New Web Site Focusing on the Legal Design of Money

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Introduction

A recently created web site, named Just Money, is an initiative by a group of legal scholars with a focus on “money as a legal project”.

More precisely, their commendable program has the following rationale and aims:

Created to meet demands both public and private, money depends on law for its definition, issue, and operation. That legal structure of money – its design – matters deeply. In the words attributed to an early banker, “those who create and issue money . . . direct the policies of government and hold in the hollow of their hands the destiny of the people.” Our aim is to encourage discussion, debate, and scholarship on money’s design and its reform towards a world that is as just as it is (economically) productive. (About Just Money)

The banker quoted was Reginald McKenna, former Chancellor of the Exchequer in England.

Just to be clear the Just Money web site is not (yet?) affiliated with the Alliance For Just Money (AFJM). We are glad that the Just-Money meme is spreading, but also like to caution against any confusion.

Who’s Who

Among the founders and editors we find some scholars already somewhat known to our AFJM community: Christine Desan, Morgan Ricks, and Mehrsa Baradaran.

Dr. Desan has written many papers addressing the legal aspect of money creation and wrote the monograph Making Money: Coin, Currency, and the Coming of Capitalism.

Dr. Ricks is also a legal scholar who wrote some enlightening papers on money and wrote the study The Money Problem: Rethinking Financial Regulation.

Dr. Baradaran is known for her work on under-banked communities and is the author of How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy and The Color of Money: Black Banks and the Racial Wealth Gap.

New to us is the Israeli legal scholar Roy Kreitner, whose profile indicates that we can expect soon a study by him on . . .

. . . the history of money in the United States between the Civil War and World War I. The book details the transformation of money from a searing issue of electoral politics in the last third of the 19th century to an expert dominated issue of bank reform by the time of the establishment of the Federal Reserve.

The prospective title is From Promise to Property, from Populism to Expertise: The Political Career of the Dollar, 1862–1913 (See here).

So far the web site published two articles, one on an alternative currency proposal in Italy by Michael Svedman and one on public banking in the US by Bryna Godar.

The web site also directs you to the research by the legal scholar Iain Frame at Kent Law School in the UK [1]. Frame promoted on his research on money creation in England and Wales between 1799 and 1844 and he recently wrote a paper on the UK Bank Charter Act of 1844.

Though Frame’s opening sentence of the above article states that the article . . .

. . . explores a dilemma at the centre of the monetary order: how to counter inflation eroding the value of money and simultaneously allow bank-created credit to meet the needs of an expanding economy . . .

it will not come as a surprise that we at the AFJM see the central dilemma in terms of which institution actually creates the money supply: The state or the banks?

Money as a Democratic Medium Conferences

Because many of the editors of the Just Money web site were involved in the 2018 Harvard Law School conference “Money as a Democratic Medium”, and the web site provides a complete overview of all sessions including audio and video files, the hunch emerged that the Just Money initiative actually has its roots in that gathering. We asked the current assistant editor Dan Rohde if that is the case and he confirmed the hunch but stressed the fact that the conference and the web site are separate, independent activities.

Meanwhile Just Money also announced a follow-up conference in 2020 titled “Money as a Democratic Medium 2.0”. The conference is tentatively scheduled for December 4 and 5 at the Harvard Law School. In the invitational e-mail they stated that,

We welcome work on reform and responsibility, given our profound legal and political obligations to evaluate the dynamics of the monetary and financial system . . .

At the AFJM we can only say “amen” to that.

Policy Proposals

Therefore we are encouraged that, besides historical research, Just Money also considers policy proposals which might tweak or overhaul the current monetary system. For that purpose they have dedicated a column.

This column includes short pieces explaining policy proposals that highlight, revise, or contest current monetary design. While we focus on contemporary proposals, historical episodes may be included occasionally.

Of course the US and international monetary reform movement would be delighted to see, maybe even contribute, to this column with explanations of its own legislative initiatives which have crystallized in countries like the USA, the UK, Switzerland, Iceland and the Netherlands [2]. We also strive for the democratization of money and specifically propose the nationalization of national currencies and turning the banks again into loanable funds managers thereby reinstating the state’s privilege to manage the money supply in a responsible manner and use the regained seigniorage to improve society’s infrastructure, be it physical, health-wise or educational. Our proposals reach back to the 1930 Chicago Plan and find current very encouraging modelings [3].

Course Materials

Very helpful for those who are in an intermediate stage of studying monetary theory and reform and are interested in the legal aspect of money, the course contents of several classes on money and the law are posted. For example Christine Desan, who is the Leo Gottlieb Professor of Law at Harvard Law School, offered a course in the spring of 2019 titled “The Legal Architecture of Globalization: Money, Debt and Development“.

Course Description: An integrated political economy now covers much of the globe. This course focuses on the monetary structure of that phenomenon as a matter created and contested in law. Trade, extraction, exchange, debt, and economic development – for centuries, all have depended on money as their medium. By examining the changing legal design of money, we will study globalization as a material, ideological, and distributive event of enormous significance.

In the sixth class of her course she discussed “The Invention of Modern (Bank-based) Money“[4].

Conclusion

All in all it seems remarkable that so much historical and theoretical work on the status of money is done in the legal community. Maybe that is not that surprising as money is not initially a special commodity which only became regulated after its origination, but has its origin in law in the first place. As Aristotle already observed, money “owes its existence, not to nature, but to law” to which Aristotle also added the–for monetary reformers encouraging–implication that “it is in our power to change it” [5].

Endnotes

[1]. Iain Frame at Kent Law School. His most prominent papers are:

Frame, Iain. 2012.Country Rag Merchants” and “Octopus Tentacles”: An Analysis of Law’s Contribution to the Creation of Money in England and Wales, 1790-1844. Thesis, Harvard Law School.

Frame, Iain. 2015. “‘Country Rag Merchants’ and English Local Currencies in the Late Eighteenth and Early Nineteenth Century“. Journal of Law and Society, 42/4: 588-610.

Frame, Iain. 2020. “Between the ‘Bank Screw’ and ‘Affording Assistance’. Rules, Standards, and the Bank Charter Act of 1844.” The Modern Law Review, 83/1: 64-90.

[2]. See the web site of the International Movement for Monetary Reform.

[3]. See the following papers:

Kumhof, Michael & Benes, Jaromir. 2012. “The Chicago Plan Revisited“. IMF Working Papers 12/202. Washington: International Monetary Fund.

Van Egmond, N. D., and B. J. M. de Vries. 2016. “Dynamics of a Sustainable Financial-economic System“. Working Paper of the Sustainable Finance Lab. Version 2. Utrecht University, The Netherlands.

Yamaguchi, Kaoru. 2010. “On the Liquidation of Government Debt under A Debtfree Money System: Modeling the American Monetary Act”. In: Proceedings of the 28th International Conference of the System Dynamics Society, Seoul, Korea, 2010. The System Dynamics Society.

[4]. For this sixth class the following reading material is included:

Jackson, Andrew, and Benjamin Dyson. Modernising Money. London: Positive Money, 2013, 47-71, 75-80.

Ricks, Morgan. “Money as Infrastructure.” Columbia Business Law Review 3 (2018): 757, 772-787.

Desan, Christine. “Money Creation by the Federal Reserve: A Note on the Basics of Legal Authority” (January, 2019).

Mehrling, Perry. The New Lombard Street: How the Fed Became the Dealer of Last Resort. Princeton, N.J.: Princeton University Press, 2011, 11-17.

[5]. Meikle, Scott. 1994. “Aristotle on Money“. Phronesis, 39/1: 26-44. Quote on page 35.

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Howard Switzer
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Howard Switzer

Like the attention on the law, because as we know it is the law that must change.
Two concerns, their focus on banks and seeming attachment to bank money
and this statement: “By examining the changing legal design of money,”
What change? They talk like change has happened or is happening.

If so I hope the change is toward democracy, the only change acceptable at this point.

Govert Schuller
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Govert Schuller

Yes, indeed, I also like this concept of ‘the legal design of money’. The change they are referring to is the one which happened over historical time, and not necessarily the one AFJM is promoting. So, we’ll have to dig into what JM is proposing as far as the democratization of money is concerned.