With the Federal Reserve’s second round of “quantitative easing” expiring, The Christian Science Monitor’s Donald Marron recently asked whether “quantitative accommodation” could be around the corner.
“Quantitative easing” was the smart-sounding euphemism for the U.S. central bank’s purchase of about $600 billion worth of government debt bonds, apparently a strategy for alleviating the credit market of those assets.
Marron notes, though, that QE2 has generally been used to denote the “flow” — that is, the purchases themselves — as against both the flow and the stock, which refers to the fact that the Fed hasn’t yet reinvested its new assets; he suggests that we may need another name, one like “quantitative accommodation,” for whatever the Fed decides to do from here, be that continuing to own or selling some assets off.
Regardless of the Fed’s decisions, which we are taught take place in a magical vacuum, independent from the mucky world of politics, the fact is that the state just “created” money on computers to finance state debt. Euphemize that as you will. And conveniently for the state, as it dilutes its official currency, it also forbids us mere mortals to coin our own and compete with it.
Although it is today taken for granted, we need not assume that legal tender should be the exclusive domain of the state, that it must be the only institution capable of issuing money. The market anarchist alternative suggests that the market for currency, like all others, be completely open to genuine competition.
“That our present financial legislation,” wrote nineteenth century American anarchist Dyer Lum, “is marked by inequality, that by our laws the right to issue free money, ‘emit bills of credit’, is denied, that voluntary organization of mutual credit … is prevented by the artificial system now enjoying protection …”
As the central bank of the United States, the Federal Reserve possesses a legal monopoly on creating and circulating what is considered proper currency, enlisting the coercive force of law to foreclose competitors. The Fed’s bank notes, then, are the only “negotiable instruments” — a legal term denoting a specific kind of transferable contract — that the state regards as real money.
But banks, of course, regularly issue their own notes, representing obligations to pay, and there’s no reason why these too couldn’t be exchanged on a free market as competing currencies. Real competition between currencies, rather than generating a situation of instability or inflation, would check any single bank’s power and ensure the reliability of currency generally.
With regard to the state’s domination of the financial services industry, though, we’re conditioned to accept a species of the argument from authority, a logical fallacy that puts status above reason. The state, it is thought, is the only thing standing between the consumer and the parlous condition of unbridled commerce.
It’s easy enough to scan the corporate landscape of the present moment and think that allowing banks free rein would result in a disastrous field day for the rich. What is perhaps little understood, however, is the fact that the state, through its Byzantine complex of laws and regulations, has interfered with and shaped the financial system at every level.
The recent Panic of ’08 was a consequence not of a dog-eat-dog free market, but of an obstructed market tied down by the state for a few powerful plutocrats. Freeing the credit market from the Wall Street cartels and currency from the Fed would effectuate a solidity and a sanity in the financial economy that were strikingly missing in the crisis the ruling class gave us.