Inbook; B. Lietaer, C. Arnsperger, S. Goerner and S. Brunnhuber. 2012. Money – Sustainability: The Missing Link. Triarchy Press; C. Eisenstein. 2011. Sacred Economics. North Atlantic.

42

In recent years, US-based non-financial companies have dramatically increased their cash holdings, from US$1.6 trillion in 2000 to about US$5.8 trillion. M. Faulkender, K.W. Hankings and M.A. Petersen. 2022. Why are U.S. companies hoarding so much cash? Kellog Insight, Kellogg School of Management at Northwestern University.

43

This is related to the contradictory uses of money that will be explained in more detail in Chapter 5.

44

C. Arnsperger, J. Bendell and M. Slater. 2021. Monetary Adaptation to Planetary Emergency: Addressing the Monetary Growth Imperative. Institute for Leadership and Sustainability, University of Cumbria, UK.

From Ancient Mesopotamia and Classical Rome to India and Islam in the 19th century, history has repeatedly shown the incompatibility between interest-bearing loans and a slow-growing or stagnant economy such as today’s, resulting in high levels of unpayable debt. T. Hartley and G. Kallis. 2021. Interest-bearing loans and unpayable debts in slow-growing economies: Insights from ten historical cases. Ecological Economics, 188(C): S0921800921001907.

45

Financial Crisis Inquiry Commission, USA. 2011. The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States (henceforth Financial Crisis Inquiry Report).

46

For a more detailed account of the role played by Wall Street firms, rating agencies and the federal government itself in the wave of securitisation of subprime mortgages, see Financial Crisis Inquiry Report, ch 5.

47

For a detailed account of the role law and lawyers played in the increased complexity of financial securities, see K. Pistor. 2019. The Code of Capital. Princeton University Press, ch 4.

48

In Financial Crisis Inquiry Report, p 68.

49

I borrow the term to describe the monetary, banking and financial processes that coalesced in the boom first and bust later of the first decade of the 2000s from Gabor and Vestergaard, Towards a Theory of Shadow Money.

50

Financial Crisis Inquiry Report, p 175.

51

Stated by Robert Levin, Chief Financial Officer of Fannie Mae, a Federal National Mortgage Association in the United States. Financial Crisis Inquiry Report, p 180.

52

For a detailed description of the aggressive and risky lending practices during the boom, I recommend reading Chapters 6 and 7 of the Financial Crisis Inquiry Report, aptly titled respectively ‘The mortgage machine’ and ‘The CDO machine’. Hyman Minsky would have characterised these ballooning schemes as Ponzi financial structures. He distinguished hedge, speculative and Ponzi finance as three distinct income-flows to debt-flow relations for economic actors. In hedge financing, economic actors can attend all their payment obligations (outflows) with their income inflows. In speculative financing, economic actors can only attend the interest part of their payment obligations, having to roll over their debts to attend payment of their principal obligation. In Ponzi financing, economic actors need further borrowing just to pay the interest on previous loans, their outflows surpassing their inflows. H. Minsky. 1992. The financial instability hypothesis. Levy Economics Institute of Bard College, Working Paper No. 74.

53

Angelo Mozilo, CEO of Countrywide Financial Corporation, the biggest mortgage granting institution from 2004 until the market collapsed in 2007. Between 2002 and 2005, the company sold or securitised 87 per cent of the $1.5 trillion in mortgages it originated. In Financial Crisis Inquiry Report, p 105.

54

Patricia Lindsay, a former fraud specialist at New Century, told the Financial Crisis Inquiry Commission. Financial Crisis Inquiry Report, p 105.

55

Financial Crisis Inquiry Report, chs 4 and 11.

56

As John Snow, former Treasure Secretary of the United States, told the Financial Crisis Inquiry Commission. Financial Crisis Inquiry Report, p 66.

57

In Saving the Market from Capitalism, Massimo Amato and Luca Fantacci argue that it is not the market mechanism per se that is to be blamed for the recurrent crises of capitalism, but the fact that finance has been organised along a market principle. The problem, they argue, is that there is one market too many, the financial market. M. Amato and L. Fantacci. 2014. Saving the Market from Capitalism. Translated by G. Sells. Polity Press.

58

In 1988, Charles Goodhart, a British economist who served as senior adviser at the Bank of England, wrote an insightful history on the evolution of central banks as the bank of banks. As the book traces the evolving role and practices of central banks, Goodhart engages with the neoliberal free-market arguments of those advocating for free-banking for whom the ‘introduction of an outside agency to regulate and control the banking system represents an undesirable intervention in the otherwise satisfactory working of a free market system in the banking industry’ (p 4). In contrast, Goodhart finds the non-competitive aspect of the central bank crucial for the performance of its roles as facilitator of a nation’s payment system, ultimate source of liquidity and superviser of key sectors of financial markets. C. Goodhart. 1988. The Evolution of Central Banks. MIT Press.

59

For a discussion of the selective introduction of central bank money, see C. Desan. 2020. The key to value: The debate over commensurability in neoclassical and credit approaches to money. Law and Contemporary Problems, 83(2): 1–22.

60

Based on an analysis of Census Bureau surveys, researchers at the University of Michigan conclude the impact of the US federal government COVID-19 pandemic stimulus bills was a clear reduction of material poverty and other poverty related indicators. See P. Cooiney and L. Shaefer. 2021. Material hardship and mental health following the COVID-19 relief bill and American rescue plan act. Poverty Solutions. University of Michigan.

61

Amazon has become the epitome of big business taking advantage of government financial support all while submitting its workers, at home and abroad, to inhuman labour conditions. See R. McGahey. 2020. Amazon gets billions while state and local government budgets collapse. Forbes, 17 December; S. Ghaffary and J. Del Rey. 2020. The real cost of Amazon. Vox, 29 June; D. Lee. 2020. Amazon contractors enduring ‘subhuman’ conditions in Philippines. Financial Times, 1 April; J. Greene. 2021. Amazon’s employee surveillance fuels unionization efforts: ‘It’s not prison, it’s work’. The Washington Post, 6 December.

62

M. Mazzucato. 2018. The Value of Everything: Making and Taking in the Global Economy. Penguin Books.

63

A. Armstrong, E.P. Davis, I. Liadze and C. Rienzo. 2013. Evaluating changes in bank lending to UK SMEs over 2001–12 – ongoing tight credit? Econometric analysis using data from the UK Survey of SME Finances and the SME Finance Monitor. Report. Department for Business Innovation & Skills, UK Government.

64

Bank of England. 2012. The distributional effects of asset purchases. Bank of England Report, 12 July; G. Bernardo, J. Ryan-Collins, R. Werner and T. Greenham. 2013. Strategic Quantitative Easing: Stimulating Investment to Rebalance the Economy. New Economic Foundation. See also Reinhart, Finance for an Equitable Recovery.

65

See B. Dyson, G. Hodgson and F.v. Lerven. 2016. Sovereign Money: An Introduction, Positive Money; Benes and Kumhof, The Chicago plan revisited; J. D’Arista. 2018. All Fall Down: Debt, Deregulation and Financial Crises. Edward Elgar; Amato and Fantacci, The End of Finance; Amato and Fantacci, Saving the Market from Capitalism; J. Muellbauer. 2014. Combatting Eurozone deflation: QE for the people. Centre for Economic Policy Research; S. Wan, E. Bartsch, J. Boivin, S. Fischer and P. Hildebrand. 2019. Dealing with the next downturn: From unconventional monetary policy to unprecedented policy coordination. BlackRock Institute.

66

See L. Zelmanovitz and B. Meyerhof Salama. 2020. Central bank digital currency: The hidden agenda, Just Money; R. Hockett. 2020. The inclusive value ledger: A public platform for digital dollars, digital payments, and digital public banking. Just Money.

67

D. Hengsbach. 2022. Monetary sovereignty in the digital age: A case of central bank digital currencies (CBDC)? Paper presented at the SASE conference, Amsterdam, July 9–11.

68

S.L. Star. 1999. The ethnography of infrastructure. American Behavioural Scientist, 43(3): 377–391. See also the distinction between intermediary and mediator in Chapter 1 of this book.

69

John Stuart Mill’s discussion of money is exemplary of the invisibility of infrastructures while they work and their coming to light when they break down. Though adhering to a view of money as neutral to the workings of the economy, Mill was however keen to admit that money had an effect on the economy when it broke down. He could held this contradictory understanding within the space of two sentences. In a chapter entitled ‘Of money’, he writes: ‘There cannot, in short, be intrinsically a more insignificant thing, in the economy of society, than money; except in the character of a contrivance for sparing time and labour. It is a machine for doing quickly and commodiously, what would be done, though less quickly and commodiously, without it: and like many other kinds of machinery, it only exerts a distinct and independent influence of its own when it gets out of order.’ In other words, as an infrastructure of the economy, money is made invisible when it works, and visible when ‘it gets out of order’. J.S. Mill. 1877/1848. Principles of Political Economy with some of their Applications to Social Philosophy, book 3, ch 7. D. Appleton and Company.

70

CBPP Staff, Robust COVID relief.

71

D. Autor, D. Cho, L.D. Crane, M. Goldar, B. Lutz, J. Montes, W.B. Peterman, D. Ratner, D. Villar and A. Yildirmaz. 2022. The $800 billion paycheck protection program: Where did the money go and why did it go there? Journal of Economic Perspectives, 36(2): 55–80.

Interlude 1

1

I build the account of Yap from Furness’ original travel-book as well as from Felix Martin’s delightful opening to his insightful and entertaining book on money. W.H. Furness. 1910. The Island of Stone Money: UAP of the Carolines. J.B. Lippincott Company; F. Martin. 2014. Money: The Unauthorised Biography. Vintage Books.

2

Furness, The Island of Stone Money, p 11.

3

Furness, The Island of Stone Money, p 140.

4

For both economists, fascination for Yap’s stone money related to the form of rationality it was an expression of. In Keynes’ words: ‘[The island of Yap] has brought us in contact with a people whose ideas on currency are probably more truly philosophical than those of any other country. Modern practice in regard to gold reserves has a good deal to learn from the more logical practices of the island of Uap.’ In Friedman’s words: ‘The Yap Islanders regarded stones quarried and shaped on a distant island and brought to their own as the concrete manifestation of wealth. For a century and more, the “civilized” world regarded as a concrete manifestation of its wealth metal dug from deep in the ground, refined at great labor, and transported great distances to be buried again in elaborate vaults deep in the ground. Is the one practice really more rational than the other?’ J.M. Keynes. 1915. The island of stone money. The Economic Journal, 25(98): 281–283. M. Friedman. 1991. The island of stone money. Working Papers in Economics, Hoover Institution, E-91–3.

5

Furness, The Island of Stone Money, p 93.

6

As we saw in an earlier chapter, seeing value in the very token that represents value defines a commodity understanding of money. Metallists see value in the content the token is made of or is made to represent. Marx adapted such idea to his labour theory of value by placing the value of the coin in the labour incurred to mine and shape the precious metal content (see Chapter 2, footnote 18). At first, Furness offers a mix of the two commodity-based understandings of value when he discusses the value of a specific fei as residing in its size, in its quality, and in the labour it took to quarry, shape and transport it to Yap.

7

Furness, The Island of Stone Money, p 96. Emphasis added.

8

Furness, The Island of Stone Money, p 92. Emphasis added.

9

G. Simmel. 1900. The Philosophy of Money. 3rd enlarged edition edited by D. Frisby, translated by D. Frisby and T. Bottomore. Routledge.

10

Furness, The Island of Stone Money, pp 97–98.

11

Economic anthropologist Keith Hart reasons along these lines when he argues that ‘[m]oney … is an expression of trust between individuals in society, an act of remembering which allows us to bring calculation to some of our interactions and relationships. This trust is two-sided also, residing in both personal responsibility and the shared memory of communities, in personality and culture.’ K. Hart. 2001. Money in an Unequal World: Keith Hart and His Memory Bank. Texere.

12

Among sociologist scholars of money, Geoffrey Ingham is the first to approach money as ‘a social technology’ for the coordination of the economy; more specifically, as ‘a specific form of social technology that accounts for abstract value and transports it through time’ (p 60). G. Ingham. 2004. The Nature of Money. Polity Press.

13

Elinor Ostrom showed a third alternative existed for the management of the natural commons. While mainstream economic and political theory presented the market and the state as the only actors capable of successfully managing the commons, in her travels across communities from South East Asia to Africa, from Latin America to Southern Europe, Ostrom found many an example of natural commons more productively managed by communities. For her work identifying the principles for the successful collective governance of the commons she was awarded the Nobel Prize in Economics in 2009. E. Ostrom. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press.

For an application of Ostrom’s notion of the commons to a discussion of money, see E. Barinaga, A. Honzawa, J. Ocampo, P. Raffaelli and L. Ussher. 2021. Commons-based monies for an inclusive and resilient future. In Climate Adaptation: Accounts of Resilience, Self-Sufficiency and Systems Change. Arkbound, pp 301–321. For an application to digital monies of Ostrom’s eight principles for the government of the commons, see D. Rozas, A. Tenorio-Fornés, S. Díaz-Molina and S. Hassan. 2021. When Ostrom meets blockchain: Exploring the potentials of blockchain for commons governance. SAGE Open.

14

Furness, The Island of Stone Money, pp 98–100.

15

For some descriptions of how private profiteers, supported by governments, are grabbing the natural commons to the detriment of the communities that live in and from them, see K. Lanz. 2022. Large-Scale Land Acquisition in Ghana: Institutional Change, Gender and Power. Routledge. J. Dell’Angelo, P. D’Odorico, M.C. Rulli and P. Marchand. 2017. The tragedy of the grabbed commons: Coercion and dispossession in the global land rush. World Development, 92: 1–12; J. Franco, S. Kishimoto, S. Kay, T. Feodoroff and G. Pracucci. 2014. The Global Water Grab: A Primer. The Transnational Institute.

16

The example of primitive communities whose money systems were grabbed by colonising powers is not unique to Yap and recent colonial history. It appears the Inca empire partly applied its bureaucratic prowess on colonised communities by grabbing their local monetary system. Pre-existing traditional ayllu groups used knotted strings – khippu – to keep record of household’s appropriations from and contributions to necessary work in the village – clearing fields, harvesting, maintaining water canals and reservoirs, porterage or repairing bridges and other communal buildings. Knots were continuously knotted and unknotted in the strings to keep track of a household’s debts and their cancellation. Upon expansion, the Inca imposed labour on the ayllus and coopted the khippu to record labour debts owed to the central Inca administration. Yet, ‘[u]nlike the local string records, these were fixed and non-negotiable; the knots were never unravelled and retied’. D. Graeber and D. Wengrow. 2021. The Dawn of Everything: A New History of Humanity. Penguin Random House, p 426.

Chapter 4

1

In G. Bazzani. 2020. When Money Changes Society: The Case of Sardex Money as Community. Springer VS, p 78. Subsequent quotes from Sardex are from this source.

2

I find the following passage in Mauss’ essay particularly enlightening: ‘[T]he system of gift-through-exchange permeates all the economic, tribal, and moral life of the Trobriand people. It is “impregnated” with it, as Malinowski very neatly expressed it. It is a constant “give and take”. The process is marked by a continuous flow in all directions of presents given, accepted, and reciprocated, obligatorily and out of self-interest, by reason of greatness and for services rendered, through challenges and pledges.’ M. Mauss. 2002 [1954]. The Gift: The Form and Reason for Exchange in Archaic Societies. Routledge Classics, p 37.

3

Mauss, The Gift, p 93.

4

Material used to build the Sardex story comes from Giacomo Bazzani’s empirically rich doctoral thesis, from videos and webinars freely accessible online as well as from a couple of interviews with one of the founders. For the Málaga Común story, material comes from interviews with users and my own participation in that citizen money system.

5

Entry in blog BlogSostenible in 2010 by one of the founders. Own translation. https://blogsostenible.wordpress.com/2010/09/05/nueva-moneda-en-malaga/

6

Figures come from the Spain’s National Institute of Statistics (Instituto Nacional de Estadística, INE). https://www.ine.es/jaxiT3/Datos.htm?t=3996

7

See Chapter 3 in this book.

8

From Bazzani, When Money Changes Society, p 35.

9

Though economic crises undoubtedly exacerbate the scarcity of money and, therewith, the difficulty of connecting an economy – of mobilising an economy’s resources to satisfy its needs – the experience is well known to regions located at the periphery of the monetary circuits of a globalised economy. Regions with little value adding industry, low rates of return on capital, and few opportunities – typically rural areas and the global South – have few ways to attract the ‘free global capital flows’. Money tends to move to financial centres with higher rates of return and economic hubs with high value adding industries. With little local production and heavily reliant on imports, communities at the margins of global networks of trade and finance see the little money they may be able to attract – through, for instance, tourism and remittances – leak out of their territory. In these regions, the scarcity of money is a constant affliction which unswervingly intensifies during global crises. In Plugging the Leaks, community organisers Bernie Ward and Julie Lewis build on the idea of the leakage of money to urge communities to map and identify how money leaves their territory. Such a mapping exercise would inevitably suggest lines of action to ‘plug the leaks’ and strengthen the local economy. B. Ward and J. Lewis. 2002. Plugging the Leaks: Making the Most of Every Pound That Enters Your Local Economy. New Economics Foundation.

10

Bazzani, When Money Changes Society, p 35. Emphasis added.

11

The emergence of a profusion of local currencies is a phenomenon tightly connected with economic crisis. Based on numismatic evidence, Gómez and Prittwitz revise the connection between periods of economic distress and the rise of monetary plurality for various historical episodes. See G.M. Gómez and W. Prittwitz und Gaffron. 2018. The pervasiveness of monetary plurality in economic crisis and war. In G.M. Gómez (ed) Monetary Plurality in Local, Regional and Global Economies. Routledge, ch 7.

12

The estimate of the number of local complementary currencies went up to 400 if time-banks were included. Time-banks are a complementary payment method that uses hours as its unit of account and follows the principle of clearing in the dispensation and disappearance of monetary tokens. N. Hughes. 2015. The community currency scene in Spain. International Journal of Community Currency Research, 19: 1–11.

13

J. Blanc and C. Lakócai. 2020. Toward spatial analyses of local currencies: The case of France. International Journal of Community Currency Research, 24(1): 11–29.

14

H. Meng and A. Ueda. 2020. Characteristics of community currency that contribute to endogenous regional activation: Based on case studies of three community currencies: Ma~yu, Tengu and Awa Money. International Journal of Community Currency Research, 24: 54–63; Yoshihisa Miyazaki and Ken-ichi Kurita. 2018. The diversity and evolutionary process of modern community currencies in Japan. International Journal of Community Currency Research, 22: 120–131.

15

I. Sotiropoulou. 2011. Alternative exchange systems in contemporary Greece. International Journal of Community Currency Research, 15(D): 27–31

16

C. Thiel. 2011. Complementary currencies in Germany: The Regiogeld system. International Journal of Community Currency Research, 15(D): 17–21; R. Schroeder. 2006. Community exchange and trading systems in Germany. International Journal of Community Currency Research, 10: 24–42.

17

J. Ryan-Collins. 2011. Building local resilience: The emergence of the UK transition currencies. International Journal of Community Currency Research, 15(D): 61–67.

18

J. Mascornick. 2007. Local currency loans and grants: Comparative case studies of Ithaca HOURS and Calgary Dollars. International Journal of Community Currency Research, 11: 1–22.

19

E. Gomes da Silva Hernandes, E. Souza Siqueira, E. Henrique Diniz and M. Pozzebon. 2018. A digital community bank: Mapping negotiation mechanisms in its consolidation as an alternative to commercial banks. International Journal of Community Currency Research, 22: 56–70; A.S. Rigo. 2020. Challenges of social currency use: A survey on community development banks in Brazil. International Journal of Community Currency Research, 24: 74–85; C. Place. 2011. Community currency progress in Latin America (Banco Palmas). International Journal of Community Currency Research, 15(D): 39–46.

20

C. Stamm. 2021. Understanding the recent dynamics of local currency initiatives in Switzerland. International Journal of Community Currency Research, 25(2): 63–76; C. Place, A. Calderon, J. Stodder and I. Wallimann. 2018. Swiss currency systems: Atlas, compendium and chronicle of legal aspects. International Journal of Community Currency Research, 22: 85–104.

21

G.M. Gómez. 2009. Argentina’s Parallel Currency: The Economy of the Poor. Pickering & Chatto.

22

I. Fisher. 1933. Stamp Scrip. Adelphi Company. See also J.W.C. Harper. 1948. Scrip and Other Forms of Local Money. PhD Dissertation. University of Chicago.

23

For several classificatory efforts, see L. Larue. 2020. A conceptual framework for classifying currencies. International Journal of Community Currency Research, 24: 45–60; A. Tichit, C. Mathonnat and D. Landivar. 2016. Classifying non-bank currency systems using web data. International Journal of Community Currency Research, 20: 24–40; J. Blanc. 2011. Classifying ‘CCs’: Community, complementary and local currencies. International Journal of Community Currency Research, 15(D): 4–10; J. Martignoni. 2012. A new approach to a typology of complementary currencies. International Journal of Community Currency Research, 16: 1–17; G. Seyfang and N. Longhurst. 2013. Growing green money? Mapping community currencies for sustainable development. Ecological Economics, 86: 65–77; C. Meyer and M. Hudon. 2019. Money and the commons: An investigation of complementary currencies and their ethical implications. Journal of Business Ethics, 160: 277–292; M.J. van der Linden and C. van Beers. 2017. Are private (digital) moneys (disruptive) social innovations? An exploration of different designs. Journal of Social Entrepreneurship, 8(3): 302–319; L. Larue, C. Meyer, M. Hudon and J. Sandberg. 2022. The ethics of alternative currencies. Business Ethics Quarterly, 32(2): 299–321.

24

I agree with French economist and scholar of complementary currencies, Jérôme Blanc, when he argues that ‘attempts to construct typologies and proposals for naming moneys have generally proved disappointingly incoherent or unsystematic, as if the subject of analysis itself were not amenable to any stringent form of classification’. J. Blanc. 2018. Making sense of the plurality of money: A Polanyian attempt. In Gómez, G.M. (ed) Monetary Plurality in Local, Regional and Global Economies. Routledge, pp 48–66.

25

L. Doria and L. Fantacci. 2018. Evaluating complementary currencies: From the assessment of multiple social qualities to the discovery of a unique monetary sociality. Quality & Quantity, 52(3): 1291–1314. Another author arguing for the particular effectiveness of mutual credit systems is T. Greco. 2013. Taking moneyless exchange to scale: Measuring and maintaining the health of a credit clearing system. International Journal of Community Currency Research, 17(A): 19–25.

26

See, for instance, G. Vallet. 2016. A local money to stabilise capitalism: The underestimated case of the WIR. Economy and Society, 45(3–4): 479–504; J. Stodder. 2009. Complementary credit networks and macroeconomic stability: Switzerland’s Wirtschaftsring. Journal of Economic Behaviour & Organization, 72(1): 79–95. J. Stodder and B. Lietaer 2016. The macro-stability of Swiss WIR-bank credits: Balance, velocity, and leverage. Comparative Economic Studies, 58(4): 570–605.

27

J.M. Keynes. 1942. Proposals for an international currency (or clearing) union. In Horsefield, J.K. (ed) 1969. The International Monetary Fund 1945–1965: Twenty years of international monetary cooperation, volume III: Documents, pp 3–18. International Moneary Fund.

28

M. Amato and L. Fantacci. 2012. The End of Finance. Polity Press. For a call to reform the current international monetary system along Keynes’ bancor proposal, see L. Fantacci. 2013. Why not bancor? Keynes’s currency plan as a solution to global imbalances. In Hirai, T., Marcuzzo, M.C. and Mehrling, P. (eds) Keynesian Reflections: Effective Demand, Money, Finance, and Policies in the Crisis. Oxford Scholarship Online. M. Amato and L. Fantacci. 2014. Back to which Bretton Woods? Liquidity and clearing as alternative principles for reforming international money. Cambridge Journal of Economics, 38(6): 1431–1452. For more on how Keynes’ bancor plan worked, see L.J. Ussher, A. Hass, K. Töpfer and C.C. Jaeger. 2018. Keynes and the international monetary system: Time for a tabular standard? The European Journal of the History of Economic Thought, 25(1): 1–35. For a discussion of the relevance of Keynes’ bancor to today’s international monetary system, see P. Mehrling. 2016. Beyond bancor. Challenge, 59(1): 22–34.

29

All personal names have been anonymised.

30

Fieldnotes, 4 May 2016.

31

Oscar. Fieldnotes, 20 February 2016.

32

Inés. Fieldnotes, 20 February 2016.

33

Rocío. Fieldnotes, 20 February 2016.

34

A growing line of research within the emerging field of complementary currencies attempts to assess the impact of these local forms of money. Empathetic to the social and environmental motives that guide the monetary experiments, scholars are rejecting impact assessments that squarely focus on economic cost–benefit analysis and are instead suggesting indicators that acknowledge the social, political and environmental dimensions of local monies. Some of these indicators would be empathetic to Raquel’s insight on the impact of complementary currencies on individual members’ sense of belonging and emotional wellbeing. For example, see H. Nakazato and T. Hiramoto. 2012. An empirical study of the social effects of community currencies. International Journal of Community Currency Research, 16(D): 124–135; L. Moyer. 2015. An impact assessment model for web-based time-banks: A thought-experiment in the operationalisation of social capital. Consilience: The Journal of Sustainable Development, 14(2): 106–125; K. Dittmer. 2013. Local currencies for purposive degrowth? A quality check of some proposals for changing money-as-usual. Journal of Cleaner Production, 54: 3–13.

Some authors question the extent to which the suggested social and environmental impacts of complementary currencies suffice to stabilise these monies and compensate for their geographical limitations. In this respect, see M.S. Evans. 2009. Zelizer’s theory of money and the case of local currencies. Environment and Planning A: Economy and Space, 41(5): 1026–1041; J. Matti and Y. Zhou. 2020. Money is money: The economic impact of BerkShares. SSRN Electronic Journal; L. Larue. 2022. The case against alternative currencies. Politics, Philosophy & Economics, 21(1): 75–93. In this line of thought, see also J. Powell. 2002. Petty capitalism, perfecting capitalism or post-capitalism? Review of International Political Economy, 9(4): 619–649.

35

Conceived as values, reciprocity, solidarity and mutuality are often conflated in analysis of complementary currencies. In line with the relational approach adopted throughout the book, Interlude 2 reframes reciprocity, solidarity and mutuality as interactional patterns. The conceptual move helps distinguish the distinct effect of the three patterns on the way the monies inserting those patterns in their design work.

36

See, for instance, E. Barinaga. 2019. Transforming or reproducing an unequal economy? Solidarity and inequality in a community currency. International Journal of Community Currencies Research, 23(2): 2–16; E. Collom. 2011. Motivations and differential participation in a community currency system: The dynamics within a local social movement organization. Sociological Forum, 26(1): 144–168; G. Peebles. 2011. The Euro and Its Rivals: Currency and the Construction of a Transnational City. Indiana University Press; K. Werner. 2015. Performing economies of care in New England time bank and Buddhist community. In Roelvink G., St.Martin, K. and Gibson-Graham, J.K. (eds) Making Other Worlds Possible: Performing Diverse Economies. University of Minnesota Press.

37

V.A. Zelizer. 2005. Circuits within capitalism. In Nee, V. and Svedberg, R. (eds) The Economic Sociology of Capitalism. Princeton University Press, pp 289–322.

38

To acknowledge the influence the work of Vivianna Zelizer has had on economic sociology, American sociologist Randall Collins remakes Zelizer’s notion ‘circuits of commerce’ into ‘Zelizer’s circuits’. R. Collins. 2000. Situational stratification: A micro-macro theory of inequality. Sociological Theory, 18: 17–43.

39

V.A. Zelizer. Circuits within capitalism.

40

V.A. Zelizer. 1997. The Social Meaning of Money: Pin Money, Paychecks, Poor Relief, and Other Currencies. Princeton University Press.

41

I take this expression from Nigel Dodd’s book, The Social Life of Money. The book is a broad-ranging theoretical elaboration of what money is, where monetary legitimacy resides, and how new monies could, eventually, transform society. The book is impressive in its intellectual reach. It skilfully advances sociological approaches to the study of money and introduces much welcomed variation to perspectives on money. Yet, similar to Zelizer, Dodd falls short of recognising the determinant role social relations play into the configuration of money itself. Further, more could be done in terms of advancing an understanding of the relation between different monetary configurations and their specific performative effects on the world. N. Dodd. 2014. The Social Life of Money. Princeton University Press.

42

G. Simmel. 1900. The Philosophy of Money. 3rd enlarged edition edited by D. Frisby, translated by D. Frisby and T. Bottomore. Routledge.

43

Except time-banks that use ‘hours’ as the unit of account, most mutual credit systems use legal tender as the measure of the value of the monetary tokens they create and use. The manual for the design of LETSystems explicitly advises equalling the value of the local currency to that of the conventional national currency. The argument given is one of convenience, as the national currency is the one most users think with and thus use to assess the level of prices of the goods and services exchanged. For Michael Linton’s LETSystems design manual, see https://archive.lets.net/gmlets/design/home.html. See also M. Fare and P. Ould Ahmed. 2017. Complementary currency systems and their ability to support economic and social changes. Development and Change, 48(5): 847–872; Seyfang and Longhurst, Growing green money?

44

N.R. Kocherlakota. 1998. Money Is memory. Journal of Economic Theory, 81: 232–251. In a similar vein, British economic anthropologist Keith Hart conceives money as ‘mainly, but not exclusively, an act of remembering, a way of keeping track of some of the exchanges we each enter into with the rest of humanity’. K. Hart. 2001. Money in an Unequal World: Keith Hart and His Memory Bank. Texere, p 234.

45

Mike Bryan, Vice President of the Federal Reserve Bank of Atlanta, in ‘Money: An Economist’s Perspective. The Curious Case of the Yap Stones’, a video from 2011 that explains the stone money of Yap.

46

Recorded in the minutes to the General Assembly held on 5 April 2016. In the original, ‘Tanto la parte que ofrece como la que consume aportan. Los dos aportan. Lo importante es el movimiento (circulación de la moneda)’.

47

In Mutual Life, Limited, Bill Maurer attests to a similar ironic scepticism towards the local currency system he studies, IthacaHOURS. And, though IthacaHOURS builds upon a different monetary design – fiat, print-as-you-deem model – the scepticism is characteristic of the sort of critique local monetary experiments encounter both among economists and lay-people. B. Maurer. 2005. Mutual Life, Limited: Islamic Banking, Alternative Currencies, Lateral Reason. Princeton University Press.

48

Limits on credits and debits is somewhat contested among practitioners in mutual credits systems. As an illustration it may suffice to mention the different views of two key figures in that field: Thomas Greco and Michael Linton. While Thomas Greco advocates the need to manage limits so as to better allocate credit, in the LETSystems manual Michael Linton co-authored there are no limits. In a recent interview, Linton goes as far as suggesting that such ‘credit limits and lots of added features [did not make] it work better, and some blocked it from working’. See Greco, Taking moneyless exchange to scale. The LETSystem design manual can be found at https://archive.lets.net/gmlets/design/home.html. The interview with Michael Linton can be found at https://www.lowimpact.org/posts/lets-origins-michael-linton-letsystems.

49

They discussed the reformulation of many other common terms used to describe the economy and relations in it, yet these puns translate badly to English. For those readers who speak Spanish, other terms they played with were from ‘tra-bajar’ to ‘tra-subir’ or ‘tra-gozar’, from ‘asamblea’ to ‘amablea’ and from ‘almacén’ to ‘alma-zen’.

50

Dittmer, Local currencies for purposive degrowth?

51

Evans, Zelizer’s theory of money.

52

From the meeting minutes of the General Assembly held on 8 April 2015.

53

Bazzani, When Money Changes Society, p 2.

54

From sardexpay.net.

55

See Bazzani, When Money Changes Society; J. Blanc. 2021. Book review of Bazzani (2020) ‘When money changes society: The case of Sardex money as community’. International Journal of Community Currency Research, 25(2): 77–80.

56

From E. Posnett. 2015. The Sardex factor. Financial Times, 18 September.

57

On the need to safeguard the symmetry of obligations between creditors and debtors in local mutual credit systems, see T. Greco. 2009. The End of Money and the Future of Civilisation. Chelsea Green. Doria and Fantacci root the particular sociality enticed by mutual credit systems in the symmetry of obligations. Doria and Fantacci, Evaluating complementary currencies.

58

From Posnett, The Sardex factor.

59

Bazzani, When Money Changes Society, p 46.

60

Bazzani, When Money Changes Society, p 36.

61

Bazzani, When Money Changes Society, p 56.

62

Bazzani, When Money Changes Society, pp 3 and 165.

63

From Bazzani, When Money Changes Society, pp 48–49.

64

Bazzani, When Money Changes Society, p 113.

65

In the minutes of Málaga Común General Assembly held on 8 April 2015.

66

The argument that monetary configurations shape how people relate to money and to others is parallel to Michel Callon’s argument that economics is performative. See M. Callon. 2007. What does it mean to say that economics is performative? In MacKenzie, D., Muniesa, F. and Siu, L. (eds) Do Economists Make Markets? On the Performativity of Economics. Princeton University Press, Chapter 11, pp 311–357.

Chapter 5

1

F. Schwarz. 1951. The experiment in Wörgl. Verlags-Genossenschaft Freies Volk. Translated from the German by H. Martzak-Goerike and prepared and shortened for the internet by H. Eisenkolb. All figures on Wörgl come from A. Von Muralt. 1934. The Woergl experiment with depreciating money. Annals of Collective Economy, 10(1), pp 48–57; Schwarz, The experiment in Wörgl; and I. Fisher. 1933. Stamp Scrip. Adelphi Company. Michael Unterguggenberger, the mayor of Wörgl at the time, also wrote in 1934 about the dire economic circumstances in 1932. The end results of the Wörgl experiment. Annals of Collective Economy (today renamed to Annals of Public and Cooperative Economics). For background on Austria’s contemporary currency policy, see H. Handler. 2016. Two centuries of currency policy in Austria. Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrial Central Bank), 3: 61–76.

2

M.C. Bourdet. 1934. A French view of the Woergl experiment. Translated by G. Spiller. Annals of Public & Cooperative Economics, 10(1): 58–59.

3

von Muralt, The Woergl experiment, p 55.

4

J.M. Keynes. 1936. The General Theory of Employment, Interest and Money. Macmillan, ch 23, p 335.

5

Fisher, Stamp Scrip; B. Champ. 2008. Stamp Scrip: Money people paid to use. Economic Commentary. Federal Reserve Bank of Cleveland. Today, Italian economic historian Luca Fantacci suggests Fisher’s Wörgl-like stamp scrip as a monetary tool to cope with economic crises. L. Fantacci. 2013. Reforming money to exit the crisis: Examples of non-capitalist monetary systems in theory and practice. In Pixley, J. and Harcourt, G.C. (eds) Financial Crises and the Nature of Capitalist Money. Palgrave Macmillan.

6

In Schwartz, The experiment in Wörgl. Von Muralt, contemporary economist and Fisher’s student, reasoned against prohibition not only based on the merits of Wörgl’s stamp scrip, but also the misdeeds of private bank money. In his words: ‘In any case, these certificates are decidedly more harmless than the expanded credits of numerous financial institutions which have by no means been so sternly dealt with.’ Von Muralt, The Woergl experiment, p 55. The prohibition of Wörgl’s municipal money parallel to the legality of private bank money is testimony of the extent to which central banks prioritise the interests of banking and financial actors over those of the people and their elected officials; in the 1930s like in the 2000s. For more on this topic, see Chapter 3.

7

Some economists and scholars of money distinguish between the medium of exchange and the means of payment functions. As a medium of exchange, cash is used to pay immediately for the goods and services bought. As a means of payment, money handed over serves to cancel an obligation. Functioning as medium of exchange, goods are sold and money acquired for the purpose of acquiring other objects through further acts of exchange. Functioning as means of payment, money is used to settle previously incurred debts – however this debt may have come about. According to Karl Polanyi, a distinguishing attribute of archaic societies is the use of different objects to accomplish the various functions of money. He gives Hammurabi’s Babylonia as an example where, in general, the payment of obligations such as rents, wages and taxes was done in barley; important staples functioned as means of exchange; silver was used as the money of account (1 shekel of silver = 1 gur of barley); and wealth was stored in the form of a plot of land, a house, heads of cattle, or slaves. The introduction of markets as places of exchange led to the unification of the various uses of money into a single money-object on the basis of the exchange-use. As he writes, ‘with the introduction of markets as the physical locus of exchange a new type of obligation comes into prominence as the legal residue of transactions. Payment appears as the counterpart of some material advantage gained in the transaction. Formerly a man was made to pay taxes, rent, fines, or blood-money. Now he pays for the goods he bought. Money is now means of payment because it is means of exchange. The notion of an independent origin of payment fades, and the millennia in which it sprang not from economic transaction, but directly from religious, social, or political obligations, are forgotten’ (p 183; emphasis original). K. Polanyi. 1968 [1957]. The semantics of money-uses. In Dalton, G. (ed) Primitive, Archaic, and Modern Economies: Essays of Karl Polanyi, pp 175–203. Beacon Press.

In monetised societies with ‘all-purpose money’, the distinction between medium of exchange and means of payment can feel somewhat studious, but it carries effects. As we saw in Chapter 2, seeing money as medium of exchange is proper of the commodity imaginary of money, and directs our gaze to the assumed inherent value of money tokens. Highlighting the means of payment function is characteristic of an understanding of money as originating in a relationship of debt and credit and helps us recognise the symmetrical obligation of debtors and creditors in facilitating the repayment of the original debt. Debtors have an obligation to pay back, and creditors an obligation to circulate their monetary tokens and ease debtors’ access to a money with which to pay back their debts.

For the purpose of unpacking Wörgl’s money, however, the distinction has no relevance for the stamp scrip served both to pay for goods one wanted and to discharge past debt obligations. As we will see, however, it is important to recognise the state-based debt–credit relationship (and imaginary) that anchored Wörgl’s money.

8

That money serves as a unit of account to visualise economic value does however not determine the criteria on which economic value is assessed. Through his theory of labour value, Karl Marx advocated for an objective criterion that elevated the hours needed to produce the good as the basis of economic value. Mainstream economics however is aligned to subjectivist criteria where the desires of consumers for the good relative to the supply of that good determines the value of the good. For a readable discussion on the various value theories in economics, see M. Mazzucato. 2018. The Value of Everything: Making and Taking in the Global Economy. Penguin Books.

9

To recall from Chapter 2, the problem of the ‘double coincidence of wants’ is a central element of the commodity imaginary of money as it places the origins of money in a barter economy that needed of a standardised medium of exchange to address that ‘when we meet, you not only have to have what I want but also have to want what I have’. N. Kiyotaki and R. Wright. 1989. On money as a medium of exchange. Journal of Political Economy, 97(4): 927–954.

10

C. Menger. 2009 [1892]. On the Origins of Money. Ludwig von Mises Institute.

11

Keynes, The General Theory, p 147.

12

As reported by the Spanish economic newspaper Expansión, based on a study by the Spanish Hospitality Federation. For a detailed report in English on the crisis in Spain written by the central bank of Spain, see F. Eguidazu. 2017. Report on the Financial and Banking Crisis in Spain, 2008–2014. Banco de España.

13

In ‘The great slump of 1930’, J.M. Keynes concisely summarises the contradiction between individual and general interest that is the defining vector of the tragedy of the commons. ‘In this quandary individual producers base illusory hopes on courses of action which would benefit an individual producer or class of producers so long as they were alone in pursuing them, but which benefit no one if every one pursues them.’ In J.M. Keynes. 1933. Essays in Persuasion. Macmillan and Co., pp 135–147.

14

Keynes identified three main reasons for individuals’ liquidity preference: ‘(i) the transactions-motive, i.e. the need of cash for the current transaction of personal and business exchanges; (ii) the precautionary-motive, i.e. the desire for security as to the future cash equivalent of a certain proportion of total resources; and (iii) the speculative-motive, i.e. the object of securing profit from knowing better than the market what the future will bring forth.’ In The General Theory, p 85.

15

Of Keynes’ three reasons for the individual’s liquidity preference – ‘the transactions-motive’, ‘the precautionary-motive’ and ‘the speculative-motive’ – speculation is most sensitive to changes in the rate of interest. Keynes’ response to this peculiar tragedy of the commons was therefore to lower the rate of interest through active monetary policy. With it, the age of money management through interest rates began. Traditionally, monetary policy had focused on managing the quantity of money by fixing it to the gold reserves of the country, without concern or awareness of the domestic circuits through which money flowed. Keynes’ suggestion to manage money through the interest rate refocused monetary policy to also consider, to a certain extent, the circulation of money.

16

S. Gesell. 1916. The Natural Economic Order. Translated by M.A. Philip Pye, p 11.

17

With roots in the French demeurer – delay – the term ‘demurrage’ comes from the world of chartering vessels for transportation of goods. In the shipping industry, ‘demurrage’ refers to the fees charged to the charterer and paid to the ship owner for the delay of the first in loading or unloading the vessel. In the world of complementary currencies, the term ‘demurrage’ has kept the meaning of charges imposed on delaying circulation, this time of monetary tokens.

18

Irving Fisher collected several of these monetary experiments in his book from 1933, Stamp Scrip.

19

Gesell estimated that goods depreciated 3–4 per cent per year. To discourage hoarding and incite spending, he saw it as necessary to go beyond merely eliminating the natural advantage of money compared to the goods it is meant to buy. He therefore recommended a yearly rate of depreciation for money somewhat higher than his estimated depreciation of goods.

20

J. Blanc. 1998. Free money for social progress: Theory and practice of Gesell’s accelerated money. American Journal of Economics and Sociology, 57(8): 469–483.

21

The expression ‘market fundamentalism’ was coined by George Soros to convey the quasi-religious certainty of contemporary advocates of the liberal market doctrine. Fred Block and Margaret R. Somers use the expression to haracterize not only contemporary neoliberal doctrines but also the spirit that dominated the years between the two World Wars and to which Keynes’ and Gesell’s ideas were a reaction. See G. Soros. 1998. The Crisis of Global Capitalism: Open Society Endangered. Public Affairs; F. Block and M. Somers. 2016. The Power of Market Fundamentalism: Karl Polanyi’s Critique. Harvard University Press.

22

Keynes traces the many theoretical claims of classical economics to their original assumption that demand and supply meet in equilibrium. As he writes in The General Theory, ‘It is, then, the assumption of equality between the demand price of output as a whole and its supply price which is to be regarded as the classical theory’s “axiom of parallels”. Granted this, all the rest follows—the social advantages of private and national thrift, the traditional attitude towards the rate of interest, the classical theory of unemployment, the quantity theory of money, the unqualified advantages of laissez-faire in respect of foreign trade and much else which we shall have to question’ (p 19).

23

Skidelsky indeed argues that ‘[t]he Quantity Theory of Money continued a ghostly existence in the General Theory, as seen in Keynes’ liquidity preference equation … where the supply of money is exogenously given, as in the quantity theory’. R. Skidelsky. 2018. Money and Government: A Challenge to Mainstream Economics. Penguin Books, p 125.

24

Though John Maynard Keynes is most often thought of as a proponent of a state actively using fiscal policies, Keynes’ thinking was guided by his analysis of how money works. He was a monetary economist who came to see the limits of monetary policy in promoting full employment and thus the further need for the state to spend its budget to activate the economy. In doing this, Keynes revolutionised not only the traditional understanding of money but also the traditional role assigned to the state. For a historical account of how Keynes’ monetary policies challenged traditional thought in economics, see Skidelsky, Money and Government. For a biography that connects the evolution of Keynes’ ideas to his own life experiences, see Z. Carter. 2020. The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes. Penguin Books.

25

Gesell criticises Marx’s analysis of capitalist exploitation on the basis of money’s natural advantage compared to the goods it is to be exchanged for in the market. Marx states that money is equivalent to wares in the known equation W-M-W. This leads Marx to place interest/surplus-value in the exploitation of the capitalist. But Gesell says that W (wares) is not equal to M (money) because the first deteriorate while the second doesn’t. This means that the holder of M can charge an interest to buy W earlier. Gesell, that is, finds interest in the actual nature of money while Marx finds it in capitalist exploitation.

26

Keynes, The General Theory, ch 17.

27

Luca Fantacci, writing about Fisher’s stamp scrip, reasons similarly. ‘The money collected through the tax provides a backing to the scrip, and eventually ensures its convertibility in actual money at a par. Moreover, the tax acts as an automatic mechanism to reabsorb idle balances: to the extent that the scrip is not spent, it is gradually withdrawn from circulation.’ Fantacci, ‘Reforming money to exit the crisis’, p 129.

28

J.W.C. Harper. 1948. Scrip and Other Forms of Local Money. PhD Dissertation. University of Chicago. See also S. Elvins. 2005. Scrip money and slump cures: Iowa’s experiments with alternative currency during the Great Depression. The Annals of Iowa, 64: 221–245. For an in-depth account of the successes, failures, challenges and local leadership of a local scrip project in Mason City, Iowa, see B.C. Bjorklund. 2017. Saving Local Communities Using Scrip Money to Fight the Great Depression in North Central Iowa. Master’s Thesis. University of Northern Iowa.

29

Unemployment figures for Wörgl and Tyrol in the 1930s are found in absolute numbers. Nowhere have I been able to find what those numbers meant in terms of proportion of population of working-age unemployed. However, some studies mention that unemployment in Austria grew sharply from the beginning of the 1930s, reaching a peak in 1933–1936 with 24–26 per cent of the labour force unemployed. See P. Gerlich and D. Campbell. 2000. Austria: From compromise to authoritarianism. In Berg-Schlosser, D. and Mitchell, J. (eds) The Conditions of Democracy in Europe, 1919–39: Systematic Case Studies. Macmillan, pp 40–58.

30

In the original German, ‘Das grösste aller Laster, ist, Wörgl, dein Straßenpflaster’. In Von Muralt, ‘The Woergl experiment’.

31

Schwarz, ‘The experiment of Wörgl’.

32

Handler, ‘Two centuries of currency policy in Austria’.

33

The years between 1919 and 1923 are marked in German memory as the years of catastrophic hyperinflation. The exchange rate of a German mark to the American dollar went from 4.2 to one in 1914 to 4.2 trillion to one in 1923. Indiscriminate printing of money to pay war reparations to the Allies led to the precipitous devaluation of the German currency. The trauma this period left on German people facilitated the rise of anti-Semitism and radicalism in the following years, eventually leading to the Second World War. For an empathetic account of those years, see A. Fergusson. 1975. When Money Dies: The Nightmare of the Weimar Hyper Inflation. William Kimber & Co. Ltd.

34

Keynes, The Great Slump of 1930, p 140.

35

P. Krugman. 2012. End This Depression Now!, ch 2, p 15. W. W. Norton & Company.

36

Keynes, The Great Slump of 1930, p 135.

37

Keynes, The Great Slump of 1930, p 136.

38

In an amusing remake of the story of Robinson Crusoe, Silvio Gesell describes the pernicious consequences of a money imagined to naturally accrue interest, suggesting the reimagination of money free of interest as the relatively simple way to move beyond economic troubles. See Gesell, The Natural Economic Order, part V, pp 365–370.

39

In Schwarz, ‘The experiment in Wörgl’.

40

The text printed on the reverse side of Wörgl’s labour certificates reminded its holder of the connection between slow circulation of money and unemployment. As it were: ‘To all whom it may concern! Sluggishly circulating money has provoked an unprecedented trade depression and plunged millions into utter misery. Economically considered, the destruction of the world has started. It is time, through determined and intelligent action, to endeavour to arrest the downward plunge of the trade machine and thereby to save mankind from fratricidal wars, chaos, and dissolution. Human beings live by exchanging their services. Sluggish circulation has largely stopped this exchange and thrown millions of willing workers out of employment. We must therefore revive this exchange of services and by its means bring the unemployed back to the ranks of the producers. Such is the object of the labour certificate issued by the market town of Wörgl: it softens sufferings dread; it offers work and bread.’ In von Muralt, ‘The Woergl experiment’, p 49.

41

Schwarz, The experiment in Wörgl.

42

von Muralt, The Woergl experiment.

43

Calculation based on the mayor’s data in Unterguggenberger, The end results of the Woergl experiment, Annals of Public & Cooperative Economics, 10(1): 60–62.

44

In Schwarz, The experiment in Wörgl.

45

Schwarz, The experiment in Wörgl, p 5.

46

100 groschen were equal to 1 schilling.

47

Schwarz, The experiment in Wörgl.

48

In its simplest form, the Quantity Theory of Money takes the form of Fisher’s formula: MV = QP, where M is the quantity of money in supply, V the velocity of circulation of money, Q the quantity of goods/services exchanged in the economy and P the average price of the goods/services exchanged. The formula is by definition true for the sum total of money spent equals the sum total of goods/services bought. Quantity theorists assume V and Q to be fixed. From that assumption, the logical deduction is that an increase in M leads to an equal increase in P; that is, an increase in the quantity of money leads to an equal increase in the general level of prices, or inflation. But the assumptions need not hold true in practice; there being much slack capacity in the economy (and thus no fixed Q) and, as in Wörgl, money circulating faster than prognosticated (and so, no fixed V). A further assumption is that all M is spent and spent in the real economy, an assumption that Keynes’ analysis of speculative and hoarding behaviour held to be untrue. See I. Fisher. 1922. The Purchasing Power of Money, its Determination and Reaction to Credit, Interest and Crises. Macmillan. For a non-formulaic critique of the Quantity Theory of Money (Fisher’s as well as Wicksell’s), see Skidelsky, Money and Government, ch 3.

49

Unterguggenberger, The end results of the Wörgl experiment.

50

Von Muralt, The Woergl experiment, p 52.

51

Von Muralt, The Woergl experiment, p 54.

52

For recent descriptions of Wörgl’s stamp scrip, see Blanc, Free money for social progress; T. Greco. 2009. The End of Money and the Future of Civilization. Chelsea Green.

53

Schwarz, The experiment in Wörgl.

54

An early major critique of the euro is precisely the lack of institutions to coordinate monetary policy (orchestrated by the European Central Bank) and national fiscal and tax-raising policies (orchestrated at the national level). Given the economic disparity between the EU member states, one unified monetary policy for the euro region necessarily involves it cannot attend the various fiscal needs of all its member states. This is indeed the source of many tensions between the EU member states, economically strong countries like Germany advocating restrain in fiscal and monetary policies and peripheral countries demanding a relaxation of fiscal austerity. For a brief text that connects this tension to how we imagine money, see C. Goodhart. 1997. One government, one money. Prospect, March.

55

Unterguggenberger, The end results of the Wörgl experiment, p 62.

56

Keynes’ analysis of money is one of the arguments MMT scholars use to support the validity of their description of how money works. See R. Wray. 2019. Alternative paths to modern money theory. Real-World Economics Review, 89, 5–22.

57

Apart from the possibility to issue currency and impose taxes in one’s currency, when considered at the national level, MMT discussions include the question of exchange rate regimes – a question that is not relevant for discussing Wörgl’s labour certificates. For an introduction to MMT, see R. Wray. 2012. Modern Monetary Theory: A Primer on Macroeconomics for Sovereign Monetary Systems. Palgrave. For an account of MMT more accessible to the lay-person, see S. Kelton. 2020. The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy. PublicAffairs.

58

Keynes, The Great Slump of 1930, p 135.

59

Keynes, The General Theory, p 325.

60

Blanc, Free money for social progress.

Chapter 6

1

M. Swan. 2015. Blockchain: Blueprint for a New Economy. O’Reilly.

2

S. Ammous. 2018. The Bitcoin Standard: The Decentralized Alternative to Central Banking. Wiley.

3

S. Ammous. 2021. The Fiat Standard: The Debt Slavery Alternative to Human Civilization. The Saif House.

4

For some examples of advocates arguing the utopian future guiding blockchain dreamers is already here, see C.R. Harvey, A. Ramachandran and J. Santoro. 2021. DeFi and the Future of Finance. John Wiley and Sons.

5

Paolo Ardoino, tweet on 2 September 2022.

6

J. Tirole. 2020. Institutional and economic challenges for central banking. In Monetary Policy: The Challenges Ahead. Colloquium in honour of Benoît Coeuré. European Central Bank, pp 34–40.

7

F. Panetta. 2022. For a few cryptos more: The Wild West of crypto finance. Speech by Fabio Panetta, Member of the Executive Board of the ECB, at Columbia University, 25 April.

8

IMF. 2021. El Salvador: Staff concluding statement of the 2021 Article IV mission.

9

In an interview on September 2021, Christine Lagarde, president of the ECB, put the issue adamantly: ‘Cryptos are not currencies, full stop. Cryptos are highly speculative assets that claim their fame as currency, possibly, but they’re not. They are not.’ The assessment is based on two arguments. As the ECB sums them: ‘Crypto-assets are fundamentally different from central bank money: their prices are often volatile, which makes them hard to use as means of payment or units of account, and there is no public institution backing them’ (https://www.ecb.europa.eu/paym/digital_euro/html/index.en.html). The first argument, their lack of capacity to function as a medium of exchange. The second, the fact that there is no public institution backing them. While crypto enthusiasts would never accept the latter as a criteria to assess the money-ness of cryptocurrencies – their ultimate vision being a money with no need to trust a central public authority – they aim however at becoming a global medium of exchange.

10

See, for instance, P. Frijters. 2017. Why Blockchain has no economic future. Pearls and Irritations: John Menadue’s Public Policy Journal, 13 November.

11

With ‘blockchain dreamers’, I am using Lana Swartz’s expression to refer to those advocates, crypto-entrepreneurs and developers that exalt the technology’s capacity to marshal a revolution. See L. Swartz. 2017. Blockchain dreams: Imagining techno-economic alternatives after Bitcoin. In Castells, M. (ed) Another Economy is Possible: Culture and Economy in a Time of Crisis. Polity Press, pp 82–105.

12

Italian economists Massimo Amato and Luca Fantacci go as far as concluding that ‘the only merit of bitcoin is that it is a provocation’. M. Amato and L. Fantacci. 2020. A Fistful of Bitcoins: The Risks and Opportunities of Virtual Currencies. Bocconi University Press, p 125.

13

See Chapter 3 in this book.

14

L. Brainard. 2020. Update on digital currencies, stablecoins, and the challenges ahead. In Monetary Policy: The Challenges Ahead. Colloquium in honour of Benoît Coeuré. European Central Bank, pp 21–25. Emphasis added.

15

Massimo Amato and Luca Fantacci argue that the strong ideological underpinnings coded in the Bitcoin blockchain as well as the utopian visions hailed by enthusiasts make it a ‘proposal for a new faith’. Amato and Fantacci, A Fistful of Bitcoins, p 97.

16

In The Passions and the Interests, Albert O. Hirschman refreshingly pays heed to ‘unrealised intentions’ as opposed to the more common focus on ‘unintended consequences’. Unintended consequences are a given outcome of any complex project and, as such, can illuminate little on the form and reason for the decisions and actions undertaken. ‘Intended effects’, on the other hand, act as basis for decisions with social and political consequences. While they may fail to realise, intended effects shape the course of events. In the entrepreneurial space of cryptocurrencies, intended though unrealised effects shape the design of the internal architecture and governance institutions of the new digital monies, with results, thus far, other than those originally intended. A.O. Hirschman. 1977. The Passions and the Interests: Political Arguments for Capitalism Before its Triumph. Princeton University Press.

17

S. Nakamoto. 2008. Bitcoin: A peer-to-peer electronic cash system. White Paper. Emphasis added.

18

See Chapter 3 of this book.

19

For the earliest critiques, see J. Carrión. 2017. Against Amazon: Seven Arguments / One Manifesto. Biblioasis; D. Caine. 2019. How to Resist Amazon and Why: The Fight for Local Economics Data Privacy, Fair Labor, Independent Bookstores, and a People-Powered Future. Raven Books.

20

Nakamoto, Bitcoin, p 1.

21

For a similar rendition of what happens when you swipe your card as the one I develop next, see P. Vigna and M.J. Casey. 2015. Cryptocurrency: The Future of Money? Vintage, pp 99–100.

23

R. DeYoung and T. Rice. 2004. How do banks make money? The fallacies of fee income. Economic Perspectives, 28(4): 34–51. Federal Reserve Bank of Chicago.

24

P. Bruno, O. Denecker and M. Niederkorn. 2021. Global payments 2021: Transformation amid turbulent undercurrents. In The 2021 McKinsey Global Payments Report. McKinsey & Company, pp 4–13.

25

ECB. 2019. Card Payments in Europe – Current Landscape and Future Prospects: A Eurosystem Perspective.

26

Nakamoto, Bitcoin. Emphasis added.

27

The birth of the internet has been traced back to Paul Baran’s ideas on distributed networks. He developed them in the midst of the Cold War, when the United States was concerned about the possibility that a Soviet nuclear attack on a node could bring down communication infrastructures organised along centralised and decentralised models. Baran’s solution was to build networks that were distributed and digital. Because in a distributed system each and every node acts as a message router, the collapse of one node would not have an effect on the overall communication capacity of the network. Though initially dismissed, Baran’s ideas were after a few years tested between nodes in UCLA (Los Angeles) and RAND (Santa Monica). Within a couple of years, the network had expanded, eventually breaking off from the military sphere to become the World Wide Web.

28

This has been simplified for the sake of clarity. In reality, nodes may leave and rejoin later, thus omitting the records of those transactions that occurred while they were out. For such cases, Nakamoto designed a method (the proof-of-work validation method, or PoW) for the nodes to accept the longest chain of blocks as ‘proof of what had happened while they were gone’. For more detail, see Nakamoto, Bitcoin.

29

Repository of all communication from Satoshi Nakamoto, https://satoshi.nakamotoinstitute.org/

30

In the first years of Bitcoin, nodes run the blockchain with the central processing units (CPUs) of regular personal computers. As the promise of big profits started to attract investors, the technology evolved, CPUs quickly becoming obsolete. Nodes now invest in Application-Specific Integrated Circuit (ASIC) – specialised equipment with high computer power.

31

See S. Nakamoto. 2009. Bitcoin open source implementation of P2P currency. Blogpost at the P2P foundation.

32

For a real-time update of the number of nodes and other figures, see https://coin.dance/nodes.

33

For a discussion on the activity, risk profile, trust and regulatory issues associated to each of these new mediators, see M. Campbell-Verduyn and M. Goguen. 2019. Blockchain, trust and action nets: Extending the pathologies of financial globalization. Global Networks: A Journal of Transnational Affairs, 19(3): 308–328; as well as I.D. Motsi-Omoijiade. 2018. Financial intermediation in cryptocurrency markets: Regulation, gaps and bridges. In Kuo Chuen, D.L. and Deng, R. (eds) Handbook of Blockchain, Digital Finance, and Inclusion, Volume 1: Cryptocurrency, FinTech, InsurTech, and Regulation. Academic Press, pp 207–223.

34

I. Makarov and A. Schoar. 2021. Blockchain analysis of the bitcoin market. National Bureau of Economic Research (NBER), Working Paper No. 29396.

35

K. Finley. 2018. After 10 years, bitcoin has changed everything – and nothing. Wired, 31 October. For updated statistics on the number of bitcoin transactions validated per second, see https://statoshi.info/?orgId=1. For other bitcoin charts and figures, see https://bitcoin.org/en/resources.

36

J.P. Trespalacios and J. Dijk. 2021. The carbon footprint of bitcoin. DNB Unrestricted. De Nederlandsche Bank. See also P. Howson and A. de Vries. 2022. Preying on the poor? Opportunities and challenges for tackling the social and environmental threats of cryptocurrencies for vulnerable and low-income communities. Energy Research & Social Science, 84: 102394. In an article from 2017, Zac Zimmer argues the ecological impact of bitcoin resides in the extractive logic of mining that guides its infrastructural design. To build the argument, Zimmer compares the ‘bitcoin moment’ we are living to the Spanish silver mining of the Potosí mountain in the New World during the 16th century. Z. Zimmer. 2017. Bitcoin and Potosí silver: Historical perspectives on cryptocurrency. Technology and Culture, 58(2): 307–334. Others argue that, from the perspective of the environmental damage resulting from bitcoin mining, the most apt metaphor for the cryptocurrency is not that of ‘digital gold’ but of ‘digital crude’. B.A. Jones, A.L. Goodkind and R.P. Berrens. 2022. Economic estimation of Bitcoin mining’s climate damages demonstrates closer resemblance to digital crude than digital gold. Nature, Scientific Reports 12.

37

See FairCoin for an example.

38

See B. Maurer, T.C. Nelms and L. Swartz. 2013. ‘When perhaps the real problem is money itself!’: The practical materiality of Bitcoin. Social Semiotics, 23(2): 261–277. See also Zimmer, Bitcoin and Potosí silver.

40

For a detailed description of how this process unfolds, see Chapter 3 of this book.

41

S.D. Williamson. 2017. Quantitative easing: How well does this tool work? Federal Reserve Bank of St. Louis.

44

The origin of the expression is attributed to a misspelling in a post in the Bitcointalk forum in 2013. The title of the post read ‘I am hodling’. It was quickly adopted by the crypto community and adapted to the acronym of Hold On for Dear Life. Crypto enthusiasts cite it as a show of faith in the value and future of cryptocurrencies. For the original post, see https://bitcointalk.org/index.php?topic=375643.0.

45

Communication between Hal Finney and Satoshi Nakamoto. https://www.metzdowd.com/pipermail/cryptography/2009-January/015004.html.

46

G. Silverman. 2021. Crypto’s wild ride raises new liquidity concerns. Financial Times, 11 December.

48

P. Krugman. 2011. Golden cyberfetters. New York Times, 7 September.

49

Today, the obligation of central banks is really an accounting obligation. The historical origin of this obligation is the gold standard, when central banks were obliged to covert their notes to gold upon request. This obligation ceased when Richard Nixon suspended the possibility of conversion on 15 August 1971. The event inaugurated the regime of free-floating exchange rates in which we live today.

50

In what concerns the dual existence of today’s money in the asset and liability sides of the balance sheets of various monetary actors, see Appendix.

52

In proper, John Maynard Keynes’ first reference to the barbarity of gold as a way to understand and govern money refers to the gold standard as implemented previous to the First World War. ‘In truth’, Keynes wrote, ‘the gold standard is already a barbarous relic’ for, he argued, ‘actual practice has been shifting … to preserving the stability of business, prices, and employment, and are not likely, when the choice is forced on us, deliberately to sacrifice these to the outworn dogma, which had its value once, of £3.17s 101/2d per ounce. Advocates of the ancient standard do not observe how remote it now is from the spirit and the requirements of the age. A regulated non-metallic standard has slipped in unnoticed. It exists’. J.M. Keynes. 1977 [1924]. A tract on monetary reform. In A. Robinson and D. Moggridge (eds) The Collected Writings of John Maynard Keynes. Cambridge University Press, pp 137–138. Keynes repeated the expression in a speech delivered to the UK parliament on the topic of the International Monetary Fund. On that occasion, however, he directly called on gold as the ‘barbarous relic’. https://api.parliament.uk/historic-hansard/lords/1944/may/23/international-monetary-fund.

53

Looking back into what led to the horrid tragedies of the 20th century, Karl Polanyi identified the commodification of money as one of the reasons. It is worth re-reading his analysis in The Great Transformation, as it is reminiscent of the dynamics set off by a ‘fictitious commodification’ of money – I am here thinking of both crypto-monies and our conventional money (see Chapter 3). K. Polanyi. 2001 [1944]. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press. On this, see also M. Amato and L. Fantacci. 2012. The End of Finance. Polity Press.

54

Sepp Hasslberger wrote to Nakamoto on 18 February 2009: ‘It is important that there be a limit in the amount of tokens/coins. But it is also important that this limit be adjustable to take account of how many people adopt the system. If the number of users changes with time, it will also be necessary to change the total amount of coins.’ Sepp’s reasons were exactly the value distortions that we see in bitcoin and the chapter has traced to the fixed supply of money tokens. Two days later, on 20 February 2009, Sepp argued: ‘The reason balance of the system is important: if it’s going to be used for payments, you don’t want to have large changes in the value of the coins. It would lead to distortions, I believe, by continually increasing the “purchasing power” of a single coin.’ For the email exchange, see http://p2pfoundation.ning.com/forum/topics/bitcoin-open-source?id=2003008:Topic:9402&page=1.

55

With the phrase ‘code is law’ Laurence Lessig neatly condensed the dangerous view that the development of protocols making up the internal architecture of the internet should be left outside the intrusion of government regulators and driven solely by the incentives igniting the functioning of free markets. The article highlighted the danger to the freedom of the internet posed by such a code-is-law approach. As other architectures are being coded and layered on top of the original internet protocols, values other than freedom and privacy are being forced onto its users. But the coders do not necessarily abide to the original ideal of internet freedom and neutrality. Free market actors implementing identification and certification architectures are not disinterested. Their encoding of their interests, Lessing argued, was regulating behaviour on the internet. And yet, that code with those encoded interests was being created and enforced by a minority of coders. He traced the challenge to the freedom of the internet to a narrow understanding of the notion of freedom to simply indicate free from government intrusion.

It is worth quoting in full one of the paragraphs in the article for how it summarises the argument: ‘Our choice is not between “regulation” and “no regulation.” The code regulates. It implements values, or not. It enables freedoms, or disables them. It protects privacy, or promotes monitoring. People choose how the code does these things. People write the code. Thus the choice is not whether people will decide how cyberspace regulates. People – coders – will. The only choice is whether we collectively will have a role in their choice – and thus in determining how these values regulate – or whether collectively we will allow the coders to select our values for us.’ Twenty-plus years later, Lessig’s warning continues to be just as relevant both for the internet and for the blockchain technologies that similarly build on notions of distributed and open infrastructures. L. Lessig. 2000. Code is law: On liberty in cyberspace. Harvard Magazine.

56

The story of one of Bitcoin’s most divisive conflicts is told all over the internet, with discussion forums at Reddit, Twitter and Bitcointalk Forum, blogposts by those involved in the conflict and outsiders, and re-tellings at major crypto-news sites such as CoinDesk and Cointelegraph. The main posts from which I have built this section are Mike Hearn’s letters recounting his direct involvement (M. Hearn. 2015. Why is Bitcoin forking. Mike’s Blog Plan 99. https://medium.com/faith-and-future/why-is-bitcoin-forking-d647312d22c1; 2015. On block size. Mike’s Blog Plan 99. https://medium.com/@octskyward/on-block-sizes-e047bc9f830; 2016. The resolution of the bitcoin experiment. Mike’s Blog Plan 99. https://blog.plan99.net/the-resolution-of-the-bitcoin-experiment-dabb30201f7; 2020. The philosophical origins of Bitcoin’s civil war. Mike’s Blog Plan 99. https://blog.plan99.net/the-philosophical-origins-of-bitcoins-civil-war-400468335377), Cointelegraph’s entry (S. Haig. 2019. Bitcoin block size, explained. Cointelegraph. https://cointelegraph.com/explained/bitcoin-block-size-explained) and CoinDesk’s entry (https://www.coindesk.com/learn/2015/08/21/what-is-the-bitcoin-block-size-debate-and-why-does-it-matter/).

57

The Bitcoin Foundation was modelled after the Linux Foundation, which maintains and coordinates updates of the open source Linux operating system. The Bitcoin Foundation however was snarled in scandal from its inception as its board members had been engaged in the online marketplace the Silk Road that enabled criminal activities, in the fraudulent bitcoin exchange Mt Gox, and in questionable behaviour in the cryptocurrency space.

58

The mining pools were all located in China: F2pool, BTCChina, Antpool, Huobi and BW.

59

In the crypto-world, a hard-fork refers to a radical change in the protocol that steers a blockchain, which results in branching the cryptocurrency into two. This happens when users of the cryptocurrency cannot agree on changes to the rules coded in the protocol. Hard-forks create a new blockchain, which is not compatible with the old version. Soft-forks, by contrast, do not create a new blockchain and are thus compatible with the old version.

60

E. Smart. 2015. Bitcoin XT users allegedly suffering coordinated hack attack. Cointelegraph.

61

In a Reddit post in mid-2015, Theymos, the pseudonym of Michael Marquardt, a top moderator of the bitcoin.org forum r/Bitcoin, wrote: ‘Bitcoin is not a democracy. Not of miners, and not of nodes. Switching to XT is not a vote for BIP 101 – it is abandoning Bitcoin for a separate network/currency. It is good that you have the freedom to do this. One of the great things about Bitcoin is its lack of democracy: even if 99% of people use Bitcoin, you are free to implement BIP 101 in a separate currency without the Bitcoin users being able to democratically coerce you into using the real Bitcoin network/currency again. But I am not obligated to allow these separate offshoots of Bitcoin to exist on r/Bitcoin, and I’m not going to.’ https://www.reddit.com/r/Bitcoin/comments/3rejl9/comment/cwoc8n5/.

62

For a simplified yet inclusive account of the various proposals set forward, see G. Caffyn. 2021. What is the bitcoin block size debate and why does it matter? CoinDesk, 21 August.

63

P. De Filippi and B. Loveluck. 2016. The invisible politics of Bitcoin: governance crisis of a decentralised infrastructure. Internet Policy Review, 5(3).

64

S. Nakamoto. 2009. Bitcoin open source implementation of P2P currency. P2P Foundation: The Foundation for Peer to Peer Alternatives.

65

G. Standing. 2019. The Plunder of the Commons: A Manifesto for Sharing Public Wealth. Pelican.

66

This wording refers to FOMO, a favourite acronym in the crypto space.

67

Witnessed by Joseph Borg, president of the North American Securities Administrators Association (A. Nova. 2018. Desperate to get into bitcoin, investors slip into debt. CNBC) and reported in a survey conducted by KIS Finance. 2021. Cryptocurrency Consumer Research and Data: Autumn 2021. M. Brown. 2017. Some investors use a credit card to buy bitcoin and then carry over the balance. LendEDU Report; Financial Conduct Authority. 2021. Consumer investments data review April 2020 – March 2021. FCA; A. Perrin. 16% of Americans say they have ever invested in traded or used cryptocurrency. Pew Research Center; LendEDU. 2021. Investing in Bitcoin: Survey & Report; V. Hajric. 2021. Bitcoin’s current holders are new, with 55% getting in this year. Bloomberg. For a contemporary critical news on this, see E. Griffith. 2021. We’re all crypto people now. New York Times, 25 April; S. Kale. 2021. ‘I put my life savings in crypto’: How a generation of amateurs got hooked on high-risk trading. The Guardian, 19 June.

68

For an example, see C. Reinicke. 2022. If you invested $1,000 in bitcoin this year, you’d have about $800 now. Why you still may want to buy more. CNBC.

69

As Lana Swartz puts it, ‘[m]etallism, as a techno-economic imaginary, is a theory not just of money but of society’. L. Swartz. 2018. What was Bitcoin, what will it be? The techno-economic imaginaries of a new money technology. Cultural Studies, 32(4): 623–650.

Interlude 2

1

In using the term ‘entrepreneur’ to refer to communities starting up their own monetary systems as well as to municipalities introducing city monies, I adhere to a broad notion of entrepreneurship – one that is not limited to ventures pursuing a profit motive. Instead, I am inspired by those Critical Management Studies scholars who go to the etymological origins of the term – from the French entreprendre – to refer to efforts to ‘under-take’, to ‘set in motion’ initiatives, entrepreneurship as processes of organising for change. These efforts and processes include those guided not only by a market logic of profit, but also by other logics such as a social logic of care, or a community logic of resilience. See D. Hjorth and C. Steyaert. 2009. The Politics and Aesthetics of Entrepreneurship: A Fourth Movements in Entrepreneurship Book. Edward Elgar; M. Calas, L. Smircich and K. Bourne. 2009. Extending the boundaries: Reframing ‘entrepreneurship as social change’ through feminist perspectives. Academy of Management Review, 34(3): 552–569.

2

H. Minsky. 1986. Stabilizing An Unstable Economy. Washington University Press, p 255.

3

For making this argument I draw on the lessons taught by the later Wittgenstein. See footnote 45 in Chapter 1.

4

Note that in defining reciprocity on an individual-to-individual basis I am distancing myself from those that would describe a collective’s giving back to one of its individual members as a reciprocal relationship. Karl Polanyi, a political economist and economic historian from whom I otherwise draw much inspiration, does follow such a broader view of reciprocity that includes collective-to-individual interactions. The reason for my different definition of reciprocity lies in our somewhat different entry points. He is concerned with the institutional patterns under which economies are organised; I am interested on the interactional patterns inhering in monetary arrangements. Though we both arrive at three patterns – he identifies reciprocity, redistribution and house-holding (autarky) – the different focus of our gaze lead us not only to define reciprocity differently but also to only partially overlapping patterns. Polanyi’s redistribution is similar to my solidarity; his reciprocity is comparable to my mutuality; and instead of a counter-pattern to his autarky, I suggest reciprocity. See K. Polanyi. 2001 [1944]. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press, ch 4.

5

K. Polanyi. 1957. The economy as instituted process. In Polanyi, K., Arensberg, C.M. and Pearson, H.W. (eds) Trade and Market in the Early Empires. Henry Regnery Company, pp 243–270, at p 250. Observe that, in that text, Polanyi reconsiders the three institutional patterns that give economies unity and stability to be reciprocity, redistribution and (market) exchange. Redistribution maintains the definition he gave in The Great Transformation, but reciprocity is defined as occurring between symmetrical groups, and instead of householding/autarky he identifies (market) exchange. It is Polanyi’s institutional pattern of market exchange which is parallel to my interactional pattern of reciprocity. Mauss’ analysis of gift economies as involving an obligation to reciprocate, a form of forced generosity, influences my understanding of reciprocity advanced here (for Mauss’ notion of the gift, see Chapter 4).

6

D. Graeber. 2014 [2011]. Debt: The First 5,000 Years. Melville House, p 103.

7

Polanyi, The economy as instituted process, p 250.

8

David Graeber, too, identifies three relational principles: communism, hierarchy and exchange. Because Graeber is concerned with the forms of morality that ground equal and unequal economic relations, with the ‘way of thinking and arguing about the rights and wrongs of any given situation’, he approaches these principles as moral principles. Somewhat provokingly, Graeber uses the term ‘communism’ to refer to what here I denominate mutuality; his hierarchy is Polanyi’s redistribution and my vertical solidarity; his exchange is Polanyi’s exchange in his 1957 text cited previously and my reciprocity. Graeber, Debt, ch 5.

9

For an early description of how mutual savings and lending groups work, and the many names they receive in various low-income countries, see C. Geertz. 1962. The rotating credit association: A ‘middle rung’ in development. Economic Development and Cultural Change, 10(3): 241–263. For a recent overview of the variety of such groups across the world, see Hossein, C.S., & Christabell, P.J. (eds). 2022. Community economies in the global south: Case studies of rotating savings and credit associations and economic cooperation. Oxford University Press.

For a critical analysis of how the relationships of mutuality undergirding savings-and-lending groups are being embedded into a cryptocurrency with social purposes in Kenya, see E. Barinaga. 2020. A route to commons-based democratic monies? Embedding the production of money in traditional communal institutions. Frontiers in Blockchain, 3: 575851. doi: 10.3389/fbloc.2020.575851.

10

Writing about the nature of money in 1913, Mitchell Innes recognised ‘the sanctity of obligation’ as foundational to all societies. The passage deserves quoting in full: ‘We are here fortunately on solid historical ground. From the earliest days of which we have historical records, we are in the presence of a law of debt, and when we shall find, as we surely shall, records of ages still earlier than that of the great king Hamurabi, who compiled his code of the laws of Babylonia 2000 years B. C., we shall, I doubt not, still find traces of the same law. The sanctity of an obligation is, indeed, the foundation of all societies not only in all times, but at all stages of civilization; and the idea that to those whom, we are accustomed to call savages, credit is unknown and only barter is used, is without foundation. From the merchant of China to the Redskin of America; from the Arab of the desert to the Hottentot of South Africa or the Maori of New Zealand, debts and credits are equally familiar to all, and the breaking of the pledged word, or the refusal to carry put an obligation is held equally disgraceful.’ A. Mitchell Innes. 1913. What is money? Banking Law Journal, pp 377–408.

Part III

1

E.O. Wright. 2010. Envisioning Real Utopias. Verso.

In discussing his proposal for an International Clearing Union (ICU), Keynes embraced a similar understanding of utopia as a vision that welded realism with imagination: ‘[The ICU] is also open to the objection, as the reader will soon discover, that it is complicated and novel and perhaps Utopian in the sense, not that it is impracticable, but that it assumes a higher degree of understanding, of the spirit of bold innovation, and of international co-operation and trust than it is safe or reasonable to assume’ (emphasis added). J.M. Keynes. 1980 [1941]. The origins of the clearing union. In Moggridge, D. (ed) The Collected Writings of John Maynard Keynes, Volume XXV: Activities 1940–1944. Shaping the Post-War World: The Clearing Union. Cambridge University Press, p 33.

Chapter 7

1

Supporters of UBI include Nobel laureates James Buchanan, Herbert Simon, Angus Deaton, Christopher Pissarides and Joseph Stiglitz; academics Tony Atkinson, Robert Skidelsky, Robert Reich, Clauss Offe and Philippe Van Paris; economic journalists Martin Wolf and Martin Sandbu. The idea has gathered other supporters who, however, defend the need for a UBI not from the perspective of deepened democracy, but from acknowledgement of the risk increased automation puts to profit due to the overall decline in purchasing power. Among these supporters we find Silicon Valley investors and tech entrepreneurs Sam Altman, Chris Hughes, Elon Musk or Eric Schmidt to name but a few. For an updated and more detailed list of supporters, visit the website of the Basic Income Earth Network: https://basicincome.org/.

2

In G. Standing. 2017. Basic Income: A Guide for the Open-Minded. Penguin Books.

3

For a thorough exposition of the main arguments for basic income – justice, security and freedom – as well as for an overview of the objections to it – mainly those concerning affordability and its impact on the supply of labour – and how to address them, I recommend reading Standing, Basic Income, as well as R. Bregman. 2014. Utopia for Realists: How We Can Build the Ideal World. Little, Brown and Company. For a discussion of UBI in relation to a reorganisation of national money along the ideas of Modern Monetary Theory see G. Crocker. 2020. Basic Income and Sovereign Money: The Alternative to Economic Crisis and Austerity Policy. Palgrave Macmillan.

4

Initial studies of various UBI-type programmes in low- and middle-income countries show not only a positive impact of these programmes on the local economy (D. Jones and I.E. Marinescu. 2018. The labor market impacts of universal and permanent cash transfers: Evidence from the Alaska Permanent Fund. American Economic Journal, 14(2): 315–340), but also large improvements in psychological well-being (J. Haushofer and J. Shapiro. 2016. The short-term impact of unconditional cash transfers to the poor: Experimental evidence from Kenya. The Quarterly Journal of Economics, 131(4): 1973–2042) and health (L. Robertson, P. Mushati, J.W. Eaton, L. Dumba, G. Mavise, J. Makoni, C. Schumacher, T. Crea, R. Monasch, L. Sherr, G.P. Garnett, C. Nyamukapa and S. Gregson. 2013. Effects of unconditional and conditional cash transfers on child health and development in Zimbabwe: a cluster-randomised trial. The Lancet, 381(9874): 1283–1292) as well as a significant reduction in domestic violence (J. Haushofer, C. Ringdhal, J. Shapiro and X.Y. Wang. 2019. Income changes and intimate partner violence: Evidence from unconditional cash transfers in Kenya. NBER Working Paper No. 25627). These positive impacts were observable beyond those individuals and households receiving the unconditional payments, in the form of increased consumption for non-recipient households and of larger revenue for local firms (D. Egger, J. Haushofer, P. Niehaus and M. Walker. 2019. General equilibrium effects of cash transfers: Experimental evidence from Kenya. Econometrica, 90(6): 2603–2643). Importantly, positive impacts were sustained over time with recipients able to build higher levels of asset holdings, and maintain food security, consumption levels and psychological well-being relative to non-recipients (Haushofer, J. and Shapiro, J. 2018. The long-term impact of unconditional cash transfers to the poor: Experimental evidence from Kenya. The Poverty Action Lab, Working Paper). Improved impacts are proving to be resilient to dramatic shocks such as the COVID-19 pandemic (A. Banerjee, M. Faye, A. Krueger, P. Niehaus and T. Suri. 2020. Effects of a Universal Basic Income during the pandemic). Positive impacts have also been documented in high-income countries such as Canada (E. Forget. 2011. The town with no poverty: The health effects of a Canadian guaranteed annual income field experiment. Canadian Public Policy, 37(3): 283–305; W. Simpson, G. Mason and R. Godwin. 2017. The Manitoba basic annual income experiment: Lessons learned 40 years later. Canadian Public Policy, 43(1): 85–104) and Finland (Kangas, O., Jauhiainen, S., Simanainen, M. and Ylikännö, M. 2021. Experimenting with Unconditional Basic Income: Lessons from the Finnish BI Experiment 2017–2018. Edward Elgar, with a reduction in hospitalisations, improved mental health and increased school attendance). For an overview of impact studies of various UBI-type programmes, see R. Hasdell. 2020. What we know about UBI: A cross-synthesis review. Stanford Basic Income Lab. See also U. Gentilini, M. Grosh, J. Rigolini and R. Yemtsov. 2020. Exploring Universal Basic Income: A guide to navigating concepts, evidence, and practices. World Bank Group.

5

To name just a few: 2020 Democratic presidential candidate Andrew Yang, Indian member of parliament Varun Gandhi, co-founder of the Workers’ Party of Brazil Eduardo Matarazzo Suplicy, Germany’s minister for foreign affairs Annalena Baerbock, and almost half of the politicians in the Welsh and Scottish parliaments.

6

For an overview of these pilot studies results, see Standing, Basic Income, ch 11. For a distilling of the lessons learnt through the pilot studies into principles to design, implement and evaluate basic income pilots, see G. Standing. 2021. Basic income pilots: Uses, limitations and design principles. Basic Income Studies, 16(1): 75–99.

7

Guy Standing speaks of the precariat as a new dangerous class that has emerged from the demise of the traditional proletariat. The process of globalisation that unfolded with the neoliberal turn of the 1980s led to the erosion of labour rights and the weakening of trade unions. This has resulted in a change in the relations of production, a change that has been the most dramatic for the lowest income group. This group has seen its labour contracts become ‘flexible’, casual, part-time or intermittent – precarious. The constant change of jobs and the need to take whatever is on offer leaves the precariat with no occupational identity, forced to work for little pay in jobs that carry no pension or holiday benefits. Such structural conditions have led the precariat to feelings of anxiety, anomie, alienation and anger, turning them into a ‘dangerous class’, some of them united in their struggle for a progressive agenda. See G. Standing. 2011. The Precariat: The New Dangerous Class, Bloomsbury Academic; G. Standing. 2014. A Precariat Charter: From Denizens to Citizens. Bloomsbury.

8

The Spanish name of the movement (‘Los Indignados’) came from the French booklet that inspired it, Stéphane Hessel’s Indignez-vous! from 2010. A second booklet that greatly inspired the non-violent tactics followed by the Spanish movement was G. Sharp. 2012 [2002]. From Dictatorship to Democracy: A Guide to Nonviolent Resistance. Serpent’s Tail.

9

For some pictures of the many occasions where these slogans can be seen on placards, see https://elpais.com/elpais/2021/05/12/album/1620811148_178548.html#foto_gal_1.

10

Much has been written about the long-term impact of the Spanish Revolution and Occupy movements in the societies that held them. While some dismiss them as simple outbursts that left nothing but disillusion when they wore out, others argue that they transformed the political landscape, with the formation of new political parties that have changed the parliamentary game – as in Spain – the organisation of civil society to support the most vulnerable – as to stop evictions – or the reappropriation of urban space for communal use – as in the creation of urban gardens on abandoned plots. For an ethnographic account from one prominent participant in the Occupy movement, see D. Graeber. 2013. The Democracy Project: A History, a Crisis, a Movement. Spiegel & Grau.

11

Graeber’s formulation, The Democracy Project.

13

In Spanish, the term used to speak of local or community currencies is ‘social currency’ (moneda social).

14

In Demos Manual, p 5. Own translation. (M.A. Figueroa García. 2015. Funcionamiento de monedademos.es. Demos.)

15

Miguel Ángel Figueroa, interview on 12 April 2022.

16

Mainstream economics and political science had for long argued that the only way to deal with the tragedy of the commons was through giving property of the common resource to either private owners (in whose interests it would be to manage the resource) or public authorities (who could regulate its use). That is, it was either through the market or the state that the commons could be managed. In her Nobel prize winning research, Elinor Ostrom argued there was a third way to manage the commons, one that had proven resilient to changes in the conditions of the common resource and to the passing of time. Her empirical research took her to communities that had managed water and land resources sustainably for years all over the world. She identified eight principles shared by communities that had successfully managed the commons sustainably. Summarily, well-defined communities developed governance rules fit to the local circumstances of the resource and the community, monitored the following of those rules, and developed a graded system of sanctions for those that broke the rules. Both the development and implementation of rules and sanctions worked best if they were carried out in an inclusive, participatory manner by members of the community. As we see, these are all principles Demos followed intuitively, naturally emerging from their very premise to realise economic democracy. E. Ostrom. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press.

17

I would like to thank Professor Eduardo Diniz from Fundação Getulio Vargas for his patience and detail in explaining the context, development and functioning of Mumbuca and its tech payment platform e-Dinheiro.

18

D.M. Neumann. 2021. Mumbuca: Moeda Social e/ou Renda Básica de Cidadania? As narrativas sobre a moeda social de Maricá. Master’s Thesis. Fundação Getulio Vargas. I have Professor Mario Aquino Alves to thank for this reference.

19

A. Cernev and B. Proença. 2016. Mumbuca: a primeira moeda social digital do Brasil. Revista Brasileira de Casos – Gvcasos, 6(2), Doc 15. A. Cernev. 2019. Mumbuca e-Dinheiro. Revista Brasileira de Casos – Gvcasos, 9(2), Doc 10.

20

The payment platform e-Dinheiro was developed by Instituto e-Dinheiro – formerly Instituto Palmas – a non-profit organisation that supports the development of community development banks across Brazil. See A. Cernev and E. Diniz. 2019. Palmas para o e-Dinheiro! A evolução digital de uma moeda social local. Revista de Administração Contemporânea, 24(5): 487–506. A. Ansonera, E.H. Diniz, E.S. Siqueira and M. Pozzebon. 2021. From community bank to solidarity fintech: The case of Palmas e-Dinheiro in Brazil. In Walker, T., McGaughey, J., Goubran, S. and Wagdy, N. (eds) Innovations in Social Finance. Springer, pp 251–268. For the history of Instituto Palmas itself, see C. Meyer. 2012. Les finances solidaires comme biens communs durables: étude de cas de la Banque communautaire de développement Palmas (Brésil). Université libre de Bruxelles.

21

Other cities took the step to roll out a UBI at the onset of the pandemic. The most well-known schemes are probably those of Barcelona (Spain) and Seoul (South Korea). See S. Seung-Yoon Lee, J. Lee and K. Kyo-seong. 2020. Evaluating basic income, basic service, and basic voucher for social and ecological sustainability. Sustainability, 12: 8348; S. Martín Belmonte, J. Puig and M. Roca. 2021. Crisis mitigation through cash assistance to increase local consumption levels: A case study of a bimonetary system in Barcelona, Spain. Journal of Risk and Financial Management, 14(9): 1–17.

22

F. Freitas. 2022. Transferência de renda com moeda social em Cabo Frio, Itaboraí, Niterói e Maricá: alívio da pobreza ou renda básica? Gestão, Política e Sociedade.

23

See L. Gonzalez, A.K. Cernev, M.H. de Araujo and E.H. Diniz. 2021. Digital complementary currencies and public policies during the COVID-19 pandemic. Brazilian Journal of Public Administration, 54(4): 1146–1160. For a discussion of digital payment technologies as instruments to implement public policies based on the experience of Maricá, see D.P. Rodrigues. 2021. Inclusão financeira e o uso de fintechs como instrumentos de políticas públicas. Master’s Thesis. Fundação Getulio Vargas.

25

Martín Belmonte et al, Crisis mitigation through cash assistance.

26

Up until September 2021.

27

Gama and Costa (2021), cited in Freitas, Transferência de renda com moeda social em Cabo Frio, Itaboraí, Niterói e Maricá.

28

A recent study conducted and co-authored by Maricá’s Planning Director observed ‘evidence of low currency recirculation, which limits its potential to stimulate the local economy’. To activate circulation of mumbucas, the authors discuss ways to enhance the use of mumbuca as well as mechanisms to make the city less dependent on oil royalties for the backing of the municipal currency. Among others, they discuss a more active involvement of the city in stimulating local production, thereby extending the possible use of mumbucas. See D.P. Rodrigues and D.M. Neumann. 2021. Moeda social e desenvolvimento local em Maricá (RJ). Master’s Thesis. Fundação Getulio Vargas.

29

As stated on GoodDollar’s website: https://apply.workable.com/gooddollar/. Quotes in this section come from Yosi Assia’s (CEO and Founder of eToro), intervention at the OECD Forum in 2019 (https://www.youtube.com/watch?v=f-iKF2rwiII); GoodDollar White Paper: A distributed basic income (https://whitepaper.gooddollar.org/); and GoodDollar’s website (https://www.gooddollar.org/). See also Y. Assia and O. Ross. 2018. Good Dollar experiment: Wealth distribution position paper, 18 April.

30

Yosi Assia’s address to the OECD Forum, 2019. Minute 2.

31

Y. Assia, T. Barrack, T. Iron and A. Stone. 2020. The GoodDollar White Paper, p 2. For a brief, entertaining and well-informed critique of trickle-down economics, see J. Quiggin. 2010. Trickle-down economics. Zombie Economics: How Dead Ideas Still Walk among Us. Princeton University Press, pp 137–176.

32

Assia, OECD Forum.

33

Assia et al, The GoodDollar White Paper, p 11.

34

Assia, OECD Forum. About minute 7.

35

Assia et al, The GoodDollar White Paper, p 3.

36

The blending of a financial logic with a logic of social good is not new. Micro-finance and social impact bonds are typically designed along both logics. On the one hand, these financial instruments attend the interests of investors so as to mobilise their resources and put them to work to achieve a social or development goal. On the other hand, there is an avowed intention to focus on satisfying the needs of more or less vulnerable groups. These are, as it were, instruments that cater to two distinct interest groups which may have conflicting interests – returns and liquidity the investors, economic development the target groups – and timeframes – the short-term dominates investors’ preoccupations, while a long-term approach is central for achieving sustained socioeconomic development. As investors and financial actors ultimately hold the upper hand, the interests of investors tend to be prioritised over those of the vulnerable groups which these hybrid instruments are supposed to serve. For a critique of financial instruments that follow such a hybrid logic, see M.J. Roy, N. McHugh and S. Sinclair. 2018. A critical reflection on social impact bonds. Stanford Social Innovation Review, May 1. S. Yan, F. Ferraro and J. Almandoz. 2018. The rise of socially responsible investment funds: The paradoxical role of the financial logic. Administrative Science Quarterly, 64(2): 466–501. D. Kent and M.T. Dacin. 2013. Bankers at the gate: Microfinance and the high-cost of borrowed logics. Journal of Business Venturing, 28(6): 759–773.

37

Assia, OECD Forum. About minute 4.

38

Stablecoins emerged as a response to the volatility that characterises first-generation cryptocurrencies such as bitcoin. By pegging and backing their value to an official currency, to a basket of currencies or to an external asset (such as gold), the teams behind stablecoins aim to overcome the instability of the currency’s price and thus provide a safe digital asset. DAI is a well-known stablecoin on the Ethereum blockchain backed by Ethereum-based assets deposited in the MakerDAO ecosystem. Those involved in governing DAI aim to maintain its value equal to US$1,00. Initially, much hope had been placed in the stability stablecoins promised. See, for instance, L. Fantacci and L. Gobbi. 2021. Stablecoins, central bank digital currencies and US dollar hegemony. Accounting, Economics, and Law: A Convivium.

The crypto-crash of 2022 has however thrown much doubt upon the reality of the backing that is to stabilise this second generation of cryptocurrencies. The implosion of TerraUSD – a stablecoin whose 1-to-1 peg to the US dollar was meant to be held by its backing in the crypto-token LUNA – was the particular event that threw the crypto world into turmoil: when LUNA succumbed to extreme selling, its value collapsed, bringing the value of TerraUSD down with it, and raising general mistrust on other stablecoins.

39

Assia et al, The GoodDollar White Paper.

40

Assia et al, The GoodDollar White Paper.

41

For updated figures, visit GoodDollar’s dashboard: https://dashboard.gooddollar.org/.

42

Assia et al, The GoodDollar White Paper, p 13.

44

Assia et al, The GoodDollar White Paper.

45

G. Segovia. 2022. GoodDAO Community Call 01: Main Features of GoodDollar V2 & Our First Governance Proposal, 20 January.

46

GoodDollar HQ. 2021. Introducing the GoodDAO: GoodDollar Governance.

47

Assia et al, The GoodDollar White Paper.

48

GoodDollar HQ, Introducing the GoodDAO.

49

Segovia, GoodDAO Community Call 01, minute 28.

50

Assia et al, The GoodDollar White Paper, p 9.

51

In Woke Capitalism, Carl Rhodes makes a parallel argument. He discusses the extent to which major corporations set the democratic agenda through what are popularly seen as good-faith gestures. Including progressive social critique – such as denouncing racism or calling for LGBTQIA+ rights – in their marketing campaigns, corporations shape debates without the need to act on changing the very practices and structures at the root of what they may campaign for. C. Rhodes. 2022. Woke Capitalism: How Corporate Morality is Sabotaging Democracy. Bristol University Press.

Chapter 8

1

This is no place to repeat the environmental disasters and climate-change dynamics that are already unfolding as consequence of human action on the planet. For some of the most recent climate and environmental reports, see the Intergovernmental Panel on Climate Change (IPCC)’s Climate Change 2022 reports. https://www.ipcc.ch/report/ar6/wg3/ and https://www.ipcc.ch/report/ar6/wg2/

2

For recent reviews of the scientific literature, see M. Lynas, B.Z. Houlton and S. Perry. 2021. Greater than 99% consensus on human caused climate change in the peer-reviewed scientific literature. Environmental Research Letters, 16(11); K.F. Myers, P.T. Doran, J. Cook, J.E. Kotcher and T.A. Myers. 2021. Consensus revisited: Quantifying scientific agreement on climate change and climate expertise among Earth scientists 10 years later. Environmental Research Letters, 16(10); J.L. Powell. 2019. Scientists reach 100% consensus on anthropogenic global warming. Bulletin of Science, Technology & Society, 37(4):183–184. For a list of US scientific societies issuing public statements endorsing the position that the global climate is warming and that the source of this change is anthropogenic visit https://climate.nasa.gov/scientific-consensus/#*.

5

United Nations’ webpage on Climate Change. https://www.un.org/en/climatechange/paris-agreement.

6

E. Masood and J. Tollefsen. 2021. ‘COP26 hasn’t solved the problem’: Scientists react to UN climate deal. Nature, 599: 355–356.

7

UNEP’s Emission Gap Report highlights the gap between national climate pledges and what would be needed to keep global warming below the 1.5°C that was the goal of the Paris Agreement. See, for instance, UNEP. 2022. The Heat is On: A World of Climate Promises Not Yet Delivered. Emissions Gap Report 2021.

8

A. Nurse. 2022. Cleaning Up Greenwash: Corporate Environmental Crime and the Crisis of Capitalism. Lexington Books.

9

House of Commons Environmental Audit Committee. 2005. Corporate Environmental Crime. Second Report of Session 2004–05. HC 136.

10

Popularised in the year 2000 by the chemist Nobel laureate Paul Crutzen, the term ‘Anthropocene’ – from the Greek ‘anthropo’ for human and ‘cene’ for epoch – has become a contested terrain between geologists and environmentalists. For geologists, we are in the Holocene, an epoch that started some 11,700 years ago with the end of the last major glacial period. The term Holocene does however not recognise that human civilisation has caused mass extinction of plants and animal species, altered the chemical composition of the soil, transformed the climate, and modified many of the Earth’s geologic, hydrologic and biospheric processes. To heed attention to the connection between the form of our civilisation and the health of the Earth, environmental scientists prefer the term Anthropocene. Not seeing evidence in rock strata, geologists criticise the term, arguing that there is no clear-cut proof for the existence of a new epoch and maintaining that the Anthropocene is more about popular culture than hard science. Environmentalists find evidence in the traces of radiation the first atomic bombs – those thrown on Hiroshima and Nagasaki – left in soils around the world and therefore place the start of the Anthropocene in 1945. Others place the start sometime in the 1800s, when the onset of the Industrial Revolution started impacting the levels of carbon and methane in the atmosphere. Regardless of the debates on terminology and starting date, the term clearly makes us aware that human civilisation is having an impact on the environment at a planetary scale, that the fate of the Earth ultimately hinges on the actual organisation of society and the economy. See P. Cruzen. 2002. Geology of mankind. Nature, 415: 23; W.J. Autin and J.M. Holbrook. 2012. Is the Anthropocene an issue of stratigraphy or pop culture? GSA (Geological Society of America) Today, 22(7): 60–61; W.J. Autin. 2016. Multiple dichotomies of the Anthropocene. The Anthropocene Review, 3(3): 218–230; J.R. McNeill and P. Engelke. 2016. The Great Acceleration: An Environmental History of the Anthropocene Since 1945. Harvard University Press.

11

See, for instance, J.W. Moore (ed). 2016. Anthropocene or Capitalocene? Nature, History, and the Crisis of Capitalism. Kairos.

12

For descriptions of some such initiatives, see the edited volume, published in 2021, Climate Adaptation: Accounts of Resilience, Self-Sufficiency and Systems Change. Arkbound Foundation.

13

‘Prefiguration’ refers to a form of citizen-driven activist politics that emphasises direct action and participatory democracy as ways to bring the future these engaged citizens call for by making it here and now. Common examples of prefigurative initiatives are workers’ take-over and recuperation of factories after Argentina’s economic collapse of 2001, intentional eco-villages around the world, or the community-driven organisation of the squares during the Occupy movement. On these examples, see M.I. Fernández Álvarez. 2017. La política afectada: Experiencia, trabajo y vida cotidiana en Brakeman recuperada. Prohistoria Ediciones; S. Clarence-Smith and L. Monticelli. 2022. Flexible institutionalisation in Auroville: A prefigurative alternative to development. Sustainability Science, 17: 1171–1182; D. Graeber. 2009. Direct Action: An Ethnography. AK Press. For recent overviews of prefiguration and prefigurative politics, see G. Fians. 2022. Prefigurative politics. The Cambridge Encyclopaedia of Anthropology; P. Raekstad and S.S. Gradin. 2020. Prefigurative Politics: Building Tomorrow Today. Polity Press. For an edited volume with contributions by leading prefigurative scholars, see L. Monticelli (ed). 2022. The Future is Now: An Introduction to Prefigurative Politics. Bristol University Press.

14

R. Read. 2021. Dodo, phoenix or butterfly? Why it’s time for TrAdaptation. In Climate Adaptation: Accounts of Resilience, Self-Sufficiency and Systems Change. Arkbound Foundation, pp 332–346.

15

This is a reference to Bruno Latour’s We Have Never Been Modern from 1993. In that book, Latour argues that Modernity is constituted by two processes; one hidden, the other explicit. In the explicit process, we have two separate poles. Nature is transcendent, universal, objective and general. The Society pole is immanent, contingent, subjective and specific. Between these two poles there is a no man’s land. Every phenomena, every fact, is purified, analysed and classified in either one pole, never a mix of the two. In the hidden part of Modernity’s Constitution, Latour finds the work of mediation, where hybrids are recognised and constructed out of both Nature and Society. Through the work of mediation Nature and Society mix in our everyday life and doing. This results in networks, connecting and mixing every point.

Moderns, Latour argues, have only seen the explicit part of Modernity’s Constitution. They have always believed that the power of Western culture lies in their ‘realisation’ that Nature and Society are distinct and apart. Their progress lies in their belief in the independence between Nature and Society. Since they conceive time on the basis of the achievement of such distinction, Moderns classify all other cultures as Premodern. Science, Moderns argue in Latour’s analysis, implies the separation of Nature from Society; no separating the two, Premoderns got Magic instead.

However, Latour continues, Moderns haven’t realised that underneath the work of purification lies the work of mediation. Latour maintains that this lack of acknowledgement has enabled for the proliferation of hybrids: because Moderns believe that Nature is independent from Society, an influence on Nature wouldn’t in turn influence Society. And, vice versa, shaping Society does not shape Nature. This illusion facilitated intervening on Nature or Society because, the assumption was, Moderns couldn’t anticipate any bigger change on the other pole. Premoderns are more reticent to intervene in either Nature or Society because, seeing the close link between Nature and Society, they have been too afraid of undertaking any change. Hence, Latour concludes, their lack of innovation. Yet, Latour contends, the overlap of Nature with Society, what we call magic, is not a worse belief than the Modern belief of two separate poles. Rather, the reason why Moderns won over Premoderns is not the separation of the two poles, which was but a chimera, but the size of the network Moderns were embedded in. Latour maintains that we have never been Modern because, although we never acknowledged it, we have been constantly engaged in the production of hybrids, of nature–culture collectivities.

For another book about the entanglement of Nature, Society and Technology similarly building on ANT sociology, see M. Callon, P. Lascoumes and Y. Barthe. 2009. An Essay on Technical Democracy: Acting in an Uncertain World. Translated by G. Burchell. The MIT Press.

16

The Charter of the Earth is an international declaration of principles to guide local efforts to build a just, sustainable and peaceful global society. It exhorts global interdependence and shared responsibility and calls individuals and organisations to action in restoring and caring for planet Earth. It is the result of over a decade of global collaboration between civil society organisations and was formally agreed at the UNESCO headquarters in 2000. For more information, see https://earthcharter.org/about-the-earth-charter/history/.

17

C. Casal Lodeiro. 2015. Transició VNG y la ‘turuta’: hacia una sociedad diversa, sostenible y pacífica. 15/15/15: Revisit para una nueva civilización. Empirical material for this section on the Turuta comes from a study visit in June 2016, formal presentations and debate at the Spanish National Meeting of Community Currencies in 2016 as well as at the 4th International Conference of Complementary and Community Currencies held in 2017 in Barcelona along with an interview in 2022 and several informal discussions in the last five years. Empirical material also comes from the currency’s webpage and interviews with some of their members published on the internet.

18

C. Casal Lodeiro. Transició VNG y la ‘turuta’

19

To see the land recuperation projects the Turuta is currently undertaking, see https://turutes.blogspot.com/p/participar.html.

20

For an empirical description of a common relationship towards debt, and the resignification of debt in mutual credit systems, see Chapter 4.

21

In personal written exchange with Ton Dalmau, co-founder and member of the Board.

23

European Commission. 2019. The European Green New Deal. Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions.

24

Eurostat. 2020. Urban and rural living in the EU. See also The World Bank Data. Urban population (% of total population) – European Union, https://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS?locations=EU.

25

The first stage of the Vilawatt initiative focused on the Montserranina District of Viladecans, with a size of 45 hectares, 20,216 residents – or 30 per cent of the city’s residents – and a total of 8,026 dwellings, 6,203 of which were constructed previous to the building insulation legislation of 1976. Its residents earn an annual income 15 per cent lower than the city’s average.

Empirical details for Vilawatt come from Vilawatt’s webpage, the Statutes of the Vilawatt Consortia, Vilawatt currency design, operational protocols and official impact reports, the description of the project in the UIA (Urban Innovative Actions) website (https://www.uia-initiative.eu/en/uia-cities/viladecans), the UIA Case Study Viladecans, the final Journal UIA Vilawatt project, as well as a variety of pages hosted under the European Union European Regional Development Fund (see https://ec.europa.eu/regional_policy/funding/erdf_en).

26

Vilawatt Consortium Statutes, p 3. And in Ajuntament de Viladecans. 2019. Protocol de Funcionament Moneda Local Vilawatt, p 4. 11/04/2019.

27

On the politics of visibility and trust performed through numbers, see T.M. Porter. 1995. Trust in Numbers: The Pursuit of Objectivity in Science and Public Life. Princeton University Press. See also his post actualising the matter to today’s political divide in the United States. Porter elicits the politics of numbers to deliver an incisive critique of Trump’s and the Republican Party’s efforts to cultivate ignorance by waging a war on accurate numbers. T.M. Porter. 2020. Democracy counts: On sacred and debased numbers. Princeton University Press Ideas.

29

M. Martín. 2021. Viladecans’ innovative governance for Energy Transition. UrbAct: Driving Change for Better Cities. European Union: European Regional Development Fund.

30

The Global Covenant of Mayors for Climate and Energy (https://www.globalcovenantofmayors.org/) is an alliance of city and local governments around the world committed to lead work towards building resilient and low-emission cities. It is interesting that cities and local governments are taking the lead in transforming the organisation of the economy towards sustainability, acting themselves while calling upon national governments to follow their lead. Emerging from cities and centred on transforming people’s everyday practices, this ‘new municipalism’ – as this new breed of city-based policies has been called – often stems from the organisational capacities of activists and social movements to assemble actors across the board to build democratic and ecological cities. For a seminal article identifying the municipal as the spatial scale from which to develop transformative politics, see B. Russell. 2017. Beyond the local trap: New municipalism and the rise of the fearless cities. Antipode: A Radical Journal of Geography, 51(3): 989–1010. For an article identifying three forms of new municipalism, see M. Thompson. 2020. What’s so new about New Municipalism? Progress is Human Geography, 45(2): 317–342.

31

According to a United Nation’s report from 2021, an estimated 12 per cent of the plastic produced has been incinerated and 9 per cent has been recycled. United Nations Environment Programme (UNEP). 2021. Drowning in Plastics: Marine Litter and Plastic Waste Vital Graphics.

32

See P.S. Ross, S. Chastain, E. Vassilenko, A. Etemadifar, S. Zimmermann, S.-A. Quesnel et al. 2021. Pervasive distribution of polyester fibres in the Arctic Ocean is driven by Atlantic inputs. Nature Communications, 12: 106; H.K. Imhov, N.P. Ivleva, J. Schmid, R. Niessner and C. Laforsch. 2013. Contamination of beach sediments of a subalpine lake with microplastic particles. Current Biology, 23(19): R867–R868; E. Genbo Xu and X. Duan. 2021. Plastic, plastic everywhere: Airborne microplastics are settling into the most remote corners of the globe. The Conversation; M. Bergmann, S. Mützel, S. Primpke, M.B. Tekman, J. Trachsel and G. Gerdts. 2019. White and wonderful? Microplastics prevail in snow from the Alps to the Arctic. Science Advances, 5(8). For impactful images showing the ubiquitousness of plastic, see the photo exhibition organised by the Basel Convention Plastic Waste Partnership, Plastic is Forever.

33

J.M. D’Souza, F.M. Windsor, D. Santillo and S.J. Ormerod. 2020. Food web transfer of plastics to an apex riverine predator. Global Change Biology, 26(7): 3846–3857; L. Tosetto, C. Brown and J. Williamson. 2016. How microplastics make their way up the ocean food chain into fish. The Conversation, 1 December; M.E. Iñiguez, J.A. Conesa and A. Fullana. 2017. Microplastics in Spanish table salt. Scientific Reports, 7(1): 8620; G. Liebezeit and E. Liebezeit. 2014. Synthetic particles as contaminants in German beers. Food Additives & Contaminants: Part A, 31(9): 1574–1578; D. Yang, H. Shi, L. Li, J. Li, K. Jabeen and P. Kolandhasamy. 2015. Microplastic pollution in table salts from China. Environmental Science & Technology, 49(22): 13622–13627.

34

For a swift and somber overview, see the two UNEP reports from 2021 on marine litter and plastic waste. UNEP. 2021. Drowning in Plastic: Marine Litter and Plastic Waste Vital Graphics; UNEP. 2021. From Pollution to Solution: A Global Assessment of Marine Litter and Plastic Pollution.

35

With the infrastructure turn in urban studies, there has come a recognition of the heterogeneous nature of urban infrastructures. Building on Science and Technology Studies, urban infrastructures are conceived as sociotechnical networks, assemblages of material objects, social practices and cultural understandings that constitute and are constituted by infrastructural conjunctions. Studies that centre on the urban infrastructures of the Global South have particularly focused on how marginalised and vulnerable communities are an intrinsic element in the creation, maintenance, extension and adaptation of infrastructures across time and space. They are the human component of a continuous infrastructuring process that enables or disrupts flow of materials. See J.-P.D. Addie. 2021. Urban life in the shadows of infrastructural death: from people as infrastructure to dead labour and back again. Urban Geography, 42(9): 1349–1361; L. Chelcea and G. Pulay. 2015. Networked infrastructures and the ‘local’: Flows and connectivity in a postsocialist city. City, 19(2–3): 344–355; A. Simone. 2004. People as infrastructure: Intersecting fragments in Johannesburg. Public Culture, 16(3): 407–429; S. Graham and S. Marvin. 2011. Splintering Urbanism: Networked Infrastructures, Technological Mobilities and the Urban Condition. Routledge; S. Graham and C. McFarlane. 2014. Infrastructural Lives: Urban Infrastructure in Context. Routledge.

36

Twenty-one is the middle point for the estimated 19 to 23 million metric tons of plastic waste that entered the ocean in 2016. That was more than a doubling for the equivalent estimate for 2010. For 2016 figures, see S.B. Borrelle, J. Ringma, K.L. Law, C.C. Nonnahan, L. Lebreton, A. McGivern, E. Murphy, J. Jambeck, G.H. Leonard and C.M. Rochman. 2020. Predicted growth in plastic waste exceeds efforts to mitigate plastic pollution. Science, 369(6510): 1515–1518. For exact figures for 2010, see J.R. Jambeck, R. Geyer, C. Wilcox, T.R. Siegler, M. Perryman, A. Andrade, R. Narayan and K.L. Law. 2015. Plastic waste inputs from land into the ocean. Science, 347(6223): 768–771.

37

See OECD. 2022. Global Plastics Outlook: Economic Drivers, Environmental Impacts and Policy Options. OECD Publishing; The Pew Charitable Trusts & SYSTEMIQ. 2020. Breaking the Plastic Wave: A Comprehensive Assessment of Pathways Towards Stopping Ocean Plastic Pollution.

38

In United Nations Global Compact. 2016. Banking what the sea spits back. Breakthrough News. Empirical details for Plastic Bank come from the website; D. Katz. 2019. Plastic Bank: Launching Social Plastic® revolution. Field Actions Science Reports, 19: 96–99; a UN Global Compact brief (http://breakthrough.unglobalcompact.org/briefs/plastic-bank-sea-spits-back-david-katz-shaun-frankson/); and from Y. Gong, Y. Wang, R. Frei, B. Wang and C. Zhao. 2022. Blockchain application in circular marine plastic debris management. Industrial Marketing Management, 102: 164–176. Quotes also come from Katz, D. 2017. Social Plastic is a new currency. TEDx Talk (https://www.youtube.com/watch?v=tnndie-ijKs); and Katz, D. 2018. The surprising solution to ocean plastic. TED Talk (https://www.youtube.com/watch?v=mT4Qbp89nIQ).

39

Katz, Plastic Bank.

40

In Katz, Plastic Bank.

41

Katz. 2017. Social Plastic is a new currency. TEDx Talk. https://www.youtube.com/watch?v=tnndie-ijKs

43

Figures refer to 15 September 2022. For updated figures, see https://plasticbank.com.

44

In The Value of Everything: Making and Taking in the Global Economy, Mariana Mazzucato engages in an accessible critique of how global capitalism and its financial markets together with mainstream economics that legitimate the system have come to understand value and organise its creation, distribution and transfer. Early in the book, she gives a swift historical overview of economic theories of value, identifying a divide between those theories that conceive value as objective and those that conceive value as subjective. Identifying where value resides is, she argues, a necessary step to sort those who create value from those that extract it without adding any. Mazzucato’s book is a well-deserved staunch critique to the confusion between ‘taking value’ and ‘making value’ that pervades popular debate and that devoids big companies – such as Pharma – and financial markets of responsibility. She deplores the way mainstream economics has completely forgotten discussion on what value is. She however does not offer an alternative understanding of value that could enrich economic debate. While absent in economics, value and value-making through processes of valuation are the topic of much interest in economic sociology. See, for example, M. Callon and F. Muniesa. 2005. Economic markets as calculative collective devices. Organization Studies, 26(8): 1229–1250; L. Karpik. 2010. Valuing the Unique: The Economics of Singularities. Princeton University Press; D. MacKenzie. 2006. An Engine, Not a Camera: How Financial Models Shape Markets. MIT Press; F. Muniesa. 2012. A flank movement in the understanding of valuation. The Sociological Review, 59(2): 24–38; F. Muniesa. 2014. The Provoked Economy: Economic Reality and the Performative Turn. Routledge; F. Vatin. 2013. Valuation as evaluating and valorizing. Valuation Studies, 1(1): 31–50.

45

https://www.ted.com/talks/david_katz_the_surprising_solution_to_ocean_plastic. Another quote from Katz that illustrates the sociomaterial nature of value is: ‘If every bottle was five euros, how many would you see on the street? Zero. What did we just prove? That the question is not the bottle: it is the value that we give to it. By turning what was once waste into a resource, it becomes a way to end extreme poverty.’ In Katz, Plastic Bank.

46

Katz, Plastic Bank.

48

Katz, Plastic Bank.

50

A most illustrative quote of Karl Polanyi’s argument in this respect: ‘Production is interaction of man and nature; if this process is to be organized through a self-regulating mechanism of barter and exchange, then man and nature must be brought into its orbit; they must be subject to supply and demand, that is, be dealt with as commodities, as goods produced for sale. Such precisely was the arrangement under a market system. Man under the name of labor, nature under the name of land, were made available for sale; the use of labor power could be universally bought and sold at a price called wages, and the use of land could be negotiated for a price called rent. There was a market in labor as well as in land, and supply and demand in either was regulated by the height of wages and rents, respectively; the fiction that labor and land were produced for sale was consistently upheld. … But, while production could theoretically be organized in this way, the commodity fiction disregarded the fact that leaving the fate of soil and people to the market would be tantamount to annihilating them.’ K. Polanyi. 2001 [1944]. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press, pp 136–137.

Chapter 9

1

For a list of economists whose models ignore money as a key element of economic dynamics, see S. Keen. 2022. The New Economics: A Manifesto. Polity Press.

2

In The End of Finance, Massimo Amato and Luca Fantacci despair over creditors/bankers’ resignation of their fiduciary obligation towards their debtors. Commodifying the asset-side of the debt–credit relationship and selling it forward, bankers need no longer take care of the debtor’s ability to pay back her debt and, thus, the creditor can ignore the larger effects the debtor’s repayment ability – or inability – has on the larger social body. Amato and Fantacci call the create-credit-to-sell-it-forward the liquidity principle. It organises the production of private bank money, putting that principle at the root of the recurring booms and busts that have characterised economies since the 1970s. In the vocabulary used in this book, the commodity imaginary built into the monetary arrangement pushes us to relate to money as something to hold and sell, enabling individuals to disregard the larger collective and, thus, with consequences for the health of the social. Amato and Fantacci’s suggested solution is to return to a banking practice where creditors have a credit-long obligation of care towards their debtors. I do admit the hurdles of implementing such solution at the national and supranational levels; after all, in the form of implementing quantitative easing monetary policy after the Great Financial Crash of 2007–2009 showed the extent to which the interests of private bankers and states are interlocked. Hence the suggestion put forward in this book to have a multiplicity of complementary monies, organised at various territorial levels and managed by actors anchored at the specific territorial/organisational level. M. Amato and L. Fantacci. 2012. The End of Finance. Polity Press.

3

Though I make the argument with a focus on local complementary monies, Positive Money makes the same argument for our conventional national monies. See Positive Money Europe. 2022. Democratise the European Central Bank; S. Jourdan and S. Diessner. 2020. Strengthening the European Parliament’s Role in ECB Scrutiny. Positive Money Europe.

4

G.M. Gómez. 2019. Monetary Plurality in Local, Regional and Global Economies. Routledge.

5

In 2014, the Bank of England admitted 97 per cent of the money circulating in the economy was created by private banks when extending loans. M. McLeay, A. Radia and R. Thomas. 2014. Money creation in the modern economy. Quarterly Bulletin, Bank of England. See Chapter 3 in this book.

6

Erin O. Wright presents three strategic logics for systemic transformation, each characterised by its relation to the dominant system. Ruptural transformation involves a sharp break with the extant social order and established institutions and aims at creating institutions anew. On the other end of the spectrum, symbiotic transformation implies an extension and deepening of extant institutions to encompass those groups and address those problems currently ignored. Interstitial transformation is, in a way, unrelated to extant institutions either in an antagonistic or in a symbiotic relationship. Instead, interstitial transformative strategies work from the in-betweens, from the margins of the current social order to build new institutional forms. E.O. Wright. 2010. Envisioning Real Utopias. Verso.

7

Some successful local currencies that have inspired both citizens and municipalities beyond their reach are the WIR, a mutual credit system created in 1934 in Switzerland and still functioning, which most notoriously inspired Sardex in Sardinia along with the network of similar currencies throughout Italy we saw in Chapter 4. Another example is the municipal money launched in 1973 in Curitiba, Brazil, to involve citizens in collecting garbage; it inspired the launch of Lixo in 2016 in Lisbon, Portugal, which has been replicated in other Portuguese municipalities. See S. Lima Coelho. 2019. ‘E pudesse eu pagar de outra forma’: o uso de uma moeda local como instrumento mobilizador de práticas de reciclageme de dinamização do comércio local em Campolide. Analyse Social, 233(4): 760–781.

8

As we have seen throughout the book, voices across the ideological divide are calling for a reorganisation of societies. They differ however on the extent of that reorganisation. The more conservative call for a piecemeal upgrade of the system proposing to reimagine capitalism by giving finance a social purpose. Others conceive a complete overhaul of the system, calling for a post-capitalist future, characterised by cooperative forms of organisation and a de-growth economy. For a few examples across the array of suggestions see R.M. Henderson. 2020. Reimagining Capitalism in a World on Fire. Public Affairs Books; I. Ferreras, J. Battilana and D. Méda. 2022. Democratise Work: The Case for Reorganising the Economy. University of Chicago Press; P. Mason. 2015. PostCapitalism: A Guide to Our Future. Penguin Books; T. Jackson. 2009. Prosperity Without Growth: Economics for a Finite Planet. Routledge; G. Kallis. 2014. Degrowth: A Vocabulary for a New Era. Routledge.

9

In his posthumous book, David Graeber, together with David Wengrow, looks back to the distant past to get inspiration from civilisational forms long gone. Theirs is a hopeful chant to the creativity of groups and collectives to find ways to govern themselves and do so democratically, as equals. If they could do it some 5,000 years ago, the two Davids seem to suggest, so can we. D. Graeber and D. Wengrow. 2021. The Dawn of Everything: A New History of Humanity. Penguin Random House.

10

I owe this insight to Eva Álvarez de Andrés, who I only met over an intense day rich in experiences. For over a decade, she has worked with stigmatised gipsy communities repeatedly made homeless in the outskirts of Madrid, Spain. Despite the difficult conditions in which they live and the extortionist treatment they receive from employers and local authorities, they stubbornly live life full of dignity, gaiety and hope. For some of her work, see E. Álvarez de Andrés, C. Cabrera and H. Smith. 2019. Resistance as resilience: A comparative analysis of state-community conflicts around self-built housing in Spain, Senegal and Argentina. Habitat International, 86: 116–125; E. Álvarez de Andrés, M.J. Zapata Campos and P. Zapata. 2015. Stop the evictions! The diffusion of networked social movements and the emergence of a hybrid space: The case of the Spanish Mortgage Victims Group. Habitat International, 46: 252–259.

11

The nature of hope implicit in interstitial efforts to transform society – as in Wright’s ‘real utopias’ – differs from the nature of hope implicit in ideologies of free market or planned economies. In interstitial real utopias, hope is grounded in experiences of living differently together, in continuous involvement in making a different economy, in participation in decision-making processes concerning one’s polity. Arjun Appadurai phrases it nicely when he writes: ‘Hope now is a collectively mobilized resource that defines a new terrain between the temptations of utopia and the arrogance of technocratic solutions to change.’ A. Appadurai. 2007. Hope and democracy. Public Culture, 19(1): 29–34.

Appendix

1

Mehrling, The New Lombard Street. For the curious to learn more about the ‘money view’ and see it applied to US monetary history as well as to the events of the 2007 financial meltdown, I recommend taking Mehrling’s Coursera free online course, ‘Economics of Money and Banking’.

2

The ‘money view’ builds on Keynes’ and Minsky’s understanding of the relation between the income flows of economic actors (households, business firms and government) and their financial commitments (or cash outflows/debt to financial actors). The following paragraph in one of Minsky’s papers succinctly summarises this understanding: ‘The fundamental idea of a theory that integrates the financial structure with the determinants of real income is that the various components of the real income system – household, business firms and governments – have liabilities which are commitments to make payments to financing organizations. These payment commitments on debts are supported by wage and other household incomes, gross profits after taxes for business, and taxes for governments (for simplicity we ignore international relations). These debts originate in exchanges by which the debtor receives money today and promises to deliver money tomorrow.’ Minsky, Stabilizing an Unstable Economy.

3

Federal Reserve Bank of St. Louis, FRED Economic Data. https://fred.stlouisfed.org/series/BUSLOANS

4

The possibility to get credit enables the figure of the entrepreneur, which is quintessential to capitalism. As Schumpeter noted, someone ‘can only become an entrepreneur by previously becoming a debtor. … What he first wants is credit. Before he requires any goods whatever, he requires purchasing power. He is the typical debtor in capitalist society.’ J. Schumpeter. 1983 [1934]. The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. Translated by R. Opie. Transaction Publishers, p 264.

5

IMF economists Marco Gross and Christoph Siebenbrunner offer a similar balance sheet example of money creation through the creation of loans by commercial banks. Gross and Siebenbrunner, Money creation in fiat and digital currency systems.

6

For a similar balance sheet example, see Gross and Siebenbrunner, Money creation in fiat and digital currency systems.

7

In the UK, the Bank of England implemented quantitative easing by overwhelmingly buying UK government bonds from the non-bank private sector. In the US, the Federal Reserve bought both US Treasuries (equivalent to government bonds) as well as mortgage-backed securities backed by other public agencies. The European Central Bank opted to implement quantitative easing by buying banks’ toxic loans. Though implementation varied in terms of what assets the central banks bought, the monetary policy results equally in the expansion of the central bank’s balance sheet. See M. Joyce, D. Miles, A. Scott and D. Vayanos. 2012. Quantitative easing and unconventional monetary policy: An introduction. The Economic Journal, 122(564): F271–F288.

Indeed, upon their original constitution in the early 20th century, central banks soon developed into the banker’s bank, commercial banks relying on the central bank to provide extra liquidity in times of trouble. It was this emergent responsibility as the banker’s bank that led central banks to develop the art of monetary management. For a well-written description of the origin and development of central banks, see Goodhart, The Evolution of Central Banks.

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