Looking forward and backward - at banks and the State

Over a decade ago, I wanted to know why society had stumbled so badly, in a crisis about money that had engulfed so much of the world. Through the activist group Positive Money, I discovered that banks had behaved badly. Rather than being symbiotic to society they’d behaved more like parasites. That was the beginning of a journey to explore and learn in the new-to-me field of economics. I read of J M Keynes’s dream about the “euthanasia of the rentier”, found out what that meant, learnt about how banks had acted parasitically, grabbing income they did little to deserve, and learnt about how that behaviour had been concealed, becoming hard to see.

Then I learnt of a second problem, much connected with but not at all the same as the first. That recent governments, all around the world, had chosen to wear straight-jackets. Rather than solve social problems, using resources that were readily available, they had consciously chosen to be unable to act. Faced with social and environmental crises, governments were deliberately deciding not to govern and not to act. It seemed like someone who’s caught a dangerous and possibly fatal disease. They have pills in their pockets that can treat the disease with substantial success, and could even stand a chance of curing it. They refuse to swallow the pills, out of a mistaken, firmly-held conviction that harm will inevitably be the result.

Governments, it seems, have deeply-mistaken convictions about money. Politicians and civil servants, who administer and regulate the money system, appear to not understand how it works. Learning about money and economics has led, via a long and far from straight road, to that staggering, shattering, so-hard-to-believe and yet entirely inescapable conclusion. Worse, this second problem isn’t separate from the first but more like the cause of it.

It isn’t only ideas that have gone astray, but language too. Then language then becomes a bane not a boon, concealing rather than revealing. In this field, some words don’t mean what they seem to say. Other words confuse or mislead, adding preconceptions, assumptions or side issues that deflect or distort any chance of clear understanding. Jargon abounds. Sometimes that jargon is appropriate and correct, while at other times it’s twisted or incorrect. How to tell the two apart?

The whole situation is complicated and the entire money system needs dramatic reforms in my view. But let’s just take one small step, involving just a few words in common use.

To specify your position on a map of course needs two things, two numbers. If you say one number, you speak truly with accuracy. Yet the utterance is incomplete. I think it was Nigel Lawson, a former UK Chancellor of the Exchequer giving testimony under oath to a Public Inquiry, who admitted that he had previously been “economical with the actualité”. He had not said anything incorrect, but he didn’t describe the complete situation. He’d managed to mislead while telling the truth.

Some language about money is simple, yet its linguistic deficit tends be hard to spot. For example -

1A) State commodity-backed money is debt,

1B) Bank-issued money is debt.

A and B look and sound like the same situation, and both are true statements of course.

Yet surely the words credit and debt ought to be like co-ordinates on a map - two things must be specified to be meaningful. Debt and credit involve a second thing, about perspective or viewpoint. Between A and B above, the perspective changed yet that change went unsaid. I was being ‘economical with my actualité’.

Let’s leave the perspective unaltered, and re-state the situation -

2A) State commodity-backed money is credit,

2B) Bank-issued money is debt.

Has the look-and-feel of the situation between A and B changed, using unaltered perspective?

I’ve come to think that debt and credit might well be words best avoided, if at all possible, when talking about the nature of money and the impact of different ways of its being in the world.

I now prefer to think and say that, for example -

3A) State commodity-backed money is interest-free,

3B) State non-commodity fiat money is interest-free,

3C) Bank-issued money is interest-bearing.

Other terms are surely possible too, such as saying -

State fiat money is owned money, while bank-issued money is rented.

That might even be shortened to ’State money you own, bank money you rent’.

I’d say the difference, and its impact on your and everybody else’s finances, is easier to see that way.

And subtlety and nuance can surely help too, in speaking of money’s nature. I’ve heard Richard Murphy say quite without qualification “Money is debt - the government borrows it from the people”. I wish he’d said something equally short but rather more nuanced and subtle, such as “Money doesn’t have to be debt”. That implies that much money is, or has been, debt while not closing the door on other arrangements that don’t necessarily involve rental payments.

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