Moral Economies of Money as applied to today’s economy

I just completed reading Jacob Feinig’s masterful “Moral Economies of Money.” I am going to pin this article to the top because my comments below are my initial thoughts and I expect that as time passes I will add to the article and hope the responses are an ongoing conversation particularly as we are about to embark on a Republican House of Representatives newest crusade to destroy our social safety net precisely because the false “money” MEMES are embedded in the American psyche.

I start with the brief introduction from Stanford University Press:

“For much of American history, large numbers of people claimed that money was a public good and asserted the right to shape money creation practices. If popular knowledge about money creation was once widely shared, how and why did it disappear?

In this astute new work, Jakob Feinig shows how the relation between money users and money-issuing governments changed from British colonial North America to today’s United States, discussing how popular movements reshaped money-creating institutions, and how their opponents attempted to silence them. He also reveals how monetary and political history unfolds in the tension between “moral economies of money” and “monetary silencing.” Offering an introduction to money creation practices since the colonial era, the book enables readers to understand why most people are disconnected from knowledge about money creation today.”

To be sure, while Feinig does not directly discuss Modern Monetary Theory, his analysis of the use and creation o f money ultimately is a strong line of underlying support for MMT.

From Colonial days through to the 1930s, most people understood money creation to be a civic issue- managed by people via their governing institutions. State govts in colonial times literally created money by printing “token” and distributing them. Tokens could be actual notes, authorized notes from a bank, or certificates denominating some value. The state would then disburse these tokens and then reclaim them as payment for taxation. The tokens were not necessarily linked to any commodity (gold or silver).

Throughout the book, the desire for ‘democratic money’ was tied to the belief that nobody should be making money from money (as in interest) because money was a public good and infrastructure- not a private wealth mechanism.

The first deviation from money as a public good was the Jacksonian era which focused on the Gold Standard. Banks were beginning to be more prevalent and creating their own bank notes but Jacksonians were leery of banks and corporations and wanted some intrinsic item which could be “objective” and not able to be manipulated by banks- so they went with gold. IMO this makes the Jackonian era the only true “libertarian” era of American history. Unfortunately their cure addressed the wrong disease. Rather than rein in bankers, they adopted commodity which locked the economy into having ONLY the amount of money in circulation that existed in gold- tight money created recessions and depressions, caused bankruptcies and foreclosures- hardly the result that a “people oriented” Jackson administration should have desired.

The Civil War was finance in the north by Greenbacks (money issued by the government) not gold. People accepted it because the govt accepted it back. It was the default currency. But elected officials decided to phase this out in the late1800s and revert to a gold-based money.

Feinig doesn’t get into the bimetallism debate too deeply as it is out of the lane for his book, but my own research explains that — while misguided insofar as ‘metalism’or commodity it was,, the progressive/populist movement for “free silver” — in which silver would be recognized along with gold as standard for money- would have expanded the money supply greatly- the economy was not expanding because the banker class on Wall St wanted tight money and high interest rates which they could maintain ONLY by keeping to the (limited suppy of) gold.

Franklin Delano Roosevelt did a slight of hand which stays with us now, by effectively splitting money management and fiscal management into two lanes. Prior to that, most citizens understood money and fiscal (budget) to be two sides of the same coin- FDR separated them, though for his own self while in office he effectively managed both, but once we got past his administration- money supply and creation devolved solely to the Federal Reserve.

Roosevelt was also the originator of the “federal budget is like the household checkbook” canard and the concept that the govt is a “money user” It isn’t- govt IS a money creator. This is the MOST destructive meme to circulate with regards to budgets and money supply/creation.

So now, though Congress does not directly create money, it does so indirectly via the Federal Reserve. The governments fiscal policies, budget and appropriations call for a certain dollar amount needed for the various programs identified. The Federal Reserve then creates the money to circulate for these appropriations. In this sense, the US government does NOT have a debt or a deficit. Remember, government is a currency ISSUER, not a currency user. We won’t run out of gold. The so-called debt is literally ledger column numbers shifted from one agency to another.

The government’s ‘debt’ to the Federal Reserve is literally an accounting feature, not actual debt. The government’s debts to citizens (for social security as an example) are paid in government dollars which the government created. The government then accepts these dollars back as payment for our debts to it, i.e. taxes.

Edit: Inflation. In the modern age, inflation has become a major boogeyman to be held in check no matter what. Memes of Weimar Germany are circulated and Americans harken back to the 1970s burst of inflation which almost hit 10% in 1981. Everytime we discuss monetary policy and the implementation of expanded money supply the ghosts of inflation past are trotted out. But Feinig’s book aptly illustrates that everyday people EXPECTED to see some inflation. It wasn’t the horror that is presented these days. It was a normal part of the cycle of monetary creation, use and disposal.

Why is inflation such a boogeyman? Yes, higher prices do costs working people in terms of the cost of the goods and services. But they are also paying debts in depreciated currency, making payments is easier. Who does not like inflation, really? Wall St. Bankers. Creditors. They don’t want depreciated currency because they believe they have lost out on accrued income.

Further, really crushing inflation causes even MORE pain to working people as the graph below will illustrate in job losses and unemployment! But then, for the banker capitalist class, that is the point- desperate unemployed workers are easier to exploit and pay less than workers in a solid economy.

More later as my thoughts develop with regards to other issues on which to comment…..