Felix Martin -- Money: the unauthorized biography
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The central point in "Money: the unauthorized biography" is the
concept of money that Martin wants us to understand and all the
ramifications (especially for economic thought) and consequences of
that concept.  You can view the historical parts of this book as
Martin's attempt to make that concept clear.

So, let's consider three alternative concepts of money:

1. Money is transferable credit.

2. Money is a commodity, for example gold or silver.  Currency and
   coins are just stand-ins for that commodity.  Martin claims that
   in this view, it's the commodity that matters.  Money,
   independent of the commodity does not exist at all.

3. Money is anything we can use to make payments.  Under this view
   all of the following would be money: coins (whether or not they
   contain precious metal), currency (whether or not it was
   redeemable for precious metal such as gold or silver), credit
   instruments (e.g. a transferable I.O.U.), and more.

View 2 (money as a commodity) is Martin's "bete noir".  It's the
concept that has shaped the thinking and theories that in Martin's
eyes have caused so much harm.  And, it's *his* view of money (money
as credit), that Martin thinks can do so much good, especially in
the sense that money and having enough of it in circulation is what
enables economic activity and creates prosperity.

And, since credit can be created (that's what banks and quasi-banks
do, after all), under Martin's view of money as transferable credit,
we can create the money/credit that is needed to propel the economic
activity that creates the prosperity that we all want.

So, there are (at least) two broad issues that you may want to try
to work your way through, if you choose to read this book:

1. What is wrong with what Martin calls the conventional view of
   money, i.e. the view of money as a commodity?  How does it cloud
   and confuse our thinking?  And, specifically, what disastrous
   consequences does it cause and how does it prevent solutions to
   those problems?

2. Credit is good, but too much credit is bad: it causes booms and
   busts.  Martin spends a significant amount of time in "Money: the
   unauthorized biography" trying to find solutions, cures, and
   preventatives for this.  Does he succeed?  And, how?  After all,
   even *if* we agree that the view of money as a commodity is bad,
   we might still conclude that the view of money as transferable
   credit is worse.  You would not have too much work to do in order
   to convince me that the view of money as transferable credit is a
   scheme created and promoted by banksters so that they can create
   the money (and financial transactions) that make them rich, and
   then when they have created too much money and the asset bubble
   bursts (the real estate bubble, the art market bubble, the stock
   market bubble, whatever the scheme of the day is), the government
   and the national bank can bail them out so that they will get
   richer still.  You can probably tell that I've been reading Matt
   Taibbi (for example, "The Divide: American Injustice in the Age
   of the Wealth Gap" and many of his articles in Rolling Stone
   magazine).

One anecdote is worth mentioning both because it is an important
part of the history of the development of money and finance and
because it emphasizes abstract nature of money and the importance of
*trust* for its use -- At one point in medieval history, there was a
regular fair which was used by merchant bankers to resolve and clear
credits and debits.  An important instrument that required clearing
were bills of exchange.  A merchant could pay for a shipment in a
foreign country or far off city by using a bill of exchange from a
local merchant bank to make the payment through an affiliated bank in
that far away place.  Martin tells that story much better than I
could, and he makes it entertaining and educational.  It's a story
about the invention of money, and if you are interested in
innovation, as I am, it's a fascinating one.  Effectively, these
merchant banking houses were enabling private credit/debt to
circulate as a form of money.  I suspect that they were creating a
new form of money.

One question -- Are we at the end of history with respect to money.
You can study finances as the history of the invention, at different
times and in different places, of new and different kinds of money,
the invention of new kinds of credit and new kinds of debt
instruments each of which has its own affordances, each of which
enables us to engage in business and commerce and finance in yet
another new way.  Will that history go on?  Will we invent yet more
kinds of money, credit, and debt?  And, of course, will we have yet
more schemes for getting rich off each new, future kind of money.
Perhaps we are at the end of history, i.e. the end of the history of
money.  However, each news article about Bitcoin, whether it ends up
in the ditch or is part of our future, indicates that someone is
still trying.  And, Bitcoin is not the only new money: see this for
information on yet more alternative histories --
https://en.wikipedia.org/wiki/Alternative_currency

08/12/2014

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