Demystifying Money: Fictions of Capital and Credit

Abstract

The 2007 global financial crisis fueled critical scholarship on the geographies of finance, money, credit and debt. This research led to calls for clarifying and demystifying modern money and credit to better understand the proliferation of debt, austerity, and inequality within the contemporary nexus of capitalist class relations, and the broader imperative of managing global economic growth and crises under financialization. This article contributes to demystifying modern money by outlining two prominent historical-theoretical narratives of money: commodity-money and credit-money. These monetary narratives in turn reflect the dialectical imperatives of capitalist social relations, especially capital/labor conflicts, but also the congealing relations between finance capital and the state. Critical analysis demonstrates that both these contradictory monetary narratives are manifest within the institutional design and policies of the U.S. monetary system. This monetary framework is institutionalized through a monetary geography of power that operates through the hegemonic networks of the U.S. Federal Reserve System. This is demonstrated by incorporating the credit-money account into a Marxian framework, which is employed at the national scale to analyze the functional contradictions, history and institutional structure of the U.S. monetary system. The competing money narratives, explicit within the functional design of the Fed System itself, reflect the capitalist state's attempt to reconcile competing social agendas between capital and labor. The mystified monetary fictions underlying monetary authority obscure the political power of commodity-money and the bond/financial markets and class interests they serve, as well as mask the reality and progressive fiscal possibilities of the U.S. Federal Reserve credit-money system.