The Return of Scarcity and the International Organisation of Money After the Collapse of Bretton Woods Introduction

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The Commoner N.7 Spring/Summer 2003

Matthew Hampton

The Return of Scarcity and the International Organisation of Money After the Collapse of Bretton Woods


“Money” wrote Bagehot, “will not manage itself” [1873/1915, p20]. This insight, as true now as when he penned his classic account of London’s capital markets, is usually explained by highlighting the anarchical state of the capitalist financial system. Lacking a world state or global central bank, capitalist money has assumed the shape of a pyramid formed by successive layers comprising private (bank), state and finally world money – each layer promising final validation that its money is an independent form of abstract social wealth. Integrating this myriad of different monies thus defines, on a first cut basis, the problem that the international organisation of money seeks to resolve, with various ‘solutions’ formalised in a succession of international monetary regimes.

Yet this integrative problem is far more complex than simply resolving the anarchy of the market. Nor is it reducible to an analysis of inter-state rivalry over seigniorage rights or the competing interests of ‘national’ or ‘fractional’ capitals, despite the Left’s obsession with charting successive international monetary regimes against the rise and fall of ‘hegemons’ (gold standard/Pax Britannica; Bretton Woods/Pax Americana). Instead, this problem goes to the very heart of the problem of capitalist money itself – how is ‘value’ (abstract labour) integrated into the social form of money? This is a problem of exploitation, not market coordination within an “anarchical exchange process” [Itoh and Lapavitas, 1999, p56]. It requires exposing the social power of money rather than cataloguing its ‘functionality’ – a power that is only apparent by examining how capitalist money is integrated in toto.
While many commentators have recognised a resurgence of this power under the ideological auspices of neo-liberalism, in this paper I hope to situate this resurgent power in the radical global reorganisation of money that has occurred since the collapse of Bretton Woods. After highlighting the apparent paradox lying at the heart of this new regime, I briefly explore the challenge this poses to orthodox Marxist theory. I then suggest the defining characteristics of this new regime mark a return to monetary internationalism and thus a “shift of state power to the world level – the level at which monetary terrorism operates” [Marazzi, 1977/1995, p85]. Finally, through a political reading of this regime, I explore how it has leveraged open and destabilised the national economy, decomposing both the state and the working class as social reproduction is subordinated to the global rule of money.
The Paradox of 15 August 1971
The Nixon Administration’s New Economic Policy – unleashed on 15 August 1971 – not only ended Bretton Woods by abnegating the US’s commitment to maintaining convertibility between the dollar and gold, but signalled a more general crisis in the techniques of monetary nationalism. This doctrine, which emerged triumphant within orthodox economic science after a long and divisive debate during the 1920s and 1930s, sought to mediate the law of value by driving a wedge between national currencies and world money, mainly through limited exchange rate flexibility and capital controls. This sharp break with liberal internationalism was a necessary precondition for the institutionalisation of the Keynesian strategy of harnessing working class struggle as a motor of capitalist accumulation through the pervasive manipulation of credit-money within the national economy. In the face of rigidities imposed by the rise of the mass worker, Keynesianism was an explicit recognition that the organisation of money could no longer be left to the untrammelled workings of the world market. Money in short, needed to be managed by the state – its supply determined domestically to enable the manipulation of its price and value (interest rates and inflation respectively) in order to calibrate internal equilibrium conditions (such as effective demand and real wage flexibility) as determined by a monetarised class struggle.

The revolutionary nature of this spatial transformation in the organisation of money should not be underestimated. It was a direct attack on the cornerstone of liberal internationalism, undermining the “guarantee of bourgeois freedom - of freedom not simply of the bourgeois interest, but of freedom in the bourgeois sense” [Schumpter, 1954, p406]. This ‘freedom’ in turn guaranteed that the organisation of money would be conducted on the principles of capitalist rationality. In an era marked by the rise of the liberal-democratic state-form, central banks and mass participatory politics, the spatial mobility of money - in essence the right of holders of national currencies to exercise convertibility – held the promise of sound money. Convertibility subordinated the state and its key organs such as the central bank to the power of world money, ensuring national fiduciary money could not be politicised and ‘debauched’.

Since 1971 the spatial barriers of monetary nationalism have been removed piece by piece alongside the reversal of the Keynesian strategy of monetarised class struggle. The once discredited doctrine of monetary internationalism has re-emerged as orthodoxy, and again money is constituted at the level of the world market through untrammelled flows of money-capital. Yet there is something radically different about this latest reincarnation of monetary internationalism when compared to its precursors – the classical gold standard and its lustreless interwar successor. Rather than subordinating the state and national money directly to a logic of scarcity by guaranteeing convertibility to global commodity money at par, this latest internationalism has combined a vastly heightened spatial mobility of money with a dematerialised money-form at the level of the world market. It appears to have combined a central goal of monetary nationalism – inconvertible and elastic money supplies – with the hypermobility of monetary internationalism.
The paradox raised by August 15 1971 is how a global monetary pyramid organised around an infinitely elastic paper money-form driven by fictitious capital has left us with a “sound money standard” [BIS, 1997, p2]? How has national austerity emerged from global financial excess? This paradox was not immediately obvious during the 1970s and most economists misread the collapse of Bretton Woods as an intensification of existing biases towards monetary nationalism and inflationism – a realisation of the Keynesian dream of “a world of macroeconomic autarky” [Dunn, 1983, p4]. Despite the obvious fact that the past two decades have seen a “process of global disinflation” [BIS, 1999, p4], many commentators on both the left and right have persisted with the view that the return of monetary internationalism has failed to impose the “rigorous anti-inflation discipline” of the gold standard [Turner, 1991, p104]. While it is true large deficits continue to be financed by capital flows, the underlying logic of the new regime has clearly imposed austerity over national economies to such an extent that the spectre of deflation now haunts most of Europe, the US and Japan. And it has done so without the need for commodity-money, confounding the predictions of orthodox Marxism and challenging its understanding of capitalist money more generally. In the following section I briefly explore this problem in order to offer an alternative conceptualisation that focuses on the foundations of the social power of capitalist money.

Form and Content in Capitalist Money
Given the gold fetishism that has constantly tarnished the arid functionalism that passes as analysis within orthodox Marxist monetary theory, one might have thought the fundamental transformation occasioned by the dematerialisation of the money-form would have drawn a detailed response. Yet surprisingly it appears to have been largely ignored. Without discussing the reasons for this avoidance, it clearly poses a significant challenge to a functionalist conceptualisation of money as “embodied value”. In contrast, exposing the social power of money does not require holding to this false absolutism over commodity money, but rather developing an understanding of the dialectic between form and content.
Instead of a passive singularity of form/content (embodied labour in a thing), we should conceptualise money as an antagonistic unity of form and content. This antagonistic relation between form and content is internal to the social category of money, meaning transformations in the money form are a mode of existence of class struggle [Bonefeld et al, 1992] - the external expression of the struggle between the social form (abstract social wealth) and value content (exploitation) of money. This form/content dialectic charts capital’s struggle to subordinate labour through the imposition of the commodity-form through the act of exchange. It is the movement of this contradictory and antagonistic social relation that causes money’s form to be “stripped away” [Rosdolsky, 1974, p67]. Indeed as Mohun argues, “the way in which form is developed out of content gives form a real independence of content such that it can appear to contradict its own determinants” [1994, p226].
Orthodox Marxism has displayed an ingrained if misguided habit of measuring this apparent ‘gap’ or independence by the distance the money-form has travelled from a content that is assumed must ultimately correspond to an essentialist “determinant” - the commodity-form itself – rather than seeing this gap as a barometer of labour’s refusal to work. Clinging to the view that only commodity money can fulfil the necessary ‘functions’ of money has led Marxists into theoretical, political and historical absurdities created by a false absolutism over a form of money already an anachronism by the close of the Great War. If one holds to this view but admits to its absurdity, then the only logical conclusion is to argue that contemporary money – a substanceless nothing - is devoid of content and is in fact not ‘money’ at all. Late capitalism, in short, has become an economic system independent of money, superseding the law of value – a position argued by Fleetwood [2000] and Kennedy [2000]. Itoh and Lapavitsas make a similar point by referring to “the pathological implications” of extinguishing commodity money [1999, p264].
These arguments strike me as unconvincing. While the ‘universal equivalent’ reduces all to the flat monochrome of price, surely it is its ability to transform the “form-giving fire” of concrete labour into abstract labour through the wage form that is fundamental. I see no reason to believe this ‘value relation’ has been superseded under late capitalism. Undoubtedly the drawn out dematerialisation of the money form was the result of working class struggle against the law of value. Yet to conclude from this that dematerialised money necessarily lacks the “ontological” depth required to maintain an internal relation between value form and content [Kennedy, 2000], sits uneasily with the experience of the past 30 years. The problem seems to depend on how this ‘content’ is understood. If the law of value is conceptualised as the struggle between necessary and surplus labour (the spheres of imposed work and non-work) [Palloix, 1977; Negri, 1991], than it follows that money must prove its content by enforcing the capitalist relation of work. The power of money lies in its “power to command labour and its products” [Marx, 1844/1984, p295] - a moment of domination and coercion by a thing. Or putting this in reverse, “the powerlessness of the individual with respect to society… is experienced as the absence of a thing, money” [Lebowitz, 1992, p79].
The problem then crystallises into tracing how a constantly transforming money-form continues to express a content of exploitation, ie how does the generic (content) exist as a constitutive moment of the specific (form)? The answer does not depend on money taking the form of a commodity, but rather whether it assume a form capable of expressing a socially constructed scarcity mediated through the mechanism of market exchange, creating a web of monetarised social relations. This requires the transposition of scarcity to money itself, whether in commodity or paper form, ie money must be ‘hard’. In short, money must itself be experienced as scarcity – the necessary moment of coercion endlessly drawing individuals back into the act of market exchange. Money interposes itself between individual ‘needs’ and object (social wealth) as a moment of exclusion or inclusion – “the pimp between need and object, between life and man’s means of life” [Marx, 1844/1984, p375]. This lack of access to social wealth constitutes the basis of money’s power to command the individual deprived of ownership over the means of production, for only the sale of their alienated labour can secure the medium required to enter exchange relations. I should stress that capitalist money is predicated on this moment of alienation which it cannot overcome (as claimed by Proudhonists and other monetary cranks). However, its power to mediate and bring to life a relation of exploitation through the wage form is always contested and thus the intensity of this relation is variable. In short, while the social mode of existence of money (its form) is continually transformed, its value content is neither emptied nor reified and static, for it is a social relation. The only value capitalist money can ever have lies not in the supposed dead labour embodied within it, but in the living labour it is able to command. Without this act of command, specie is sterile, fiat money no more than wastepaper and electronic money so much cyber-trash.

While this apparently simple formulation of social power located in acts of exchange seems distant to the world of haute finance, money’s ‘hardness’ (or scarcity) is ultimately dependant on the form assumed by money. Form, as we have seen, is a mode of existence of class struggle, and it is this struggle that forces the organisation of money beyond the liberal-democratic state form, which while essential for the longer-term durability of capitalist domination, has proven problematic in reinforcing money’s social power. It is only in the world market that the capitalist monetary pyramid can have any hope of cementing itself to a principle of scarcity and it is here – in the global integration of money where its final form is constituted – that we see this mode of class struggle expressed at its highest social level. It is only at this level that we can begin to gauge money’s ability to grip living labour, and in the following section I draw upon this conceptual framework to unravel how the global dematerialisation of the money-form since 1971 has sought to close the ‘gap’ that had opened under Keynesianism between money’s form and content through a return to scarcity constructed upon financial excess.

The Post Bretton Woods Regime
The Bretton Woods regime finally collapsed as official parities were repeatedly tested by speculative flows of hot money. While the resurrection of these flows has usually been ascribed to the inflow of either petrodollars or excess greenbacks following the US’s malignant abuse of its seigniorage powers, the rise of Euromarkets predated the oil shocks, while US deficits had only a minor bearing on the decision to park money off-shore [Dufey and Giddy, 1994]. The decision by holders of money-capital to ‘invest’ offshore, whether ‘foreigners’ or ‘US residents’, was instead an act of flight from the struggle of the factory floor to the heady, enchanted world of speculation and fictitious capital. By 1970, US corporations were estimated to have currency portfolios of $30-35 billion – three times the size of US government reserves [Tugendhat, 1973], while financial assets increased from 19.8% of total corporate funds in 1966 to nearly 26% by 1973 [Council of Economic Advisers, 1981]. Currency speculation in particular was rife, “reflecting an erosion of confidence in paper currencies” [BIS, 1974, p14], leading to enormous volatility within foreign exchange markets.
Yet behind the monetary chaos of the 1970s, several West German monetary theorists and technicians such as the central banker Otmar Emminger and Professor Giersch from the neo-liberal Institut für Weltwirtschaft, began to perceive a logic capable of short-circuiting the impasse in Keynesian class management. According to Giersch, the “international currency market served to police the system and impose discipline on national governments”. Furthermore, while this reversion to heightened capital mobility witnessed wild overshooting in exchange rate adjustment, Giersch clearly recognised in this not a market failure as commonly portrayed, but rather a mechanism to impose from above the necessary discipline over labour. This strategy was foundered on the dislocation imposed by a permanent crisis in the international organisation of money – decomposing working class formations through imposed austerity that found leverage in the massive disruption generated by vast and rapid movements of liquid capital. “Only a drastic change would have aroused people to make such an adjustment” argued Giersch, referring to “the loss of a million jobs in Germany and the creation of several million jobs in the United States”. “Under those conditions” he suggested, “control of capital movements would have got in the way of the necessary market signals and stifled responses that were highly desirable. It was always necessary to look beyond short-term adjustments and short-term capital flows and take account of the underlying forces at work” [1981, pp228-9].
The last thirty years has seen the further development of this ‘adjustment’ model constructed on the shift to a purely fiat global money standard. Foreign exchange markets have continued to expand in scale and scope and now constitute “the core of the international financial system… the largest, the most liquid, the most innovative, and the only 24-hour global financial market in the world” [Ito and Folkerts-Landau, 1996, pp1-34]. By 1992 daily turnover had reached a figure equal to 86% of total world fiat reserves, dwarfing the resources of individual central banks. By 1995 it exceeded the total equity of the world’s largest 300 banks [Ito and Folkerts-Landau, 1996]. As of April 2001, average daily trading was $1.2 trillion [BIS, 2002], less than 2% of which related to trade in goods and services. Other financial markets are minnows in comparison, with the next largest (using 1995 data) - US government securities - averaging $175 billion daily turnover, while the average for the ten largest stock markets was a mere $42 billion.
Driving this vast market is a ‘new’ form of convertibility – not a guaranteed parity to bullion, commodity-money or pseudo-world money – but simply the right to switch currencies at will, in a sense a return of the old liberal freedom of mobility. While a few centres have retained fixed parities (notably Euroland), the underlying trend has been towards flexibility in conversion rates. Although only gaining de jure legitimacy under the Second Amendment to the IMF’s Articles of Agreement announced at Jamaica in 1976, between 1975 and 1997 IMF members with floating currencies rose from well under a third to nearly two-thirds [Eichengreen, 1999]. Furthermore, the heaviest traded cross-rates – USD/EUR, USD/JYP and USD/GBP - are all floating. This act of conversion, as I mentioned above, is in essence an act of movement or flight, and the suppliers of money (nation-states) “face the continuous distrust of money users who will switch in and out of currencies at the whim of slight changes in confidence in these moneys” [De Grauwe, 1989, p10]. For major currencies, quoted prices can change 20 times a minute, while the now extinguished USD-DM cross-rate altered up to 18,000 times a day [Ito and Folkerts-Landau, 1996]. Unsurprisingly, volatility in foreign exchange markets has escalated to unprecedented heights, often reaching levels five times or more than those experienced under Bretton Woods. Furthermore, supposedly core economic relationships such as the assumption of purchasing power parity – a cornerstone of money’s alleged neutrality – have been thrown akimbo as exchange rates overshoot, deviating from ‘fundamentals’ not just momentarily, but for weeks, months, even years.

What drives such enormous and fickle flows through foreign exchange markets and how does this lead to a “sound” global integration of capitalist money? It is clear traditional balance of payments theory, particularly in its Keynesian formulation as developed by monetary nationalists such as Lerner, Meade and Machlup, is now totally inadequate as an explanatory model. Within this framework the determination of exchange rates was made by ‘real’ economy mechanisms such as the Marshall-Lerner condition and Keynesian absorption strategies. The capital account was viewed largely as a ‘residue’ factor off-setting current account deficits or surpluses. This is no longer a sustainable view given the minor role played by flows of goods and services relative to total foreign exchange transactions. Like the tail wagging the dog, capital flows are now the central driver of exchange rates, at least in the short to medium term. These flows in turn reflect the enormous expansion in global liquidity that has occurred under a pure fiat system that contains no material barriers blocking the endless creation of money. As the BIS noted, there is “no single ‘anchor’… for the system as a whole” [1997, p144], and subsequently no final global ‘validation’ of pseudo socially validated money in the orthodox sense (convertibility into commodity-money).

Predictably, the outcome has been a massive increase in global monetary reserves, of which over 90% now comprises ‘inconvertible’ (ie paper) foreign exchange, creating an “International Monetary Scandal” in the words of one long-time critic [Triffen, 1991]. More fundamentally, the dematerialisation of money has made the conceptual distinction between the credit and monetary systems largely meaningless. Marx once suggested “money – in the form of precious metal – remains the foundation from which the credit system, by its very nature, can never detach itself” [1974, p606]. This is no longer true and clinging to a monetary theory of credit seems either irrelevant [De Brunhoff, 1976], or simply erroneous if it leads to a conclusion that the failure of reality to match this ‘analytically prior’ theory is a further sign of monetary pathology under late capitalism [Itoh and Lapavistsas, 1999]. Such an approach tells us nothing about how abstract labour is integrated into a valueless value-form – credit money – within the circuit of capital as a whole (the world market). It offers no insight into how this transformation has been a constitutive moment in money’s renewed power to globally enforce work through the commodity form.

The fusion of money and credit into a single anchorless system has seen an explosion of “Mother Credit”, with domestic bond markets now topping $33 trillion compared to less than $1 trillion in 1970, with an additional $9 trillion issued on international markets (up from $900 billion in 1987) [BIS, 2003a]. Apart from ongoing lax pseudo-validation by central banks at the least sign of crisis, other processes such as securitization (pooling homogenous financial assets into tradable securities) and disintermediation (issuing bonds directly to the market) have added further fuel. In the US, securitisation of consumer credit increased from less than 4% in January 1989 to nearly 36% in March 1993, while over 50% of mortgages are securitised (and now comprise 15% of total foreign claims on the US). Dematerialised money stands alongside this mountain of paper as just another asset class to be traded and speculated on like any other (the current trend is towards “currency overlay management” – unbundling currency risks from underlying assets and ‘managing’ it separately). Clearly distinctions remain between ‘money’ and ‘credit’, particularly in their inter-temporality, while money still has the special property of legal tender within national jurisdictions (although even these distinctions are fuzzy at the margins, such as M4). The fundamental point however, is that money cannot look back reassuringly upon a gleaming hoard of reified human labour as somehow backing its promise of embodying validated social wealth. To honour this promise, money must ensure it does not “lose its grip” (begriffslos) [Bonefeld, 1995] over living labour in the here and now, while credit exists as a claim on future labour.

Whether as ‘money’ or ‘credit’, each promise is continuously judged and priced by the market as it assesses its ‘value’, creating an environment of ceaseless competition by widening the act of conversion beyond competing national currencies to the entire spectrum of financial securities. Any number of events that may directly or indirectly impact upon an economy (or simply expectations of such events) – including inflation differentials, government finances, interest rate movements, current account figures or labour unrest – can be seized on by the markets as they constantly sit in judgement. National ‘IOU’s’ judged negatively by the markets are discounted or even rejected (ie liquidity in that asset ‘disappears’). As the IMF noted, “investors have displayed an increasing tendency to discriminate between regions and countries in response to changes in economic fundamentals, and this has been reflected relatively quickly in the behaviour of capital flows” [Folkerts-Landau et al, 1997, p63].

This competition creates enormous volatility within global financial markets. Taking bond markets as an example, the “relentless search for higher yields” [BIS, 1997, p118] leads to constant churning as bondholders trade with scant regard for underlying maturity structures. According to BIS figures, the average holding time for US notes (maturity of 1 to 10 years) and bonds (maturing over 10 years) is approximately 1 month (similar figures apply to Japan, Germany and the UK). For T-bills (maturing between 3 months and 1 year), the figure is approximately 3 weeks [Henwood, 1997]. Even more dramatically, the IMF claimed daily trading of $400 billion out of a total stock of $3.4 trillion of US government debt in 1990, suggesting “that the entire volume of marketable debt turns over on average once every eight days” [Goldstein et al, 1993]. Overall, daily transaction levels in the US government bond market as a percentage of total stock increased tenfold between 1985 and 2002 [see for current data].

These ceaseless acts of conversion within and between asset classes are heightened by the spatial configuration of money-capital circuits, which have become simultaneously decentred and integrated. While London and New York of course remain central, there is no longer any single hub or geographically dominant centre [Germain, 1997]. Instead multiple nodal points create a market constituted not by place or location, but by space – or rather the ability to shift across the spatial web created by these multiple points. This in turn heightens the defining spatial characteristic of the new regime, which is movement. Of course, movement in itself is meaningless. What is important is how this decentredness actually integrates the world market through the constant spatial rearrangement of financial assets. With the progressive breakdown of regulatory barriers constructed on the ontological pre-eminence of the nation-state as the defining spatial boundary of the ‘economy’, one national economy after another has been integrated into these global circuits. Fundamental was the removal of exchange controls - the regulatory cornerstone of Bretton Woods. Beginning with the US in 1974 and accelerating with the dismantling of capital controls by the Thatcher government in 1979 and Japan in 1980, liberalisation came in quick succession to Australia in 1983, New Zealand in 1985, France and Denmark in 1989, followed rapidly by Italy, Austria, Ireland, Sweden, Norway and Belgium in 1990, with the rest of the OECD catching up in the early 1990s [Helleiner, 1994; Goodman and Pauly, 1993]. The geographical coverage of financial markets grew rapidly in line with this. In 1980 only a handful of countries had established markets for Treasury bills, certificates of deposit and commercial paper; by 1991 few in the OECD did not. Similarly for options and futures, coverage grew from the US and Netherlands in 1981 to virtually all industrialised countries by the early 1990s [BIS, 1992].

Integration in turn has led to vast increases in cross-border transactions in financial securities over the past 30 years. In the US, cross-border transactions in bonds and equities as a percentage of GDP grew from 4% in 1975 to 213% by 1997, while Canada, Germany and France experienced similar increases (3% to 358%, 5% to 253% and 5% to 313% respectively) over the same period. These cross-border flows are reflected in the growing percentage of assets held by ‘non-residents’, which in the US is now equivalent to 77% of GDP. For example, foreign holdings of US public debt rose from 14.9% in 1983 to 40.1% in 1997, while over the same period Canada and Germany saw increases from 10.7% and 14.1% to 23.1% and 29.3% respectively. Cross border holdings of bonds reached $7.4 trillion by 2001, while bond market correlations, especially with US securities, have increased as a result of arbitraging [BIS, 1998; 2003a].1

These transactions impact on exchange rates for the simple reason that financial integration can only occur through the medium of national monies. All financial securities (including their associated ‘products’ – the first, second and third order derivatives used to hedge against and speculate on price movements in the underlying asset), are denominated in particular national currencies - a direct consequence of the failure to construct a viable form of world money – and hence global transactions are usually mediated through the foreign exchange market. The implications are important, for shifts in asset portfolios (including money holdings), are likely to generate large flows through the foreign exchange markets. Similarly, any factors that suggest immanent changes to exchange rates (currency risk) can shift asset holdings (by affecting the risk/return profile of portfolios), immediately impacting on foreign exchange markets.
This constant cross-border churning of financial assets is driven in large part by the “activist asset and liability management culture” of institutional investors [BIS, 1993, p222]. Activist is a polite way of saying short-term and speculative strategies hoping to ‘beat’ the market prevail over more traditional ‘buy and hold’ investments, and these new leviathans of global finance - pension funds, insurance companies, bank trust departments, mutual funds and ‘macro’ hedge funds - shift in and out of currencies as they do equities and fixed income assets. The central role of institutional investors in integrating financial markets can be gauged from the average holding of foreign assets by institutional investors, which approached 20% by the late 1990s - a figure translating into roughly $4 trillion of invested funds capable of being reshuffled rapidly in line with perceived shifts in risk/return outlooks.

We are now in a position to summarise how the key characteristics of this new regime interact and reinforce each other to constitute a global organisation of money capable of enforcing a regime of austerity – a return of scarcity imposed by a substanceless and infinitely elastic money-form. The fundamental transformation has been the integration of an anchorless money-form into credit markets, forming massive global portfolios that surge through exchange rate mechanisms as supply and demand ebbs and flows. This mediation “highlights the foreign exchange’s role in transferring liquidity from one currency to another” [BIS, 1996, p96]. It is this “migration of currencies from one area to another” [Giersch, 1981, p229] that lies at the heart of the new international monetary regime and its overarching strategy of imposed scarcity. Decentred markets driven by a relentless search for short-term returns and high risk have a greatly magnified “capacity to re-denominate the currency composition of its assets at short notice” [Goldstein et al, 1993, p22]. The organisation of money is determined globally through these vast, rapid portfolio recompositions, manifesting as sharp movements in liquidity preferences for particular currencies and resulting intense pressures on exchange rates.

Where the control of global liquidity under Bretton Woods mediated and weakened the global law of value, the new regime of convertibility – based on mobility and competition – has recalibrating the law of value in favour of surplus labour. National currencies have been globally reintegrated, infusing money with the social power to command which manifests within national boundaries as the subordination of social reproduction to the capitalist relation of work [Bonefeld, 1993, p46]. It has not required a return of commodity money - an unnecessary anachronism – nor does it signal the ‘end’ of capitalist money. It has instead created new pathways to enforce the principles of scarcity over national monies by their direct and immediate integration into the hypermobility of global financial markets. Furthermore, this new form of integration has reversed Gresham’s Law. Rather than the sterile act of hoarding, money judged as ‘bad’ is driven from global markets, either experiencing severe discounting, or at worse totally expunged and sent in disgrace back to its national space. Such a rejection can entail not just a country’s money but its entire pyramid of financial assets with devastating effect – at worst occasioning complete economic, political and social collapse (for example, Asia and Latin America), or at best a severe warning that greater austerity is required (for example, Euroland). However, to gain a better understanding of how this regime has created space for the reimposition of scarcity at the national level requires a more nuanced political reading of credit.
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