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The power to 'create money out of thin air'




Modern finance is generally incomprehensible to ordinary men and women..... The level of comprehension of many bankers and regulators is not significantly higher. It was probably designed that way. Like the wolf in the fairy tale:

“All the better to fleece you with.”

Satyajit Das, in Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives. (2010, FT-Prentice Hall)


Last summer, I took up a book that had been on my reading list for some time: Cambridge sociologist Geoffrey Ingham’s Capitalism (Polity, 2011).[1]


Geoffrey Ingham is one of a handful of academics not blinded by the smoke and mirrors of today’s monetary ‘alchemists’. His excellent The Nature of Money (Polity, 2004) reveals a sounder grasp of credit-money than many contemporary heterodox economists and almost all orthodox, monetarist economists.[2]


Just as with The Nature of Money, Ingham’s Capitalism adds a great deal to our understanding of the systemic nature of capitalism. Like the distinguished sociologists on whose shoulders he stands, Ingham draws on those theorists whose work he “found to be most valuable”. They are Adam Smith, Marx and Weber, but also Joseph Schumpeter and John Maynard Keynes – who are included he writes,


“not only for their seminal heterodox contributions to the economic analysis of capitalism, but because this heterodoxy is implicitly ‘sociological’ ”. (ibid. p.2)


This book is therefore a must-read for both sociologists and economists; indeed for anyone wanting to deepen their understanding of the systemic nature of today’s global financial crisis.


However, while Ingham’s review of heterodox analyses is illuminating, it is, by his own admission, not comprehensive and, I will argue, includes a number of flawed analyses which are the subject of current debate, and discussed in some detail in this review.

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