The Power to Create Money out of Thin Air is a review of Geoffrey Ingham’s book, Capitalism (Polity Press, first published 2008). However, like all the best reviews, it has become a hook on which to hang discussion of the author’s contemporary pet themes. Here, these include primarily, capitalism’s ‘elastic production of money’. However, Pettifor also takes the opportunity to explain why misunderstanding about the creation of money is so widespread, and why orthodox economists are mainly responsible for the confusion.
Out of this discussion arises a further one about ‘fractional reserve banking’ – currently at the heart of debate surrounding an IMF Working Paper by Kumhof and Benes. Pettifor then looks at the theory and policy frameworks that prevent (or claim to prevent) co-ordination between monetary and fiscal authorities.
The review challenges, too, the widespread assumption (long promulgated by the enemies of labour, but also held by others) that wage claims by trade unionists caused, or led to, the inflation of the 1970s.
But Ingham’s book raises important issues which are and will be at the heart of politics and economics in 2013: with a deeper understanding of capitalism’s ability to create ever expanding amounts of credit-money, how does a democratic society once again rein in, regulate and subordinate the private finance sector to the wider public interest? How does society regain control over the public good that is credit and a sound banking system, and use both for financing society’s most important needs – including the need to tackle the threat of climate change?
And finally, how can public goods (including liquidity) avoid being confiscated by the finance economy? And how can they be restored to public accountability?