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Cash Crisis: Between Market Fundamentals and Political Judgment

I argue that contemporary monetary policy is characterized by a tension between two implicit social theoretic conceptions of money. On the one hand, “exchange-commodity” theories conceptualize money as fundamentally a means of exchange whose primary function is to represent exchange ratios between real commodities on the market. This view cast monetary policy as a politically benign matter of stabilizing the money supply in pursuit of stable and efficient exchange in the real economy. On the other hand, “chartalist” theories conceptualize money as a token of debt settlement. Here, money tokenizes the political judgment of the state and plays both a discretionary and constitutive, rather than merely stabilizing role in the market. Neither conception is entirely convincing, yet central banks’ response to financial crises tend to be justified inconsistently in terms familiar to both conceptions. The result is a politically unstable policy environment in which policies affirm imperatives of following market “fundamentals”, but which also seem to illustrate significant political discretion on the part of central banks. I sketch a potential political crisis that could result from this tension, before turning to a potential solution in global monetary institutions.

► This event is in-person. Join in person at the Centre for Ethics (Larkin Building room 200).

Stefan Macleod

Political Science
University of Toronto

Wed, Jan 29, 2025
12:00 PM - 02:00 PM
Centre for Ethics, University of Toronto
200 Larkin