James Kwak — Mysteries of Money

James Kwak on Christine Desan's Making Money. Useful summary of debt and chartal (state) money, both of which are legally based although the use of debt grew out of custom. Chartal money is the liability (debt) of the sovereign that the sovereign accepts in payment of liabilities (debt) owed to the sovereign. Christine Desan is a law professor.

To paraphrase Desan, at the same time that the English political system invented the modern monetary system, liberal theorists like Locke obscured it behind a simplistic fetishization of gold. The fable that money was simply transmutated gold went hand in hand with the fable that the economy was simply a neutral market populated by households and firms seeking material gain. This primacy of the economic over the political—the idea that government policy should simply set the conditions for the operation of private interests—is, of course, one of the central pillars of the capitalist ethos. Among other things, it justified the practice of allowing private banks to make profits by selling liquidity to individuals (that’s what happens when you deposit money at a low or zero interest rate)—a privilege that once belonged to sovereign governments.
Making Money is the most fascinating book about anything, let alone money, I’ve read in a while—thought-provoking like David Graeber’s Debt, but firmly grounded in the minutiae of English history. In these times when everyone from gold bugs (like Ted Cruz, let’s not forget) to Bitcoin enthusiasts is calling for a redefinition of money, it reminds us what a complicated and politically determined thing money always has been.

Liberal economics (capitalism) is based on a hoax spun from just-so stories.

Baseline Scenario
Mysteries of Money

James Kwak