Money and the State

The discussion of money is plagued with the question of what is money. In the Monetarist debates of the 1980s the question related to the measure of the stock of money (‘money supply’) and the discussion of which financial asset (for example, M1, M2, M3) would be the more appropriate. This was in the context of a view of the world in which the stock of money set the price level (and hence the rate of change set its rate of inflation) and where money was generally treated as controllable by the Central Bank or government (’exogenous’ rather than ‘endogenous’ money’). However, the differences over the conceptualisation run much deeper and relate to the heart of what is meant by money and what are its key functions. In this chapter we seek to explore some of those differences, and in particular we focus on the interplay between concepts of money and the perceived relationships between the State and money.