This is a chapter from the book:
Finance Capital (2nd revised edition)

III. Financial sector and public power: A conflict-ridden symbiosis

The state regulates, promotes, and makes demands on all branches of its national economy according to their particular requirements and performance. The financial sector, however, is not a branch of business like the others to the state. As the lawmaker looking after the business of the banks, it is taking account of their importance for the functioning of the entire economy. Consequently, it doesn’t just apply its legal clauses to them, but acts as central bank (§ 1). As manager of a budget, the state uses the financial markets as a source of funds to pay for political rule (§ 2). It exerts influence on the accumulation of money and credit in these two ways, and links this influence programmatically with its interest in growth, the criterion for the success of its economic system. And it utilizes this influence to steer financial business, and through financial business, business life overall, onto an appropriate course (§ 3). The result is an indissoluble symbiosis of bourgeois state power and financial industry that is characterized by antagonisms and contradictions.

1. How the state looks after financial business: Serving the banking industry while issuing a mandate

Proper regulation of the banking business by a constitutional state requires far-reaching modifications to the legal protection of property. Such regulation cannot do without a material commitment by the supreme power. And it leads to a noteworthy consequence: by giving the guarantees necessary for their private lending business, the state draws on banks to make its legal tender prove itself as capitalistically useful money.

a) Legal certainty for finance capital’s sustaining lie

Capitalistic business life needs legal certainty. The bourgeois state provides what is needed with its monopoly on using the force immanent to the system of competition. It guarantees the substance of this competition, private property, giving it a regime that dominates all needs as well as the means for satisfying them, including the labor required. The legal institution of the contract, with which the state steps into all economic relations — and not only those — as the third party with decision-making power, is an effective way to safeguard the general bourgeois struggle for money, the definitive means of existence for its society.

This elementary form of all business — legally obliging each party to provide something to the other as the formal principle of any cooperation — readily fits the lending business, of course. In its simplest variant, the creditor loans the debtor a sum of money and the recipient undertakes to pay interest and repay the principal amount in due time. However, there is something a bit special about this transaction. It is not equivalents that are being exchanged, but rather a sum of money for the promise to return it plus interest. Economically, the latter is an uncertain ‘hope value,’ in actual fact a mere declaration of intent. The constitutional state, which recognizes the need for such special agreements as well, is therefore faced with the task of defining what the debtor’s undertaking means under property law. It has to specify what equivalent for his money the creditor holds in his hands with his debtor’s obligation to pay, and, on the other side, to what extent the debtor’s right of disposal over his own monetary assets is affected when they are increased by another’s property and encumbered with an obligation to repay.[1] The creditor hasn’t simply parted with his money as in a normal purchase, but retains a right to it. Depending on the kind of promise to pay he has received, he can carry his right to it in the books as a still existing and growing asset of his own, and even (re)sell it, i.e., turn it back into money. The debtor may use the borrowed money like his own. This doubles the power of the money temporarily but with real effect — a state of affairs to be codified by contract law.

This legal relation, though precarious, has of course always been masterfully cast in legal terms, varying in accordance with a nation’s legal tradition. It becomes a more far-reaching challenge for the state through the fact that it is not just a matter of one special kind of legal transaction alongside many others but, attended to by a separate industry, has been generalized and developed into the basis for all business activity. In their double character as creditors and debtors of their customers, banks take the liberty of using their customers’ property — that meaning the money of society as a whole today — for their lending business at their own discretion and for their own benefit, and substituting it in virtually all its functions with money tokens. In so doing, they make the total monetary wealth of society dependent on their business success, i.e., put it at risk. After all, the money tokens functioning so smoothly in payment transactions between banks are — in terms of their economic nature and basis — wealth in the form of money that is used for banking: a capital advance that has to prove its worth by generating profits. Banks replace state-defined money — the private power of property given a tangible form by state decree — with credit tokens, means of payment representing this industry’s business model, namely, the lie it lives so very successfully that promised profit is as good as current monetary assets and is definitely a basis for functionally replacing money.

This work of the banking industry presents the constitutional state, which guarantees the regime of property with the power of its laws and stipulates the legal tender that quantifies the power of property and materially represents it, with a sovereign organizational task that it tackles in a consistently constructive way. Where promises to pay that are economically based on ongoing business, i.e., on future wealth, are equated commercially with real monetary assets that can be freely used, the state sees a justified need on the part of the business world for a property guarantee that extends to the money tokens banks use for handling payments, and that approves as lawful the equivalence of credit with successfully expanded capital, the object of the exercise. The state meets this need. The first thing it does is fundamentally license banks to commandeer and use the wealth of its national money-based economy in accordance with their criteria for success. In so doing, the state establishes property rights that put into force the equations underlying the power of the banking sector. But it doesn’t make these equations work out. Economically redeeming all the promises of payment in the banking industry is still up to the competition between contracting partners. The state is unable and unwilling to prohibit the failure of the business it allows, and to decree its success. It carries off the contradiction of approving and conferring legal validity on the banking industry’s constitutive lie — that promised money is as good as money on hand, and promised yields as good as ones brought in — without making it come true. And it deals with this contradiction by doing what it can, as law-making authority, for its formal property guarantee to be really redeemed. It does not just grant its license giving legal force to the financial world’s business practices and products. It ties it to restrictions and regulations that obligate banks, if not to succeed, then to make every effort to succeed, and that incorporate safety guarantees for their customers’ property into their speculative business.[2]

The state as lawmaker naturally obligates professional money and credit creators to exercise utmost diligence when they are handling society’s money transactions with self-created means of payment, replacing the money assets entrusted to them with liquid promises of payment. It has long been forbidden for a bank to use its own notes that feign being backed by real money assets of the bank’s, but the problem was taken care of by the development of cashless clearing between financial institutions. This perfected form of payments is recognized by the state, so too of course that the banks’ liquidity is dependent on the success of their credit operations. Since the banks’ liquidity is in turn the basis for the solvency of the entire business world and of society in general, the state takes various legal precautions to avoid critical situations. Rules for deposit guarantees for demand (checking), time (term), and savings accounts, as well as ones for minimum cash reserves in banks, or alternatively for balances at the central bank in fixed ratios to the various obligations of the licensed financial institutions, are supposed to ensure the customers’ solvency by separating it from these institutions’ changeable business situations. Some of these rules, and many others, concern the soundness of the credit transactions themselves by which the financial industry stakes society’s monetary wealth on future growth, thereby putting it at risk. Loans must be backed by a certain percentage of the lender’s own funds, and jumbo loans reported to state supervisory authorities in their total amount or individually above a defined ratio to the bank’s own capital. In advanced capitalist states, sole proprietors are excluded from entering the banking business: incorporated capital existing independently apart from the shareholders’ private assets is supposed to ensure a better foundation for creating credit and eliminate arbitrary management. In addition, the lawmaker specifically targets the ‘subjective factor’: it repeatedly and conspicuously requires that managers of financial companies show “expertise,” “diligence” and “conscientiousness” and also act “in their customers’ interests.” They are to organize their business operations so as to ensure that conflicts of interest between different clients as well as those between the bank and its clientele are kept “to a minimum.” The profit-yielding risks that the industry constructs and brings into circulation as commodities are allowed to be risky but must be transparent, i.e., made known and basically clear. This is the appropriate way to apply to this kind of business the general principle that a contractual relationship, meaning the distribution of potential gains and losses in this context, is only legitimate when it can be properly consented to. Such codes of conduct relating to propriety and good morals in the credit business are the constitutional state’s way of taking into account that the business items in question are not any real goods but rather expressions of will that it certifies as legally valid, declarations of intent that are deemed ownership of capital. These promises of enrichment have a price level in inverse proportion to their chances of success, and it becomes doubtful or is in any case doubted how honest they are whenever they fall through. Legislation, supervisory bodies, and the judiciary, duty bound to uphold the state’s guarantee of property, do what they can to draw lines between what is a legally acceptable risk and what is fraud. These lines are of course rarely clear. That a promise of payment was never to be fulfilled from the start, i.e., was quite empty — as in those infamous ‘pyramid schemes’ — only becomes apparent after the fact, often enough, when no more ‘good money’ is ‘thrown after bad.’ The business of the financial industry simply always involves arousing, serving, and exploiting someone’s trust — driven by greed for money — in another’s business success. So regulations that make economic success, or a serious effort to achieve it, an actionable legal obligation always only form a big ‘legal gray area.’

The contradiction the modern constitutional state is attending to here prompts it to follow the innovations that banks dream up when making the most of their license to create credit and market fictitious capital. The restrictions it may see a need to impose do not revoke this license but rather make it sustainable under property law. The state consistently seeks constructive solutions, testifying to the understanding it shows for this industry’s exquisite requirements, but above all to its vital interest in this industry’s services which are indispensable for national growth.

Additional remarks

The business world that the financial sector serves in order to serve itself includes a rather important branch: the world of crime. Illegal business needs financing too; unlawfully gained money is also out to enjoy its right to increase. These two needs are just as welcome to the financial industry as those of other branches. In line with the logic of its business and with its public service, it pays no attention to the source of the funds that are entrusted to it and that are used to pay for its products. These funds interest the pros only as financial means that enable them to create credit. Nor do they care what purposes their loans are used for — as long as these purposes offer them the prospect of sharing in profit they have financed. The state’s distinctions between legally and illegally acquired wealth; the legal definition of moneys and transactions as, for example, drug money, extorted protection money, bribes, etc.; the tax authorities’ legal claim to share in wealth and income — none of this concerns a line of business that is exclusively supposed to, and entitled to, see to the abstract aspect of abstract wealth. Its business is to unleash the capitalistic power of property, place it at the disposal of others, and fulfill the right of property in money form to increase, for its customers and for itself. Discriminations the state makes are at odds with the financial industry’s economic agenda, unless they relate to the nature of the business item itself. Consequently, the state has to specifically impose them on the industry and specifically make sure it complies with them.

Conversely, there is hardly anything a citizen does that the state can’t get its hands on by monitoring bank business. A bank account and its movements are not only a good reflection of important moments in the course of a bourgeois existence; they, at the same time, allow effective access to its means. So in this area the state requires cooperation.

Thus, the state’s need for supervision and the fight against crime also provide a very special link between the constitutional state and the banking system, in both a negative and a positive way.

b) How the banking business is attested materially by refinancing through legal tender

The bourgeois state recognizes that there is one thing the economy absolutely can’t do without if it is to grow: credit. So the state doesn’t leave it at licensing the private lending business and looking after it legally in the elaborate way required. It sees the financial sector as so important, as such an indispensable public task, that it does not merely act as the authority expediently extending property law, but acts as a financier itself.

Under certain circumstances, namely, when banks are weak, the financial markets even weaker, and domestic growth accordingly leaves something to be desired, a market economy–savvy government will found state-owned banks, which inject national currency into the economy as a capital advance. This by no means violates the basic rules of private capitalism. At least not if the government is financing a national capital accumulation firstly with the aim of establishing an independently growing circulation of credit, and secondly is so successful at it that private capital takes hold of this circular affair and makes money on it. In doing so, the state furnishes practical proof that, in the modern world, credit is the prime and crucial form in which the private power of property becomes capitalistically productive. And that is why the state might have to make the first move and get accumulation started by using its monetary sovereignty as the source of credit.

The modern state withdraws from this business the more successful it is at it. So specialized banks operating under public law may still keep accumulation going with loans that are cheaply refinanced thanks to state guarantees, in sectors of the domestic economy that are financially weak but supported for political reasons, traditionally agriculture. Generally speaking, these are areas from which a government expects more for the nation than the private financial industry expects for its profits. The strange thing about the state’s withdrawal, however, is that it ‘withdraws’ to the higher position of financier of the financial system as a whole. It thus fundamentally fuses its monetary sovereignty with the private-sector banking industry’s course of business. It does not leave bankers to their own devices, after all, but empowers them to refinance their loans by making use, under the particular terms it stipulates, of lawful money it creates as needed. At the same time, the state obligates banks to keep enough of its legal tender, society’s solely definitive and binding money, on hand to be able to prove their liquidity, in accordance with criteria it formulates. It thereby takes a decisive step beyond what it is already doing by licensing the banking business, i.e., beyond formally sanctioning the equation between debt and money capital, between credit tokens and means of payment. It still does not guarantee that this equation will be economically fulfilled; that would actually mean abolishing the private nature of the financial business. But it takes part in it. By acting as the higher, ultimate authority over the creation of credit and money, it does not merely guarantee financial business, but rather instigates it and, consequently, the accumulation of capital in its country.

c) How the state’s credit-money is attested economically by the banking business

As the ultimate financier of the financial industry, the modern state uses its monetary sovereignty so absolutely that it has emancipated the official means of payment from the stuff the business world has factually chosen as its universal means of exchange. This stuff independently represents the exchange value of the elements of society’s wealth the business world produces and trades. And it is what the public power always used to treat as the material basis for the money it defined. So it carries off the paradox of stipulating by law a means of payment as the independent existence of property, thereby specifying it as the binding measure for exchange relations between traded commodities, i.e., for their value, while leaving the amount of the value represented by the units of measurement of lawful money completely up to business practice to determine, to the business world which calculates its costs and revenues in it. The entity regulating the use of money and consequently the amount of value in its units of measurement is the financial industry. This it does by financing business life with its credit tokens based on the official money, i.e., by creating ability to pay for society’s capital advance and justifying this creation with an actually achieved increase in the power of capital. The relation between the advance and a surplus tallied in the same money always contains both the real increase of capitalist wealth and some proportion of a merely nominal increase. This ‘fuzziness’ is necessary in a credit-financed capitalistic expansion process that is reflected by the amount of value of the money unit, or its variation. Hence, while society’s means of payment bindingly prescribed by the state is a country’s abstract wealth in tangible form in terms of money’s legal quality, it becomes this economically and in terms of its amount of value by being utilized by banks for their regime over the country’s economy, and insofar as banks do so successfully and thereby actually fulfill what money is supposed to be by state decree.

The objective constraint the state subjects itself to by using its monetary sovereignty this way is a demand on the business world. This is the other, complementary side of the value contained in national credit-money being dependent on its expansion as a means of private enrichment for money capitalists. The business they are interested in, and are supposed to be solely interested in, is at the same time a service to the higher state purpose of establishing a value-bearing national means of payment. The credit industry has to and is supposed to render this service by merely doing its job successfully. So when financial capitalists pursue their money materialism, this is not just their private concern, but a national concern, too. The state’s economic agenda that is materialized in the central bank’s credit-money commands banks to act out of their own business interests and in keeping with the logic of their industry, and requires them to be successful at serving themselves.

In the normal course of the market economy, the way private business interests coincide with the state’s economic agenda is by representatives of each side having to deal with controversies on a high level. After all, both politicians and bankers take the equation between finance capital’s interest and the public interest seriously, each from their own standpoint. The government side sees banking as carrying a heavy responsibility for the whole economy, values its service to growth, and attributes any great failures to a neglect of duty out of greed or to speculative excesses that should be addressed with better rules and more stringent supervision. The partners on the financial side insist that their business activity can only benefit the whole economy, as politicians and the general public rightly expect, if it is handled professionally according to speculation’s immanent criteria for success, and remunerated appropriately in relation to this success.

That they are empowered to use other people’s property, the monetary wealth of society as a whole, is to them a fact of nature. Any government regulations aimed at a politically desirable handling of their economic power are taken to be an unprofessional if not dysfunctional obstruction, which they respond to by fundamentally demanding deregulation. When they fail on a grand scale, exposing the state-certified lie their trade is based on — that money’s right to increase can be trusted and credit is identical with capital growth — they stop calling on the state only to support their success strategies by ensuring liquidity available at all times, but take it equally for granted that it will now finance their losses and their ‘recapitalization.’ It is beyond them how anyone could object that the state’s recognition of their ‘systemic’ importance invites them to commit ‘moral hazard,’ to gamble with others basically taking the risk. At the same time, both politicians and finance capitalists are certain — and rightly so — that in a capitalist system there is no alternative to their symbiosis anyway.

Additional remarks

When there is a major crisis, politicians and bankers agree, precisely because there is no alternative in capitalism, that the banking industry must be saved from collapse by state money. The cooperation between the two sides develops here into the paradox that the state autonomously creates a great amount of money without any positive economic justification to compensate (quasi-) economically for the failure of the very business that is supposed to be forever successful and thereby give the state’s money its capitalistic value as source of its own increase. Only this is to give it its value as representative of society’s monetary wealth. And the credit rules say this has to happen. Before the capitalist world collapses, its masters push the contradictions of their system to the extreme. Since they do this in competition with each other and can only do it in agreement with each other, more about this last advance in the symbiosis of finance capital and state will follow in chapter IV, section 4a.

2. Money and debt: Utilizing the finance business for the national budget

For the state as manager of a budget, capitalist growth is the source of the financial means used to pay for political rule. Governing aims to foster free-market success, and in terms of this objective, the effective use of state power actually becomes a cost. What it needs, financed by taxes and debt, is the object of continuous deliberations weighing one interest against another, which under democratic conditions turn into justification spectacles. However, they still lead to public finances being fitted out in accordance with capitalism. The finance branch of the economy is the instrument of state management, but this does not impair financial business. Instead, the state’s utilization of its services gives it another boost of power.

a) Ruling with money for the rule of money

By virtue of its state license and with the backing of the central bank, the financial sector puts money into circulation and increases it as an advance for growing capitalist business out of its own interest and according to its own calculation. This money serves the state as a means of rule. It buys what it needs; it pays for the services it requires. For enforcing its monopoly on the use of force and for arranging its people’s living conditions, it uses the civil power of disposal that is realized by the universal means of payment in measured portions and that it itself has made legally valid. It makes use of the private power of money that takes the form of an object and is not recognizable as a relation of force, just as any customer or employer does. Of course, the way it procures the money it needs is not at all typical of the free market: payment is compulsory, there are tax laws, a revenue office, and social security contributions. The force it uses to get its hands on the money its citizens make recedes behind a multitude of objective points of view and specific explanations of the various obligatory payments the tax authorities collect — the state almost seems to be selling necessary services. This disguising of state force is not merely a formal affair or a semblance. A modern state actually makes itself and its need for force most decidedly dependent on the private power of money being applied and increased first and foremost in its proper economic function, productively as the private command over society’s work and wealth, before getting hold of it for its own concerns. It counts on systemic capitalist self-interest, the private enrichment of both major and minor actors in its bourgeois society, as the source of wealth in money form that it draws on as its means of power.

This puts the state in a fundamentally self-critical position in relation to the economically active people it rules over. It sees its subjects’ tax payments not simply as its sovereign right to be taken for granted, but as a real burden it imposes on its economy. It sees them as an extra cost impeding the proper, expedient use of money that it itself recognizes and carries through, i.e., its use as capital, as a means of private enrichment in all the forms that private business sense comes up with. So the rationale of its sovereign force includes the general guideline of self-restraint when it comes to appropriating its citizens’ earned money and productive financial assets, so as not to cause counterproductive damage to the source of its sovereign force. And it includes a first, priority political goal: to promote the capital accumulation whose fruit it lives on, i.e., that it is a drain on.

In accordance with these imperatives, the state organizes the operations of its rule in a budget where it does more than balance its revenues and expenditures. It makes the revenue side conform with the economy as far as possible; and it always wants its expenses to comply with the task of serving and furthering the money-making interests of its various capitalist performers. So it has its subjects pay their taxes in such a way that they are obliged to do so when, and only when, money has been successfully earned in the course of free-market business life, and only to the extent that this business life remains intact. Of course, despite its great restraint, it still meets with criticism every time it expropriates someone in its own favor, especially from the owners and managers of money’s economically productive command. Though they understand that their competition needs a social order and a suitable order takes a great deal of force, they themselves always need more money than they already have to beat the competition properly, and they certainly don’t need an additional cost factor that is totally unproductive from their point of view. Unlike the rest of society, they are by no means simply reminded by those holding political power that government services are indispensable for them to pursue their interests, or that the precious good of legal security is so useful for their business. Instead, the politicians in charge make every effort to use the money that passes through their hands to achieve an overall budget for the nation that makes ‘the economy grow.’ Ultimately, the state power operating with money is to have a productive force that outweighs, or at least justifies, what it costs.

This slightly contradictory endeavor never succeeds to everyone’s satisfaction in the competitive society that the bourgeois state governs. This, however, is an area where the democratic nature the state has given itself develops its own productive force. On the one hand, the never-ending dispute over the best solution affords every kind of discontent the morally inestimable satisfaction that everyone gets to speak up and complain publicly about how poorly his concerns are being treated and what a bad job the government is doing altogether, and even gets heard in accordance with his financial standing. On the other hand, constructive political criticism and the occasional change of government ensure that alternative recipes for promoting growth have an opportunity to prove their effectiveness in the course of capitalist progress.

So it makes good sense, i.e., is clearly beneficial to the modern state, that it so intensely sees to the success of the credit business and has banks operate with a credit-money that it has brought into the world and that, through its use, becomes the representative of capitalist wealth. For this is the way the state makes use of its capitalists’ competition for maximum private enrichment as an unbeatably effective productive force for reproducing and increasing its own power. And it matches this state of affairs completely that the exercise of power is both criticized and justified in a democracy by way of a budget debate, and that on balance — at least in peacetime — it is the taxpayer, that celebrated political creation, that decides not only how popular a government is but also whether it may stay in power.

b) The state as customer of the credit industry — Credit business as an instrument of state power

The state meets its constant and far-reaching monetary requirements by participating in the finance business, following this business’s rules. It uses the power it has given this industry — to use promises of payment as a means of payment and to carry anticipated cash flows in the books and market them as existing monetary assets — for itself.

On the example of commercial credit, which allows companies to continue their business free from the contingencies of market developments, the state makes use of the money trade’s control over society’s payment transactions in order to be liquid at all times. After all, it has deliberately structured its revenue to come in according to the course of capitalist business. This means the flow is not particularly reliable, the amount varies, the higher a payment is the greater the delay, etc. As a customer of the banking industry, the state makes its budget independent of the current course of business in its tax-paying society, makes sure it constantly has at its disposal the funds it needs for its rule, and thus ensures the unbroken continuity of its rule. Moreover, modern governments arrange their budgets so that the costs they burden their national economies with are as low as possible. So they always have a shortage in their coffers in relation to their extensive needs and have notorious deficits to post. With a perfectly clear conscience, they schedule the payments for government goods and services whose benefit lies in the future so that the cost to their budgets is likewise incurred in the future. Following the example of lending between banks and investing companies, they use for such purposes short-term bridge loans and finance capital’s achievement of fictitious capital: they pay with debts that banks credit to themselves as claims or market as securities. In this way, they make use of the private finance industry as an indispensable instrument for the operation of their rule.

With this procedure, the state makes itself a participant in the competition that determines the banking business and rages on financial markets. When it issues debt securities, it subjects itself, that is to say, its financial needs, to the valuation that speculators are constantly carrying out by comparisons with other issuers of securities and that they bring to bear in practice in the form of interest claims. The fact that the state is not a capitalist enterprise, so that the bonds it issues and loans it thereby obtains are not intended for any profitable use, is no obstacle to the community of investors. They still value state debts as promises of future returns and treat them as fictitious capital like any other bond. Instead of trusting in the issuer's business, in this case they trust in the sovereign power that has access to everything turned out by the capitalistic society it has dominion over. They are quite confident that it will be able to procure what it owes and deliver on its promises, more reliably than commercial debtors dependent on market developments. At the same time, financial markets, when claiming interest and constantly reevaluating government bonds, are definitely still critical when it comes to the soundness of the indebted sovereign and the earning power — proved in the past and anticipated for the future — of the total capitalist business the sovereign has access to. Another factor they consider is the level of debt that the state borrower has already incurred. After all, every repayment obligation and interest promise has to be met — from future tax revenues or else from new, additional loans, for whose soundness creditors must again be able to rely on the sovereign’s power and the wealth of its nation. On the other hand, speculators valuating government debt always find it a positive factor that a state has a central bank, the authority that creates the money banks fall back on to refinance their loans and that they can sell the state’s own securities back to at the promised value if need be. The comparisons that financial markets make between these securities and those of the country’s commercial issuers thus combine a fundamental recognition of state sovereignty with a critical assessment of its country’s economic capacity and the use the state makes of its power to access wealth. And these comparisons combine this appraisal with the certainty offered by the central bank as a sovereign creator of money and with the value of the money issued by the central bank, this value depending in turn on how the money is used as finance capital. The result basically turns out to be, not surprisingly, that the valuation of the national debt, already the largest item in a nation’s fictitious capital, sets the minimum level for interest claims that corporate bonds have to compete with and that guides speculation on the stock market.

In this way, the financial industry renders the state the service expected of it. It lends the state money and buys and markets its debts, thereby bringing about their recognition as something they are actually not at all, namely, self-expanding money capital. It gives the sovereign liquidity using all the tricks of its trade.

c) Productive force and unproductive government debt

When the state uses the financial industry for its money needs, it does not take anything away from anyone. Instead, it strengthens the industry's credit-creating power in a special way. On the one side, its debts and the various debt instruments it places on the financial market are a welcome boost to the banks’ business. They are especially welcome because such assets are easy to sell at any time and a good collateral guarantee for creating more credit. On the other side, in the government’s hands they create an additional ability to pay over and above the sums of money the tax-collecting state pockets from the money realized on the market. The use of these government securities directly gives rise to additional business and, in the hands of the financial institutions that transact this business, to additional deposits that can be used for creating more credit again.

However, this increase in credit-financed ability to pay comes at a price. For one thing is clear: the credit the state raises and that its business world treats as money capital, on the one hand, and exploits as well-funded demand, on the other hand, doesn’t pay off. According to all the valid criteria of a sound capitalist debt economy, an advance for an expansion process is supposed to make credit act as capital. The ability to pay that the financial industry makes available to the state does not serve in its hands to create a salable commodity that will earn on the market what its creditors can book to their accounts as their fictitious capital. What is being turned into money is in reality nothing but the state’s power over the production of capitalist wealth. This money cannot be economically justified, either, by the taxes the public power uses to finance most of its regular expenditures. At best, future tax revenues act as a guarantee for current debts; and this kind of guarantee is not intended to be ever invoked in practice. Government debt is rolled over, including the accruing interest obligations. In the twenty-first century it is normal for this rollover to exceed any amount that might conceivably ever be paid back. This is usually not a problem; at least not as long as the state’s maintenance of its nation’s business, despite the budget deficits, contributes to an economic growth that increases not only society’s wealth but also the funds the tax authorities can get hold of. In other words, what counts is that the resulting relation between capital accumulation and public debt is such that financial markets let it pass for economic justification of the fictitious capital from state hands that accumulates with them. But what finance capital definitely takes critical note of and regards as negative is the difference between the accumulation of real capitalist power of disposal and merely nominal economic growth. This is a difference it brings about itself by creating credit so as to promote its own growth and thus financing a growth that always includes quite a bit of mere price increases that result in legal tender losing value. It makes a very substantial contribution to this effect by honoring state budget deficits as money capital and providing the treasury with ability to pay on this basis. Looking at the same thing from the other side, the state’s capitalistically unproductive need for money provides a strong incentive and a lot of material for the financial sector to be constantly hyperactive, making every effort to finance more growth than actually takes place.[3] At the same time, or preferably even in advance, this sector reacts with perfect business sense to the effect it increases, by recouping itself with higher interest claims.

This need not necessarily worry the state or the economy either. After all, proactive and reactive price increases and interest rate hikes that reduce money’s capitalist use-value are basically proof that all important players in the economy are dealing with the notorious surplus of credit creation over capitalistically successful credit expansion in the way that serves their business. From the standpoint of the national budget, a depreciation of legal tender automatically reduces the accumulated public debt in relation to the figures representing the economy and its growth, and can even have the effect of clearing debt a bit. But the contribution that public debt makes to capital accumulation’s insufficient justification of national credit and consequently to the fall in value of the nation’s monetary unit — a contribution that can never really be calculated, as crucial as it generally is — does show one thing. Even the way the state finances itself by way of credit, it does not eliminate the costs of its sovereign activity for its society. The saving in taxes it bestows on society wears away the value of all assets existing in money form as well as the buying power of all money incomes. This damage is of course distributed extremely unequally in extreme conformity with the system over the business world, which imposes price increases all around and can also finance them, albeit at rising interest rates, and over the more numerous rest of capitalist society.[4] Nevertheless, the contradiction of the state’s need for money both promoting and burdening the national economy cannot be resolved with a debt-financed budget alone.

Digression: The great controversy over the state financing itself by creating money — and what it reveals about the nature of money

When a state finances its budget by borrowing, it at the same time stands by with its central bank as its creditor, which refinances the purchase of government bonds by commercial banks as needed, i.e., converts the state’s deficit into money. When the central bank actually does that and does it on a large scale, then it is suspected — not entirely without reason — of straying, with this part of its money creation, from its mandate to serve the banking industry’s liquidity needs that arise in the normal course of its business. Instead, the central bank is said to be satisfying the state’s money needs in a dirty way not compliant with the market, and causing inflation rather than capitalist growth. As long as the private business world is brought into the relation between public debt and central bank, and banks have their own economic reasons for treating government bonds as part of the fictitious capital they stock financial markets with, the matter is still considered to be in keeping with the rules. What is properly forbidden, impermissible economically or even legally, is the central bank directly financing the state budget by ‘printing money.’ This ban is based on — apart from all kinds of theory — the experience that a state that meets its money needs in this way is disregarding the capacities of its national economy and undermining the power of money to make capital grow, ultimately ruining it. On the other hand, there is — besides alternative theories — the other experience that even such money printed without any economic justification monetizes the goods of capitalist companies just as well as any other money, i.e., rewards investments with returns and thereby creates growth. In advance there is no way of knowing to what extent this growth will be eroded by inflationary effects, if at all.

As far as the experiences invoked by advocates and opponents of the state’s direct self-financing are concerned, it’s the same as with all questions of capitalist competition: it depends.[5] In all events, whatever way the central bank supports the marketing of public debt as money capital, this is the means of choice for a government to overcome the limits that taxation puts on to its ability to access its society’s wealth. This freedom always includes the possibility of the state’s credit-financed access overburdening its society’s capitalist capabilities, which usually shows itself by the financing going more into price increases than into growth. It is the relation between the mass and rate of capital accumulation in the country, on the one hand, and the volume and use of government loans, on the other hand, that determines which effect will predominate. Is this relation such that the country’s credit trade is able to incorporate government debt into its productive cycle of capital advance, business, and economic justification of the advance through successful profit-making, thereby making the country’s economy grow on balance? Or is it such that the credit trade refinances its loans to the business world and the state, not out of the capital accumulation that its loans are not sufficiently fueling, but through the central bank? By such means it is only nominally inflating the economic cycle while actually even shrinking it, as far as money’s power to increase its capitalist command is concerned, so that in the end society does not even manage to simply reproduce itself.

When it comes to the theoretical dispute over which of the two alternative financial policies for promoting growth is right or wrong — with ‘Keynesian’ monetary theorists facing off against ‘neoliberals’ — the theoretically interesting point is that it cannot be resolved, because it pits one side against the other of a contradiction that actually exists. These thinkers notice the peculiarity of public debt. Credit is being created and spent in order for the power of advanced money to get the economy moving, i.e., to boost the accumulation of capital. But it is being spent not as a capital advance, i.e., not with the purpose of successfully expanding and then flowing back with a surplus to the credit creator and user, the state, but rather as an expenditure that, despite possibly bringing forth capitalist fruits elsewhere, remains without revenue to justify it — as a constantly increasing deficit — in the government’s cash books. The position held by the one side in the controversy is basically that this growing deficit is no problem because the state power does not have to listen to any criticism from creditors when it lends itself money in its capacity as central bank, i.e., when it is its own creditor. The deficits are recorded at the central bank; the money issued is earned by society like any other and generates growth. The argument — whether spelled out or not — is that state power is creating the power of money by law. The position held by the other side is — again regardless of the specific arguments used — that a capitalistically unproductive state deficit must not simply persist and be turned into money by the central bank because an increase in ability to pay that is not based on any business, i.e., has no matching increase in purchasable commodities, is economically unfounded, reduces the value of money accordingly, and thus gradually expropriates every money-owner. The argument is that value must be created through legitimate business alone, ultimately that commodity value must be ‘honestly’ produced and is merely represented by money. Both positions are equally true and false at the same time. The latter one already ignores that money is value in the independent form of an object representing capitalist wealth alongside and separate from value’s origins in commodity production. And it definitely ignores how the power of money takes on an independent form in credit, existing and taking effect as a state-guaranteed legal relation. The other position ignores that the only reason why money and credit represent economic power, i.e., control over work and access to material wealth, is that they are the form in which society’s means of life are produced and the workforce reproduced at all. They are a command relation in objectified form, which the state sanctions with its power but does not replace. And what the one side ignores, the other side sets up as absolute.

The resolution lies in the contradiction of the capitalist mode of production, in the absurd way it creates the material wealth required for society’s livelihood. The economic purpose for producing wealth is not the wealth itself, but rather the antagonistic relation of having exclusive disposal over it. The credit-money the state creates strictly on its own authority is definitively the pure power of command — but over an economy of property, which produces and reproduces means of life and means of production that embody material power, i.e., the power of private property, and the complementary material powerlessness of the bulk of society. This economy of property is the origin of money’s command over work and wealth, and also the source of the command the state wields when governing with money, no matter how much of it is just ‘printed.’

A modern state does not need to be aware of this contradiction — what use would it even have for such knowledge! — to cater it it. This can be seen by the form the state gives the contradiction. It distinguishes between economically taboo direct recourse to the central bank for financing its capitalistically well-intentioned budget deficits, and usual and acceptable recourse to the capital market, which includes licensing its main players to have the central bank refinance their acquisition of government securities. On the one hand, this distinction appears to be artificial and self-deceptive, being constantly violated whenever the need arises, but, on the other hand, it is considered tremendously important. With its standpoint that it can only finance its budget through the devious route of private credit business if it is to conform with the system, the modern state is insisting on the contradiction that power equals wealth in its society. Accordingly, it won’t allow any doubt — on the one hand — that its promises of payment (bonds) and the means of payment (money) issued for them have the quality of money capital. It underlines its sovereignty over money, capital, and credit, and thus their character as being derivative of its sovereignty, by coolly being prepared to redeem its promise any time using money it produces itself. At the same time, it insists just as imperiously — on the other hand — that the promises of payment that are considered money capital under its sovereignty, including its own bonds, are not empty promises but must be redeemed economically one way or another, and that the products of its central bank’s press are perfectly good from a strictly economic point of view, even without the force of law. None of the liberties it takes are supposed to alter the fact that the basic lie of finance capital that it makes use of (promised returns are as good as real returns) is no mere swindle but rather the prevailing practical constraint. This constraint really does prevail, its effect actually being so strong that money and credit suffer when the state employs this capitalist achievement while ignoring the fact that promises of payment are ultimately only worth as much as their redemption — or in its own case, as much as its promise of their redeemability which the private financial industry accepts.

3. Necessity and ideal of governments’ growth policy: Success by exerting a controlling influence on the money and credit business

The goal of keeping its own expenses from burdening capitalist growth, instead proving itself as a promoter of successful business, is pursued by the state in special areas. Through tax and economic policies, stabilization and monetary policies, it attempts to steer its nation’s economic growth on a path to success. In the process, it arrives at cost-benefit calculations that are sui generis. Their implementation involves making use of the financial industry, constantly runs into budgetary issues, opens up new business opportunities for banks — and once and for all makes clear what the relation between state power and financial business is.

a) Economic growth as reason of state

The state looks after its nation’s capitalism with its law, and credits it through its central bank’s transactions with the banking world, in order to make use of its accumulation of capital as the source of its power. It thus makes its freedom of action as a state, the use of its sovereignty, dependent on the course of business of the free market economy, which it authorizes to employ the nation’s work and wealth for strictly business purposes. The state makes itself dependent on the growth of private wealth, which it nevertheless restricts one way or another: directly by taxing the use of this wealth, or indirectly via the effects that its debt has on the value of the money it gives its business world to earn.

The state has no means to cope with this contradiction other than those it uses to create it. One is the central bank, with which it formally recognizes and materially sets off the private creation of credit and money. The other is its budget, with which it meets its own needs and the acknowledged requirements of a functioning market economy. So, in the interests of its economic power and thus its freedom of action, it sets itself the task of applying its credit-money and shaping its budget to bring about a capital growth that offsets the financial burden it puts on its economy and capitalistically justifies its debt. Everything it does is subjected to the criterion of promoting growth, and developed wherever possible to become part of a policy aimed at steering the nation’s economic activities on a successful course that businessmen would not achieve on their own. While doing so, it generously overlooks the fact that its growth calculation adds up outputs (which its policies also treat as an aggregate as far as possible) that a whole lot of private companies are achieving for themselves and their profits not just interdependently but above all in competition with each other. It also places itself and its growth-promoting agenda above the contradictory collaborative effort of the capital market, which turns over, and thus in practice represents, society’s total capital in its fictitious form. Beyond all antagonistic individual interests and enrichment strategies, it wants to have businesses earn more and more money and accumulate more and more financial power. And it of course wants them to do this without itself interfering in their business policies or encroaching on the freedom of the market. So it constructively develops the contradiction it wants to resolve. Formally speaking, it launches the project of steering the free market economy without subjecting it to its planning. As to the substance of this project, it is trying to use the financial power it procures to increase its companies’ business success beyond their own ability to make profits.

So the political sphere makes itself liable for economic success that free business is supposed to achieve out of its own profit interests. And it utilizes the financial sector to fulfill this responsibility it has defined for itself.

b) Central-bank policy for a tailor-made money supply

The central bank is enlisted by the government as a growth engine. In many cases its charter explicitly mentions the task of working toward full employment, which everyone correctly understands to be the mandate to create favorable growth conditions for employment-offering firms. This is in fact perfectly all right since credit always provides a growth-conducive capital advance, which the central bank has to regulate and ensure through its refinancing relation with the private banking world. From the point of view of promoting growth, this function becomes the government’s mandate to pursue a monetary policy that stimulates the credit-creation business and frees the rules this business has to follow from any inhibitory or restrictive elements. At the same time, it is of course clear that it is solely up to enterprising capitalists to take up credit in accordance with their calculations for success, and it is up to the banks to speculate on growth and accordingly finance growing advances. That limits the effectiveness of an active central-bank policy from the outset, on both sides. Even the most favorable financing terms and conditions only work in line with the state’s growth policy if the nation’s companies are themselves betting on expanding their business. Attractive terms may promote the corresponding investments, but the conditions themselves don’t bring anything about. And if they are taken advantage of to expand business operations as intended, this by no means ensures that the result will comply with the government’s interests. The particular state of the market or the economy may cause a growth-oriented central-bank policy to promote not so much the desired ‘upswing’ as its ‘downside’: a ‘financial bubble,’ ‘inflation,’ unwelcome ‘excesses’ in the money and credit business. The central bank’s political taskmasters are so familiar with such counterproductive effects of a basically desirable ‘easy-money policy’ that they regularly lay down as their central bank’s second or even first mandate that it protect the value of the nation’s currency.

The official money managers apply themselves to their contradictory task. To them, inadequate or a complete lack of growth, just like the fear of a financial bubble or inflation, is a challenge. It is a problem of readjusting the money supply — that parameter of the nation’s credit business that they don’t really have under control either, but can influence. They operate with open market operations, interest rates, minimum reserve requirements, etc., in order to approach the ideal of a money supply that is just right. They draw on the experience that interest rates during booms are high but not high enough to keep the value of money stable, prevent the economy from overheating and the credit business from forming a bubble, normally to be followed by the bubble bursting and business collapsing. For that reason, the central bank has to keep the liquidity needed by the banks tight enough that they cannot expand their lending business at will, and expensive enough that they are sure to lend only to rock-solid enterprises.[6] However, it must also change both of these regimens and make its money available more amply and cheaper at just the right time, in order to prevent the inevitable decline in growth from leading to collapse as feared, or the devaluation of money from turning into the even worse evil of deflation. Opinions differ as to what regime the central bank should choose. The competition is not just between received academic opinions, but above all between divergent political positions. Those who advocate a restrictive supply of liquidity to the banks in the interest of rock-solid credit business and stable monetary value are always opposed by a faction who call for more freedom and enhanced incentives for banks to create credit in the interest of brisker growth and easier borrowing by the public sector, this too for the sake of a continuous upswing. And each of the two sides has the right prognostic concept for its approach, and the corresponding strategic plan for balancing out credit supply and demand and for catching the point where the central bank is still promoting genuine growth without yet contributing to a general rise in prices, and is ensuring stable prices without stifling growth.

But no matter what central bankers do to steer the economy by influencing banks’ liquidity management — credit-financed capital accumulation goes up and down caring precious little about their plans and good intentions. Their monetary policy is therefore notoriously accompanied by the accusation that they have reacted too late again. Instead of steering the economy properly and effectively, the state bank has merely profited off the high level of interest rates in the boom, then dealt the final blow to business that was already stagnating, only to fail to raise the lowered interest rates again in time to prevent the next economic bubble and surge in inflation. Central bankers take this criticism to heart the same way it is meant: they devote their accumulated wisdom and Nobel prize–worthy monetary theories to their calling of skillfully ‘leading from behind’ to steer the private credit business on a course of lasting success. It is part of their job to fail.

c) Budget funds for the growth of their source

To ensure that the well-intentioned business conditions its central bank’s monetary policy establishes are properly taken advantage of, the state gets involved by orienting its budget policy accordingly. It wants to be able to afford everything it needs without just being a ruler freeloading off its society, but rather by managing its polity’s budget, the idea being that capital benefit from the national business location, the location profit accordingly and consequently the state, too, as its guardian. For that reason, and to that end, it approaches its national economy as an investor, using its expenditures to make an advance for nationwide growth and deriving its revenue from the business it thereby leverages.

This standpoint dominates, whether in a positive or in a negative way, all the budgetary items the state uses to finance the necessities of its rule. The state makes a fundamental distinction between ‘consumption’ and ‘investment’ expenditures, without the allocation to one or the other category being clear in individual cases. The first category definitely includes the expenses the wage-dependent masses incur for their support agencies by always having such a hard time surviving in a class society unless funds are redistributed and allocated. This is where there has to be some serious saving of outlays. Social welfare funds must be kept on a short leash, expenditure must be ruled by the maxim that you can’t spend more than you have. Any payments and programs that go beyond what is currently defined as absolutely necessary are considered ‘largesse’ and, together with a whole host of other items, subject to funding restrictions. The general idea here is not that a good cause justifies the required expenditure of money, but rather if there is a sum that might be spared that dictates the appropriate definition of the cause to be attended to. Things are different when it comes to the outlay for creating and maintaining what the state calls ‘infrastructure’ and counts among its indispensable tasks. Here, it is the criterion of importance for more and future economic growth that determines the hierarchy of projects that can be exempted from funding restrictions. Thus, fully respecting the business world’s notion of profitability, the state has it produce means of communication, transport routes, and energy, in order for some private companies to make money offering lucrative services, and others to make money utilizing low-cost services. It promotes science with a view to future growth, which all experience of capitalism shows to be unsustainable unless technical progress goes on and on. So it also likes to keep its funding in proportion with that its intellectual elite is able to raise from private companies. It invests in education and training in order to provide its forward-looking companies with the necessary personnel, and to enable the young to make themselves useful as needed rather than sinking into poverty. ‘Investment’ expenditures in the narrower sense are a great variety of aids that make ventures worthwhile, thereby making them contribute to the nation’s capital accumulation when they wouldn’t by the purely finance-capitalist calculus of probability. By providing grants, subsidized loans, sometimes only guarantees that relieve a company of the usual need to prove its profitability or that amount to insurance against the notorious risks of competition, the state stimulates business requiring a capital advance that is too large for private investors and a turnover time that is too long. Subsidies will make some companies profitable that are important for the nation and its regional or structural policy, i.e., for its ‘future’; tax rebates, inexpensive land from the state, research contracts, etc., might do the trick. At some investment cost, the state can also convert companies that, for some historical reason, have ended up in its hands into profit-oriented businesses and list them on the stock exchange. Here, they enrich the portfolios of affluent investors, which already benefits capital growth more than they did under civil servants’ control. Such investment is accepted by politicians as costs resulting from state intervention and as aid given for the last time to start up a capitalist success story.[7] And a modern government, out to offer not merely one-time business opportunities but a lasting source of income, comes up with ‘public-private partnership,’ which offers private investors the possibility of co-financing suitable budget items and in return enriching themselves with incoming fees or similar payments that thus take on the form of a regular return on their investment.

All this of course fails to produce a stable, lasting boom, which politicians realize at the latest when the growth they have promoted has — once again — led to the quandary of the accumulated capital running out of opportunities for further expansion. Then the expected growth fails to materialize, and the economic cycle enters its downturn phase. Responsible policymakers will now no longer be content to gear the financing of the state’s agenda to the growth effect they hope their relevant expenditures will have. They must be, and are, prepared to address the purpose of capitalist moneymaking directly and to spend money for it to be earned by the private business world. They hit on suitable objects — construction projects being particularly popular. Such expenditures belong to the repertoire of ‘anti-cyclical economic policy,’ as do monetary policy measures that the state uses, in its capacity as central bank, to boost capital accumulation through cheap loans. This is certainly directed more to trying to master the overall economic crisis of the moment than to the prospect of ever getting a political grip on the fatal seesaw of booms and busts in national business life, much less overcoming it. So the corresponding measures that no state fails to take are always accompanied by criticism: such costly ‘consumption’ offensives on the part of the state can result at best in a ‘flash in the pan.’ The sad fact is that once the government contract is completed the business is over, and there won’t be a proper upswing until a great deal of capital has been destroyed to bring back opportunities for the surviving capital to expand profitably and thus for the creation of credit to be worth it again. Even though governments repeat this experience so often, they insist on borrowing in a big way particularly for such initiatives to stimulate the economy. They are sure that this is just the right case for government debt to act directly as an engine for capital accumulation and pay off like an advance for a successful business.

Whether that works, in this case or in general through a government’s budgetary policy aimed at promoting growth, is tested in practice on the financial markets. This is where judgment is passed on whether the state has in the final analysis only increased its debt level or actually revived the accumulation of capital in the country. And the markets pass this judgment the way they are always valuing securities anyway, i.e., in the form of the interest rates they charge or base their trade in fictitious capital on. This speculation issues the decisive judgment on the prospects for success, i.e., the capitalist effectiveness, of the nation’s credit that the financial industry itself creates. It also decides on the quality of the nation’s money, namely, to what extent it quantifies growth or mere inflation and to what extent it loses value when it is increased. Thus, finance capital informs the state of how things look for it and the economic prospects of its power.

Additional remarks

Even in the negative extreme case of a ‘hyperinflation’ that does away with all of money’s power to increase itself, a state continues governing with money. What it doesn't get from its society, either through taxation or by way of credit speculation, it has its central bank create. The central bank is then definitely no longer serving the liquidity needs of a proper private banking business, but solely the state budget. This money now only represents the will and might of the supreme authority to acquire the necessary means of rule at the expense of the reproduction of its society’s wealth. If a state commands a national market economy that is still capable of regenerating itself somehow, it is left with a currency reform as a way out. It can annul its money, its debts denominated in that money, and the corresponding monetary assets, and try to relaunch the money-making process by introducing new credit-money.

d) The economic justification of political rule: good money

The modern state puts its budget and monetary policy explicitly and consistently at the service of the nation’s finance capital, promoting its performance and business success. This it does because it wants finance capital’s operations to serve the capitalist power of its own money, capitalistically multiplied money to serve its own needs, and the economic power it thereby gains to serve its credit-mediated promotion of growth in its national business location. Finance capital, for its part, accomplishes what the public power is unable to do under the laws of the property system it has established. With its credit business and its functional substitute for money, it makes the state’s money a source of capitalist wealth, applying and economically confirming this money as the objectified power to increase itself. It profitably exploits as fictitious capital the debts the supreme authority finances its budget with, thus economically justifying the freedom of action the state exploits. With its financial might, the money industry represents the nation’s capitalist capabilities in a strong, universally applicable form. Each side, finance capital and state, pursues its cause in its own interest and in accordance with the logic of its cause, while being dependent on the other side, and making use of it for itself.

The success criterion for this combined action is the money generated, in terms of its quantity and its quality. This money sums up a nation’s capitalist capacity and the economic might of its ruling power. So it is precisely what nations compete over in the modern global economy.


[1] Legal policy makers in a bourgeois state can certainly not be thought to waste a lot of theoretical effort on the concept of property or the contradiction of utilizing someone else’s property for one’s own enrichment (see chapter I, section 1b including the “digression” following it). But they are all the more understanding when it comes to dealing with the consequences that the peculiar who-is-giving-what in a loan relation has for the right to exclusive disposal.

[2] Banking legislation explicitly allows banks to carry claims from lending, securities investments, etc., in the books as assets, and juxtapose them with liabilities, i.e., claims on the bank, as their equivalent. Only on the basis of this recognition of the equation between (granted) credit and available capital does banking law enact precautionary measures that reflect and at the same time deny that this is an inequation. Assets have to be backed with the bank’s own ‘equity’ capital in accordance with their risk weighting, which since ‘Basel II’ is no longer only done in terms of type of debtor (state, central bank, private-sector bank, private company), but also in terms of its individual financial standing. For the required equity, banks may in turn use their claims when rated as safe.

[3] Market-economy experts like to conclude from this that the state is the main culprit behind inflation, if not the only one.

[4] In the extreme case, a quite exceptional price increase is the way the state power impedes the majority of its citizens from procuring the necessities of life.

[5] Especially in the ‘one world’ of the twenty-first century everything revolves around the competition between nations for the world’s money and around the standing of their national credit-money, as well as the means they have for succeeding in this arena. That is the subject of Chapter IV.

[6] Traditionally, central bankers have assumed that commercial banks create and grant too much credit rather than too little, and declare tightness to be the primary maxim of their monetary policy. Thus, the European Central Bank (ECB), in its November, 2008, report on The Implementation of Monetary Policy in the Euro Area, defines its mission as, “stabilizing money market interest rates and creating (or enlarging) a structural liquidity shortage,” that may be helpful in improving the ability of the Eurosystem to operate efficiently as a supplier of liquidity. Now, after years of financial crisis, the ECB instead needs a ‘liquidity glut’ in order not to completely lose its influence on the euro-credit market. Of course, the result of its influence — apart from an oversupply of cost-free central-bank credit — is beyond its control again. That’s the difference between a ‘condition’ and a ‘cause’…

[7] Progressive social policymakers have also come up with the idea of basically remolding the area of poverty management, at least the departments handling old-age poverty and health care for the masses, into a business opportunity for insurance companies. That would save wage incomes from having to be redistributed, which companies have long seen as an unreasonable burden in the form of additional labor costs. And it would pay off for an entire section of finance capital; then any tax money that might have to be paid would be doing a really good deed there.

© GegenStandpunkt 2021