Policy Research in Macroeconomics

The future of money – for El Pais

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This note was published by Spain’s El Pais on 4 May, 2020

Central banks have adopted extraordinary, historically unprecedented measures to prevent this pandemic collapsing the globalised financial system. Trillions of dollars, euros and yen have been created ‘out of thin air’. As a result there is a fear of inflation – the erosion of the value of money. I have another anxiety: that the heavily indebted global economy is headed for a future of deflation. An era in which over indebted companies will collapse and default; assets like oil will become ‘distressed’; prices, profits and wages will fall, but the value of money will rise, increasing the costs, and the burden of debt. Deflation results in a transfer of wealth from the rest of the community to the rentier class. From the active, to the inactive – to quote J M Keynes.

That will come about because the world’s monetary systems ultimately serve the interests of the rentier class: those who make capital gains or ‘rent’ from effortless lending, speculation and gambling. In this sense, the globalised financial system, including the Euro, bears a strong resemblance to the gold standard of the 19th century, which served the interests of the rentiers of that time: the City of London’s bankers.

If we want our future monetary system to serve the interests of the whole of society and the ecosystem – not just the 1% – then we must take back control, assert democratic public authority over the system, and make finance, the servant, not the master of national and regional economies.


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