By Will Beaman
Public banking is often misdescribed as a nicer way of lending money. Instead of depositing public revenues in private banks, the sales pitch goes, governments can place their revenues in a public bank that will try its best to lend money in ways that support a progressive agenda. All while making a profit, of course.
This vision misses the political significance of endogenous money. An unfortunately technocratic-sounding term, endogenous money simply means that money is created through lending. It is not “borrowed” from the future, nor is it lent out from an existing stock of bank deposits. Instead, a private bank loan creates an asset and a liability from thin air at the same time in such a way that makes it look like the passive intermediation and recycling of private funds.
Seeing this is a lot like noticing the editing cuts in a film that create the appearance of continuous space-time through its opposite—discontinuous cuts that hide their own seams. We produce continuous cinematic space-time because that’s the genre convention*, not because it’s necessary for the cinematic experience to be “sound” or valid. With banking, hiding the plasticity and infinitude of money is a genre that limits the public demands we might make of the monetary medium. And that’s the whole point: investment banking joins together large-scale industrial policy driven by credit creation with asset-bubble dynamics designed to provision an oligarchy, while we debate fiscal policy through the hydraulic image of tax-dollars being recycled from suburban breadwinners.
All money is created before it is seemingly “recycled” through this fiscal kayfabe. The reason this creative capacity is laundered through private banking is to shrink fiscal policy to the size of periodic showdowns with reactionary state legislatures and governors, while tech and other industries effectively grow and expand as much as they want. So, when public banking is conceived on the basis of widely debunked economic models of private banks lending and multiplying other people’s deposits, it concedes basically everything to the profit motive. Sewer Socialism is dead on arrival.
*Not coincidentally, the historical emergence of self-effacing continuity techniques is associated with early racial melodramas that likewise laundered a reactionary moral worldview through a visual and narrative naturalism.
“Piggy Bank being Smashed with Hammer” by Images_of_Money is licensed under CC BY 2.0.
“IOU in a piggy bank” by Images_of_Money is licensed under CC BY 2.0.
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