Crypto-Current (052)

§5.58 — Central banking did not begin with the Bank of England, in exactly the same way that terrestrial capitalism did not originate among the Anglophone Powers. This is to say that a comparable ‘usurpation of destiny’ – in the full ambivalence of the term – is evident in both cases. Fate was settled on an English path, which took work.[1] An obscure opportunity for supra-national influence was captured, and became self-consolidating, through convergence. Which is to say: the occasion for financial elaboration found its strongest expression on the supra-national line. It was, from the beginning, world-historical.[2] In the final analysis, it has happened to peoples more than from them. Teleological instrumentalization of the English-speaking peoples, as agents of global process, has been no less basic than their adoption of new financial technologies. The two developments have been one. Central banking has been nationally functional to the exact extent it has been internationally competitive, and thus globally compelling. It won wars that mattered, first for the Dutch, then for the English. By the time the United States inherited managerial responsibility for the world order, its principles of financial sovereignty had been firmly set in place. The task of managing the national debt was, as a matter of concrete practicality, a military logistics function. It assured war-fighting capability at the highest level of strategic abstraction. Whatever was needed was made affordable. The consequences were consistently dramatic. Because the states that quickly took the lead in central banking were – not at all by coincidence – the successful vehicles of a supra-national (or global-revolutionary) undertaking, nothing like a simple nationalization of money was ever actually happening. Rather, the production of international reserve currency was becoming reflexive, and institutionally self-aware. This does not make monetary nationalism a mere illusion. The organizational level of the nation state did in fact become increasingly dominant, and all the more so when international adventure was at stake. It did not, however, control its own context. The supra-national process preceded, exceeded, and catalyzed all national developments, because the battlefield was the arena of selection. The history of central-banking is bound far more tightly to the production of world-money than happenstance could account for. The global revolutionary mission was primordial (i.e. essential, or intrinsic). In contra-distinction to the financial myth, sound domestic money management did not simply come first.

§5.581 — The Bank of England was incorporated by the 1694 Bank of England Act. However much centralized monopolization of bank note issuance now looks like the basic destiny of the institution, it was only very gradually established, over the course of more than two centuries of subsequent legislation.[3] It was not, therefore, a guiding project (in anything other than an obscure teleological sense). Monetary nationalism was only a slowly emerging outcome. It was fiscal nationalism that provided the primary imperative. Twin agendas were originarily complicit, directed at once to domestic financial stabilization and to state revenue-raising with a definite outward, geopolitical orientation. The incorporation of the Bank, then, marked a further step in the integration of modern banking with sovereign political power.

§5.582 — The much later US central banking Federal Reserve System is far more arcane than the Bank of England. It dates back only to the final days of 1913, as a creature of the Federal Reserve Act, through which Congress announced an American public (i.e. national) monetary policy. The institutional origin of the Federal Reserve is explicitly inseparable from a post-liberal ideology of money, which conceives it as an administrative tool, to be placed in the service of national economic objectives (the macroeconomic suite of full-employment, stable prices, and moderate interest rates).[4] The British experience had been educational, in this regard. Money had been re-minted as an imperial project, with twin global and domestic faces. Where the Pound Sterling had found itself elevated by fortune to the status of imperial scrip, the US Dollar now ventured onto the same path of geopolitical fatality with greater self-consciousness. The relation to war economy was effectively deepened. By the early 20th century it was obvious to all observers that the primary Anglophone world power could have no (merely) national interests that were not immediately matters of global geostrategic and ideological competition. The US Dollar could only be an architectural pillar of world order. To trust it was direct psychological investment in a planetary destiny.[5]  

§5.583 — Under conditions epitomized within the era of matured central banking, but by no means restricted to it, monetary value reduces ultimately to a political substrate, where confidence is maintained by evidence of effective power. This registers a critical inversion. The capacity to protect property begins to ‘appear’ – i.e. to trade – as its essence. Recognition of the ‘protection racket’ as a mode of criminal enterprise closely coincides with this development in time. Investors – including even mere holders of currency – have been re-sensitized to regime risk, which sub-divides into two broad (but intricately inter-articulated) categories. Firstly, the 20th Century has dramatically featured sheer expropriation, of the nationalist-communist type. In response, assets of any kind now feature some degree of Marxist discount. They are priced with a measure of definite regard to their vulnerability to government seizure, or ‘revolutionary redistribution’, which automatically increases yields in the most hazardous cases. The antithesis is practically assimilated. Secondly, and more subtly, political authority has been increasingly formalized as an asset class. No longer merely devoted to the protection of property, whether to a greater or lesser extent, it has itself become an object of comparatively direct financial investment. Government bonds offer a share in imperium. They securitize regime resilience and demographic purchase, or geopolitical capability.[6] Under conditions of global stress, most conspicuously, the lender of last resort transitions into a debtor of last resort, and thus a savings facility, socializing deferred private consumption through the medium of public financial obligations. The Federal Reserve Note is nothing less than a wager upon the future of America, its central government, and – most specifically – its taxation power. By extension, the exceptional global acceptance of the US dollar is an investment in American world order. All these relations are analytically reversible. Geopolitical crisis implies currency crisis, or – still further – potentially follows from one. The coin has two sides, and can be easily flipped. ‘Derealization’ into pure credit only accentuates money’s ambivalence. As it is incrementally demetallized, money takes the form of a promise, whose credibility is founded upon the public image of state power, as fully-expressed within both domestic and international contexts. Under such circumstances – especially when a global hegemon is in the spotlight – the stakes of a ‘monetary revolution’ are not easily over-estimated. Nor are its positive implications readily anticipated. The nature of money has long ceased to be separable from the order of the world.[7]  

[1] Within six years of the 1688 ‘Glorious Revolution’ and the installation of the Orange monarchy, the Bank of England was born. It is difficult, therefore, to miss seeing a transnational socio-historical project at its root. Many nations undoubtedly find a way to frame their fate exceptionally, within the terms of a mission exceeding common geopolitical interest. A country is thus conceived as a vehicle for something other than its people. The Glorious Revolution illuminates the English version of this. Protestantism and – more profoundly – capitalism is the cargo. Neal Stephenson’s ‘Baroque Cycle’ of historical novels captures the process in its cultural essentials. National independence, holy war, and unprecedented financial technology composed an original compact system. Catholic ‘conspiracy theory’ in this regard is not unwarranted. The hostile perspective of an E. Michael Jones brings out the contours of this new thing more sharply than its liberal defenders can. It was built so that schismatic theology might prevail in global conflict. With all due diligence to the hazards of unfettered teleological apprehension, it remains near-irresistible to ask: What was the Bank of England designed to finance? Nothing less than a planetary revolution could count as an adequate answer. The Dutch Revolt or Eighty Years’ War (1568-1648) had set the template. Advanced financial infrastructure offered near-miraculous strategic geopolitical advantage. The defeat of the Spanish Empire in the Dutch independence struggle meant that the culture of modernistic schism, or autonomizing capital, would not be stopped. No future foe would present comparable challenges, whether estimated in terms of the apparent balance of forces, or even the clarity of ideological decision. Globalization in the ‘neo-liberal’ sense was henceforth implicit, dominating the historical horizon of the world. All of its subsequent contestants would be compelled to articulate their resistance within a framework fundamentally shaped by the liberation of Capital, and benchmarked to it.  

[2] There is no doubt a Globalist Idea and most probably several. The Oecumenon tilts towards one. (One is never less than simply compelling.) It would be precipitous, nevertheless, to assume that the supra-national points unambiguously towards global unity. Delocalization and globalism are synonymous only under strained dialectical assumptions. It takes more than an entire planet to complete the logical sense of a globe. Comprehensive globality has no possible empirical instantiation. Proselytizing religion is its natural territory, and it evokes concreteness only to mock it. From the perspective of oecumenical globalism, the empirical process necessarily underperforms at oversight. It is, critically, excessive in its singularity. Ethnic peculiarity, in particular, inflects it. There is no side-road back to the universal, even through a conception of ethnic peculiarity in general. Capital escapes exactly once. It therefore shrugs-off generic characterization. Concretely, within modernity, ‘supra-national’ has meant predominantly Anglophone. In addition, the requirement for expertise at delocalization almost sufficed in itself to ensure significant Jewish involvement, which the Protestant revolution notably facilitated. In can therefore be insisted, on grounds exceeding firm analogy, that globalization is not a project, in precisely the same sense that there is not an International Jewish Conspiracy. Which is to say that there is in both of these cases really something – and even the same thing – manifested as a structure of fate, though without commanding deliberation. The conspiratorial interpretation is encouraged (and simultaneously misled) by the fact there are not here simply two different things. Ayn Rand’s widely-derided identity assertion (“A = A”) finds productive application on this point. Capital – as historical fatality – is what it is and nothing more.

[3] The first Bank of England notes were issued in 1694, the year of the bank’s founding. Initially, they functioned as bank checks, written for arbitrary sums. Their denominations were not standardized until 1745. Large notes predominated. The smallest note issued by the Bank was £20 until 1759, worth £3,300 in 2017. Innovation tracked the cycles of the war economy. The first £10 note was issued during the Seven Years’ War, the first £5 note during the war with revolutionary France (in 1793), followed quickly by temporary £2 and £1 notes before the end of that same conflict, and the century. These early notes were units of government debt, but not circulating currency. It was not until 1855 that they became payable to the bearer, and thus freely exchangeable. In keeping with their new function as currency, the notes became entirely machine-printed in the same year. Previously, of course, standardized national currency production was the exclusive responsibility of the Royal Mint, as it had been since AD 886. Monetary transition into the fiat regime has been tracked by the rise of the Bank of England, and reciprocal marginalization of the Royal Mint (which continues to manufacture UK coinage to the present day, although now out of intrinsically near-worthless base metals). Issuance monopoly came slowly. Even the smallest banks were permitted to issue their own bank notes prior to the Bank of England Acts of 1708 and 1709. Currency issuance was actually liberalized by the 1826 Country Bankers Act, extending the right to print money to joint stock banks (meeting certain criteria of size, and distance from London). It was only with the 1844 Bank Charter Act that monotonic progression towards Bank of England currency monopolization was set unambiguously in motion, with removal of note-issuing rights from England’s last private note issuer (Fox, Fowler and Company of Somerset) following its acquisition by Lloyds Bank. The process was not fully completed until 1921. The comparatively rapid demotion of the UK from the geopolitical responsibilities of recent centuries took place over a small number of subsequent decades. Partial convergence with a broader European trend to currency integration was an indicator. The pound was only decimalized in 1971, following the entry of the UK into the European Common Market (predecessor to the European Union).

[4] The US central banking Federal Reserve System came into being on December 23, 1913, with the enactment of the Federal Reserve Act. The brief of the new institution, quite explicitly, was to subject financial market psychology to centralized governance. Specifically, it was designed to suppress panic. The most immediate reference was the 1907 Banker’s Panic or ‘Knickerbocker Crisis’ (named after the Knickerbocker Trust Company whose collapse triggered the nationwide financial catastrophe). In keeping with the modern formula, bank-runs had been the primary driver of cascading insolvency. Under American institutional conditions, there was no circuit-breaker in the process. This was the conclusion of an investigative commission into the panic, established and chaired by Senator Nelson W. Aldrich in 1908, which identified the country’s lack of a central bank as the root cause of the crisis. The Aldrich Commission proposals led directly to the creation of the Federal Reserve System. The new institutional structure, named with misleading simplicity as the Federal Reserve (or just ‘the Fed’), was characterized by Byzantine complexity. Its Board of Governors has seven members, appointed by the US President (subject to Senate confirmation) for 14-year terms. In order to maximize administrative continuity, and manifest independence, one member is appointed every two years (in a 14-year cycle). In addition, there are twelve regional federal reserve banks (FRBs). The entire Board is supplemented by five presidents from the regional FRBs to compose the (twelve-member) Federal Open Market Committee (FOMC). In recognition of its status as the nation’s financial capital, the New York City FRB is privileged with a permanent position on the FOMC. It is the FOMC that wields primary executive power within the system, practically directing national monetary policy. Finally, the (private) banking industry is provided with formal consultative representation within the system, through the twelve-member Federal Advisory Council. In respect solely to the occult social status of the Federal Reserve, the most appropriate comparison might be to The City of London (as an institution). William Gibson makes this private crypto-governance (whose medium is the open secret) a theme of his time-travel novel, The Peripheral.

[5] In God we Trust, the official motto of the United States of America since 1956, began to appear on the country’s paper currency in the following year. It had already been struck onto coins for almost a century (beginning in the Civil War year of 1864). Over the course of three centuries, the implicit commitment underlying the monetary credibility of the world’s principal English-speaking power had escalated from (the 17th century) Protestantism will survive to (the 20th century) Anglophone global capitalism will prevail. The difference is primarily cosmetic. Those oblivious to the core identity of Protestantism and Capitalism understand neither, or the fact each is the occult aspect of the other. Schism and automation are the guiding threads. The Great Seal of the United States, with its twin mottos Annuit Cœptis (‘our undertaking is favored’) and Novus ordo seclorum (‘New order of the ages’), has decorated Federal Reserve notes since 1935. The intensity of Federal Reserve conspiracy-theorizing has not, of course, been harmed by this.

[6] As Niall Ferguson remarks in The Ascent of Money (p.102), while describing the economic consequences of the First World War: “Those who had bought war bonds had invested in a promise of victory …” Insolvency then follows from an erroneous interpretation of destiny. At work here is an economic domestication of geopolitical risk. If any single index captures bourgeois nationalism, it is this. Private savings are explicitly invested in a national-collective undertaking. No less notable is the dynamic of self-reinforcement, accentuated by survival bias. One thus sees in the bond market political economy being synthesized in real time.

[7] At the world-scale of the economic hazard transitions into transcendental risk, where the stake is nothing less than the system in its entirety. The whole cannot be hedged. Wild bets on, or against, the future of capitalism stretch the competence of markets to their outer limits.