July 1, 2007

Money as Debt

Filed under: Economics — duncan @ 6:53 pm

“… the sign that is money, the sign that it carries and the pledge that it is, are one and the same thing – just as a man’s signature is also what commits his responsibility.” (Mauss.)

Derridean themes: the signature and the sign; counterfeit money. I’ve got a twenty pound note here: Adam Smith’s dashing profile; the hardworking pin manufacturers; an invisible hand. It bears the same legend as all English banknotes: “I promise to pay the bearer on demand the sum of…” (“…Twenty Pounds”). It’s signed by Andrew Bailey, the Bank of England’s chief cashier.

Vertiginous reflexivity: this twenty pound note is a promise to pay me twenty pounds. The money is a promise to supply itself. A bank note is a promissory note. The note itself is not money. This fiction is the foundation of our economy. Banks make money by lending out money. They lend money by promising to supply money. The promises they supply are themselves money.

Easy to forget how recently we’ve got used to this. Fifty years ago economists fought for the gold standard. Now we are prepared to accept our currencies as castles in the air. This acceptance is part a radical shift in perspective.

If money is already debt, then money cannot be opposed to debt.  Let’s take this as a starting point. There is nothing outside of debt: debt is money.

[August 3rd 2007:  Well, okay.  So unconvertible paper money was already pervasive during the Napoleonic Wars.  And “Fifty years ago” may not be… absolutely precise.  But still.  In 1925 Keynes was more or less a voice in the wilderness when he opposed the return to the gold standard.  Which surely shows (doesn’t it?) a strong reluctance in the contemporary economic mainstream to accept money’s self-sustaining reflexivity.  This all requires a somewhat more detailed analysis – which I’ll provide just as soon as I know what I’m talking about.]

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