A-Infos (en) The commoner #7 - The Return of Scarcity and the International Organisation of Money After the Collapse of Bretton Woods - by Matthew Hampton I (1/2)

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Introduction
?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
â??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 â?? in the
global integration of money where its final form is constituted â?? 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 â??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 â??invest' offshore, whether â??foreigners'
or â??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 â?? 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, â??reflecting an erosion of confidence in paper
currenciesâ?? [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 â??international currency market served to police the system and
impose discipline on national governmentsâ??. 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 â??
decomposing working class formations through imposed austerity that
found leverage in the massive disruption generated by vast and rapid
movements of liquid capital. â??Only a drastic change would have
aroused people to make such an adjustmentâ?? argued Giersch,
referring to â??the loss of a million jobs in Germany and the creation
of several million jobs in the United Statesâ??. â??Under those
conditionsâ?? he suggested, â??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 workâ?? [1981, pp228-9].

The last thirty years has seen the further development of this
   â??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 â??the core of the international
financial systemâ?¦ the largest, the most liquid, the most innovative,
and the only 24-hour global financial market in the worldâ?? [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 â??new' form of convertibility â?? not a
guaranteed parity to bullion, commodity-money or pseudo-world
money â?? 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 â?? 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)
â??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
moneysâ?? [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 â?? a cornerstone of money's
alleged neutrality â?? have been thrown akimbo as exchange rates
overshoot, deviating from â??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 â??soundâ?? 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
â??real' economy mechanisms such as the Marshall-Lerner condition
and Keynesian absorption strategies. The capital account was viewed
largely as a â??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 â??no single â??anchor'â?¦ for the system as a wholeâ?? [1997,
p144], and subsequently no final global â??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
   â??inconvertible' (ie paper) foreign exchange, creating an
   â??International Monetary Scandalâ?? 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 â??money
â?? in the form of precious metal â?? 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 â??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 â?? credit money â?? 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 â??Mother Creditâ??, 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 â??currency overlay managementâ?? â??
unbundling currency risks from underlying assets and â??managing' it
separately). Clearly distinctions remain between â??money' and
   â??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 â??lose its grip
â?? (begriffslos) [Bonefeld, 1995] over living labour in the here and
now, while credit exists as a claim on future labour.

Whether as â??money' or â??credit', each promise is continuously
judged and priced by the market as it assesses its â??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) â?? including inflation differentials, government
finances, interest rate movements, current account figures or labour
unrest â?? can be seized on by the markets as they constantly sit in
judgement. National â??IOU's' judged negatively by the markets are
discounted or even rejected (ie liquidity in that asset â??disappears').
As the IMF noted, â??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 flowsâ?? [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
http://www.bondmarkets.com/research/statist.shtml. 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].

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.

Debt, Risk and Instability: Reading Credit Politically

The IMF in its usual fetishistic fashion considers the foreign exchange
market a giant ?mechanism for pricing tradable wealth
internationally? [Goldstein et al, 1993, p5]. It is no such thing. It is
rather a giant mechanism for pricing and judging debt - a form of
wealth yet to be. To read this new regime politically one must
conceptualise the global network of financial markets not as channels
for allocating credit, but rather as mechanisms to create, distribute
and control debt. Debt of course, is the counterpart to credit. Yet the
social relationship that constitutes the singularity credit/debt is
contradictory, antagonistic and contested. While credit extends social
relations into the future, weakening market discipline, its counterpart
debt seeks to impose the rule of money (exploitation) in the here and
now. Debt creates a social space for the re-imposition of the social
bond(age) of money and thus the capitalist relation of work, an
essential moment if credit is to crystallise as social wealth. By
tightening these linkages, the $42 trillion of interest bearing capital
currently in existence has acted as a point of fulcrum for the
imposition of austerity at the level of the national economy rather
than a mechanism weakening the social bond of the market.

Credit is a leap of faith, a view reinforced by its Latin derivation of
credere - ?I believe'. While Sismondi suggested credit is ?an
exchange of a reality against a hope? [Perelman, 1987, pp181-2], the
genealogy of debt suggests creditors have relied on more than faith or
hope. Creditors have typically had access to socially ordained powers
to impose sanctions on a defaulter. Etymologically this ability to
punish is clear. The German for both guilt and debt is Schuld, closely
linked to the infliction of punishment, debt thus being ?backed' by
suffering, while Geld (money) is supposed to have originated from
Vergeltung, the settling of scores or revenge [Nietzsche, 1887/1989;
Ingham, 1996]. Mortgage in its medieval usage refers literally to a
   ?death pledge' or ?death grip'. The creditor will be repaid - if not in
money than in kind, with the suffering of those who have broken
faith. As summed up by one Swiss central banker, between creditor
and debtor ?the strategic situation is as simple as it is explosive
?? [Egli, 2000, p275].



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