There was a basic flaw in the Vollgeld “sovereign money” proposal rejected by the Swiss in a referendum last Sunday. An arrangement that gives the state or its agencies exclusive power to create money, oversee bank accounts and direct lending to the economy is hostile to capitalism. It cannot produce the assurance needed to allow the process of rational monetary calculation that is the essence of capitalism. This was pointed out by the sociologist Max Weber in 1922. Geoffrey Ingham of Christ’s College Cambridge sums up Weber’s conclusion as follows:
Money is a near-universal social institution. It evolved to support human cooperation and to control and coordinate the life of humankind. Like other core institutions, such as marriage and language, the forms that money takes may differ widely. The values and norms governing money’s use, and the practices associated with it, also vary widely.
For the individual, money is also a psychological symbol. Money allows each person to enjoy the fruits of others’ work. For many billions of people, obtaining money is the sole purpose of their everyday life.
International FinTech startups are looking to the United States as a vast consumer and business market for their applications and services. Despite the difficulties posed by a dual regulatory system, in which multiple federal regulators join agencies in all 50 states, the wealth and size of the market beckons.
In my last newsletter, I said that global economic fundamentals seem to be positive, and in spite of market turmoil in the interim I am going to reiterate that statement. Volatility has returned, which will bring opportunities for those who are not faint of heart. This is an exciting time, never dull, never boring.
Here are ten things that I think will shape the global and Australian economies in 2018, and that expect I’ll be talking about at conferences and events over the course of the coming year.
1: Central banks
The era of ultra-cheap money, which began during the global financial crisis, is drawing to a close. Already, the US Federal Reserve has raised its key policy interest rate target four times since the end of 2015, and has begun to wind back its bloated balance sheet (something which will take a very long time to complete).