Arnon Grunberg

Demand

Vacuum

On money and mysticism – Rebecca L. Spang in TLS:

‘Money, it would seem, isn’t what you think it is. Perhaps, for example, you believe that money is a thing and therefore gains value by being rare, that it is subject to the law of supply and demand. Or perhaps you think that money used to be a thing, which was then backed by other things, and now is just printed at will by the Federal Reserve, the Bank of England, the European Central Bank and co. And maybe you think money ought to go back to being a thing; that the “gold standard” is called that for a reason. Perhaps you think money in the future will be wholly digital. And maybe you think that if families have to balance their budgets and save for retirement then governments ought to do so too.’

(…)

‘Stephanie Kelton will have none of it. In her compelling study The Deficit Myth: How to build a better economy (John Murray; £20) she argues that concern with national deficits is rooted not in sense but in sensibility. While it may feel right to say a government is simply a large household and therefore must balance expenses against revenues, Kelton and other proponents of Modern Monetary Theory (MMT) argue that the reverse is true. Unlike individuals, firms, or even local authorities, a government like that of the US or UK issues the money it spends. A country that controls its currency (something that is not the case for the member countries of the eurozone, for example) can never become bankrupt in its own money. By this logic, as long as the US government, for example, spends US dollars on the American people then public deficits equal non-governmental surplus – Uncle Sam may be in the red but Americans are in the black. And since Uncle Sam is both a metaphor and immortal, he doesn’t need to save for retirement. His deficits don’t bother him at all. Democratic governments are not private households, and describing them as such is simply ideological.’

(…)

‘Budgets are literally accounts, they are representations; and, much as no one would mistake Boswell’s An Account of Corsica for the Mediterranean island itself, so we should not confuse budgets with reality.’

(…)

‘Throughout, Goldstein repeatedly concludes that money is fundamentally a relation of trust and what we trust changes with time. And at those moments when the structure of trust changes, nothing seems real, everything feels fake (as revealed by myriad past bank runs). Trust works best, that is, when you don’t know it’s at work. As I wrote in my own book Stuff and Money in the Time of the French Revolution (2015), “Trust is habit congealed through repetition into faith”.’

(…)

‘Consider this passage: “We must decide what our priorities are … we should think about how to achieve them … [we] would probably agree that a system that provides financial security for retired people is a good thing”. In five short lines, the author moves from posing a major challenge (determining shared priorities) to inviting thought and then assuming a conclusion. Left largely unaddressed throughout the book is the question of how to proceed when “we” cannot agree on shared priorities, when the words more often spoken are “us” and “them”.’

(…)

‘The dominant voices in economics have long largely ignored contextual specifics (claiming, as Milton Friedman famously did, that inflation always and everywhere has monetary causes), but it is increasingly obvious today that history really does matter. And so does politics.
Where, for instance, does the “we” of MMT end? In a world of global capital flows and multinational corporations, the US dollar is far more than a domestic currency. Kelton grants that US monetary policy affects billions of non-Americans, but rather than giving her pause, this recognition prompts a plug for something like soft imperialism and the re-establishment of the US as a global police officer. The US, she suggests, “could use its currency hegemon status … to mobilize resources for a global Green New Deal … and promote global economic tranquility”. And this is just the sort of US-centric thinking that Subacchi’s The Cost of Free Money so helpfully and effectively challenges. An international economist with particular expertise on China, Subacchi no more endorses self-regulating markets and balanced budgets than does Kelton or Hockett – but she also makes it clear that no government acts in a vacuum.
Policymakers in a politically polarized and increasingly unequal US – hegemon or not – are in no position to think through the global effects of their monetary policy. Seen from Brazil, quantitative easing was not a quasi-Keynesian response to recession but a veritable currency war. Subacchi explains the mechanisms clearly: in response to the 2008 Global Financial Crisis, the Federal Reserve dropped interest rates nearly to zero. In search of higher returns, major investors (pension funds, insurance companies, private asset-management companies) went elsewhere – and the effect was that corporate bond issues in the developing world grew fifty-fold (from $13 billion in 2000 to $630 billion in 2013). As money poured into Brazil, the Brazilian currency increased in value compared to the dollar. Brazilian exports (ores, minerals, meat) hence became more expensive, demand dropped, production slowed, and jobs were lost.’

(…)

‘By the estimate of the former governor of the Bank of England Mervyn King, 95 per cent of money today is privately created. The money is denominated in the same terms (dollars, pounds, euros) as the public currency, but national governments today don’t limit how much of it is created. So while MMT’s starting insight is legally, conceptually valid, it is insufficient for an era increasingly dominated by finance capitalism. And the banks that are “too big to fail” are barely the visible part of the iceberg. Over half the new mortgages in the US today originate with shadow banks. Quicken Loans, developed by the same company that created TurboTax (the widely used, for-profit online tax filing system), is by far the largest. It may perform a crucial function often associated with banks (though also with pawnshops, loansharks and wealthy relatives), but it is not a bank: it is not regulated as such and does not take deposits. Nor is shadow banking unique to liberal capitalism: researchers at the Reserve Bank of Australia conclude that “non-bank financial institutions” (NBFIs) account for 40 per cent of China’s GDP. Most MMT theorists – including Kelton – seem simply to ignore the realities of modern finance capitalism, while others tend airily to point to “regulation” as the way around it.’

(…)

‘Technology is neither neutral nor a panacea.
Friedline’s exhaustingly researched book – many a phrase or clause has its own endnote (some individual sentences have six) and the bibliography runs to more than 100 pages – can be tough going. But this is less for the “hard truths” it reveals than for the repetitive way it tells them. Banking on a Revolution is, sadly, all call and no response. Or, rather, the response for which it calls (“revolution”) is too ill-defined to be intellectually satisfying or politically actionable.’

(…)

‘After having long been treated as technical matters best left to dismal experts, money and finance are now hotter topics than they have been in generations. As medium and messenger, money is central to the urgent challenges we face today: systemic racism, fractured polities, grotesque and growing inequality, climate change. Understanding its workings is one step – but only a first step – towards confronting them.’

Read the article here.

So what’s money? Trust that became flesh and trust works best when nobody knows it’s at work.

We don’t know how money exactly works, it can make us poorer, just look at the example of investors buying Brazilian bonds, but it is ‘central’ to the fight people have to fight in the future. It can give a sense of security, and maybe more than just a sense.

Rightly Rebecca L. Spangs rightly asks: who is we?

Money after all is also the instrument with which we fight our enemies.

Money is the medium, of imperialism and idealism, of war and religion, of love and sex. No, human beings (give or take a few exceptions) are not for sale, but with the right incentives we are willing to compromise.

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