Dear Economists – please throw new light on money

Dear Economists

It has come to my attention that you’ve taken a battering in the last few years. Apart from a handful of you, the massive failure to predict the financial crisis, and the peddling of tried-and-failed theories of how to get out of said crisis, seems to have diminished your profession’s standing. Some politicians are even listening to sociologists, who say you have have nothing useful to offer on systems for achieving greater well-being, rather than mere economic growth. Perhaps rather unkindly, some now wonder whether your assumptions about self-interest have been a severe case of projection.

I don’t like to see anyone in such a bind. Especially when I sense there is major opportunity for a turn around in your fortunes. Although I’m one of your poor-cousins (i.e. a sociologist), for the past couple of years I’ve been reading some economics, mostly on monetary systems, and mostly by those I think you call “heterodox economists.” As an active reader, I jotted down some questions that I wanted answering. As I read on, it seemed that these questions were not yet answered! I looked everywhere (well, at least not just on wikipedia) and could not find data on them. So if you work on the following questions, not only could your answers become seminal, secure yourself tenure, you might even gain a spot in the next ‘Inside Job’ movie! I hope you read on and come back with peer-reviewed articles in the coming years.

1) How much money is there is in the world, and how much debt? If the amount of debt is much higher than actual money, what mathematical models can you offer for how this will be resolved, and with what implications for overall utility?

2) Which governments do not issue bonds to private banks, or to (semi-)privately owned central banks, but issue their own money (or issue bonds to government-owned central banks that do not then sell those bonds on to private banks – the same as issuing their own money)?

3) Which governments used to issue their own money, but no longer do, and when did these changes take place?

4) How do the non-GDP aspects of the Human Development Index correlate with the periods and places of governments issuing their own money? (Just take out the “income” component from the HDI and if you have got the information on monetary policy and central bank ownership, then bingo).

I realise some of you may have a more neo-institutional approach (dare I say sociological?!), and are interested in how economics is discussed in the media, or used in public policy. So for you, I also have a couple of research questions to suggest:

5) Of the news coverage since 2008, what % of the coverage on “financial crisis” also mentions “monetary reform”? I ask, as when searching on Google, only 3% of websites mentioning “financial crisis” also mention “monetary reform”. If you find similar statistics from trawling databases of news coverage, could you create follow up questions to reveal why there is this lack of analysis?

6) How are countries receiving advice, assistance and training on monetary issues, and what interests and evidence are involved in that advice?

7) How many economists does it take to change a light bulb?

“As many as need the light.”

Ok, so I knew the answer to that one. But could the answer instead be “as many as know the light is needed?”

I’m asking these questions as they relate to my own interests in sustainable enterprise, exchange and development, and I’m not about to retrain in your wonderful arts (sorry, “science”). If you want to know why more non-economists would like you to research these issues, you can view my TEDx talk on the “money myth.” For some output from economists already engaged in related matters, I recommend “Where does Money Come from” by Professor Werner and colleagues. Other, fairly elementary, resources Ive listed on my blog.

So, dear economists, please throw new light on money. I’m waiting for illumination. Posting links to peer-reviewed work in the comments section below would be great.

Professor Jem Bendell

Adjunct Professor at Griffith Business School
Distinguished Visiting Professor at IE Business School

3 thoughts on “Dear Economists – please throw new light on money”

  1. Hey Jem,

    Curious post. I see you were mentioned in the FIL newsletter as a WEF dude…congrats.

    As someone who has studied money and is a political economist with heavy sociological, anthropological and geographical elements in my research I wanted to explore your first two questions.

    1) The question of money to debt. I have to say this is a non-sensical question in my belief. Money is essentially built of sociological foundations that include debt. Read the work of Geoffery Ingham (a sociologist) or David Graeber (an anthropologist) and you will realise that money is an abstract and sociological notion. Money is not stuff but money of account (Keynes said as much) and therefore our obsession with linking currency (coins) with money is a false relationship and money has existed as a “virtual” thing many times before.

    2) There is a limited history of governments issuing their own bonds. I believe there are a few examples however within a capitalist framework money issuance is typically done in the way we experience it now – where banks, states and society operate in a tense three way relationship. The value of money is always (within a capitalist framework) defined in part by its scarcity. And, the controlled scarcity is a class project (Geoffery Ingham argues this very well) and therefore those that control its scarcity also control its value and the resulting social relations.

    Hope this gets closer to answering your questions…

  2. Thx.

    1) My question on debt is a cheeky one, as about 97% of all current money is issued by private banks as debt, and with interest, therefore there is more debt in the world than money. So the question is quite sensible – how much debt is there in total? Its more than the amount of money. I dont assume that money in this case is somehow physical. Its that the debt obligations are higher than the purchasing power created. I want to see peer reviewed studies on how we can resolve this conundrum.

    2) There are various examples in history of governments not having to issue debt to private banks in order to raise funds. UK during WWI, USA during the civil war. But I hear from some sources that other countries do this today (Iran? Singapore?). I want to see the full set of data on this, for all countries, from today, back through history, and correlated with non-income HDI. This will tell us how central bank ownership and government issuance of currency affects social development outcomes. Ive not found this data, and indeed, to even find info on who owns central banks, and how the government bond markets work, was an infuriating exercise.

    So my questions are quite specific, and remain. Im seeking data and empirical studies. Problem is most economists Ive met dont even understand the first thing about money creation.

  3. Dear Jem
    A very interesting and amusing post. I’m not an economist so can’t help with the questions, some of which (as you admit in your answer above) are, I suspect, rhetorical anyway. As for question 3, I think the Island of Guernsey in the mid 19 century might be an example, but you probably already know that.
    Thanks to your recommendation, I have been studying some of Richard Werner’s ideas. His explanation of the problem seems convincing but I’m less sure about the solutions. The examples of societies issuing their own debt free money seem to be mostly historical or on a small scale. As an intermediary measure, I’m more attracted by the idea of at least splitting up the banks so that there’s more competition. Werner makes a good argument for Germany’s local credit unions and banks here:
    However, even there I have a doubt. I live in Spain and the country’s numerous savings banks, often part owned by the local government, have run into terrible problems due in part to corruption among local politicians. These local banks are now being forced to merge, so Spain is ironically moving away from the German model and more to the UK model, which Werner criticises.
    Anyway, thanks for the inspiring ideas.
    All the best
    James Dyson

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