Beyond Twin Deficits: Emotions of the Future in the Organizations of Money

American Journal of Economics and Sociology, The, Oct, 1999 by J. F. Pixley

Moreover, Simmel shows its further mediation, for when the value of exchange 'has no direct value for the other party [i.e. unlike barter], but is merely a claim upon other definite values', the realization of this claim depends on the whole economic community or the government 'as its representative'. Money transactions move a relation between two exchanging parties to a relationship that each party has 'with the economic community that accepts the money'. 'This is the core of truth in the theory that money is only a claim upon society' (Simmel 1978 p. 177). The social significance of Keynes' remark that the liquidity preference is not an option for the whole society is rendered analytically rigorous.

If money is a credit relation in which trust and confidence are 'paramount', a process of concentration and centralization is readily understood. [12] The development of central banks was no mere aberration from a more 'perfect' self-regulating market, as Post Keynesian John Smithin points out (1994 p. 80) and there is little evidence that such a money 'market' could provide viable money (Ingham 1998 p. 13). 'In an uncertain environment promises to pay are inevitably of different quality, and the process of acquiring a good reputation in this respect will have a self-reinforcing quality' according to Smithin. A hierarchy of less- to more-reputable issuers of promises to pay, whether of central banks which did evolve, or even in so-called deregulated environments, seems unavoidable and inevitably entails power relations (Smithin 1994 p. 80). Analysis would also be sharpened by use of the sociological concept of impersonal trust organizations (either private or public). In contrast to neo-classical views of th e neutrality of money, Simmel's case is compelling: 'the function of exchange, as a direct interaction between individuals, becomes crystallized in the form of money as an independent structure' (1978 p. 175). Thus, money is 'a reified social function' where 'the sociological representative of the relation between objects and money is the relationship between economically active individuals and the central power which issues and guarantees the currency' (Simmel, 1978 p. 177).

Yet as Ingham argues, neither a central bank, the 'state' nor any other financial organization can simply establish or 'produce at will' the invariant standard and 'substantive validity' of money. Taking a cue from Weber, Ingham maintains that money's 'purchasing power can only be established through the struggle between producers and possessors of both money and goods'. But such a struggle, he argues, between relatively autonomous social processes of goods production and money production, is always contradictory, for in achieving monetary stability, instability emerges elsewhere. The control of inflation is a 'continuous rebalancing of power relations'. As he puts it, 'there is a constant tension and trade-off between the expansion of value through the creation of credit (and debt), and the breakdown of monetary stability through its over-expansion in relation to production' (Ingham 1998 pp, 13-14).