by Giorgio Ruffolo (original title: A che serve la moneta?, in “Il capitalismo ha i secoli contati “, © Einaudi 2008, ISBN 8806188275 - translated by Katherine Margaret Clifton)
What is money for?
God and gold often make their appearance in literature. In Faust by Gounod Mephistopheles sings: «God of gold and lord of the world». According to a legend dating from the time of the Sumerians and the Babylonians, gold is dug from the bowels of the Earth on behalf of the gods that inhabit a remote planet and who serve themselves of human slaves to extract gold from the mines. Slaves who never see the sun, living dead. But a mutinous few gave gold to men, just as Prometheus gave them fire, and for this they were exterminated. Men have extracted from gold its dust, gifted with magic powers. In the Old Testament, which draws on all the legends of that time, it is known as manna.
But the gods of the mysterious planet have maintained a relationship of command with some of the miners and they make use of them for mysterious operations intended to sustain their dominion over men.
In effect, gold is not a solitary god. Other metals have from time to time challenged its supremacy: silver above all; as have many other objects (both material and immaterial) to which the role of money has been attributed. However, gold is not only money. And money is not only gold. So what is it?
From the king of Lydia to date, money is the meeting point between market and State
The question of what exactly money is has been discussed for centuries and not always in a very clear manner. Gilles de Muisis, abbot of Tournai in the fourteenth century, considered it «a murky thing». «They», he said of coins, «grow and diminish in value and you never know what to do. When you expect to gain you find it is the contrary». Even today many, amongst whom the unfortunate debtors of the sub prime, are of the same opinion. In the sixth century B.C., the king of Lydia, Croesus, coined money, giving it its classic shape. Yet before and after him, money has assumed a variety of shapes: shells, dog’s teeth, leather and fabrics, salt, cocoa, tea, tobacco, axes and knives. And even, as in Indochina, bulky gongs and discs of metal (perhaps to discourage misers).
One thing is certain; money has always been very important in the history of mankind. It can be considered the central element of the economy. Central, because it constitutes the meeting point of two great subjects of the economy: the market and the State. Money is inconceivable without one or the other.
We don’t know why the Greeks and Romans gave Hera, or Juno if you wish, the nickname of ‘moneres’. «Solitary»? «Admonisher»? The Romans dedicated a temple on the Campidoglio to her. Zeus-Jupiter on the other hand, to punish her for some misdemeanour, hung her between the sky and the earth, tied to a cable (of gold, naturally) from which the devious goddess managed to free herself. Between the sky and the earth: a metaphor springs to mind, between State and Market, which certainly never occurred to Zeus.
Yet that would be a fine metaphor for money. Often hung from a gold cable (think of the famous gold standard) but always tempted to free itself; born of the combined efforts of the Market and the State. Time and again one prevails over the other in governing it.
And then banks came…
In recent history, for example, the role of the States in governing the world’s currencies was decisive in the years following the Bretton Woods agreement, immediately after the war. Then in the seventies and eighties, it was the market, through the banks, that assumed a growing role in governing currencies, above all thanks to the liberalisation of the movement of capital. Governing, to some extent, because, belying the predictions of the great economist Milton Friedman, who had announced a period of tranquil self-regulation of the money and stock markets, during the nineteen-eighties and nineties they became unstable and reckless as never before, a situation that has continued into the beginning of our century.
In recent times financial institutions (banks and all the other financial «intermediaries» sprang up like mushrooms. And thanks to the proliferation of their offers (such as the now famous derivates) and the volume of the transactions they create (about ten times the world gross product), money travels over the surface of the Earth at incredible speeds, never mind Juno!
During the last and most recent upset, that of the so-called sub prime (mortgages granted too lightly to an excessively gullible clientele) the repercussions of the enormous power exercised by the banks in managing currency: not gold coins, which have been out of circulation for some time, nor even the gongs and discs of metal; or the paper money – invented by the Chinese and reinvented by the Scottish in the eighteenth century – but telephonic and electronic money.
The mechanisms through which the banks have vastly extended the area of credit (Polyani would have said that they have marketized space and time) are technically fascinating, especially if explained impeccably by economists as eminent as Luigi Spaventa: in particular, with regard to the spread of risks and its twofold consequence of effectively protecting the individual but at the same time disseminating the risk throughout the system: rather like the gold dust, the legendary manna, which the Old Testament tells us was so useful the Jewish people, while at the same time exterminating their enemies (in our case it is a question of the banks and their clients).
Keynes, the Europe and the serendipity of money
The fact is that this most recent crisis has raised more than one doubt about the possibility of losing control of the money system; and the paradox due to which the Central Banks, created to guarantee the stability of the system, are forced to intervene with massive injections of cash to avoid the consequences of its instability. It has also re-presented the problem of the relationship between «gold» and politics, with which we opened this prattle, that we will continue in an even more lunatic manner, recalling a heretical proposal that should fundamentally resolve the problem of excessive recklessness of the banks… by eliminating the banks. The proposal derives from a provocation by a German business man in the nineteen-thirties, Silvio Gesell - quoted with interest by Keynes - who proposes, in order to eliminate the unproductive waste of financial accumulation, applying a negative interest to credits, with the payment of an annual duty that gradually reduced the value. The proposal was relaunched, ten years ago by the so-called Bromsgrove Group, or group of Money Reformers led by James Gibb Stuart, in a more complex form that involved the entire money and tax policy. In a few words, rather than gathering revenue with taxes or borrowing, the government should create money to directly finance public investments or individual consumption: money distributed in Keynesian style and saddled with negative interest in the Gesell manner, which would then be immediately spent in consumption and investments exorcising an inflationistic excess in demand thanks to an immediate increase in the offer and a depressive defect of demand thanks to the absence of saving. Before laughing at the idea, just ponder it for a moment, as the eccentric James suggests in an imaginary discussion in the manner of Swift, whose works are not recommended to bankers with high blood pressure.
However, it will not be necessary to make an attempt on their arteries – which are somewhat fatigued at present – there are less bizarre ways of re-establishing some form of control over finance that threatens to lose its way. For example, the reconstruction of some sort of international order of the Bretton Woods type, perhaps taking up and updating the ideas that, at the time, Keynes was forced to abandon. Not to adopt a single world currency, as he suggested – the bancor – but to jointly organise a balanced system regulated by stable relationships between the world currencies: today the dollar and the euro, tomorrow, who knows?
Certainly, in Europe it would take a European government capable of dealing with a strong currency, strengthened by a European macroeconomic policy a weak economy (the opposite of what America does). The euro was born of serendipity. The mythical king of Serendippo was famous because seeking one thing, he found another much more important. The euro was to be a strong franc, nothing more; instead, it has become an international currency, with headquarters in Frankfurt. The euro can be much more than a currency, the first step in the construction of a European power with a strong vocation for rebalancing the global disorder. We could then avoid, as happens at present, an important part of our riches, both real and potential, disappearing to a remote planet where the unfathomable gods of finance preside over our destinies.
