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In Colleen Schneider’s lecture “A brief history of money”, we encountered the historical development of money in order to gain an understanding of the current monetary system and its contingencies. First, we briefly discussed the definition and the functions of money: facilitating exchange, measuring and storing value, and a means for paying debts. Colleen then explained how forms of money were created in societies with complex economic structures, rather than in a simple barter economy as oftentimes assumed. Coinage always had the crucial characteristic of being backed up by governmental structures. Governments, as issuers and legal guards of money, were historically seen as being able and allowed to control monetary standards. This perception changed as commercial banks were allowed to issue public currency as well. The profit motive became an ingrained part of the monetary system, which nowadays is a hierarchical two-level system with central banks and treasuries at the top and commercial banks as middlemen between them and individuals, businesses, etc.
Unfortunately we did not have much time left for discussing the international monetary system, but it is worth noting that money is a social contract based on trust, with no sovereign global authority that ensures its valuation. After the abolition of the gold standard and the implementation of the Bretton-Woods System, a hierarchy of currencies was established, such that there is effectively a U.S. dollar standard that produces hegemonial power structures.
Most of the abovementioned lecture content was new to me and this is shocking in some sense, as our understanding of money plays a crucial role when we think about designing new and better economic structures. Getting an insight into the history of designing money gives me the courage to think about alternative monetary systems. For me, one thing where further input and discussion is needed is how an alternative standard - say, a unit of energy instead of gold - would relate to the policy trilemma. More time to reflect on these aspects of the international monetary system would be beneficial, and I am looking forward to chances to do so in the remainder of the summer school.
Especially interesting from my point of view is how self-evident it was for the longest time of human history that governments are in charge of issuing money. This sparks ideas about going back to this understanding, thus getting rid of the profit motive and instead re-politicising the monetary system. I also want to develop my own position with regard to debt jubilees, as Colleen mentioned that, e.g., ancient Babylonians had such clearances of debts in regular time spans - they could be an interesting policy tool in modern times.
Based on the lecture "History of Money" during AEMS 2022 by Colleen Schneider.
Written by: Helena Schuch