EP 33: Money – The Unauthorised Biography (with Felix Martin)
Feb 13, 2025
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Felix Martin, author of "Money – The Unauthorised Biography," delves into the complexities of money's role in society. He discusses the fascinating Irish Bank Strike of 1970, demonstrating how communities adapt to crises through alternative currencies. Martin critiques traditional economic views, elaborating on historical figures like William Lowndes and John Locke to illustrate the evolution of monetary thought. He also highlights the vital connections between trust, political power, and the stability of money, emphasizing the relevance of leadership in shaping financial systems.
Historical reliance on private forms of money showcases human innovation in trade during times of economic disruption, like the 1970 Irish banking strike.
The philosophical debate between Lowndes and Locke reveals the complexity of money's nature, highlighting the interplay between trust, value, and political management.
Deep dives
The Role of Private Money in Economic Systems
Private forms of money, such as bills of trade, have historically played a significant role in facilitating trade and payments outside of state-controlled currencies. The oldest known coin in the British Museum originates from a private individual rather than a sovereign authority, suggesting that private IOUs have long been utilized to settle transactions in various markets. This challenges the conventional view that money is solely a product of the state, highlighting instead that merchants and traders often create their own monetary instruments to suit their needs. The adaptability of markets is evidenced by the use of private money in scenarios where official currencies become unavailable, revealing an intrinsic human drive to facilitate exchange and trade.
Economic Resilience During Banking Crises
The Irish banking strike of May 1970 serves as a modern example where the closure of banks led to the emergence of a private monetary system amid crisis. As banks shut down and individuals could not access their funds, people resorted to using checks and informal IOUs to conduct transactions, demonstrating remarkable adaptability in the face of economic disruption. Surprisingly, rather than a decrease, GDP transactions actually increased during the strike, indicating that private forms of exchange can thrive when official systems fail. This event illustrates the significant role trust plays in monetary systems, as communities adapt and create their own means of value exchange when formal institutions are absent.
Trust and Alternative Currencies in Argentina
The economic crisis in Argentina around the turn of the millennium highlights the emergence of alternative currencies when government restrictions erode faith in the national currency. In response to the government's capital controls, various provinces and local businesses began issuing their own currencies, facilitating continued commerce despite the failure of the official monetary system. The success of these alternative currencies hinged on community trust, as individuals relied on local networks to sustain economic activity. This situation mirrors historical trends where the absence of faith in government-issued money drives people to create and trust alternative financial instruments, reinforcing the critical importance of trust in any monetary system.
The Historical Debate on the Nature of Money
The philosophical disagreement between William Lowndes and John Locke during England's Great Recoinage highlights the longstanding confusion between the nature of money and its political management. Lowndes advocated for flexible monetary policies to alleviate economic woes, while Locke argued for a stable definition of money anchored in precious metals, motivated by concerns over political stability in post-civil war England. This debate set the stage for enduring misconceptions about money's value being intrinsically tied to physical commodities, ignoring its social and political dimensions. Understanding this historical context emphasizes the need for monetary policies to adapt to economic realities, allowing for necessary recalibrations while maintaining public trust.
Russell Napier quizzes Felix Martin about his book, Money – The Unauthorised Biography. A fascinating listen for anyone interested in the true nature of money, illuminated through entertaining examples such as the Irish Bank Strike of 1970, the Argentinian Crédito and the Bristol Pound.
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