Crypto-Current (054)

§5.6 — Once extracted from a domestic competitive environment, through establishment of a state monopoly of currency issuance, money supply is exempted from commercial spontaneity and becomes a macroeconomic problem. This is to say that it acquires the status of an overseen aggregate. Money is no longer conceived primarily as a kind, or as a distribution, but as a whole. It is envisaged in entirety.

§5.61 — It might be asked whether the term ‘macroeconomics’ has anything reasonably described as a common usage. The word is intrinsically extraordinary. It implies a very specific structure of professionalization, and credentialized expertise. In its maximally-reified sense – as it is employed here – it also has a designation that might escape familiarity, and certainly seeks to. Macroeconomics is not merely an intellectual domain, or its corresponding social object, but a regime.[1] Positive institutions are essential to it. These cross, consistently, between the realms of academic research and social administration. The theoretical procedures under consideration here are essentially managerial, shaped originally by policy orientation. The model macroeconomic thought-experiment takes the form: What if the government did X? Thesis and recommendation are one. Macro never speaks, then, without a side-address – at least – to the state. Power is endogenous to it. The ambiguity between Macro the thing and macroeconomics as a research domain naturally – and strategically – elicits confusion. Macro is a singular catastrophe in the technical sense, which is to say a systemic phase transition, but also – from certain inherently fragmentary and now systematically marginalized perspectives – an actual socio-historical disaster. The clue to Macro, so telling as to pass almost for a synonym, is oversight. It is lodged in that part of the social organism tasked with supervision of the whole.

§5.611 — Between the whole and its parts lies something more than a difference in scale. In no case does one simply scale-up to totality. The whole appears only to oversight (or is made to seem so). It is thus tempting to conceive macroeconomics as a structure of visibility.[2] Its essence is defined by what is called to appear before it. Any tribunal is like this. The economy is to be brought before Macro for inspection, judgment, and correction. Macro, then, is a massive, complex, pseudo-transcendent operation in the name of the whole, conducted upon the axis of trust, or confidence. It is the metaphysics proper to the economic realm. In the alien language of German idealist philosophy it might be characterized as central banking for-itself. In this respect, among others, it could not be anything other than the mainstream magical tradition.  

§5.62 — On the singular path actually taken by the world, money is recomposed as a Macro aggregate, the money supply. Under retrospective consideration, some such thing has long existed. In the same way, volcanoes erupted with a bang before anything with ears could hear them. But it is only in this way that Macro aggregates pre-existed the managerial structures which formulate them. The model of money as debt has limits, and thus provokes critique. Neither precious metals nor crypto-currencies can be assimilated to it. Positive monetary assets (collectibles) are its unthinkable outside.

§5.63 — According to the quantity theory of money, money supply determines the general price level. The economic consensus on this point is so broad it approaches recognition of a tautology.[3] After all, it would be strange indeed if money – the model object for economic estimation – were to be exempt from elementary principles of supply and demand. Although meeting a reception in popular culture appropriate to a tendentious claim, Milton Friedman’s succinct maxim that “Inflation is always and everywhere a monetary phenomenon” is in actuality almost entirely uncontroversial. The fundamental idea is one that even the Antichrist of today’s hard-money advocates, John Maynard Keynes,[4] subscribed to – without serious hesitation. Any instance of economic value is a registration of scarcity, and the value of money is only a special case of this general rule. It is, of course, in recognition of this utterly pedestrian claim that scarcity is included in any list of the essential properties required by a monetary medium. In the extreme case, glut destroys economic value. It is therefore understandable that the tendency among economists has been to negotiate the terms of this formula’s application, rather than to challenge it at a fundamental level. Submerged – very slightly – beneath the macroeconomic argument lies the real topic, which is institutional discretion in respect to money-supply management, and therefore the politics of trust. To what extent should controlled monetary debasement be available as an option to the regime?

§5.64 — The central Keynesian argument, as formulated in his The General Theory of Employment, Interest and Money (1936), has surely to be included among the most influential in history. Its unique virtue, from the perspective of the modern nation state, was to provide a rationalization for currency debasement. No previous political power had ever been blessed with such a thing. A Roman Emperor adulterating the coinage harbored no illusion about the essential corruption of the undertaking. It was nakedly a swindle, whose advantages overrode reservation. Now, however, there was for the first time an articulate justification for what was essentially the same procedure. Macro grounds its legitimacy in the proposition that programmatic monetary devaluation can, under certain circumstances, have positive aggregate economic effects, by contributing to the mobilization of unemployed resources stranded in social ‘liquidity traps’. This trade-off between inflation and unemployment – formalized in the Phillips Curve – has insinuated itself deeply into macroeconomic intuition, surviving even the complete collapse of its supportive empirical regularities during the ‘stagflationary’ 1970s.[5] It relates the inflation rate to an ideal socio-political equilibrium point, and therefore defines a managerial responsibility. Money is now indexed to a thermostat. It can be too hot (‘loose’) or cold (‘tight’). The regulatory imperative thus codified transcends any specific empirical hypothesis. The hypothesis is adjustable, and even radically replaceable. The new power, once installed, is far more resistant to retraction. Once the case for a campaign against ‘cash preference’ has been entrenched at the level of mass psychology, its theoretical foundations become dispensable. The communist and fascist anti-bourgeois tide of the 1930s found its principal Anglo-American expression in Keynesian macroeconomics. Here, too, ‘hoarding’ was denounced as a crime against the collective.[6] Implicit socialization of all economic resources was made rigorously axiomatic. There is nothing so fragile as a mere theory, here, then. Rather, there is the maturation of a socio-political program. The theory flexibly rationalizes a regime.

§5.641 — At the greatest scale of historical analysis, Macro is characterized by the way it places itself beyond the bourgeois definition of civilization. Among modernity’s ascendant prudential classes, high time-preference (or low impulse-control) served as distinctive markers of barbarism. Civilization thus acquired a measure, corresponding to a time-horizon. Industrial civilization was based upon psychological tolerance for efficient indirect methods. Roundabout production had secured its ethic. Macro breaks with all of this. Imprudence is now re-valorized on Keynesian grounds as pro-social stimulation. To spend is glorious. Anti-bourgeois cultural politics and administrative economic doctrine become one.


[1] Is Macro a regime, or does it decompose (diachronically) into regimes? The question might be inelegantly re-phrased: Would this vocabulary not better be reserved for a compendium of macroeconomic regimes (plural), in the sense that, for instance, Mark Blyth uses the term (to distinguish, in particular, social democratic and neoliberal eras)? The significance of the transition at the center of Blyth’s analysis is beyond all serious controversy. Yet, upon examination, the problem tends to self-liquidation. Social democracy underwent neoliberal transformation at the point when its stagflationary crisis became politically unsustainable. Unelected central bankers could do what democratic politicians could not (save the system, through ‘sado-monetarism’ – to use UK Labor Party Chancellor of the Exchequer Dennis Healey’s apt expression). The break, nevertheless, occurred within Macro. Regime continuity was its presupposition. Between social democracy and neoliberalism there is nominal independence, but dynamic complicity. The latter corrects the former, and makes no sense outside this context. It was a reaction, of near-mechanical predictability. Macro encompasses the oscillation.

[2] James C. Scott’s Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed undertakes a celebrated critique of ‘high modernism’ conceived as a system of visibility. Its mode of analysis thus bears comparison with Foucault, in applying philosophical criticism of the construction of objects to the social field. Such analysis, predictably, has distinctively anarchistic slant.

[3] The ‘quantity theory of money’ (i.e. of inflation) can be traced back to Nicolaus Copernicus. Subsequent proponents have included Jean Bodin, David Hume, and John Stuart Mill, among very many others. Its insistence should not be surprising. The principle of scarcity – that for any commodity abundance is inversely related to price – is a candidate for the most basic of all economic intuitions. It is unlikely that any market agent has ever seriously doubted it. Milton Friedman writes in The Counter-Revolution in Monetary Theory (1970): “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. … A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society.”  

[4] While Keynes’ reputation as the arch-inflationist among serious economic authorities is amply justified by his influence, it is less easy to square – consistently – with the letter of his text. His early writings are especially notable in this regard. Perhaps no one has ever understood the ruinous effects of inflation better. As he remarks: “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers’, who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. […] Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” – The Economic Consequences of the Peace (1919), Chapter VI, pp. 235-236.

[5] If the highly-contested term ‘neoliberalism’ is determined with primary attention to its historical limits, it coincides with a naïve confidence in the mortality of Keynesianism. The empirical commitment upon which it assumed Keynesianism would perish is easily sketched. According to the Keynesian Macro consensus, as it prevailed up until the late 1970s, the most fundamental relationship between inflation and unemployment was conceived as negative, or compensatory. It thus supported trade-offs. In the post-war Western order, an entire structure of socio-political negotiation had been erected upon this foundation. Dynamic tension between the quality of money and the quantity of employment opportunity became an arena – and even a proxy – for class struggle. Money was publicly degraded in the cause of social peace. The breakdown of this theoretical relationship was signaled by a stagflationary trend. Stagflation is an important word in the history of recent political-economic regimes, because it announces a cybernetic inversion. Under stagflationary conditions, unemployment and inflation advance together, without prospect of cross-substitution. They exhibit positive, rather than negative, cybernetic linkage. Between this acknowledgement and neoliberalism in its compact historical sense, there is no difference. Monetarism and Rational Expectations were the critical counter-thrusts to the prevailing Keynesian consensus. Monetarism challenged the Keynesian contention that the responsibilities of financial authorities and central banks ever extended to anything beyond conservative monetary management, oriented to price stability alone. The rational expectations analysis of thinkers such as Edmund Phelps and Robert Lucas argued that inflationary policy orientation would eventually be fully discounted, as populations factored it into their economic calculations. It worked then only in the short-term, as a confidence trick does until recognized. This period of efficacious money magic does not last long. As confidence tricks go, inflation is remarkable for its crudity. Macro, then, could not help but train its own marks to neutralize it. It was the epistemological differential between policy agents and targets that did all the work. Once the recipients of central bank scrip understood what was being done to them, it was all over. An epoch was closed. Yet the peculiar resilience of Macro to empirical contradiction is no less an intrinsic characteristic. Prolonged failure to grasp this has had far-reaching socio-political consequences. The ‘neoliberal’ epoch – to use the term now in a more relaxed acceptation as favored on the Left – has proven strangely inept at carrying through a cultural revolution against economic orthodoxy. Its brief ‘monetarist’ heyday succeeded only in reinforcing the dependency of market-positive and disinflationary social outcomes on the democratic-political cycle, by consolidating their formulation as policy options. The effects of this have been predictably perverse. Those firmly market-based (‘Austrian’) perspectives that had opposed the rising macroeconomic regime from the point of its emergence remained entirely marginalized, excepting only a few impressionistic, decontextualized fragments, filtered through Hayek. It is tempting to conclude that the institutional requirements of academic and administrative economic authority dictated a state-managerialist doctrine in respect to money, immune to all empirical or theoretical contravention. There is here a matter of comparatively simple political right – that of oversight – masked as a complex scientific proposition. Once monetary value is based on the potential to extinguish tax liabilities, it is implicitly defined as an obligation to the state. Absolute subordination of civil society is then conceptually fundamental. It is not ‘Keynesian theory’, narrowly conceived, that stands in principled opposition to the autonomous determination of property and its corresponding monetary order, therefore, but rather the Macro regime as such. Radical naivety in this regard was constitutive of the late-20th Century ‘Neoliberal’ moment, and finally fatal to it. Macro is essentially illiberal. It cannot in any serious way be reformed. The only way past Macro is around it.   

[6] The systematic macroeconomic conflation of the prudential and the anti-social is an innovation of great consequence. It prepares for the partial displacement of the Principle Political Dimension into the ‘culture wars’ of the late 20th century. Mere continence had now been reconfigured as an anti-social disorder. More specifically, extended private time-horizons had been made an explicit target of political denunciation. Marshmallow-test winners were the new Kulaks. Their capacity to defer gratification had been theoretically-reconstructed as social aggression, expressed concretely as a denial of employment opportunities to the people. Macro’s cultural rebellion against impulse-control had begun. A campaign against saving (i.e. private capital accumulation) could now be conducted in the name of sexual liberation. Keynes’ Bloomsbury sexuality is a crucial reference in this respect. See, in particular, Hoppe: https://mises.org/library/my-battle-thought-police

2 thoughts on “Crypto-Current (054)

  1. From Note 6: “Their capacity to defer gratification had been theoretically-reconstructed as social aggression, expressed concretely as a denial of unemployment opportunities to the people.”

    Shouldn’t that be “a denial of employment opportunities”?

    Also, the connection between sexual liberation and the Macro campaign against private capital accumulation isn’t really argued so much as tossed in there, with the bias against impulse control (i.e. moralizing incontinence) being the one obvious connection between them. Will this theme be expanded upon?

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