I’ve just finished reading Nigel Dodd‘s book ‘The Social Life of Money‘ and found it very interesting. The book is an examination of the idea of money from a variety of perspectives – starting with a flick through money’s myths of origin before looking at money through a Freudian, a Chartalist, a Nietzchian, a Simmelian, and a utopian lens amongst other. Some of these viewpoints were fascinating to me, some less so. In particular, I like that Dodd likes Simmel and keeps him pretty central to the enquiry, because Simmel is both pretty cool and under-read.
This isn’t actually going to be a book review. More notes-to-self regarding the outline of Marx’s ideas on money and credit that Dodd writes-up so nicely. Like lots of people I’ve read bits and pieces of Marx, and bits and pieces about Marx and his work. But I haven’t read Capital. I sort of assumed that Marx’s understanding of money was basically the classical Labour Theory of Value.
However, Dodd highlights Marx’s very social understanding of money: every owner of money “carries his social power, as well as his bond with society, in his pocket” (my italics). Which I think is interesting.
Furthermore, Dodd argues that there are six important steps in Marx’s account of money and credit (pp 50-58, which summarises pp49-57 if you’ve got the book):
1. Existence of money creates a gap between purchase and sale;
2. This gap means money can (and will) be hoarded;
3. Hoarding creates the need for Inside Money as well as Outside Money*, presumably because the alternative is massive deflation/ appreciation of money vs stuff;
4. Inside Money growth creates the impression that capital is self-expanding, leading to the formation of fictitious capital;
5. Existence of fictitious capital makes the cycle of bubbles and crashes inevitable;
6. Credit crunch always follows from the formation of a bubble, creating demand for Outside Money.
What is ‘fictitious capital’? @DrJoMichell tells me that fictitious capital is similar to prices as discounted future revenue streams. You pay today for tomorrow’s profits not yet realised. So, most capital markets I guess.
Points 1-3 came to mind when reading @pmarca‘s Twitterstorm yesterday, as well as @izakaminska‘s late-night tweets back. I have not really engaged in either Bitcoin Mania or kept properly abreast of FT Alphaville’s excellent BitcoinMania. In fact I have never thought about Bitcoin long enough to really rationalise a valuation. But I guess that the idea that a medium of exchange (BTC) embedded in a technology (the distributed block chain) that could reduce electronic transaction charges at point of sale should have value appears to jump from this Marxist expectation of hoarding in a candidate ‘money’ created without an Inside Money counterpart.
For what it’s worth, I’m not sold on Bitcoin being money. Although I can see it or something like it being a medium of exchange.
* Yes, I’m going to keep pushing this sensible terminology.