Today I finished reading properly Rebecca Spang’s marvellous [amazon_link id=”0674047036″ target=”_blank” ]Stuff and Money in the Time of the French Revolution[/amazon_link], having only dipped in when I first bought it. It really repays the attention. What seems to be a book about a specific aspect of the historical episode is really a reflection on the nature of money and its intrinsic relationship with politics and with conceptions of property. Set in the 1780s and 90s, it could not be more relevant to the bitcoin/ledger debate.

[amazon_image id=”0674047036″ link=”true” target=”_blank” size=”medium” ]Stuff and Money in the Time of the French Revolution[/amazon_image]

I learnt much from it, starting with the insight that the problems with the infamous assignats issued after the revolution stemmed from the unquestioned belief that the venal offices sold by the old regime, raising much government revenue, could not be cancelled or expropriated. Spang writes: “Throughout the debate, no one (not even Marat or Robespierre) took the truly revolutionary position of suggesting venal offices might be illegitimate privileges that could be cancelled without payment.” But, she adds, “Simply aboloshing the offices was unthinkable but so too was leaving the debt on the books, since officeholders who had not been repaid woulf retain their property and ‘privilege’ would still exist.” Settling the debts in one go would would consign the ancien regime to history and complete the revolution. Hence the issue of assignats backed by the expropriated land of the church.

The book also has a fascinating section on [amazon_link id=”0691116350″ target=”_blank” ]The Big Problem of Small Change[/amazon_link] (to quote the title of Tom Sargent and François Velde’s book on this): the cost of manufacturing the low-denomination coins used by most people exceeded their face value. A shortage of usable cash led to the proliferation of private currencies in many areas, and eventually their replacement by breaking up the assignats into smaller denominations, so that they morphed from something like bills of exchange, backed by specific property, into generic paper money. A sophisticated credit network built on personal relationships and specificities gave way to anonymity and ultimately distrust. But the distrust was the product of political uncertainty, the dissolution of everything familiar and the clear invalidation of the assumption that the future would be enough like the present that credit – and money – could be relied on.

[amazon_link id=”B00RLHMOF4″ target=”_blank” ]The book[/amazon_link] concludes with a reminder that the past is different from the present but what it does serve to underline is the culturally specific character of not only money but other foundation stones of economic relationships – property and value. These “have never been naturally given categories but are historically produced.” And, perhaps, poised for another revolution, as digital everything continues to strain conventional ideas of property and value to breaking point and beyond.

History repeats itself, with variations; as the famous Reinhart and Rogoff book on sovereign debt crises argues, [amazon_link id=”0691152640″ target=”_blank” ]This Time is Different[/amazon_link] – not! I’ve just been reading a fascinating book by Bill Allen on UK macro policy history, [amazon_link id=”113738381X” target=”_blank” ]Monetary Policy and Financial Repression in Britain, 1951-59[/amazon_link]. The 1950s were preceded by a period remarkably like today’s context in important ways. The Bank rate – the key policy rate of the period – had been kept at 2% for nearly two decades, to combat the Depression, finance the war, and keep the economy growing in the post-war years. With a new government in 1951, monetary policy was ‘reactivated’.

[amazon_image id=”113738381X” link=”true” target=”_blank” size=”medium” ]Monetary Policy and Financial Repression in Britain, 1951 – 59 (Palgrave Studies in Economic History Series)[/amazon_image]

The author – formerly a senior Bank of England director and now at Cass Business School – argues that the 1950s have highly relevant lessons for today. The Bank’s key rate has been at 0.5% for more than five years and will stay there for some time longer. With short-term government debt outstanding amounting to £342bn at the time he wrote (just over 20% of GDP), “This means that any increase in short-term interest rates would entail an immediate and substantial increase in government expenditure.” Yet, he continues, it is inconceivable that interest rates can stay so low for ever. The only way is up.

What possible paths are there out of this situation? Either higher interest rates will lead to a big increase in the fiscal deficit or (much) more austerity; or nominal GDP will have to rise substantially either via real growth or higher inflation to reduce the fiscal impact of higher interest rates; or banks will have to be forced to bear some of the cost of rising interest rates – as in the 1950s – by a requirement to hold very large non-interest bearing deposits at the Bank of England. The first option is unappealing, the second unlikely given present economic trends. “One fine day there will have to be a new reactivation of monetary policy, and the authorities will have to manage exactly the same problem that faced their predecessors.”

There are of course some very important differences between now and the 1950s, including the fact that the amount of private debt outstanding now is so much greater (141% of GDP vs 16% of GDP in 1951, the much lower liquidity ratios of banks now). Still, the parallels make this history extremely interesting. The bulk of the book consists of a chronological account of monetary policy and description of the techniques used and decisions made over the decade. The final chapters cover four themes: monetary policy tools, financial repression, power and influence, and an overall assessment of the monetary policy chosen.

The power and influence chapter is especially interesting. This was long before Bank of England independence so the Chancellor of the Exchequer took the policy decisions and was in principle answerable to the House of Commons. In practice, secrecy prevailed, and there was almost no communication about policy – quite a contrast to today’s situation of ample, and perhaps even excessive to the point of confusion, communication. The book places the blame for the prevailing secrecy on the dire state of Britain’s financial problems both in the 1930s and again after the war. “Formal post-war default by the UK would have been technically possible but politically poisonous.” Commentators on policy had to apply guesswork to figure out what the Bank of England had already done, never mind what its future actions might be – the book uses archive material to fill in the blanks.

One result was that academic discussions diverged from practice, a damaging divorce. For those who understood the institutional reality of money and those who developed theories about monetary policy on the whole stopped speaking to each other – something we arguably paid the price for in the recent crisis, by which time the non-institutionally grounded theories had reversed themselves into central bank thinking too. (I find the institutional detail explained in this book far more interesting than the abstractions of macroeconomic models, I must say. It brought back to me memories of reading parts of the Radcliffe Committee Report in my undergraduate days, and being intrigued by the practicalities of monetary policy – an interest thoroughly destroyed by subsequent exposure to real business cycle theories and representative agent models.)

My sole criticism of this fascinating account of the reality of a decisive decade in UK monetary history is that it’s priced for institutional libraries (£70); but anybody at all interested in how we might find a way out of the present policy pickle would do well to borrow a copy.