The Battle for the Control of Money

Abstract

Money acquires value because it is “legal tender” – that is, by sovereign authority. Nonetheless, the power to create money has been highly contested, and has frequently been hijacked by private parties. The battle between the state and haute finance to control the power of money creation has shaped financial history over the centuries. One aspect of this battle has been the institutional structures which govern the creation of money. A second, equally important, battle, has been over the ideological structures which define what money is, and how it functions in the economy. This paper provides a brief introduction to this battle on both fronts. Currently the private sector has won the battle on both fronts, since the dominant ideologies regarding money and its functions favor private control and private creation of money. Also, institutional structure prevent the sovereign creation of money, and delegate credit creation to private banks. This situation strongly favors the top 1% and is extremely harmful to the bottom 90%. Reversing this requires changing both ideological and institutional structures. This paper provides the framework for the ideological battle, while the Sigurjonsson (2015) provides an alternative institutional structure for Sovereign money.

Keywords: Credit Creation, Sovereign Money, Banking

JEL Classification: E42