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Book Review: Money: The Unauthorized Biography

November 3, 2014 in Economics

By George Selgin

George Selgin

Money: The Unauthorized Biography
By Felix Martin
Knopf, $18.92, 336 pages

The aftermath of the worst financial crisis since the Great Depression is an apt occasion for taking a fresh look at money, that most basic of all financial instruments, atop which all the rest teeter.

As his subtitle suggests, Felix Martin has attempted a warts-and-all unmasking, to which he brings formidable credentials—a doctorate in economics from Oxford, two stints at the World Bank, and his current position as macro-economist for the London-based investment manager, Thames River Capital. The author is further aided by his felicitous prose and eye for money’s naughtier antics.

He’s not short of tales to tell: about money’s little prank of masquerading as stone wheels in the western Pacific, its domestication by Greek kings, its kidnapping by crafty private bankers, and finally, its post-2001 binge. But in his eagerness to reveal truths to which others have been blind, Martin ends up exposing not so much money’s mysteries as his own incomprehension of its real nature. According to a reviewer in the Guardian, this book will leave readers both “surprisingly entertained” and “better informed.” Entertained but misinformed is more like it.

The author first leads readers astray by assuming that money has always consisted of an elaborate system of IOUs rather than of physical stuff. But while simple societies may have tracked and settled debts in many different ways, among non-intimates, monetary IOUs have themselves always been promises to pay some particular stuff, whether tobacco, sea shells, metal discs, or engraved paper.

The distinction between monetary promises and the stuff promised is, admittedly, often unclear, as it was when Britain’s pound sterling ceased to refer to any actual coin, and when modern central banks turned their paper promises to pay gold into what one former New York Fed vice president dubbed “IOU nothings.”

But the fact that a Federal Reserve note is no longer a promise to pay anything else doesn’t make the note an “arbitrary increment on an abstract value scale.” Sometimes a note is just a note, and high-toned talk about universally applicable value confuses the real nature of exchange of goods for money. When a luncheonette sells me a ham on rye for $4.99, that doesn’t mean the sandwich has a value of $4.99, universally or otherwise. It just means that to the luncheonette the sandwich is worth less than $4.99, and to me, more.

The author’s knowledge …read more

Source: OP-EDS

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