Financial Crises and the Nature of Capitalist Money Financial Crises and the Nature of Capitalist Money Mutual Developments from the Work of Geoffrey Ingham Edited by Jocelyn Pixley Honorary Professor in Sociology, Macquarie University Senior Visiting Fellow, IRRC, Faculty of the Australian School of Business, University of New South Wales Professorial Research Fellow, Global Policy Institute, London Metropolitan University and G C Harcourt Visiting Professorial Fellow in the School of Economics, Faculty of the Australian School of Business, University of New South Wales Emeritus Reader in the History of Economic Theory, Cambridge University Professor Emeritus, University of Adelaide Editorial, introduction and selection matter © Jocelyn Pixley and Geoffrey Harcourt 2013 Individual chapters © Contributors 2013 Foreword © Richard Swedberg 2013 All rights reserved No reproduction, copy or transmission of this publication may be made without written permission No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988 First published 2013 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010 Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN: 978–1–137–30294–6 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin A catalogue record for this book is available from the British Library A catalog record for this book is available from the Library of Congress Contents List of Figures and Tables vii Acknowledgements viii Foreword by Richard Swedberg ix Notes on Contributors xiii Introduction to Positive Trespassing J F Pixley and G C Harcourt 1 Requirements of a Philosophy of Money and Finance John Smithin 19 Ingham and Keynes on the Nature of Money M G Hayes 31 Money: Instrument of Exchange or Social Institution of Value? André Orléan 46 Group-think and the Current Financial Crisis Charles Goodhart 70 A New Meme for Money L Randall Wray 79 Monetary Surrogates and Money’s Dual Nature David M Woodruff 101 Reforming Money to Exit the Crisis: Examples of Non-capitalist Monetary Systems in Theory and Practice Luca Fantacci 124 The Current Banking Crisis in the UK: An Evolutionary View Victoria Chick 148 Money and the State Malcolm Sawyer 162 10 The Real (Social) Experience of Monetary Policy Sheila C Dow v 178 vi Contents 11 Economic Policies of the New Consensus Macroeconomics: A Critical Appraisal Philip Arestis 12 A Socioeconomic Systems Model of the Global Financial Crisis of 2007+: Power, Innovation, Ideology and Regulatory Failures Tom R Burns, Alberto Martinelli and Philippe DeVille 196 216 13 Credit Money, Fiat Money and Currency Pyramids: Reflections on the Financial Crisis and Sovereign Debt Bob Jessop 248 14 Geoffrey Ingham’s Theory, Money’s Conflicts and Social Change Jocelyn Pixley 273 15 Reflections Geoffrey Ingham 300 Index 323 List of Figures and Tables Figures 1.1 Correspondences 12.1 Phase model of the creative-destructive financial cycle 22 226 Tables 13 Marx on the functions of money 13 Marxian categories for the analysis of money, credit and capital 13.3 The hierarchy of money forms 13.4 The currency pyramid 13.5 Money and derivatives vii 253 255 260 261 263 Acknowledgements This book is an edited collection based on a definite idea As the editors, we have been pleased and most interested in the serious intent of each author to this task The chapters give great insights into very important aspects for joint ventures between sociology and economics on the nature of capitalist money We thank them very much; and for the care with which they responded to our questions As well, we are grateful for the suggestions of the anonymous referees and for the team at Palgrave/ Macmillan, notably our editor Taiba Baitool and Gemma Shields and our copy-editor Nick Brock The authors and the publishers would also like to thank Presses Universitaires de France for permission to reproduce the following chapter in English: André ORLEAN, « La sociologie économique de la monnaie », in Traité de sociologie ộconomique edited by Philippe Steiner and Franỗois Vatin, â PUF, 2009 J F Pixley and G C Harcourt Sydney, May 2013 viii Foreword The current financial crisis has placed two items firmly on the agenda for today’s social science: a better understanding of capitalism and a better understanding of finance The work of Geoffrey Ingham contains interesting and helpful views on both of these topics, as the essays in this volume As its title indicates, one of Ingham’s very first books – Capitalism Divided? The City and Industry in British Social Development (1984) – was devoted to capitalism And so is his latest one, Capitalism (2008) As readers of Ingham’s many books and articles know, he has also throughout his career been fascinated by the role of money, most importantly in The Nature of Money (2004) but also in the edited volume Concepts of Money (2005) What makes Ingham’s work even more relevant for today’s concerns is that the key novelty in his analysis of money – the idea of credit-money – is also central to his view of what makes capitalism into such a dynamic and volatile economic system To get a full view of Ingham’s theory of capitalism, and properly understand its originality, it is helpful to take a quick look at its predecessors and competitors This will also help to explain why he decided to cast his own theory of capitalism in the way he did As we know, the theory of capitalism was created by Marx, most importantly in Capital (1867) Two aspects of Marx’s theory especially concern us here, namely that he saw capitalism as a system, and that this system has a central mechanism that explains how it works To Marx, and also to Ingham, capitalism is not just a collection of institutions but a distinct socioeconomic system, that is, a whole where the parts interact and from which you can also read out what will happen What drives the capitalist system according to Marx, is the continuous appropriation of surplus labour in the form of wage labour While Marx was primarily interested in the production of surplus value in the factories, he also devoted quite a bit of attention to finance and viewed it as integral part of the capitalist system As opposed to modern theoreticians of finance, Marx also saw financial crashes and scandals as natural to and inherent in capitalism After Marx’s death in 1883, it was gradually realized that there was something wrong with his theory of capitalism The working class was not becoming increasingly poor and radicalized; the first major ix 316 Financial Crises and the Nature of Capitalist Money they were able to enact a period of ‘financial repression’ – low interest rates; government control/ownership of banks; capital controls and so on The discrediting of banking and finance during the current crisis and the (mistaken) belief in the absolute exigency for states’ debt reduction, might open up the possibility of a further shift from post 1980s money-capital dominance and a renewed period of ‘financial repression’ (Reinhart, Kirkegaard and Sbrancia 2011) Of course, Wray knows all this perfectly well; but prefers to play down the real power of the ‘bond vigilantes’, and considers that the belief that their credit is needed to make up any shortfall of tax revenue is mistaken He contends that we are mistaken in thinking that they have the power to set interest rates (Wray, 2012: 119; http://www.economonitor com/lrwray/2013/01/07/bond-vigilantes-and-math-sustainability-offiscal-deficits/) Perhaps more pertinently, he asks where else would they place their investments Leaving aside the long-standing interpenetration of Wall Street and successive governments, this is perhaps a more telling question in the USA Without an alternative safe haven to the US dollar, it is more realistic than in other countries to believe that it is possible to call the bond vigilantes’ double bluff – that they have power and that they would use it in a ‘bond strike’ Whatever the outcome, it would require a ferocious political struggle In her stimulating elaboration of my early work on the relations between the UK’s exceptionally large and powerful money-capital sector, the City, and the rest of the economy, Jocelyn Pixley considers the deep and enduring implications of such conflict for democracy Some would argue that any force arising from the new meme of ‘modern monetary theory’ might be compromised by the fact that states not have the necessary control over the production of money Otherwise sympathetic adherents of heterodox monetary theory in the broad postKeynesian camp, including Malcolm Sawyer in this volume, criticise the state theory of money and its ‘modern monetary theory’ derivative for treating state (treasury) money and central bank money as if they were the same (Gnos and Rochen 2002; Lavoie 2013) I not have the time (to say nothing of the competence) to unravel the intricacies of the precise flows and circuits across balance sheets of the state, central bank and banking system.15 Rather, I shall make two very general points First, contrary to Sawyer’s contention, the validity of the state theory of money does not depend on the empirical success or failure of any actual state to monopolise control of both money of account and the means of payment to which it conforms As Woodruff shows, states can fail to exercise control to a significant extent, but the state theory Geoffrey Ingham 317 is none the less the most useful single analytical tool to understand what is happening in these circumstances Second, this debate about ‘whose money’ is itself an expression of the fact of shared monetary sovereignty and the consequent structurally ambiguous location of the central bank This is also the source of the interminable debate on the proper roles of fiscal and monetary policy and the question of the legitimacy of debt monetisation At this juncture, I simply wish to note that this is a matter of the internal power structure of state agencies and, in turn, their relationship to the private banking and financial sectors, regardless of any technical discussion of the relative merits of fiscal and monetary policy On one level, the question of whose money it is in modern capitalism betrays a vestige of the ‘old’ meme in which money is a ‘thing’ – a controllable quantity Rather, as Sawyer’s contribution shows, especially in relation to the euro, states (treasuries), central banks and banking systems are parts of a complex system of credit/debt relation which constitute money as a relation To focus attention on ‘whose money’ diverts attention from this essential fact and fails to capture the consequences of the public – private hybridisation and the central bank’s ambiguous location and powers which is necessary for an understanding of why these are so continuously contested Aside from the obvious significance of the ECB and the euro in this regard (see Hayes’s comments in this volume), the recent exceptional measures to inject money into the economy bring the conventional legitimacy of the public–private roles for the production of money into sharper relief ‘Quantitative easing’ requires that bonds have to be purchased from the private sector and not directly dropped from the public treasury ‘helicopter’, as has been controversially advocated recently in the UK (see Dow’s excellent analysis of this precise point in her contribution).16 Sawyer rightly concludes that ‘it is the central bank, as the bank of the state and the bank of bankers, which plays the key role’ But this key role is only possible because the central bank is part of a system of relations that is ultimately based on the state’s sovereign power Napoleon’s stricture on the Banque de France, repeated here by Victoria Chick, that it not only belonged to its shareholders, but also ‘to the state which granted it the privilege of creating money’ was intended to convey where the ultimate source of monetary sovereignty lies in the modern world, regardless of the legal and constitutional ambiguities which obscure this reality Building on her earlier seminal work, Chick gives us a clear and concise account of the shifting balance of power in the evolution of the British banking system in terms of what 318 Financial Crises and the Nature of Capitalist Money I have described as the hybridisation of public and private She astutely observes how the legitimate conventions of the relationships have been threatened by the de facto possession of private banks in the state bailouts, creating ideological confusion and obfuscation Having franchised the supply of money to the banks, the state has a duty, Chick tells us, to monitor the quality of the franchised product through the Bank of England or other regulatory bodies However, she avers that the state has fallen short of its responsibilities in maintaining that it should not interfere in the activities of private enterprise banks – even those like RBS in which it owns an 85 per cent stake ‘But as long as they produce our money and as long as monetary policy protects them, they are never entirely private enterprises The state’s internally inconsistent thinking is directly responsible for the current situation in which profits are privatised and losses socialised It must stop’ (Chick p. 158 this volume) However, if the internal inconsistency of thinking is the result and reflection of the structural ‘inconsistency’ in the social relations for the production of money then it is the latter that will have to change before Chick’s injunction can be met Sheila Dow explores the implications of the concept of money as a social relation and the role that this plays in the framing of knowledge: ‘In the absence of ‘true’ knowledge, how we understand reality is subject to a variety of influences which are primarily social and/or political’ (Dow p 179 this volume) From this perspective she is able to see the recurrent ‘incoherence’ of monetary policy in relation to economic theory, as occurred when ‘endogenous’ money creation exposed Monetarism’s inability to grasp how the system operated But she goes beyond the ‘standard Keynesian’ critique of mainstream’s long-run neutrality which is based on the belief in the corrigibility of short-term non-neutrality by the elimination of information asymmetry and market imperfections Rather, in implicit accord with Orléan, Dow perceives the ‘more fundamental non-neutrality’ that is evident in banking crises which threaten the very existence of the social relations that constitute money.17 Today’s novel monetary policy measures cannot be easily framed within existing theory and produce a further ‘incoherence’ As the public experiences financial vulnerability – and I would add widespread malfeasance – the monetary and banking policy is shown in a true light as a political issue ‘in which framings of different groups … [confront] each other in an ongoing process of negotiation The signs are there that monetary policy too is a social relation’ (Dow p 193 this volume) Here, we might again refer to the current debate on the legitimacy and efficacy of different methods for injecting money into the economy Geoffrey Ingham 319 in the attempt to stimulate activity First, as I have already noted, the distinction between state money and central bank money and their roles in the creation of money underpins the time-honoured separation between fiscal and monetary policy Second, given the existing structural links between the state agencies and the private banking sector, the creation of new money by the existing rules of the game has merely shored up the latter’s shattered balance sheets and threatened to finance new asset price bubbles Consequently, there are calls for the direct ‘helicopter’ drop of money by the state which opens up a wider debate about who should control the production of money In particular, the centuries-old ‘public–private partnership’ is called into question If the link between the state and the private sector is to be bypassed or severed, should this be seen as an ‘exceptional’ ‘emergency’ measure or the first step in radical structural change in the social relations for the production of money?18 As a conclusion to their thorough account of the ongoing financial crisis, Burns, Martinelli and de Ville offer a list of arrangements which ‘avoid or surpass the fatal flaws of the creative-destructive financial systems’: the understanding of credit creation as a public good; the curtailment of private bank credit creation and their replacement by public, non-profit investment agencies Obviously, they recognise that these measures would ‘require the state (or an independent agency) to address coordination problems and other regulatory issues’ (Burns p 241 this volume) However, this begs all the unresolved political questions But it also leads to further and deeper problems about the nature of money which are not simply a matter of political will, as I have intimated in these reflections In this regard, I have to confess that I have not made any progress since I posed them in a somewhat glib conclusion to The Nature of Money The questions remain and I not think that I can express them more clearly than I did in 2004 Consequently, I beg the indulgence of my colleagues in merely repeating the impasse ‘It is one thing to say that money is socially constructed as a reality in a process of conflict and struggle; but this does not address the obvious and practically more important question, posed by Marx and the orthodox economists, including this time Keynes, of how this might best be done Or more pertinently, one might ask whether this is a valid question in the sense that there exists an answer Socialist and communitarian solutions based on a labour theory of value and the implicit claim of orthodox economic theory that a socially optimal outcome is the result of egotistical utility maximisation simple evade the question by bracketing the role of money … Having posed this most intractable 320 Financial Crises and the Nature of Capitalist Money of questions, I propose to close, or rather postpone, the discussion However, I will offer two observations First, whatever claim is made to have found the best solution to the questions of how, and how much, money is created, we can be certain that it is not the only one, and that it was arrived at after an essentially political struggle for economic existence between different interests Second, without such a struggle money cannot have value’ (Ingham 2004: 204) Notes There are, of course, different historical forms of capitalism as Weber outlined and as Jessop has reminded us in this volume See Smithin (2009) and Ingham (2011) Since all forms of money have their own ‘social relations’ that consist in credit– debt relations, it is misleading to view capitalist money as ‘fictitious’ or as being produced ex nihilo The social relations of its production are a social reality The economic systems of Islamic states and China in the early modern period did not develop this mediated state-private banking structure and consequently capitalism did not take root I have adapted W B Gallie’s philosophical concept ‘essentially contested’ (Gallie 1956) to denote that the central bank cannot be unequivocally assigned to either the public or private sphere See Mann (forthcoming 2013) ‘Labour, distribution, and the monetary exception’ As Orléan says, there have been notable exceptions – in particular Nigel Dodd 1994; Viviana Zelizer 1994; Heiner Ganssmann 2011; and Bruce Carruthers 1996 The distinction was originally made in his lectures at Cambridge; but did not appear in The General Theory of Employment, Interest and Money As all our contributors know, the mainstream critics of orthodoxy are legion, but not a dominant influence on the formulation and conduct of economic policy It is important to note that their Keynesian predecessors had a quite different attitude to sociology I was petrified to see Austin Robinson, James Meade and Nicholas Kaldor, in a spirit of mutuality, on the front row at my first paper presentation in the Faculty of Economics in 1971 I must reiterate my comment in The Nature of Money (2004) that Geoff Harcourt referred me to economists who didn’t think that money was merely a ‘neutral veil’ In a letter to his fiancé, Keynes described his research into ancient Middle Eastern metrology as his ‘Babylonian madness’ which I used in the title of an early paper on the nature of money (Ingham 2000) 10 André Orléan has recently made precisely the same critique and evaluation of Marx’s analysis of money and capital (Orléan 2011: 41–54) 11 It is not so much a matter of whether or not exchange controls actually enabled greater control of domestic economies in the longer term, but rather that during the late 1940s and 1950s governments thought that they might so (Ingham 2011: 85) Geoffrey Ingham 321 12 As Bloch observed in his seminal essay, the significant décrochement of the unit of account and the means of payment occurred as a consequence of the disintegration of the Roman Empire (Bloch 1954 [1936]) 13 This is not the place in which to discuss my general agreement with them 14 But the question is dealt with at length in Wray (2012: 19) 15 There is a long unfinished document on my hard drive started in 2005 entitled ‘Whose money is it?’ which I intended to submit to The Journal of Post-Keynesian Economics Its main point was that the both the ‘state theory of money’ and its critics needed a theory of the state For guidance to the complexities of this matter they might consult the latest work on this subject by of one of our colleagues – Bob Jessop (2013) 16 In well-publicised speeches in October 2012 and January 2013, the retiring head of the UK’s Financial Services Authority and failed candidate for Governorship of the Bank of England, Lord Turner, advocated the direct ‘helicopter’ drop of money to the economy Both interventions were criticised by the outgoing Governor Lord King who invoked the spectre of Zimbabwe’s inflation (see Wray’s discussion of hyperinflation phobia, 2012) 17 In trying to get across to students the fragility of this taken for granted stanchion of the social order and that money actually disappears or evaporates, I asked them whether the hoards of coins discovered after the Romans left Britain were ‘money’ 18 These debates reveal the precarious nature of the notions of central bank independence and the neutrality of money which aim to relegate monetary policy to an apolitical ‘exceptional space’ (see Mann 2013 forthcoming) References Bloch, M (1954 [1936]) Esquisse d’une histoire monétaire de l’Europe Paris: Armand Colin Carruthers, B (1996) City of Capital Princeton, NJ: Princeton University Press Dodd, N (1994) The Sociology of Money Cambridge: Polity Gallie, W B (1956) ‘Essentially Contested Concepts’, Proceedings of the Aristotelean Society, 56, 167–98 Ganssmann, H (2011) Doing Money London: Routledge Gnos, C and Rochon, L P (2002) ‘Money Creation and the State: A Critical Assessment of Chartalism’, International Journal of Political Economy, 32(3), 41–57 Ingham, G (1998) ‘On the “Undevelopment” of the Sociology of Money’, Acta Sociologica, 41(10), 3–18 Ingham, G (2000) ‘“Babylonian Madness”: On the Sociological and Historical Origins of Money’, in J Smithin (ed.), What is Money? London: Routledge, pp 16–41 Ingham, G (2001) ‘Fundamentals of a Theory of Money: Untangling Fine, Lapavitsas and Zelizer’, Economy and Society, 30(3), 304–23 Ingham, G (2004) The Nature of Money Cambridge: Polity Ingham, G (2006) ‘Further Reflections on the Ontology of Money: Responses to Lapavitsas and Dodd’, Economy and Society, 35(2), 259–78 Ingham, G (2011) Capitalism Cambridge: Polity Jessop, B (2013) The State: Past, Present and Future Cambridge: Polity Keynes, J M (1923) A Tract on Monetary Reform, in J M Keynes (1971–89) The Collected Writings of John Maynard Keynes, managing editors E A G Robinson and D Moggridge London: Macmillan 322 Financial Crises and the Nature of Capitalist Money Keynes, J M (1933) ‘A Monetary Theory of Production’, in Der Stand und die nächste Zukunft der Konjunkturforschung: Festschrift für Arthur Spiethoff, reprinted in D E Moggridge (ed.), The Collected Writings of John Maynard Keynes (1973), vol XIII, pp 408–11 Keynes, J M (1930) A Treatise on Money London: Macmillan Keynes, J M (1973 [1936]) The General Theory of Employment, Interest and Money, Vol 7, in D Moggridge (ed.), Collected Writings of John Maynard Keynes Cambridge: Cambridge University Press Kuhn, T (1962) The Structure of Scientific Revolutions London: Routledge Lapavitsas, C (2005) ‘The Social Relations of Money as the Universal Equivalent: A Response to Ingham’, Economy and Society, 34, 3, 389–403 Lavoie, M (2013) ‘The Monetary and Fiscal Nexus of Neochartalism: A Friendly Critique’, Journal of Economic Issues, 47, 1–32 Lawson, T (2003) Reorienting Economics London: Routledge MacKenzie, D (2008) An Engine Not a Camera: How Financial Models Shape Markets Cambridge, MA: MIT Press Mann, G (forthcoming 2013) ‘Labour, Distribution, and the Monetary Exception’, Capital and Class Marx, K (1959) Capital, Vol London: Lawrence & Wishart Marx, K (1976) Capital, Vol Harmondsworth: Penguin Mirowski, P (1991) ‘Post-modernism and the Social Theory of Value’, Journal of Post-Keynesian Economics, 13, 565–82 Mirowski, P (2013) Never Let a Serious Crisis Go to Waste, London: Verso Orléan, A 2011 L’Empire de la Valeur: Refonder l’Economie Paris: Seuil Reinhart, C, Kirkegaard, J and Sbrancia, M (2011) ‘Financial Repression Redux’, Finance and Development, 48(1), 22–6 Schumpeter, J A (1994 [1954]) A History of Economic Analysis London: Routledge Searle, J R (1995) The Construction of Social Reality New York: Free Press Simmel, G (1978 [1907]) The Philosophy of Money London: Routledge Smithin, J (2009) Money, Enterprise and Income Distribution London: Routledge Streeck, W (2011) ‘The Crises of Democratic Capitalism: Markets Versus Voters’, New Left Review, 71(Sept./Oct.), 5–29 von Glahn, R (1996) Fountain of Fortune: Money and Monetary Policy in China, 1000–1700 Berkeley: University of California Press Wallerstein, I (2011) The Modern World System IV: Centrist Liberalism Triumphant, 1789–1914 Berkeley, CA: University of California Press Weber, M (1978) Economy and Society Berkeley: University of California Press Weber, M (1981 [1927]) General Economic History New Brunswick, NJ: Transactions Publishers Wray, R (2012) Modern Monetary Theory: A Primer on Macroeconomics for Sovereign Monetary Systems London: Palgrave Macmillan Zelizer, V (1994) The Social Meaning of Money New York: Basic Books Index acceptance of money, 56–60, 102, 113, 305, 313 accounting identities, 96–7, 314 agents (key actors), 275, 282–92 alliance state and banks (‘memorable’, and breaking of), 150–1, 153, 189–91, 273–4, 278–81, 290, 310–11, 315, 319 see also capitalism; credit money; money; state sovereignty alternatives, 116, 143–4 see also monetary surrogates; also Bartercard; Clearing Union; imaginary money; stamp scrip American Journal of Economics and Sociology, Arestis, Philip, 5, 303 Argentina, 101, 111–13 austerity, 191, 279 see also fiscal policy balance of payments, 142 see also Clearing Union bancor, see Clearing Union Bank of Canada, 184 Bank of England, 149–50, 152–7, 185–7, 274–5, 278–80, 292 Bank of Japan, 283 banking, 40–1, 42, 73, 140, 148–58, 167–71, 180–1, 183, 187–93, 201–4, 218–19, 228–9, 239, 279–80, 284, 310 in the UK, 148–58, 273, 317–18 in the USA, 154, 155–6 failures, see alliance state and banks; crises; financial centres; moral hazard; privileges; runs; ‘too big to fail’ see also credit money; money supply Banking School, 150, 249 Banque de France, 150, 317 Barclays Bank, 156, 313 barter, 26, 31, 49–50, 80, 85–6, 116, 300, 302 inefficiencies of, 51, 103–4, 112, 164 Bartercard, 143 Basel accords, 148, 155, 157–8 Bell, Stephanie, 114–15 Big Bang (UK 1986), 155–8, 290 bilateral trade clearing, 143 see also monetary surrogates bonds (and ‘bond vigilantes’), government, 96–7, 151–2, 154, 183, 315–16 corporate, 187 building societies, 152–3, 156 Bretton Woods, 41, 153, 220, 309, 315 broadcast order (e.g means of exchange), 107–8 see also money Burns, Tom 6, 319 Capitalism Divided, 278–81, 306 capitalism, theories of, ix–xii, 13, 16 n.3, 20, 79, 138, 141, 190, 281–2, 301, 311, 315 capitalist production and trade, 85, 250, 263, 309, 312 see also credit money cartels of banks, 152, 157 cellular order (e.g means of payment), 106–8, 115–16, 118 see also money central banks, 40–3, 81, 83, 85, 117–18, 138–40, 150–4, 174–6, 183, 185, 211, 301 accommodation of commercial bank money creation, 151, 153, 186 lender of last (or first) resort, 151–2, 174, 181, 191, 268 see also institutions monetary policy (and contradictions), 141, 179–93, 196–211, 291–2 318 see also framing; quantitative easing (QE) 323 324 Index money, 140, 168–76, 206, 309, 316, 319 political (not ‘technical’) nature of, 183–4, 189, 191–3, 304, 317–18 see also moral hazard see also alliance; independence; money; signals; social forces chartalism, 25–6, 32, 84, 88, 102, 106–7, 111, 113–15, 120 n.8, 165–6, 179, 250–1, 256–7, 316–17 Chick, Victoria, 5, 7, 16 n.9, 193, 317–18 City of London, 189, 278–81, 316 circuit approach to money, 163–4, 170–3 claims, 149, 157 clearing banks, 152 see also banking Clearing Union, 134–8, 142–3, 309, 315 see also Keynes collective representations of money (moral authority), 56, 59, 61–6, 66 n.2, 219, 300, 313 see also framing Collins, Randall, 12, 46, 276 commodity view of money, see labour theory of value; metallist; money, as exchange competition, 148, 152–5, 265 Competition and Credit Control (CCC: UK), 152–4, 157–8 confidence, see emotions consumers, 34–6, 39, 48 82, 95, 187, 254, 308 contract price, 36–7 corn–only ‘model’ 35–6 credit money, xi–xii, 3, 7–8, 14–15, 32, 36, 40, 47, 79, 85–6, 116, 134, 138–9, 144, 149–58, 170–1, 179–81, 185–89, 203, 217–34, 250, 282, 309, 317 pyramid (upside–down), 154, 190 see also capitalism; investment; money credit rating agencies, 156, 291 creditor, 84, 106, 109–11, 135–6, 137, 140, 142, 282, 310 see also debtor crises of money, 1, 72–5, 77, 108, 116–17, 119, 125, 127–8, 130, 140–1, 144–5, 155–6, 158, 185, 187, 190–3, 206–8, 216–39, 253, 260, 265–9, 300, 310 see also banking; central banks; speculative boom; debt deflation, run/s currency, 127, 140, 259–62, 314, 316 see also high powered money (HPM) danger (risk), 149, 151, 154, 182, 186, 188–92, 221–3, 264 debt deflation, 41, 111, 141, 185–6, 312 debtor, 106–7, 109, 112–14, 118, 131, 137–8, 153, 155–6, 188 deficits, 96–7, 176, 191 see also austerity; fiscal policy deposits, 149, 152–5, 172, 180, 189 see also liabilities depression, 12, 191 see also crises of money; emotions of money; unemployment democratic norms, 2, 11, 15, 16 n.6, 84–5, 97, 141, 191, 210, 273–5, 282–3, 285–7, 291–2, 314 derivatives, 262–5 see also securitisation DeVille, Philippe, 6, 319 Dillard, Dudley, 7, 79, 85 discount markets, 151 Dodd, Nigel, 6, 46, 320 Dow, Sheila, 5, 7, 200, 313, 317–18 Durkheim, Émile, 54, 66 n.2, 105, 312–13 economic hypotheses, 75–6 economic metaphors, 81–2 economic sociology, 10, 20, 25, 66 n 4, 276–7, 305 Efficient Market Hypothesis, 157, 187, 206–8, 303 Einaudi, Luigi, 129–32, 311 emotions of money, 4, 12, 52, 55, 61, 63–5, 144, 180–1, 184, 188–92, 205–6, 228–9, 237 omitted in mainstream views, 191, 205 entrepreneurial business, 27–8, 254 see also firms; SMEs Index 325 epistemology (and epistemic community), 21–3, 70–2, 82, 181–3, 192 see also framing equality–inequality poles, 285–6 equilibrium models (‘stability’), 24, 33, 49–50, 58, 76, 86, 179, 189–90, 192, 201–3, 237–8, 302 ethical decline (in banking), 156–8, 288, 318 European Central Bank (ECB), 42–3, 119, 142, 170, 173–6, 317 European Monetary Union (EMU), 85–6, 173–6, 179, 189 European Payments Union (1950s), 142 exchange rates, 153, 198 expansion and contraction, see crises; money supply; systemic crises expectations, 39–40, 60–3, 181–5, 187, 192, 205 see also central banks; emotions; signals Fantacci, Luca, 5, 14, 308, 311–12 Federal Reserve System of the USA (the Fed), 168, 197, 208, 221–3 Fforde, J.S (Senior BoE official), 153 fictitious capital, 250, 256–9, 320 see also derivatives financial centres, dominance of, 192 see also central banks; City of London; Wall Street financial markets, 141 financial regulation (and evasion; destruction of), see regulation; off–balance sheet entities financial ‘repression’, see regulation financial techniques, aka ‘innovations’, 155 financialisation, definition of, 248, 264 firms, 108–111, 203–5, 283–4, 290–1, 311 see also entrepreneurial business; SMEs fiscal policy, 191, 199–201, 315, 319 see also austerity; depression; mainstream economics; social forces Fisher, Irving, 127–9, 311 Forder, James, 183, 210 Forex traders, 13 framing of money, 80, 179, 182–4, 187–93, 200, 225–7, 231–2 franchise to banks by states, 150–1, 158, 191, 301, 309, 318 see also alliance; banking; state sovereignty funding for lending, 186 see also Bank of England; compared with quantitative easing (QE) Gesell, Silvio, 128, 133 Giddens, Anthony, 12 global warming, 206 gold standard, 62, 119, 125–6, 129, 131, 140, 143, 165, 259–62, 308 goldsmiths, 149 Goodhart, Charles, 4, 13, 16 n.9, 85, 193, 200, 208, 211, 302, 313 government securities, see bonds ‘great moderation’, 192 see also central banks; inflation; social forces; unemployment Gresham’s Law, 112–13 Grierson, Philip, 83 Gross Domestic Product (GDP), 34–5 group–think, 70–8, 302–3 Harcourt, Geoff, 7, 9, 206, 320 Hayes, Mark, 4, 304, 310, 317 hierarchy of money forms, 260–2, 267, 278–81 high powered money (HPM), 85, 91–2, 101, 140, 149, 167 Hirschman, Albert, 2, 10 hoarding, 128, 132–4, 136, 145 n.1, 164, 309, 310 see also money, store of value households, 187, 191, 199–200, 204 housing boom and bust, 72–4, 76, 89–90, 208 hyperinflation, 38, 52, 65–6, 101–2, 117, 313 ideas, power of, 10, 63, 314–15 imaginary money 129–131, 134, 253 individual approach to money, 3, 8, 32, 40, 48, 59, 84, 105, 178, 186, 319 see also neoclassical views 326 Index independence of central banks, 198, 209–10, 283, 321 inflation (and ‘targets’), 42, 83, 94–6, 102, 108–9, 117, 181, 185, 190, 196–9, 201–3, 209–10, 311 asset price, 208, 222, 228, 312 see also central banks; emotions; equilibrium information, see signals Ingham, Geoffrey, ix–xii, 1–2, 6, 11, 19–21, 28, 31–2, 37, 40, 41–4, 46, 77, 79–80, 85, 101, 138, 178–81, 196, 219, 248, 250, 253, 268, 274, 278 Innes, Mitchell, 137, 140, 309 institutions, 25–8, 31, 48, 52, 54–5, 58, 76, 79, 182, 190, 273 struggles for control of, 286, 301, 304 see also social forces interdisciplinary approaches, 1–3, 6, 8–15, 19, 31, 44, 46–7, 71, 76, 178, 191–3, 224, 274, 301–6, 312, 314 interest (rates), 32, 35–6, 37–43, 140, 154, 173, 181, 185–7, 198, 201–03, 310 investment banks, or merchant banks, 155 in goods and services, 140–1, 143, 181–2, 185–7, 189, 204, 239, 279–82, 310 Jessop, Bob, 6, 303, 307–8, 321 Keynes, John Maynard, x–xi, 32–4, 37–41, 43–4, 52, 67 n.8, 89, 132–3, 151, 166, 202, 205–6, 289–90, 302, 308–10 Keynesian economics, 11, 20–1, 31 King, John 16 n.3, 24 Knapp, Georg Friedrich, 102 Kyrtsis, Alexandros, 16 n.8, 287 labour (theory of value), 181, 200, 252, 276, 289–90, 308, 319 see also social forces, balance of Lakoff, George, 81–3 legal tender, 140, 166–7 see also central bank money; currency Lekachman, Robert, lending in step, 151 see also banking leverage of banks, 156 liabilities, 84, 148, 150–1, 154, 157 licenses of banks, see banking; money, supply of; privileges light touch regulation (UK), see regulation liquidity, 37–41, 139–40, 148–9, 155, 157, 180, 191, 309, 312 ‘management’ of, 151, 154–6 preference see emotions; Keynes; uncertainty see also currency; money, value of loanable funds, 35–6 local exchange trading schemes (LETS), see currency alternatives London Interbank Offered Rate (LIBOR), manipulation of, 156, 184, 291–2 mainstream approaches, see barter; metallist; money, ignored by; neoclassical views; New Keynesians markets, 24, 26–7, 52, 64, 80–1, 84, 153, 180, 188, 207–8, 233–4 segmentation in, 187, 189 market–making, 155 Martinelli, Alberto, 6, 16 n.5, 319 Marx, Karl, ix, 16 n.3, 124–5, 249 Marxian analysis of money, 251–62, 265–9, 279–80, 306, 308 Mauss, Marcel, 54–6, 312 Max Planck Institute, Cologne, 10 mediaeval trade fairs, 143 see also imaginary money memes for market or money, 80–98, 313–14 see also framing; markets Menger, Carl, 51, 58, 103, 112, 120 n.2, 304–5 metallist approach to money, 164–6, 180 Methodenstreit, 31, 43, 47, 303–4 Minsky, Hyman, 38, 188, mobility, social status, 273, 282, 287–8, 292–3 Index 327 Modern Money Theory (MMT), 83, 85, 313–14, 316 monetarist approach, 162, 186, 192, 318 monetary macroeconomics, 20–2, 110 monetary policy, see central banks monetary surrogates, 101, 108–19, 311 monetisation of government debt, 174–5, 317, 321 money, functions of, 25–7, 55, 57, 104, 126, 130–1, 134, 138–9, 162–6, 180, 189, 191, 252–3, 300, 307, 311 ignored or ‘neutral’ in orthodoxy, 49–51, 67 n.6, 76, 125, 189–92, 196, 302 see also crises of money; social forces means of exchange, 31, 44, 47–53, 59, 64, 80, 102–4, 112, 117–18, 124, 179, 307–09, 311–12 means of payment, 56, 102, 104–8, 111–12, 115, 148, 311 money/unit of account, 32, 34, 36, 38, 52, 83–5, 115, 126, 144, 164–6, 176, 300, 308–09, 313 see also collective representations near or substitute, 149 see also banking sacred power of, 54–6, 59–60, 65, 67 n.13 supply of (or, volume of), 41, 130, 150, 153, 181, 187–92, 202–04, 223, 228 see also banking value of (or, as store of value), 52, 55, 57–8, 61, 124, 126–7, 132–3, 163, 190, 308, 311–12, 320 (compared with utility; or with labour) see also banking; credit money; currency; hierarchy of; public purposes of; social forces; state sovereignty moral dilemmas, 117 moral hazard, 118–19, 191, 291–2 see also banking; central banks mortgage loans, 88–9, 153, 155–6, 187, 229–30, 279 Moss, Larry, 16 mutual ownership, 153–4, 156 National Board for Prices and Incomes (UK), 152 neoclassical economics, 3, 7, 11, 24–5, 31, 43, 48, 49–51, 56, 60, 70, 76, 181, 310, 314 neutrality of money, see central banks; Clearing Union; credit money; crises; money; neoclassical economics; New Keynesians, 182, 185, 187–8 ‘new consensus’ macroeconomics (NCM), 192, 196–211, 312 absence of financial sector, 203, 211 see also central banks Nixon, US President Richard, 153 Northern Rock (UK bank), 190 see also run/s; banking off–balance sheet entities, 155 ontology, 20, 24, 44, 52, 178–9, 304 open market activity, 183, 187 see also central banks originate and distribute loan models, 156, 229–30 Orléan, André, 4, 8, 301–2, 305, 312–13 outcomes and experience, 184–8 see also social forces Overlapping Generations Model (of money), 57–60, 67 n.12, 200 Parsons, Talcott, 8, 9, 10, 224 partnership financial firms, 155 payroll tax, 89–90 payments system, 158, 191, 310 philosophy of money and finance, 19–28 physics envy, 3, 77 Pixley, Jocelyn, 6, 12, 14, 46, 184, 306, 316 Polanyi, Karl, xi, 13, 110, 119, 276–7, 283–4, 311 Post–Keynesian theory, 186–7, 189, 192 poverty, 188, 191 Preda, Alex, 182 political economy, 21, 23–4 postmodern sociology, 7, 12, 277–8 predatory lending, 155–6 see also banking; mortgages 328 Index prices (and rigidities), 108, 110–111, 311 privileges or bank licenses, 150, 309–10, 318 see also banking, franchise profits (and types of), 26–7, 52, 110, 151–2, 154–5, 249 property rights, 26 proprietary trading, 155 public purposes of money, see framing; social forces; social infrastructure of money quantitative easing (QE), 183, 185–7, 190, 206, 267, 317 see also central banks; credit money quantity view of money, see metallism Radcliffe Report (UK, 1949), 149, 185 rational choice (or expectations), 103–6, 179, 199 regional geographic areas (aka emerging markets), 189, compared with, see financial centres; central banks regulation of financial sector (or lack of), 75, 148, 150, 152–3, 155–6, 191, 206–7, 220–3, 235–6, 315–16 Regulation Q (USA), 156 Rentenmark, 65 reserve accounts, 140, 149, 151–2, 154, 190–2, 203, 208 retail or commercial banks: see banking; privileges rhetoric, see framing risk, see danger run on bank/s, 149–50, 190 Russian Federation, 101, 108–11, 114–15, 120 n.16, 311 Samuelson, Paul, 57–60 saving, 35–6, 57, 89, 153–4, 190, 282 Sawyer, Malcolm, 5, 316–17 Schelling, Thomas, Schumpeter, Joseph, x, 20, 49, 279, 300, 307, 315 securitisation of assets (e.g loans), 148, 154–6, 207, 223 seigniorage, 145 n.5, 180, 267, 310 shadow banking, see off–balance sheet entities shareholders, 27, 150, 282, 290 signals, 182–4, 187 see also ontology; social forces; central banks Simiand, Franỗois, 47, 5962, 66 n 5, 312 Simmel, Georg, 22, 52–3, 62–4, 107, 116, 300, 307 Smithin, John, 4, 24, 28, 301–2, 305, 307 small and medium–sized enterprises (SMEs), 187–9 see also firms social infrastructure of money 80, 84–5, 97–8, 137, 144–5, 191–3, 220, 241, 279, 314 social forces, balance of, 41–3, 48, 54–5, 61, 65, 140–1, 150, 153, 156, 178–80, 182–3, 188–93, 219, 253–4, 265, 273–5, 281, 283–4, 308–11, 313–15 social relation of money, see banking; capitalism; central banks; credit money; Ingham, Geoffrey; money; social forces; state sovereignty social system model, 224–5, 240 Soros, George, 70, 222 speculative boom, 149, 155, 207–9, 228–32 see also wealth stamp scrip, 127–32 state sovereignty, 25–6, 84–5, 87, 93–4, 101, 106, 113–14, 120 n.16, 141, 143, 150, 166–76, 180, 190–1, 207, 250–1, 280–1, 314, 316–17 see also alliance; democratic norms; chartalism; franchise by states; money, unit of account; tax state social services (e.g US Social Security, ‘welfare’), 89–93, 191, 200, 283, 309, 313 see also alliance; austerity; democratic norms; fiscal policy stock broking firms, 155 Streeck, Wolfgang, 15, 292, 314 Index 329 subprime loans, 155–6 Swedberg, Richard, 9, 288 systemic capitalist crisis defined, 217, 226 (Figure 12.1) see also crises tax, 56, 81–2, 85, 87, 114, 120 n.16, 166, 172, 275 purposes of, 88–96, 314 see also currency; liabilities; state sovereignty; wergild time orientations (short–term cf long term), 191–2 ‘too big to fail’ banks, 191, 221, 235 thrift, paradox of, 89 treasuries, 153, 168, 279 trespassing, 2, 10 triple dilemma of mobile capital, 259–60, 284 trust, 60, 65–6, 191 see also emotions; expectations Turner, Lord Adair, 13, 321 Turner, Stephen, 10 uncertainty, 7–8, 10, 29 n.5, 38, 60–1, 132, 182, 184, 186, 188, 191–2, 199, 203–5, 312 see also liquidity; money unemployment, 33, 41, 42, 128, 132–4, 141, 144, 185–8, 205–6, 289–90, 309 United States, 89–94, 150–1, 220–3, 238, 315–16 utility (use value), 48–9, 53–4, 313 utopian social movement of finance, 273, 284–7, 289–93 Veblen, Thorstein, 12, 83 wage unit, 32–4, 43–4 Wall Street, 189, 290–1, 316 Walras, Leon, 49–50, 309 war finance, 149, 281 wealth, 150, 191, 208–9, 238 Weber, Max, x, 20, 117, 249, 305, 315 on value freedom, 24, 314 on money, 56, 107, 274, 284, 285, 287–8, 312 wergild or debt, 56, 83–4 WIR (Swiss cooperative bank), 144 Woodruff, David, 4, 308, 311 world money, see hierarchy of money forms Wray, Randall, 4, 221, 307, 313–16 .. .Financial Crises and the Nature of Capitalist Money Financial Crises and the Nature of Capitalist Money Mutual Developments from the Work of Geoffrey Ingham Edited by Jocelyn Pixley Honorary... affections of the business men That is the seat of the difficulty The stagnation of industry and the hardship suffered by the workmen and other classes are of the nature of symptoms and secondary... debate about the nature of money, and to this by building on the work of a sociologist The volume is a work of mutual trespassing that takes up the question posed by Geoffrey Ingham, the premier