The Metaphysics of Money – Guest post by Paul Tyson

cashRecently I was at a coffee shop, and to test a metaphysical hunch I asked a few of my fellow caffeinated confreres this question: “What is money?” They all gave answers along the following lines. Money is an arbitrary symbol of exchange value that we just make up in order to facilitate trade and investment. Money itself isn’t any thing but it is a collectively believed in fiction which operates as a very useful means of exchange.  

This sort of answer confirmed my hunch nicely: us Modern people have no idea how (or even if) money is connected to real wealth. It was Medieval economics that opened my eyes to this fascinating and possibly very important insight.

If you were to ask a medieval person the question “What is money?” they would not tell you that it is simply a made up means of marketplace exchange. They would not say anything like that for a number of interesting reasons. The first of these reasons is that they would assume a “what is… ?” question is a question about something’s essential nature rather than a question about its conventional function or instrumental effect. This assumption reflects a huge difference between Modern and Medieval reality outlooks to start with. To the Medievals, everything has an essential meaning, and accurately discerning true meaning determines right use. To us Moderns, it is the other way around: everything has a use – effective manipulative power, based on a scientific knowledge of how things work, is the criteria of real world truth – and each person can make up whatever meanings and values they like. Indeed, to us, nothing has an essential meaning. To us, use defines value, but value itself has no essential meaning.

Because they were interested in essential meanings the Medievals did not believe in a notion so relativistic and contingent as ‘classical’ supply and demand determined “market value”. Instead, they believed in “true value” where the true (essential) value of anything sold in the market needed to be reasonably reflected in the price if it was to be sold fairly. Here a fair price was seen as a function of properly appreciated real value (knowing what something was really worth). Fair price was a function of the essential value of the traded thing itself and the real value of the skills, labour and pious stewardship of the people who produced and distributed that good. Here also the essential value of the buyer (such as a God-imaged, though poor serf, needing food) must determine the price of, say, bread if that price is to reflect true value. So you would not get an instrumental answer to a “what is?” question of any sort from a Medieval. Further, in relation to the question “what is money?” it would not occur to a Medieval that real wealth, and any means by which wealth is exchanged, would be an arbitrary fiction that had nothing to do with moral and spiritual truths.

Secondly, unlike today, the Medieval person would not think of money as an abstract numerical cypher, but as a tangible physical thing: a certain amount of a particular metal. (The Medievals, you must remember, lived before the birth of the modern nation state, and thus before central banking which guaranteed the wide spread stability of money as paper based notes of credit. ‘Money’ as we know it today first became widely viable in 1694 when the Bank of England was formed in order to fund a war for King William III.) To the Medievals money was no abstract numerical fiction, money was tangibly metallic. Further, metals were analogues of, even ontologically participants in, cosmic and spiritual realities.

To the Medievals, money was always made out of gold and silver – the metals of the Sun and Moon – and other metals. Gold, for example, as the Sun’s metal participates symbolically (and ontologically) in the Sun. The Sun is the physical source of all life, and thus – so Ficino maintained – an analogy of God Himself, the source and giver of life to creation. The Sun is a tangible icon that points us to the intangible God who is the eternal source and final destiny of all that is. Harking back to Plato’s analogy of the sun, the via antiqua metaphysics of the Middle Ages as well as Renaissance Platonism, saw God is the Goodness beyond Being, out of whom all beings come, the glorious source of the real qualitative value of all that is. Gold as incorruptible, and as the lustrous colour of the Sun, speaks to us of the eternal beauty and splendour of God and iconographically points us to the divine source of all true meaning and value. The wealth and splendour of gold is thus a real, though twice analogically reflected, wealth, and the spiritual reality that gold ‘sacramentally’ points to is divine providence, the source and essence of all wealth which is given to creation by God so that creation might flourish.

Reflecting on the theological meaning of money to a Medieval person, we can see that wealth was understood as a real feature of created reality, and that money was physically (though ‘sacramentally’) bonded to wealth. Thus money was not understood in its essence as an artificial, man-made construct. Unlike today, the Medievals could not envision money as an intangible construct to be used for whatever instrumental pursuit of transaction manipulating power the fertile imaginations of high finance simply dream up. No, to the Medievals money was an active function of real wealth, though wealth in no way reduced to human money.

The reason why I have taken you into the exotic realm of Medieval economics is that it shows us how different metaphysical approaches to money can be, and it makes us aware that our Modern understanding of the nature and meaning of money is not a fixed and certain reality. We can now hopefully see that our astonishingly instrumental and abstract assumed metaphysics of money is one option amongst many possible ways of understanding the nature and meaning of money. Modern money is one way of thinking and acting concerning the relations between work, commerce and finance; it is one way of approaching the nature of finance and its (non) relation to wealth, morality, reality and power. Perhaps, even, the abstract and instrumental nature of our assumed metaphysics of money is deeply implicated in the horrifying pathologies of high finance?

Bearing the above question in mind, let us return to gold.

The catastrophic global financial disaster of the Great Depression was in the vivid memories of those who gathered at Bretton Woods in 1944 to plan and set up the architecture for the post-war global economy. They were determined that the final popping of the massive speculative bubbles of the roaring 20s would not be repeated. How, they pondered, could they fix the value of money to reality so that speculative finance did not become the dog that wagged the tail of the real economy? The answer they came back to was gold. Currencies would be tied in value together, and the American dollar would undergird the new global economy by being tied to gold. $US35 per ounce of gold held money to some real wealth anchor and the fascinating thing is that whilst the gold standard lasted, so did the post-war boom. After the collapse of the gold standard in 1971, speculative finance took off again and the real economy started to take a back seat to high finance again. Come 2008 and the spectre of 1929 can again be seen riding its ghostly horse through the economies of Europe. High finance is now inherently unstable and the dynamic of financial implosion could spread to every corner of the globe at any time.

Perhaps we should think again about the metaphysics of money and the need to tie money in some way to real wealth rather than to let it float disconnectedly from the actual production and provision of human needs. For when that happens monetary bubbles are generated without any contact with real wealth, and money without any real wealth cannot fail – sooner or later – to unravel in bubble bursts that are profoundly destructive of real wealth.

I am not suggesting a return to the gold standard. What I am suggesting is that we must come to terms with the obvious fact that our collective metaphysical assumptions about the nature of money are now failing us badly. For today, money has no contact with real wealth, for it has no contact with reality. As Satyajit Das succinctly puts is “money and the games played [by high finance] are intangible, unreal, and increasingly virtual.” This entirely artificial conception of money has deep pathological tendencies which are profoundly destructive of real wealth.

High finance has a frankly criminal tendency such that it facilitates the transfer of real wealth from the public purse – the coffers of states in which wealth is gathered from the people for the common good of the people – into private hands. Yet our banks have this criminal ability because they are tied to our governments (as, since 1694, the big banking players have always been). Astonishingly, after the Federal Reserve Bank of the US poured trillions of tax payer guaranteed money into the private banking sector in 2008, no-one went to jail for extortion even though this is undoubtedly the largest single act of financial extortion in human history. Because global finance is dominated by institutions that are “too big to fail” this means we tax payers must keep them eating our very flesh, and the flesh of our children, in order that the economy – which apparently operates for our welfare (ha!?) – does not implode. Feed us or else we take you all down! This is extortion pure and simple.

Why do we let our governments and our high finance sectors act in so obviously criminal ways? Perhaps it is because we unquestioningly assume that money is an amoral, abstract, artificial and purely instrumental entity that is just made up. For if money is just a number that is ‘produced’ and manipulated by reserve banks and financial specialists, then we naturally assume a bizarre sort of ‘realism’ where entirely artificial finances are seen as the legitimate repositories of right order and real power. Assuming this sort of financial and political ‘realism’, it seems natural to us that our governments have the authority and legitimacy of an economic priest-caste which acts in consort with our magical banking gurus to keep the world as we know it chugging along in proper cosmic harmony

If we are to change this situation, we need to change the way we think about money, wealth and power. This is where the fundamental matters are that will determine our future.

We are not, of course, going to banish extortion or immoral instrumentalism just by having better metaphysics. Criminals, extortionist and abusers of violent power were as common and powerful in the Middle Ages as they are today. Yet if we do not appreciate the relationship between the prevailing order of wealth and power and the metaphysical assumptions which we all share when we engage in the use of money and the practise of politics, then the vital collective sources of our norms and of how power is sustained will be invisible to us. The main game is, indeed, a struggle for our minds. Plato saw this with characteristic insight. As long as we believe that illusions are reality, we are controlled by those who manipulate the collective illusions that structure the operational norms of the world of finance and power as we currently know it.

How do we get money tied to the realities of real human life so that it becomes a fair function of the actual production and distribution of real wealth? How do we re-introduce the idea that finance should be tied in some concrete way to the real world in which actual producing and consuming people live? How can we get finance to serve human (that is political) ends rather than politics facilitating financial ends for high flyers in investment banking? These are the vital questions for us today in the post-2008 world.

Dr Paul Tyson

Honorary Associate Professor


University of Nottingham

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  • Interesting post.

    I gave some consideration to a Metaphysics of Value maybe 10 years ago, basing my thinking and analysis on Pirsig’s Metaphysics of Quality.

    Value, like Quality, is an aspect of Reality, and as J A Wheeler put it, Reality is defined by the questions you put to it.

    In my analysis, Value is definable only in relative terms, by reference to a standard unit of measure for Value aka a numeraire or unit of account. As E C Riegel put it, Value is the ‘Relativity of Desire’ and Money is the ‘Mathematics of Value’ – although I prefer to think of Money as Dynamic Value which exists only in the instant o exchange.

    Such a standard unit of measure is a constant, in the same way that a metre is a standard unit of measure for length, and a kilogramme for weight. But of course there is no scarcity of units of measure and in the same way that you can never run out of metres or kilogrammes, you can never run out of units of account either.

    But you CAN run out of units of currency.

    Now what the Medievals – and you – refer to as ‘money’ I prefer to refer to as a unit of currency or generally acceptable means of exchange. And the point about this Medieval currency/money is that the Medievals only required currency in exchange from someone they didn’t trust enough to extend credit or time to pay, typically evidenced by the ‘stock’ portion of a split tally stick.

    Almost the entire economics profession ignores these credit instruments – which are not to be confused with either ‘equity’ (absolute ownership) or debt (interest bearing loan) instruments – although they pre-date both of these conflicting elements of modern finance capital.

    The footprints of the ‘stock’ credit instrument remain in the language and not only in the word ‘stock’ – the undated credit instrument which bifurcated into the two types of Common Stock (equity – shares in a joint stock company) and Debt (interest-bearing loan-stock eg gilt-edged stock/’gilts’).

    The fact is that UK sovereigns became accustomed to giving a loan ‘stock’ tally or bill to tax-payers in return for pre-payment of taxes at a discount.

    The phrase ‘tax return’ refers to the PHYSICAL return of the stock tally or bill to the Exchequer for matching & cancellation against the counter-part. While ‘rate of return’ was LITERALLY the rate over time at which the initial discount on issuance could be realised. So if a tax-payer paid £8 for £10 of stock, his return on the discount of £2 was 25% (£2/£8) and the RATE of return was the rate over time at which he could achieve this, which depended upon how much tax he paid. If £10 tax pa he made a return of 25% pa; if £5 tax pa he made 12.5%pa and if £2 pa he made 5% pa rate of return.

    Note the absence of compound interest, because what was taking place was an exchange of the value over time (money’s worth) of services (the King’s) against the value over time provided by the tax-payer.

    But I digress. You concluded by asking:

    “How do we get money tied to the realities of real human life so that it becomes a fair function of the actual production and distribution of real wealth? How do we re-introduce the idea that finance should be tied in some concrete way to the real world in which actual producing and consuming people live? How can we get finance to serve human (that is political) ends rather than politics facilitating financial ends for high flyers in investment banking? ”

    In my view the answer is simple: firstly, we need a new networked generation of associative & consensual protocols within which risk and reward may be shared equitably. Nothing new about these – they’ve existed for centuries, but survive only in the forms of Islamic finance which no-one but the most devout Muslim would dream of using (the rest preferring institutionalised hypocrisy)

    Secondly, and which changes the game,is the re-emergence (it is happening as a response to the failure of conventional finance) of the credit instrument – undated pre-pay credit – but this time based directly upon:

    (a) Use over time (utility) of land/location and energy ie asset-based or Peer to Asset credit; and
    (b) Capacity over time of people, individually & collectively to provide goods and services ie ‘People-based’ or Peer to Peer credit -which is very different from Peer to Peer debt in respect of existing (bank manufactured and deficit-based) credit objects.

    Phew. That turned into a long post.

  • Very nice juxtaposition of the modern with the medieval viewpoint. Actually, the modern view that money is a social fiction, a man-made artificial invention originates with David Hume as Marx has shown and analysed and criticised profoundly. The author of the piece shows a certain ’embarrassment’ in regard to the modern view in that he is skeptical about money’s dissociation from real wealth while, at the same time, he does not interrogate the illusory character of such dominant belief. He is misled by the idea of money’s abstractness and its appearance as a mere numerical value index. The Marxian notion of ‘real abstraction’ provides the ‘third’ connecting link that grounds money to real value (abstract labour time) and renders money’s function as the ‘universal equivalent’ of commodity value. From a critical political economic standpoint this real abstract value-money connection is exemplified by the phenomenon of inflation. If paper money reflected a mere assignable ‘value’ why not then print money profusely, pay off all outstanding debts, distribute money to whoever wants it and have everybody ‘happy’? But then the actually existing total production of commodities would have had to be exchanged with a far greater quantity of money and result at inflationary prices. The real question to raise is whence comes the profit that accrues to speculative and finance capital. ,

    • “But then the actually existing total production of commodities would have had to be exchanged with a far greater quantity of money and result at inflationary prices. ”

      Why must the production of commodities/services be fixed ?This is never the case and it’s a totally unscientific assumption that sadly makes its way in economic discussions far too often.

      Economies have been performing far below their maximum capacity utilization since the 70’s.Inflationary pressures from excess demand can arise in situations close or above maximum capacity.Obviously this is a special case and not the rule.

    • Dear Crossover you missed the sense of ‘total’. At any given moment the total production of commodities and commodified services is what it is, i.e. a certain overall magnitude regardless of the degree of underutilised productive capacity. If a greater quantity of money is to be exchanged with the sum total of any given total production (and assuming the turnover of money to be constant) then more money is buying the same quantity of products/services and this necessarily results into increased prices. You pay more to get the same or you pay the same to get less at the level of the whole economy.If you have only ten chocolate bars and five euros, each chocolate bar costs half a euro. If you throw in another five euros bill, you do not get any more chocolate bars because there are not any more to be had. But the price of each now costs one euro, the commodity price has doubled or what is the same thing seen from the other pole, the relative value of money has been halved.

    • The basic assumption still remains. You imply that the quantity of money increases while output is fixed. Sure your scenario is correct in theory but how relevant is it in the actual world? In order for anything like this to actually happen, not only you need vast sums of money injected at once(1), but it also has to be distributed among people with high marginal propensity to consume(2) and will spend this money the moment they receive it(3). I already made 3 assumptions that are required for this inflationary scenario to materialize. Why such an extreme if not impossible case to argue against something that any sane monetary authority should do: generate demand by means of fiscal transfers (money printing!) so as to promote full capacity utilization/ output gap reduction ?
      Point is, fiat money does have totally assignable nominal value and unrealistic scenarios do not prove the opposite.

    • It seems that we have arrived at an impasse. The question initially posed by P. Tyson is whether there is real value reflected by money or is it merely illusory as (capitalist) modernity seems to believe and if so how it could be connected to real production? I responded to this question. You have shifted ground, you have crossed over to another problematic, this being the issue whether fiat money can help boost underutilised capacity, demand etc.without generating inflation. The way you conceive fiat money is in its function as credit. Fiat money as credit resembles Plato’s pharmakon, it may be either a boon or a poison. To print money and give it to economic actors (which ones in particular?) does not mean that it is going to be invested productively. Claus Offe has shown conclusively that credit-financed investment passes through captalists’ decision-making processes geared to expected profit returns. Otherwise, it is siphoned off elsewhere. Since you appeal to the ‘real world’, we have the recent case of the US gvt giving more than one trillion fiat dollars to ‘systemic’ banks. How much of it has been invested productively, generated jobs, increased consumer demand etc. rather than being ‘invested’ in the stock markets generating a bubble of wealth effects (another form of inflation, inflated stock prices) to the detriment of the ‘real economy’?
      If money is ‘valueless’ (since it does not reflect any real value according to your view and that of the great majority of the commentators here) but it can still have beneficial effects on society in the form of fiat money then why not to print unlimited quantities of money to be distributed periodically (since you do not like the theoretical scenario of one-off) to everyone and turn society into an earthly consumerist ‘paradise’? Since you appeal to the ‘real world’ (and you tacitly suppose the premise of an unmediated access to ‘reality’ apart from theory and science), perhaps, the record of historical experience suffices to convince you that printing of money leads to rampant inflation and to a consequent devaluation of money’s nominal value to nil. Two such paradigmatic historical experiences have been the German interwar society of the early 1920s (where exorbitant inflation ‘ate away’ the savings of the middle classes and demoralised them drastically thus contributing to the rise of Nazism and led into its eventual capture of power and the known after-effects of its rule) and Greek society during the WW II German occupation.
      Circulation money in its function as a means of exchange of ‘exchange values’ ( and money performs many functions both economic and social, f.ex. the function of ‘conspicuous consumption’ and conferral of prestige as in the case of the super-rich ‘flaunting their money’) translates commodity values among each other by posturing as the ‘general equivalent’ and suturing the commodity world into a total matrix. It establishes commensurability among incommensurable use-values, as one commentator mentioned referring to Aristotle. Money encapsulates in its very own essence the systemic logic of the labour-capital relationship. This implies that regulatory money policy regimes cannot ‘really’ control financial crises as endemic features of capital’s reproduction, other than containing and constraining some of their adverse effects. This is, perhaps, the grandest of all illusions about money, that political regulation suffices to control it. Such problematic raises a most crucial question. Who controls money? Can (post)modern global society control money or is it rather surrendered to control by money itself? This social heteronomy under the rule of money can explain the hypocritical stance of Islamic regimes which officially condemn interest-taking but they have found out various devious ways to by-pass such Islamic prohibition. The concept of money is like the concept of time. Everybody believes that s/he knows what it is but they cannot really tell what it actually is.

    • By the way.There’s also a 4th assumption necessary for the scenario.Velocity of money should at best stay constant as the money supply increases.That’s also hardly true in the real world.It is never constant and it actually moves against the money supply…

    • The fourth assumption you state (a correct one) I have already referred to in the parenthesis (constant turnover of money) of my post.

    • “Since you appeal to the ‘real world’, we have the recent case of the US gvt giving more than one trillion fiat dollars to ‘systemic’ banks. How much of it has been invested productively, generated jobs, increased consumer demand etc. rather than being ‘invested’ in the stock markets generating a bubble of wealth effects (another form of inflation, inflated stock prices) to the detriment of the ‘real economy’?”

      Bank Reserves are not and cannot be lent out.Banks do not lend reserves.Period.You might want to have a look to a recent BoE paper, attempting to debunk this myth
      I quote:” Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.”

      QE was not supposed to provide banks with additional money so as to lend it out.As a matter of fact QE1 and QE2 had different purposes.QE1 was aiming to help fix bank balance sheets.QE2 was aiming towards a reduction of long term interest rates.Ofcourse both of them had an indirect goal of spurring lending, but there’s no direct transition from QE to bank lending.A bank able to lend, can and will do so irrespectively of its reserve position.

      Therefore QE was not what I was talking about.What I was talking about is fiscal operations with money directly entering the real economy by deficit spending, through a combination of increased public spending and a decrease in taxes.

      “If money is ‘valueless’ (since it does not reflect any real value according to your view and that of the great majority of the commentators here) but it can still have beneficial effects on society in the form of fiat money then why not to print unlimited quantities of money to be distributed periodically (since you do not like the theoretical scenario of one-off) to everyone and turn society into an earthly consumerist ‘paradise’? ”

      That’s precisely my position and the reason I keep referring to low capacity utilization/ high output gaps.We need an appropriate amount of money to maintain full capacity utilization.The fact that capacity utilization rates are so low through out the western world is a definite sign that there’s a lack of demand which would otherwise exist,were people to have higher incomes.
      If you translate this to “lets flood the economy with money to eternity” then you’re misunderstanding my position.But the idea that money printing is by definition inflationary is idiotic and based on false grounds.

      Please don’t bring examples like Weimar Republic or Zimbabwe.They merely show an inability in comprehending DIFFERENT situations.
      Both Weimar and Zimbabwe faced a gigantic destruction of their factors of production while at the same time they kept expanding their money supply.Hence their economies were constantly experiencing excess demand well beyond productive capacity.How does that have any resemblence with e.g. Greece currently standing at about 65% of capacity utilization?

      Let’s have a look at this:

      IMO one of the greatest misconceptions in economics is the tendency by some, to treat money the same way they would treat a commodity in a Robinson Crusoe Island.Demand drives Spending.Spending drives Income.And income has to be paid in money, in every normal functioning monetary economy I know.Nobody works to be paid in milk,apples or wheat.Therefore the APPROPRIATE amount of money is always needed if a monetized economy is to not let any potential output go to waste simply cause of the lack of pieces of paper.

    • Food for thought:

      “Hyperinflation in the USA”

      “Zimbabwe for hyperventilators 101”

      (And I know you haven’t mentioned Zimbabwe but it commonly appears in similar discussions for the same reason)

      As for Greece.Apart from the fact that the Nazis destroyed production and confiscated most of what was left of it,

      “Οι τρεις δυνάμεις κατοχής (Γερμανία, Ιταλία και Βουλγαρία) κυκλοφόρησαν, πα-
      ράλληλα με τη δραχμή, τα δικά τους νομίσματα (μάρκο κατοχής, μεσογειακή δραχμή
      και λέβα) και επέβαλαν νέα Διοίκηση της ΤτΕ στην Αθήνα, τοποθετώντας επιτρόπους
      με αποκλειστικά δικαιώματα άσκησης της νομισματικής και της συναλλαγματικής πο-

      “Η Τράπεζα της Ελλάδος
      παρείχε στις Αρχές Κατοχής 1.500 εκατ. δρχ. το μήνα, ποσό τιμαριθμικά αναπροσαρ-
      μοζόμενο. Επιπρόσθετα, με τη Συνθήκη της Ρώμης η ΤτΕ εξαναγκάστηκε να καταβά-
      λει ειδικό δάνειο στις γερμανικές και τις ιταλικές Αρχές Κατοχής ”

      “Παράλληλα, η επιβάρυνση της ελληνικής οικονομίας τόσο με τις δαπάνες κα-
      τοχής όσο και με τις δαπάνες αποστολής εφοδίων στις δυνάμεις του Άξονα σε άλλα
      πολεμικά μέτωπα, αλλά και η αποκόλληση από τον εθνικό κορμό σημαντικών τμη-
      μάτων του εθνικού εδάφους (Ανατολικής Μακεδονίας, Δυτικής Θράκης, Ιόνιων Νή-
      σων), που προσαρτήθηκαν από τη Βουλγαρία και την Ιταλία, συνέβαλαν στη
      δραματική μείωση της εθνικής παραγωγής και εντέλει του εθνικού εισοδήματος, η
      οποία —σε συνδυασμό με την απαξίωση του εθνικού νομίσματος— οδήγησε στην
      οικονομική κατάρρευση. Ενδεικτικά, η νομισματική κυκλοφορία αυξήθηκε κατά
      36.000% μεταξύ Οκτωβρίου του 1939 και Οκτωβρίου του 1944. Η τιμή της χρυσής
      λίρας από 1.000 δρχ. το 1940 έφθασε σε 1,5 δισεκ. δρχ. το 1944.”

      (Iστορια της Τράπεζας της Ελλάδος, 3.10 Υπό ξένη κατοχή)

    • Hmm… I would say that Augustine is the father of the medievals, and the neoplatonist metaphysics that gave them ‘true value’ was eventually undermined by the coming of Aristotle who did, in the end give us modernity, including modern finance. Even so, there is, of course, a huge rift between the great age of Aristotle (13-17th centuries) and Galileo/Descartes/Bacon and the modern world. This rift is the abandonment of the modified Platonist metaphysics which can be found in Aristotle and the embracing of the astonishingly instrumental and mathematicized pragmatism of modern science. Michel Henry writes about this very powerfully in his text “Barbarism”. Money was never the measure of value itself to Aristotle.

  • Dr. Tyson,

    Your concluding questions are profound ones, but I think your implied answers are quite wrong. You say, “I am not suggesting a return to the gold standard”, but your argument seems to lead to this answer. You suggest causation between Nixon’s abandonment of the Bretton Woods “solution” and the 2008 financial collapse and that Bretton Woods itself was a response to the experience of the bubbles of the twenties. But the world of the nineteenth and twentieth century until 1929 WAS a world of the gold standard. This “metaphysical” grounding did not prevent the bubbles of the twenties and earlier crises. In fact, almost all countries abandoned the gold standard in the thirties because they could not pursue national strategies (Keynesian ones) that would permit them to escape the depression while tied to gold. Furthermore, Nixon’s abandonment of gold in 1971 was required by the inflation resulting from the simultaneous pursuit of the Great Society and Vietnam war in the decade prior. (See The Global Minotaur for a discussion of this!) How could a currency “solution” that was impossible at the time have prevented the 2008 crash? Perhaps part of the answer to your questions was already proposed in the alternate system to the one adopted at Bretton Woods at the insistence of the world’s hegemon, the United States. That solution, which you don’t mention, was the Bancor and Currency Union with international banking controls proposed by Keynes. You imply that fiat currency is based in illusion, but isn’t the value of gold likewise an illusion? Gold (or some other metal) has only specialized use in itself. Doesn’t its value as a currency derive from the same illusion as a paper currency? Doesn’t the search for a non-political standard for value always lead to illusion? Isn’t that value always derived from agreement, from human interaction?


    Randal Samstag

    • Dear Randal

      Thank you for these comments. Yes, I see that my piece gave the impression that gold was the key to the post-war boom and this would imply that gold anchors money to reality. Thank you for pointing this out. In fact, that is not what I was thinking of when I wrote this piece. The theological grounding of the medieval conception of true value had been abandoned, in some mercantile city states, within the medieval era, and after the Reformation (the end of Western Christendom) ‘true value’ is essentially gone. By the 18th century the modern age of credit was born without any conception of ‘true value’ in trade such that the new power to increase the supply of money via leverage feeds into the capacity for prices to be radically driven up such that the environment of bubble and bust becomes a ‘normal’ feature of modern economic activity. Gold has had no contact with the idea of ‘true value’ for many centuries now.

      We have a lot to thank the increase of money supply for, and yet the possibility that money might escape reality altogether is implicit in this development. It is, perhaps, time to re-think money such as to tie it to a politically fair and economically realist (concerned with the real economy) understanding of wealth. Like you I think Keynes’ Bancor and his international banking controls for both surplus and deficit would have given us a global system that would not have reverted to pre1929 conditions after 1971, and would not have hit the wall after 2008. The reason why a politically fair and economically realist global agenda was not pursued in 1944 is because the US refused to concede its position of trade, production and military dominance of the globe after WW2. So it set its own currency as a key means of global geo-political power. The reason why the banking sector is killing Europe now is that it is tied in with geo-political power interests that will not let go of advantage in order to institute politically sustainable fairness and the facilitation of the real economy at the cost of high finance. This is our problem, I think.

      Your questions “doesn’t the search for a non-political standard for value always lead to illusion? Isn’t that value always derived from agreement, from human interaction?” are very big and important questions which I cannot do any justice to in a few paragraphs. But, very briefly, I think Plato is right. If human value is not tied in some analogical manner to ‘Value’ itself, then all values reduce to mere power, which is to say, to violence. This does not mean that the transcendent can ever be mastered or bottled, hence human values are always negotiated human constructs; but they cannot be merely human constructs if the very idea of justice is to be meaningful. The pragmatic nihilism of ‘high’ modern power is reflected in high finance and the ‘realist’ logic of global military domination. Alas, metaphysics is a very practical matter which we avoid to our great peril. Modern money is an intimate function of the nihilistic metaphysics of modernity and if we are going to make modern money serve truly human (humane) values and the production and distribution of real wealth, then I think we will have to look at our metaphysical and our theological assumptions pretty closely.

    • Dr. Tyson,

      Thanks so much for your thoughtful reply. Please forgive my not replying sooner. I only noticed your recent reply to my comment today.

      In your reply you say, “I think Plato is right.” As you suggest, this is a very long story, and one which connects our first consummate metaphysical artist with the “Medievals” of your original post. I have written a bit on my view of that longer story elsewhere ( Summarizing my conclusions; it seems to me that Plato’s Theory of Ideas is inadequately defended. I find that “the argument for it rests on the ability to arrive at knowledge of Ideas and that Plato’s arguments as to how this could be achieved in the Theaetetus all end in aporia.”

      I confess to scepticism about our arriving at any unassailable knowledge of most or all metaphysical questions, which is not to say that practical metaphysical guides are not possible or even necessary. Those guides, however, are useful, it seems to me, because they can crystallize human agreement, not because they are transcendentally true. As Sir Michael Dummett emphasized, metaphysical conclusions depend on the logic that we embrace. A logician who allows for three, or four, or more truth values (the Jains held to seven forms of predication) can defend different conclusions about metaphysics than one who sticks to bivalence.

      In economics, the labor theory of value of Locke, Smith, Ricardo, and Marx has largely been abandoned by twentieth century economics in favor of a marginal utility theory applied to price, rather than value, in the wake of the work of Menger, Walras, and Jevons. But that hasn’t prevented many modern economists, including Walras, Lange, and Joan Robinson from embracing varieties of socialist politics. It seems to me that we can still embrace empathy without grounding it in transcendent truth, but rather in the experience of suffering that we see around us.

      Thanks again for your post.

      Randal Samstag

  • This piece has left me confused.
    Is the author investigating what money IS or what HE wants money to be ?

    “For if money is just a number that is ‘produced’ and manipulated by reserve banks and financial specialists, then we naturally assume a bizarre sort of ‘realism’ where entirely artificial finances are seen as the legitimate repositories of right order and real power. ”
    I am sorry but FIAT money is exactly this.It’s just a number produced and manipulated by anyone who is the issuer of said type of money by means of monopoly power of issuance..
    Minsky said anyone can create money.The problem is to get it accepted.

    Question to the author (or anyone concerned):
    Is Europe currently lacking money or real wealth?
    Is it lacking Euros or skilled workers,natural resources,technology,know-how etc ?

    • The idea behind my piece is that thinking about how the meaning and nature of money was widely understood in the West immediately prior to modern credit lets us (thanks to a very striking contrast) think about the meaning and nature of how money is now understood, so that we might think of better ways of reconfiguring what we want money to be and mean in the future. As your questions imply, Europe is really very wealthy. If the means of exchange we now use is controlled by high finance such that instead of facilitating real wealth it degrades real wealth then we have a serious problem. Modern money’s distinctive metaphysical emptiness has enabled it to become mere financial power such that institutions handling money become centres of power such that the real economy and real politics becomes parasitic on financial (and military) power. We have to turn this around somehow. Not simply taking the metaphysical emptiness of credit (or force) for granted, but requiring money to have some genuine connection with real economic activity and real political realities is our challenge.

    • Thank you for clarifying.
      I’m glad that we both seem to agree that Europe’s problem is about lacking the appropriate amount of the means of exchange in circulation in order to mobilize its idle resources so as to generate real wealth.

      But this poses the question: What do you mean by “tie money in some way to real wealth” if this is not to happen via a return to commodity backed currencies?
      And were commodity backed currencies actually tied to real wealth? Was the quantity of extracted gold for example, enough to facilitate the mobilisation of idle resources?
      I’d say no.Fiat currencies are far superior in this direction.
      IMO, if we are to tie money this should happen via institutional/regulatory changes rather than a change in the nature of fiat money.

  • Paul Tyson’s article is frankly a load of hot air. I see he is a professor a Theology: hardly someone who is qualified to write about money. For Prof Tyson’s information, economists have studied the history of money in HUGE DETAIL: going back way before the middle ages. I suggest Prof Tyson gets up to speed with this research before wasting everyone’s time with more of his thoughts. But never mind: academia offers rich rewards to time wasters.

  • Prof Tyson’s article is the sort of hot air I expect from a theologian. For Prof. Tyson’s information, economists have looked at the history of money going way back before the middle ages. I suggest Prof. Tyson gets up to speed with this, before he wastes everyone’s time with another of his articles.

  • An energy (food/biological, electrical-mechanical, chemical, nuclear, etc.) based monetary system is the only way our species will survive indefinitely. We perceive energy with the same level of abstraction that we respect any commodity else yet energy is what allows for any process to operate (including our life). We would not be burning the miracle energy source of oil at the rate we are currently consuming it if we had to work the equivalent labor hours contained in that oil to use it (one 55 gallon barrel equates to over 20,000 labor hours). At the very least we would be using it rationally. No round the world trips on jets to vacation for two weeks. This would require economic planning, and this does not have to be a bad thing. Recall Soviet central planning was a planning of egos with no basis on material reality. In addition, the capacity for the Soviets to plan rationally was shunted by a lack of broad technological assistance (computers, ect.). It would be nice if humans behaved rationally, then the old Liberal idea of individuality could apply to consumption as well as expression, and personality (which are the good, sustainable aspects of individualism). Whether we like it or not we know little of what is best for us materially, and the current state of our ecosystem should make that obvious.

  • There are many ways of looking at these issues, and Paul Tyson has taken an unusual stance of contrasting medieval conceptions with current ones. In my view, he omits a key part of the puzzle which explains the evolution of money into the particular form of today. This omission is all the more surprising, since it concerns the key religions of Judaism, Christianity and Islam.

    One of the earliest political theorists who dealt with money in a religious setting was John Locke, in his Second Treatise. He explains that we hold all property not in our own name, but in trust for God. We are thus directly accountable to God for how we manage our property. For example, the apples growing on trees are the work of God. The act of picking them from the tree adds our labour power to the natural phenomenon, and gives us (temporary) rights of ownership. Locke explains that we are entitled to use this property (the apples picked) but always bearing in mind God’s ultimate ownership. Thus, if we pick too many, collect them in a cellar and they rot, this is a sin. On the other hand, if we sell them and collect the money in gold or silver, that is fine. God has no problem (allegedly) with people collecting large amounts of money, even when others are starving.

    The history of banking is even more important. Originally started by Jews (in desperation, at being excluded from work and even society) this was actually prohibited by the Torah. Their justification was that usury would be committed only against Gentiles, and not concerning other Jews. Then the Medici family — a family of criminals and murderers — found a loophole in the Christian prohibition on usury and the charging of interest. They rapidly became the leading bankers of Italy and filthy rich. Now, only Islamic banks are in accordance with the traditional prohibitions of Judaism, Christianity and Islam.

    Why are both these points so important. Well, they represent the transition from money as an exchange mechanism for commodities to a commodity in itself. This commodification has many implications, which are the basis of modern capitalism. Much of the writing of Marx (as another poster here writes) is concerned with the function of money. In my opinion, the objective of modern socialists should be at least partial decommodification of money such that it becomes predominantly a unit of exchange. The crooked and criminal dealings of finance capital in recent decades have been exposed and there can be few people (other than those collecting large amounts for doing nothing) who support its continuation. However, the reform of money requires a new and radical theoretical basis, of how the world economy would function with such a major structural change.

    • On Xenos’ s Locke. He is quite right to stress the relationship of stewardship that holds between mankind and divine ‘property’. This entails a certain cluster of moral obligations that men (in the generic sense) have to abide by in regard to use of property especially their own even if it has been legitimately obtained. Primary among these, is the ethical restriction not to abuse one’s own property. This means that the Lockean individual owner does not have the modern absolute right of the bourgeois of ‘utendis et abutendis’ of his property, that is, to do whatever s/he likes with it, spend it at will, destroy it, squander it whimsically. Xenos correctly pinpoints that Locke regards money (in the form of gold) as a means of ‘accumulation’ but (and here is the subtle difference that makes all the difference) not as a means of enlargement of one’s own property but as a form of ‘conservation’, of preservation of one’s produce, which again s/he cannot squander at will. Money as a means of ‘accumulation’ (and product of human greediness) is castigated by Locke as the principal culprit for the fall of the ‘Golden Age’ of humanity and of the moral/political bankruptcy of his contemporary era, all these claims located in the very same text of the 2nd Treatise of Government Xenos himself refers to. .

    • @George. Thank you for your comments. I must confess that it is some 30 years since I last read the Second Treatise, and at the time I tended toward a Marxian interpretation of Locke’s views on property and money. I should consult the text again, to see if I agree with your claim that he does not condone accumulation of money.

    • Thanks for your response. Check chap. 5 on Property on the so-called ‘self-sufficiency’ proviso (II.para. 27) that functions as a general maxim, a moral injunction limiting appropriation to ”as good left in common for others.”. See: para. 31 that defines the legitimate limit of property (what cannot be possessed as ”more than his share”). See also chap. 8, para. 111 on the ”Golden Age” and the deleterious effect of ”amor sceleratus habendi” (the criminal desire to possess, ‘evil concupiscence’, surely not the belief of someone who, supposedly, condones accumulation of possessions). What is of interest here is that Locke connects the drive to amass property with corrupt political regimes,, with ‘abusive and dictatorial political power’, suggesting that the social drive to amass wealth and its concentration perverts democratic polities and renders them illegitimate and oppressive of the People.
      As for your erstwhile ‘Marxian reading impression’ I presume you refer to MacPherson’s ‘Marxist’ reading of Locke as ‘possessive individualism’. which has been shown (in the last thirty years) to be misleadingly anachronistic and a forced interpretation. To refresh your ‘Marxian’ past permit me to quote this sentence ”For ’tis Labour indeed that puts the difference of value on every thing’ (para. 40), where we see the germinal seed of Marx’s own ‘labour theory of value’. Given who Locke is, i.e., the philosophical father of classical liberalism and the intellectual mentor of the American revolution, the identification of proto-socialist elements in his discourse (and there are quite a few others) illustrates an exemplary case of what Hegel has named ‘the ruse of Reason’ in history, dear philo-Xene. . .

  • The inevitable solution is to close the gold futures market, switch to a physical-only market, and let gold float against all currencies as a reference point. Gold would thereafter trade not as a commodity chained to other commodities, but as a wealth reserve. The authorities will never close the futures market, but if and when there is a run on the bullion banks, the market will shut down and the system will reset with gold having a much higher purchasing power. That is why I say the solution is inevitable.

    This is not the same as a return to a gold standard. Rather, fiat currencies will and should continue to operate as they now do. The difference is that people will have the choice to exchange their currency for real savings that cannot be diluted, and governments will need to manage their currencies responsibly to maintain confidence. Why is this not the perfect solution?

    • Because it robs the socialist one of thei favorite ways of stealing money that people worked for!!!

  • Easy disproof of the idea that medievals weren’t familiar with credit or complex transactions: Mohammed. Look at what he prohibited, and you’ll find pretty much everything that ruins us today. Shorting, options, interest, selling defective products, underpaying workers. Why would he prohibit those practices if they weren’t widespread in his time?

    A good list is here:

    How to solve the problem? Again one word: Mohammed. Apply his rules.

    • Exploitation via money is as old as imperial civilization itself. The Christian Medievals were well aware of this, nowhere have I said that they were not, nor have I implied that their systems of trade was anything other than complex. Indeed the centralized financialization of trade and taxation greatly simplifies transactions introducing “efficiency” into the market and government in ways that come, in the end, to make us the servants of money and power rather than keeping money and power as servants of genuinely human ends.

      Yes, I think Islamic approaches to finance are very interesting precisely because they do not merely instrumentalize financial power but set the use of money in the context of moral and religious truths that are more primary than the means of exchange, as do all the world religions. How a global system of finance can be constructed where the means of exchange are subordinate to broadly acceptable morally and transcendently referenced categories of value, within the religiously pluralistic context of the globe, is, I think, the kind of question we need to explore, rather than how to make everyone Islamic or Christian or Hindu, or an Atheist etc.

  • Here is an interesting article: Benjamin Franklin on the nature of paper money

    Here is an excerpt from Alexander del Mar’s “A history of money in ancient countries from the earliest times to the present” (c. 1885) (page 172) which quotes Aristotle on the ancient Greek nomisma system or what we today would perhaps call a “state currency” system or a “non-convertible state currency” system:

    “Nomisma by itself is a mere device which has value only by nomos (law) and not by nature; so that a change of convention between those who use it, is sufficient to deprive it of value and its power to satisfy our wants.” — Aristotle, “Politica.”

    “By virtue of voluntary convention nomisma has become the medium of exchange. We call it nomisma, because its efficacy is due not to nature but to nomos (law), and because it is always in our power to control it.” — Aristotle, ” Ethica.”

    See also this website:

    One point insufficiently covered is that the system has unraveled since the Clinton era, when Rubin and other bankers and an ignorant and corrupt Senate deregulated banking and commodities trading. This was the necessary change needed for the banking-mortgage fiasco that led to the global recession and a neocon takeover of the economies. Well documented by Bill Black at

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