Governments have come to supply currency, and to restrict the private supply of currency and deposits, not to remedy market failures, but to provide themselves with seigniorage and loans on favorable terms. This is particularly useful in times of war, but also handy in general while running budget deficits.Īs George Selgin observed, with Lawrence White, in a 2017 study of the nature of money: It is an arrangement so advantageous to politicians that virtually every national government has its own central bank now. This was the reason for creating the archetypical Bank of England in 1694. One reason this is true is the recurring cycles of financial crises, which inevitably trigger powerful political reactions.Ī second reason is that the control of money is extremely convenient to governments, especially to have their own central bank to buy their debt when they are out of money. Likewise, there is no “Finance,” only “Political Finance.” I often point out that the old title, “Political Economy,” was a more accurate term than the current “Economics.” We find economics without politics only in theory, never in reality. The current arguments and monetary stresses must become a new chapter in any future second edition.Įich’s principal overall theme is that “money is always already political.” This does seem obviously true. The Currency of Politics was published in 2022, well timed to be greeted by the Great Inflation in this country, and runaway inflation in other countries as well, which has given rise to a new global debate about central banking, money, and inflation, with the global club of money-printing central banks on the defensive-at least for now. The historical survey does inexplicably leave out the intense debate of “the money question” at the end of the 19th century in the U.S., starring William Jennings Bryan, which we will fill in at the end of this review. The author’s own recommendations, however, are sketchy and betray a naïve faith in governments. In The Currency of Politics, Stefan Eich has written a valuable and very interesting review of specific monetary debates in their historical settings during centuries of thought about the nature of money as it is entwined with politics. “Those who fail to study the intellectual debates of the past are condemned to repeat them,” is a variation on Santayana’s famous dictum particularly applicable to economics and monetary theory, where ideas cycle along with events.

Stefan eich currency of politics