At thursday evening’s talk at the occupied Empros Theater in Athens, Tiziana Terranova and I gave presentations on the political economy of social media to a diverse and engaged community.

The Empros Theatre is in central Athens, part of the overall urban geography that has been besieged by occupations, protest and police brutality in the recent surge of class conflict stirred by crisis and the accompanying austerity being inflicted on the Greek population. The theater was occupied by a collective of artists a few months ago, and hosts talks, presentations and events, often engaged in the cultural and political questions surrounding the resistance against the politics of austerity.

The financial crisis has pushed the greek economy into extremely dire straights. Eurozone pressure and speculative attack on government debt has forced the greek government into counterproductive austerity measures which are hotly contested by the population. As demand falls as a result of austerity-driven spending reduction, the economy sinks further into stagnation, in turn reducing taxation levels, leading to more austerity, and so on. A classic vicious circle.

The situation has unmasked the folly of the Euro. If Greece had monetary sovereignty, the government would have recourse to all sorts of monetary and fiscal means to stabilize demand and stimulate the economy, but because Greece is part of the Euro monetary union, it’s hands are tied. As a user, and not an issuer of it’s currency, Greece can not control it’s monetary policy, and as a result, has concrete limitations on its fiscal policy as well. It can neither increase spending to stimulate the economy, nor can it issue bonds and adjust lending rates to influence interest and control the cost of servicing its debt. All it can do is raise taxes and cut spending, and while these may stave off default and move towards Eurozone dictated fiscal constraints, these do not do what the greek economy desperately needs to recover, that is,
create demand, and thereby employment, increase tax levels, etc.

Within Eurozone Monetary policy is centrally managed. Yet, Eurozone nations may be, and usually are, out of sync at any given time in terms of what sort of policy best suites their current economic situation, and policy is naturally driven by the bigger economies, such as those of Germany and France, and not according to the interests of smaller economies like Greece. Thus, the greek people pay the price for a financial situation that was not of their own making. While other nations, especially the financial elite within them, are able to escape consequence.

Yet, while one could conclude that if Greece left the Euro and regained monetary sovereignty it would protect it’s people, sadly, not even this is likely to be true.

The political elite of Greece are beholden to the global financial elite and remain fully committed to the neoliberal program of wich the Euro was once shining jewel. The destruction of the welfare state, and immiseration of the workforce is not just a unhappy consequence of the neoliberal agenda, it is the goal. Thus, the Euro and the constraints it places on a nation’s ability to pursue the public good is quite intentional. And as they say, where there’s a will, there’s a way.

Even without the Euro, the intent remains. There is no reason to doubt that the henchmen of neoliberalism would, in any case, find ways to continue to push greek workers towards destitution. This is the case in the US and the UK, where despite possessing monetary sovereignty, these governments seems to be more interested in insulating financiers from loses, rather than actually stimulating the economy and thereby benefiting the whole of the people.

The problem is that the role of the State is to mediate among the classes on behalf of the ruling class. This is a simple political fact that can not be changed. The ruling class controls the bulk of the wealth in society and thus has the means to relentlessly push it’s own interests, and always eventually get its way. And with each victory, strengthen its position further.

Not ambitious politician or party can represent any other class, though they can represent different factions within it. To fail to attract the support of at least some faction of the ruling class amounts to handing victory to your rival, at least in most cases, and certainly in the long run.

The structure of the social order is the mirror image of the structure of wealth in society. It should be fairly safe to believe that even if the Greek government had the monetary sovereignty to intervene in the economy of behalf of their people, they would not.

Within a capitalist economy, wealth flows to owners of capital, and thus concentrates in fewer and fewer hands, while the share of wealth available to the great masses of people gets ever smaller, and with it, there political influence as well.

But for the largely autonomist crowd at the Empros theatre, the loss of political influence is not directly the most critical loss.

As with mutualist, syndicalist, “P2P” and other political views that can be described as autonomist, which can broadly include the free culture and free software movement, Occupy Wall Street, the Indignados of Spain, etc, a large current in the Anti-Austerity movement in Greece also believes that we must create our own institutions, our own alternative structures that move beyond the meagre choices offered by bourgeois society and prefigure the future society we are fighting for.

And that is right, that is also the main form of political struggle that Venture Communism proposes and explores mechanisms of realizing. Thus, the most important direct loss is not political influence, but rather mutual capital. Our capacity for investing in alternative structures comes from a single source: The amount of wealth that we, as workers, can consistently divert from consumption. Thus, as the share of wealth accrued by capital increases, not only does our political influence decrease, so does our capacity to invest in alternatives.

We can understand this as the macroeconomics of class struggle. The total wealth available for both political influence and alternative initiatives comes from the “monetary base” derived from the amount of wealth that workers can sustainably divert from consumption. Capitalism, as manifested in the neoliberal agenda, will work towards pushing this base towards zero, to increase its own base, its accumulated capital. Thus, the first dimension in the macroeconomy of class struggle os our collective will to fight to resist reduction of our base wealth. Mass collective struggles against further reduction of benefits and wages are crucial. “Counterpoltics.”

Yet, this is but one dimension, since our base of mutual capital is not only smaller than the accumulated capital of the capitalist class, but far less intensively utilized.

We must intensify the application of our base wealth. We do this by investing in alternative ways to produce and share, this means both the organisation of the surplus working power of unemployed and underemployed members of our communities, but also by making whatever money we can spare have available for social investment in commons-orientated means of creating wealth. “Venture Communism.”

And yet, these are still not likely to be enough. For not only is the Capitalist base far larger and more intensivly utilized, capital is also much more leveraged. Systems of capitalist finance multiply the amount of money by borrowing and lending. Much of the money available for investing and spending in the economy exists as a result of such activity.

We must not only protect our base wealth by means of counterpolitics, and intensify our application of wealth by means of venture communism, but we must expand the size of this wealth by means of “Insurgent Finance.” That is we must draw capital inflows into our social economy by drawing the existing accumulations of retained wages; worker’s pension funds. Pension funds are currently under the control of capitalist managers, and not only are they not being utilized to capitalize a people’s economy, but pension funds have historically been some of the most predatory financiers in the industry, most often working against the interests of workers.

We need to create securities that underwrite social ventures and convince pension funds, and workers in general, to hold them. In addition to the securities used to build capital for social enterprise, we must employ other mechanisms such as crowd funding and mutual credit to further stimulate our social economy. Insurgent Finance must not only capture capital inflows to finance the means of social production, but also create liquidity to capture demand.

We transform our society as we build the means satisfy our needs outside the financial cycles of capitalism. When we take demand away from forms of consumption that reproduce capital and further concentrate wealth, and instead satisfy the needs and desires of our communities by other means. When we produce and share according to our mutual needs and desires, and not according to the logic of profit capture.

While there is certainly much more that could be said about these dimensions of the macroeconomy of class struggle, the implied strategy is straight forward: Protect our base wealth with counterpolitcs, intensify it with venture communism, expand it with insurgent finance.

See some of you at Cafe Buchhandlung Tonight, I’ll be there around 9pm. (http://bit.ly/buchhandlung).

You all know them, the “Gold Bug,” often using words like “fraud” and “debasement of our money,” they decry government issued fiat money as a big scam to rip off the masses! We need “sound money” or “real money,” meaning gold. Gold has real value, it’s not “worthless” like paper! 

Using gold as money, instead of government issued non-convertible currency, will bring prosperity and stability and prevent us from being defrauded by bankers and bureaucrats!

The concept rests on the basic premise that since gold is relatively fixed in supply, the government can’t increase the money supply, thus money is sound. What’s more, investors and savers, financial planners and contract holders have certainty, knowing the money in their plans and bargains will keep a stable value.

Of course, there is one small problem with this: It’s hopelessly wrong. More than just being false, it’s an ideological pretense favouring the interests of the powerful, who’s real object of disdain is redistribution of wealth from the rich to the poor, like the majority of neoclassical theory, the real point is that inequality is just and any attempt to help the poor will lead to economic catastrophe.

For one, metallic currency will not prevent the money supply from growing. Most money in the economy is created by lending, and is only tentatively connected with the monetary base by policy and regulation, whenever a bank lends money, it creates money, and beyond any policy or regulation, the limit of how much money it can create is a function of the productive output of the economy and the structure of transactions within it. Thus, even with a metallic monetary base which the government can not increase, the money supply can still increase through the actions of lenders and borrowers.

The real point here is not simply controlling the money supply, but controlling the government. Gold Bugs often characterise government spending as wanton extravagance, telling torrid tails of Roman Emperors Nero and Caligula, or King Charles II to illustrate their point. The government must be kept under control! The obvious conclusion being that rather than try to restrict the spending of potential tyrants by employing dubious currency schemes, we instead focus on creating better forms of governance. However, better forms of governance may govern on behalf of all the people, not just the rich, so the Gold Bugs would rather have depraved wanton rulers, only they want to make sure these rulers are dependant on their gold.

This is an ideological position. Constraining government spending may prevent rulers from wanton extravagances, but also from beneficial spending as well. In most cases, it’s the beneficial spending that will attract the greater protest, as for the Gold Bug, there can no crime worse than improving the conditions of the poor.

When pressed, the Gold Bug will admit that lending and borrowing can also increase the money supply, every bit as much as money printing by the government can, and what’s more the government can be one of these lenders and borrowers as well, since the government usually has an excellent credit rating, this means it can still spend more gold than is collected by borrowing, however it must increase the incomes of lenders in the process to do so.

The Gold Bug will now launch into the second part of the diatribe, this time not against fiat currency, but rather against “Fractional Reserve Banking.” Just as evil in their mind as the practice of printing money.

They will propose “Full Reserve Banking,” where the banks are constrained to only lend out money in proportion to what they have in long term deposits. Since long term deposits can not be withdrawn on demmand, the money available to be spent is thus fixed.

With the money supply fixed, the value of money is certain to be stable!

Yet, even this is false. The value of money is not based on the volume of money alone, but on the volume of money available in comparison to the amount of goods that are available for purchase. Monetary Inflation is an outcome of the ratio between monetary growth and productive growth, thus having a stable money supply will only produce stable money value when the economy never grows or shrinks.

Thus, even with a gold standard, the value of money is not stable. In fact, as the economy is more likely to grow than to shrink, if the volume of money is fixed, its value is likely to continuously increase.

Now, who would really want money to increase in value? Those that have lots of money.

The value of money is essentially the exchange rate of money relative to goods and services. On one hand, providers of goods and services want more money for what they produce, on the other hand, holders of big piles of money want greater returns on their money. All prices fluctuate on the market, the value of eggs is not stable to the value of corn flakes, the value of semiconductors is not stable relative to the value of LEDs. Fluctuations of values are best constrained, so that savings aren’t wiped out or debt rendered impossible to pay, but fluctuations are quit manageable and deflation is certainly not preferable to inflation.

When you borrow money and you pay it back later, if the value of money goes down you have in real terms paid back less than you borrowed, on the other hand if the value of money goes up, you will need to effectively pay back more than you borrow. Inflation is a transfer of wealth from lenders to borrowers, while deflation is a transfer of wealth from borrowers to lenders.

In many cases, borrowers include the entrepreneurs who borrow money to invest in new business and who create economic growth. Thus deflation is also a transfer of wealth from entrepreneurs to money lenders. So far form being a great economic boon, so-called “sound” money, is actually a constraint to building the capacity for creating more wealth. The ones that benefit are those that are already rich.

Make no mistake, promoters of Gold Standards and Full Reserve Banking are promoters of the interests of the rich, and are not so much interested in economic stability, but in class stability: making sure the rich stay rich and the poor stay poor.

There can be no such thing as “sound” money, money is a relationship, a way of keeping track of what we do for each other in a large impersonal economy. The amount of money there can be is limited only by the amount we can do for each other. The aggregate of all the things that we do and make for each other is called the economy. The right amount of money to have is that which is enough for anybody who wants to buy something from anybody that wants to sell something, in other words, the amount of money needs only to stay stable relative to how much their is for sale. A free economy can not be constrained by people who want to get richer just by hoarding the currency everybody else needs to conduct their exchanges. Paper money, and other forms of credit are not “worthless,” any more than a contract is “worthless.” Its worth comes from the promises that it represents, and we should not be limited in what we can promise each other.

If government is untrustworthy, then we need new democratic forms to take its place, not try to constrain it by tying its spending to some arbitrary volume of metal, and if the banking system is not managing our money supply well, we can not help ourselves by adding even more limits on how credit and capital can be formed, but rather we need to create ways to create credit and capital amongst ourselves. Gold Standards and Full Reserves don’t help us do any of these things, what they do is chain us even more to the established distributions of wealth and power and help conserve the structure of wealth, at the expense of our common wealth.

I’ll be at Cafe looking to exchange some paper currency for some beer this evening starting around 9pm. Hope to see you there.

“Oh lord down in the congress, they’re passing all kinds of bills. From down on Capitol Hill, Money’s too tight to mention. cutback! Money money money money. We’re talkin’ about money money” – Simply Red.

The government simply hasn’t got enough money to its bills, cutback! They say. Or Raise Taxes! Or Raise the Debt Ceiling, borrow more! But wait a minute. Does the government really need to tax or borrow money to pay its bills?

If the tax collector gets money from the tax payer and then hands it over to the Government for spending, once the Government has spent all this money, it’s broke. Then, it needs to borrow money from lenders, going into deficit.

Yet, where did the tax payer and the lender get the money in the first place? Currency is printed by the government, directly or indirectly, so how could the government ever not have enough?

The government, which is the source of currency, can simply fund its spending by creating more currency, regardless of how much it borrows or taxes. That is a fact.

To illustrate this imagine that whenever the government needs to spend, it simply prints money, and whatever money it borrows or collects through taxes or rates is simply burned. Let’s start with the assumption that as a matter of policy what it prints and what it burns are equal, so that its “budget is balanced.” It is clear that this would be identical to only spending what it borrows or taxes. It is undeniable then, that the amount the government spends is limited by this policy of having a balanced budget, not by any imposed fact, or lack of money.

Now, if how much it spends, relative to how much it taxes or borrows is a matter of policy, the government is not spending your tax money, nor does spending imply it needs to borrow.

The government creates money when it spends or lends, and destroys money when it taxes or borrows.

Similarly, your Bank does not lend out your money. The bank creates money by lending, and destroys money by taking cash. The amount it lends is not limited by the amount it receives, any relationship between these two amounts is a matter of policy and regulation, not a natural fact, and has no natural limit. Putting more of your money in the bank will not cause it to lend more, nor will taking your money out of the bank cause it lend less, unless it decides to do so.

When a government creates more money than it destroys, we call this a budgetary “deficit” as if it created too much, and worry about inflation, yet banks need to create more money than they destroy as a matter of operating. If they didn’t, the economy would be starved of working capital. Most money in the economy is created by Banks, and our economy depends on this. Therefore, the amount the government creates is not directly inflationary, and there is no “ideal” relationship between how much the government ought to create and ought to destroy. In other words, there is no ideal relationship between how much you pay in tax and what the government can spend or must borrow. Government spending can exacerbate inflationary conditions, but the government’s control of the monetary base can do little to prevent them, and the reverse is true, taxation and borrowing can exacerbate deflationary conditions, but can do little to prevent them.

What’s more, inflation is not a factor of the volume of money alone, it is an outcome of the ratio of liquidity growth to production growth. Increasing the money supply is not inflationary when it is invested in such a way that causes more wealth to be produced, and decreasing the money supply can be inflationary if it robs the economy of working capital and thereby causes less wealth to be produced.

When the Banks and the government tell you that they are out of money, they are lying to you. The purpose of the lie is to obfuscate the policy choices they are making. Probably because they are making choices that are not in your interest, and thus want to make it seem like there is no choice at all, only a simple fact of “not enough money.”