I saw this guy standing in outside the Old Lady of Threadneedle street – his placard reads ‘banks create money out of nothing’ – all I wanted to do was add a hyphen to his statement of the obvious and tell him that he was preaching to the wrong audience. I think most bankers well know that banks don’t actually have any money, that is after all what banking “is”; borrowing from depositors and convincing both borrower and lender that they both own the same money.
So why the existential hyphen creating “no-thing” out of nothing? Well for me, money only starts to make sense if you see it not as nothing – but as ‘no-thing’ – something which needs to be created, its value based on contingent cultural and social contexts and relations not any sense of intrinsic or essential ‘money-ness’.
This is broadly my take on Ingham’s main point in his book "The nature of money" – that the orthodoxy of economic theory has treated money as some sort of natural element, a universal thing not a particular state of affairs – its source value therefore being based on some concept of money-ness which is a priori to any analysis of economics. As such they run into paradoxes when they try to include money in their models of markets, price and value and so they tend to treat it as something distinct and separate.
This was always the challenge of researching money – it is something that is largely invisible in everyday life and highly resistant to any theoretical perspective which assumes that ‘money’ comes from some essence of money-ness. Instead, I have found it far more productive, particularly from the point of view of innovating money concepts (of course including zopa and any projects since then) to see money as a ‘no-thing’. A no-thing is meaningless (it doesn’t even exist as ‘nothing’) until is instantiated through its usage and in the modern consumer era, its mass production and distribution, in the form of the modern products and services of the financial services ‘industry’.
Just like Coca-cola guarding its ‘secret recipe’ (the secret being that people want to believe that drinking Coke makes your life more meaningful and your thirst more quenched than just drinking its majority ingredient – namely water) banks want to believe in and convince us of the myth of money’s secret recipe – the essential ‘money-ness’ of money – from which is value and our desire for it are all derived.
However, this point of view holds back financial innovation (from banks) as much as it holds our own money in its thrall. Rather than seeing savings, loans, mortgages etc as being created FROM money, you begin to see how those products create money (and specific meanings and values of money) in their own right – transforming their potential usage and value to consumers.
I can no more point to the money in a bank than I can point at a thought in my ‘mind’ – the exercise is literally point-less (although I always felt that some of the more traditional building societies should deliberately have a pile of money in a safe which their older customers could come and visit on a daily basis – the same as we visit our money (or at least I do) every morning when I log onto the internet).
Instead "Money" is created out of the objects, relations, reciprocations, gifts, commodities and uses we have and create for it – the upshot being that capitalists do not have the monopoly on the creation of entrepreneurial capital, nor should banks (or governments for that matter) have the monopoly on the creation of ‘credit money’. If something good comes out of all this upheaval it will hopefully be that the secret recipe theory of money will be dead and buried and we can start to create a world of money that fits with the social and cultural ideals we have as individuals and as a society (global/national/loca l) as a whole.
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