Credit, Money and Crises in Post-Keynesian Economics
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Credit, Money and Crises in Post-Keynesian Economics

Edited by Louis-Philippe Rochon and Hassan Bougrine

In this volume, Louis-Philippe Rochon and Hassan Bougrine bring together key post-Keynesian voices in an effort to push the boundaries of our understanding of banks, central banking, monetary policy and endogenous money. Issues such as interest rates, income distribution, stagnation and crises – both theoretical and empirical – are woven together and analysed by the many contributors to shed new light on them. The result is an alternative analysis of contemporary monetary economies, and the policies that are so needed to address the problems of today.
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Chapter 8: International money: where do we stand?

Claude Gnos and Sergio Rossi


The nature and role of money are a subject that inflames academics, not only within the economics profession but also in the social and political sciences, as well as in theology and philosophy. A number of scientists have been attracted by the study of money, and of its essence in particular, as Ingham (2004) shows with painstaking detail with respect to sociology. Yet, as Schumpeter (1954/1994, p. 289) noted long ago, ‘views on money are as difficult to describe as are shifting clouds’. In spite of two centuries of monetary economics, it is indeed no exaggeration to claim that ‘the definition of money can still be regarded as an almost unresolved issue’ (Bofinger, 2001, p. 3). As a matter of fact, although money has been fully dematerialized and its linkage to any physical yardstick has been abandoned everywhere, several economists and the general public still think of it as a thing that is somehow comparable to real goods and financial assets. This conception derives from the idea that today’s bank money is a refinement of commodity money, which most economists consider indeed as a commodity. This view is the result of a time-honoured representation (see, notably, Menger, 1892; Brunner and Meltzer, 1971), according to which money is a medium of exchange – particularly in the form of a commodity – subdividing trade into two separate transactions, with real goods and/or (productive) services being exchanged for money and subsequently money for goods, as depicted by Clower (1967). In this story, even paper and bank monies are considered as (immaterial) goods or financial assets, whose quantity is exogenously determined by monetary authorities. This view also affected the Bretton Woods conference in 1944 and then all the political discussions on reforming the international monetary regime after the US dollar standard collapsed in the early 1970s. It has survived to, and is still well alive in, the present days of financial globalization and capital account liberalization. As such, it continues to affect the current policy debate on how to design an international monetary regime in order to limit, if not to avert, the occurrence of other financial crises in the future. In fact, it should be noted that central bankers have recently come round to the endogenous view on money, without, though, giving up the conventional view as regards the nature of money (see Rochon and Rossi, 2013; McLeay et al., 2014). This is so much so that both national and international monies are considered as media of exchange and, hence, as objects of trade, for which there exists a supply and a demand on the market place – be it the money or the foreign exchange market.

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