A. Background to the creation of the euro

While many accounts of the creation of the European Monetary Union (EMU) focus predominantly on the internal politics among EU Member States, a critical part of the context for the formation of EMU was an earlier sea change in the governance of money on an international level. In addition to being a mechanism designed to promote monetary stability in the European Economic Community (EEC) in advance of joining the euro, the creation of the European Exchange Rate Mechanism (ERM) in 1979 was a direct response to the economic and monetary instability that many countries were experiencing as a result of ‘turmoil’ in international currency markets that followed the breakdown of the Bretton Woods system of fixed exchange rates in 1973.Footnote ³³ The increased liberalisation of capital controls by states, and the development of global forex markets as a market-based mechanism for valuing the exchange rates of currencies that were no longer pegged to the gold-backed US dollar, had created a situation of volatility in exchange rates that was having negative effects on the internal market: sudden changes in exchange rates could affect imports and exports, and this volatility was having a particularly detrimental impact on the common price system of the Common Agricultural Policy (launched by the EEC in 1962).Footnote ³⁴

The ERM created a new system of pegged exchange rates within Europe whereby the diverse currencies of European states were based on the European Currency Unit (ECU), the European unit of account, the value of which was determined as a weighted average of the participating currencies.Footnote ³⁵ It is widely agreed that the ERM worked to the benefit of Germany, as the Deutchemark became the ‘nominal anchor of the ERM’.Footnote ³⁶ Indeed, the United Kingdom (UK) initially refused to join the ERM in part due to the competitive advantage that it gave to the German currency. The UK subsequently joined the ERM in October 1990, but was forced to exit just two years later under the pressure applied to the pound sterling by currency speculators.Footnote ³⁷ The UK Chancellor, Norman Lamont, announced in September 1992 that the Government ‘could no longer hold the line at the end of a day of desperate and futile attempts at propping up sterling’, which had involved spending an estimated £10 billion from Britain’s reserves and mandating a two-stage rise in interest rates to 15 per cent.Footnote ³⁸

The influence of Germany preferences with regard to the future shape of the EU’s monetary arrangements was transferred into the governance of the euro through its dominance in the ERM. As Feichtner underlines, ‘The current legal architecture of the European Economic and Monetary Union replicates and further consolidates the separation of monetary and economic policy, of money and public finance that had characterised the legal architecture of money in Germany already prior to European monetary integration.’Footnote ³⁹ In addition to mimicking the monetary culture in Germany, lobbyists from strong currency states in the ERM also ‘saw the market as a salutary source of financial discipline’ and pushed for ‘an inflation-focused independent central bank and for strict fiscal rules in order to clip the wings of undisciplined governments’.Footnote ⁴⁰ That being the case, competing factions – federalists; ordoliberals, and neoliberals – had very different visions of what the political formation of the currency union should look like, and what role law should play within it.Footnote ⁴¹ Indeed, as Streeck has also highlighted, Maastricht was sold to diverse European electorates based on different campaigns to get the treaty ratified in different countries: promises that the euro would be as ‘stable as the mark’ to German voters, and an emphasis on flexibility to Southern voters, creating an understanding that the treaties and governance arrangements could be modified in response to changing circumstances ‘in practice, if not on paper’.Footnote ⁴² Current developments reveal a partial truth in both narratives. A large body of legal scholarship has debated whether legal rules governing monetary arrangements should create stability or be interpreted teleologically in accordance with the purposes of the EU. These issues go to the heart of the current debate over the ECB’s mandate to authorise practices that effectively loosen the constraint on monetary financing, as well as the debate over its potential role in considering inequality when formulating monetary policy.

In response to accounts that maintain that the development of the euro and the design of its legal frameworks was solely a neoliberal ‘market-conforming’ project designed to advance ‘the “central” importance of Germany’s preference for “fiscal rectitude above other concerns such as growth and unemployment”’,Footnote ⁴³ Jabko argues that many policymakers saw the euro and the move away from flexible exchange rates in the eurozone as a way to regain some political control in a world of mobile capital and hegemonic financial markets,Footnote ⁴⁴ and to ‘regain monetary sovereignty from the global financial markets and the Bundesbank’.Footnote ⁴⁵ Thus, in addition to the influence of different European states and different ideological positions on the frameworks governing the euro, the creation of this common currency was also a response to developments in the international global political economy, and, in particular, to how exchange rates and flows of capital influenced production and trade in diverse political economies in spite of how individual European states chose to issue credit and conduct monetary policy when they were still able to do so. The significance of this point will become clearer in my discussion of legal theories of money and the transnational dimensions of the EU’s monetary constitution below. For now, I want to echo Otero-Iglesias and underline that, in addition to the impetus that the post-Bretton Woods shift to a world of mobile global capital provided for the creation of a common currency, this external context also influenced the character of the governance structures of the euro. In the absence of the political will to establish a European superstate – a much lamented failure of the EU, particularly in the eyes of aspiring federalists – ‘the founders of the euro agreed that the credibility of the “stateless euro”…in front of the increasingly speculative foreign exchange markets in London should be based on an extremely rigorous monetary framework that excludes the possibility of the monetisation of sovereign debt’.Footnote ⁴⁶ The need to ensure that ‘[T]he euro represents depoliticised and hence stable money’,Footnote ⁴⁷ a point underlined by Issing, a founding member of the executive board of the ECB, was argued to be required to assure increasingly mobile investors that sovereign governments would not be able to utilise their capacity to ‘print’ money to erode the value of their debts, or to implement practices that might lead to generalised inflation, impacting on the value of financial investments denominated in the new currency.

I will now present a brief overview of some of the key features of the EU’s monetary constitution before moving on to discuss competing accounts of the current crisis within the eurozone.

B. Features of the EU’s monetary constitution

The arrangements for the governance of the EMU were first set out in detail in the Maastricht Treaty in 1992 and came into operation on 1 January 1999 in 11 Member States. Pursuant to Title VIII, Economic and Monetary Policy TFEU, those Member States which have completed the final stage of monetary integration transfer their monetary policy powers to the EU, meaning that monetary policy for those states is now the exclusive competence of the European System of Central Banks (ESCB), consisting of the ECB and the national central banks.Footnote ⁴⁸ The conduct of the single monetary policy is defined in Articles 119, 127 and 130 TFEU. In exercising its tasks, the independent ECB and the national central banks must, as their primary objective, pursue the maintenance of ‘price stability’.Footnote ⁴⁹ The mandate of the ECB in conducting monetary policy is strictly limited with regard to monetary financing (funding state budgets by ‘printing’ money). The ‘no-bailout clause’ impedes the EU and its Member States from assuming the financial obligations of governments,Footnote ⁵⁰ and the prohibition of monetary financing mandates that neither the ECB nor central banks of participating states may extend credit to governments, which includes a prohibition from buying government bonds on the primary market.Footnote ⁵¹

The separation between ‘monetary’ and broader ‘economic’ and ‘fiscal’ policies in the EU’s monetary constitution reflects a monetarist understanding of the role of government institutions in the management of the economy.Footnote ⁵² Monetarists stress the importance of a steady increase in the money supply for sustainable economic growth and consider that this increase should extend from the use of monetary policy by central banks to control inflation. The mode of growth expansion envisaged by monetarists is a supply-side model in which independent central banks utilise technical monetary policy to assist the activities of private banks and private markets. This is in contrast with Keynesian perspectives that dominated in the 1970s which posited that governments should spend liberally to stimulate consumer demand, and should boost economic growth by strengthening the position of labour via wage supports. The monetarist basis of the EMU imposes fiscal discipline on Member States through the convergence criteria for joining the EMU,Footnote ⁵³ and through the Stability and Growth Pact, which obliges Member States to avoid excessive deficits and stipulates enforcement procedures to discipline errant states.Footnote ⁵⁴

In response to the sovereign debt crisis in 2010, the EU shifted substantially away from monetarist ideas towards a ‘pragmatic’ approach that incorporated an increased use of monetary policies that offered fiscal benefits for governments and sought to stimulate demand, as opposed to fixating only on the money supply. ECB Vice President, Vítor Constâncio, admitted in 2016 that ‘without the significant use of fiscal policy in 2008 and 2009’ including the OMT and PSPPs programmes, ‘stimulating our economies and supporting the banking sector, the meltdown of the financial system could not have been avoided’.Footnote ⁵⁵ He further noted that there is a ‘misguided argument that the euro area problem is almost exclusively a supply side question’.Footnote ⁵⁶ Nevertheless, the attempts by the European Council and the ECB to create greater flexibility and to authorise novel approaches to emergency credit provision and monetary policy have been subject to a number of legal challenges, leading to the cases in Pringle Footnote ⁵⁷ and Gauweiler.Footnote ⁵⁸ In Pringle, the CJEU subsequently justified the actions of the Council in finding within Article 125(1) TFEU the ultimate telos of maintaining the financial stability of the monetary union. The CJEU continues to support the actions of the ECB and EU institutions, rationalising its approach within the framework of the Treaties, however, critics continue to reject the CJEU’s legal reasoning, maintaining that by adopting the OMT programme, and, presumably, the PSPP, ‘the ECB also left its home turf of monetary policy’ and effectuated a shift from regulatory to redistributive policy as the OMT ‘re-distributes financial risk among the ECB shareholders without their involvement: if the programme is activated, it automatically creates financial obligations for the remaining eurozone members’.Footnote ⁵⁹ Many commentators regard these developments as falling foul of the restrictions on mutualising debt obligations and monetary financing within the Treaties. Kreuder-Sonnen summarises a recurrent complaint that the European Council created the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM) ‘outside the European legal order’, undermining ‘the material constitution of the Monetary Union by circumventing the no bail-out clause in Article 125(1) TFEU’.Footnote ⁶⁰ Similarly, the OMT programme put in place by the ECB in September 2012 was dubbed the ‘out-of-mandate transactions’ programme by critical commentators, and was presented as ‘a seizure of competences by executive self-empowerment that stretch the limits of the bank’s mandate’.^{Footnote 61}

C. The Eurozone in crisis: a discussion of competing accounts

A significant proportion of recent legal scholarship on the changes post-crisis to the EU’s monetary constitution is preoccupied with a shift to emergency politics, be it through overreach expressed through forms of fiscal conditionality and the troika, or through the unorthodox monetary policies of the ECB.Footnote ⁶² Stark rehearses a prevalent understanding that an independent central bank is best-suited to carry out the regulatory task of maintaining price stability, and that delegation to non-majoritarian institutions enhances ‘the secondary (ie, non-participatory) values of constitutional democracy, such as the suppression of factions and the facilitation of deliberation’.Footnote ⁶³ This construction only works, he argues, ‘as long as the bank’s activities are covered by the initial delegation contract and, in fact, remain regulatory, not distributive’.Footnote ⁶⁴ Others note that the idea that money and monetary policy must be insulated from the political process is a recent, anti-democratic reversal of the longer-standing position pursuant to which central banks ‘were first lender of last resort for the state and only later became lender of last resort for private banks.’Footnote ⁶⁵ The shift towards making the ECB ‘lender of last resort’ (LOLR) only to the private sector, as opposed to states, represented a substantial shift away from the stabilising role that central banks played during the era of the gold standard and embedded liberalism. As Frerichs underlines, ‘From a Polanyian point of view, the “protective” institution of central banking has thus switched sides – it increases the commodification of money, currency, credit, and debt rather than contains it.^{Footnote 66} (I will return to the significance of this concept of the ‘commodification’ of money in Section 2.)

Another body of scholarship on the EU’s monetary constitution casts the debate somewhat differently and focuses more on its structural and material implications for the diverse political economics of the eurozone. The lack of a solid and uniform fiscal authority behind the ECB is seen as a structural flaw in the EU’s monetary order by critics, who underline that the result of these arrangements is that EU Member States ‘issue debt in a currency that they do not control in terms of central banking (they are not able to “print” euros or any other type of currency, at least not for a considerably long period of time).’Footnote ⁶⁷. This means that governments will not always have the necessary liquidity to pay off bondholders, as happened during the sovereign debt crisis. The consequence of this structure, according to Sotiropoulous et al, is that financial stability ‘can be thus safeguarded only through fiscal discipline’,Footnote ⁶⁸ which has had disproportionate impacts on the economies in Southern Europe. A similar diagnosis is reached by De Grauwe in his analysis of the ‘design flaws’ of the EMU.Footnote ⁶⁹ For many heterodox economists and critical legal scholars, some of the legalistic discussions over the ECB’s actions pay insufficient attention to two key dimensions of the EU’s monetary constitution, namely, how the creation of a single currency impacted on dynamics in the underlying economies of core and periphery states in the eurozone, as well as on process of financialisation. Streeck draws on the ‘varieties of capitalism’ literature to highlight the significant differences between the political economies of Southern European and those of Northern European Members States. Generally speaking, he argues, Southern states in the eurozone are demand-driven economies that have relied on high levels of government spending, and in which, prior to the introduction of the euro, inflation made it easier to borrow as it eroded the value of public sector debt over time. Pre-euro, devaluations of the currency were used to compensate for the loss in international competitiveness that resulted from the high labour costs that were a part of this settlement that made it possible to harmonise the interests between workers and employers.Footnote ⁷⁰ Northern economies are different: ‘their growth came from exports, so they were inflation averse’; they were less dependent on devaluations to support competitiveness, and they were wary of both debt and inflation, and influenced by the votes of savers, who preferred a ‘stability culture’.Footnote ⁷¹ Growing pressures from speculative capital pressured governments to try to emulate the stability culture achieved by Germany in the years leading up to the introduction of the EMU.Footnote ⁷² Hence, in spite of some forecasted disadvantages, governments in Southern Europe accepted the fiscal conditionality requirements imposed to join the ERM, and the constitutional settlement of the euro reflected the conditions for economic success in export-oriented, strong-currency countries like Germany.

It is now commonly acknowledged that Germany benefits substantially from an exchange rate that is lower than it would be were its valuation on global forex markets not also impacted by the inclusion of the performance of Southern economies.Footnote ⁷³ On the other hand, though Germany, the Netherlands, Austria, and Finland are now seen to be the primary beneficiaries of the single currency, this has only been the case since 2008, when the full consequences of the EMU for Southern economies became apparent.Footnote ⁷⁴ When the single currency was first introduced, Germany was still the ‘sick man of Europe’, mainly reflecting the dramatic cost of reunification.Footnote ⁷⁵ By enforcing wage moderation and increasing labour market flexibility, Germany forced down its unit labour costs, resulting in a reduction in unemployment and a ‘stellar export performance’ that was assisted by its artificially low exchange rate.Footnote ⁷⁶ Countries in the South experienced the opposite effect as the impacts of the single currency took hold: an influx of credit flowing in from Germany and other ‘core’ countries occurred as the borrowing of Southern states was facilitated by a low nominal common interest rate in the eurozone, and by the perception of market actors that the risks of default of those governments were shared by the eurozone as a whole.Footnote ⁷⁷ The large current account imbalances created during the first decade of the single currency became increasingly unsustainable. Deprived of the possibility to devalue their currencies, and subjected to the discipline of an ECB pursuing price stability as an overall goal, when the global financial crisis began to unfurl, weaker and consequently more indebted peripheral eurozone countries were required to pursue painful internal devaluation processes including fiscal adjustments, leading to shrinkages in per capita incomes and high unemployment levels.Footnote ⁷⁸

Joerges and Falke argue there is a mismatch between how EU Law conceives of monetary governance and the material conditions that are required for a monetary unition to be successful. As they write, ‘the legal constitution of EU Monetary Union “Europeanised” ordoliberal-monetarist conceptions; law, however, could not hope ever to substitute for the necessary historical evolution of the equally Europeanised social preconditions for successful monetary operation’.Footnote ⁷⁹ Their account suggests that the formal understanding of money that underpins the legal frameworks of the Euro is in tension with how the euro operates in the context of diverse political economies. Streeck offers a similar diagnosis. ‘Monetary systems designed for different social dispensations can co-exist’ he finds, ‘so long as states retain sovereignty and can compensate for fluctuations in competitiveness’, which is fundamentally missing in the eurozone.Footnote ⁸⁰ An integrated monetary regime for such disparate economies as the supply based North and the demand based South is likely to be unsustainable, he finds.Footnote ⁸¹ Although they agree that common interest rates laid the groundwork for the explosion of (private and public) domestic borrowing that led to the sovereign debt crisis, Sotiropoulos et al cast the question of diverging interests within the eurozone differently. From their perspective, accounts such as Streeck’s, which cast the issue as a ‘tug of war between the North and the South’ over the management of the single currency,Footnote ⁸² err in putting the emphasis on the institutional malfunctioning of the single currency in the context of the ‘classical dependency schema’ of ‘core’ and ‘peripheral’ economies, and are mistaken in suggesting that the euro ‘serves the national economic interests of the most competitive countries of the “center”’.Footnote ⁸³ For these scholars, this analysis ‘declares the priority of the international factor over the internal dynamics of the class struggle’, casting the problem ‘in terms of the capitalism of the “centre”, and underweighting the matter of the power structures of the “periphery”.’Footnote ⁸⁴ The analysis of Sotiropoulis et al, which exposes the large gains made by some sectors of society in Southern European in the years leading up to the crisis and after it, reveals that, above all, when it comes to consideration of the role of the ECB with respect to inequality, attention must be trained not only on intra-country dynamics, but on how the EU’s monetary constitution configures the interests of different social classes, and how it relates to the accumulation of capital, above all, financial capital.Footnote ⁸⁵

A. Why understanding the nature of money matters for developments in the Eurozone

In broad terms, it is possible to distinguish two diverging diagnoses and sets of solutions to some of the issues afflicting the management of the single currency that are based on different conceptions of the nature of money. As dicussed above, the legal architecure governing money in the eurozone is strongly influenced by Monetarist macroeconomic theory, and it takes as its point of departure neoclassical perspectives on the the nature of money that cast money as a private resource. Feichtner’s work on the euro (discussed at footnote 9 and below) has already provided a thorough illustration of how the narrow, neoclassical economic perspective on the nature of money has been fused with constitutional thinking on the appropriate functions of government to elevate monetary stability to the level of constitutional principle within the EU. In recent years, however, the ‘pragmatic’ approach to monetary policy adopted by the ECB has re-opened a debate about solutions to the inequities that result from the operations of single currency and its administration. One diagnosis critiques the current design of the monetary constitution but places great faith in technical solutions that further advance the role of financial markets within the eurozone. Influential economist, Paul Krugman, analyses the distributional consequences of the single currency across the eurozone Member States using Optimum Currency Area (OCA) theoryFootnote ⁸⁶ – a theory that relies on neoclassical elements of thinking about money that focus on the role of money in economic exchange.Footnote ⁸⁷ The solutions that are proffered based on this conception of how money works in the EU include the ’creation of a banking union; making the ECB a genuine lender of last resort; and lifting the inflation target of the European Central Bank (ECB) to bring about a more symmetric adjustment between surplus and deficit countries.’Footnote ⁸⁸ This view would likely favour the use of more activist monetary policy by the ECB to tackle inflation and the move to create a European Capital Markets Union (ECMU). Another diagnosis, advanced by Miguel Otero-Iglesias in a direct reply to Krugman, draws on a chartalist understanding of money that emphasises the role of authority and credit relations - a perspective that sees the lack of a fiscal union at the European level as fatal to the project of a single currency. For Otero-Iglesias, Krugman’s technical solutions, which are formulated, in line with neoclassical analysis, in recognition of the differences in the ‘real’ economies of Member States, ‘are necessary but not sufficient to make the euro a sustainable currency’.Footnote ⁸⁹ He underlines that all of Krugman’s solutions ‘require in the long term the creation of a centralised political authority with the right to issue joint and several liabilities, but also with the capacity to raise joint revenues through taxation’.Footnote ⁹⁰ In his view, ‘under the Chartalist logic of money EMU will remain a fragile edifice as long as the eurozone does not create a centralized and legitimate political authority able to sustain it through the development of legitimate taxation at the European level’.Footnote ⁹¹ ‘Money is an act of sovereignty’, he underlines, and ‘sovereignty is fragmented in Europe and as long as it remains so the future of the euro will be questioned’.Footnote ⁹²

As this brief discussion suggests, competing views of the nature of money are being mobilised in debates about the possibilities for moving beyond the current status quo in the EU. For Otero-Iglesias, by following the neoclassical paradigm of focusing mainly on the real economy, Krugman’s approach ignores the important political economy questions of creditor–debtor relations. For heterodox thinkers like Otero-Iglesias, the behaviour of money in the ‘real’ economy is significantly impacted by political determinations of how creditor–debtor relations are configured by governments. On the other hand, Krugman would likely respond that focussing excessively on the creditor–debtor relation arguably underweighs how those relationships may be shaped by the differential political economies of countries with regard to ‘real’ factors of production and trade, which, while being made up of creditor-debtor relations, cannot be reduced only to this dimension. I will now turn to consider debates between different groups of economists on this central issue, before moving to introduce the recent interventions of legal scholars into this debate. Ultimately, my aim will be to demonstrate that while the ECB’s use of unorthodox monetary policy has helped to demonstrate that money is, in fact, a governance project, and that money does not follow specific economic ‘laws’ but performs, as Desan and Feichtner both argue, in accordance with a specific monetary design for the administration of credit, there is a need to consider how the legal constitution of money also conditions a political-economic reality in which money is made to behave like a commodity. Addressing this situation, I will argue, requires us to take a different approach to understanding the nature of money to that inhering in dominant neoclassical and chartalist perspectives, or even in ecent legal scholarship on money. Money may be an act of sovereignty, as Otero-Iglesias argues, but this does not mean that sovereigns are able to control money through monetary policy and fiscal channels. Indeed, as my analysis will demonstrate, it is precisely due to the ‘legal’ nature of money that this ambition is likely to be frustrated. Before I set out this argument, though, it is first necessary to examine competing theories of money in more detail.

B. Orthodox and heterodox perspectives on money

The writings of Krugman and Otero-Iglesias reflect a long-standing debate between ‘orthodox’ and ‘heterodox’ economists about the nature of money.Footnote ⁹³ For the orthodox camp, which is influenced by neoclassical economic theory, money is likened to a universal commodity that arose in private markets to improve barter. Exemplifying this tradition, William Stanley Jevons, one of the pioneers of neoclassical theory writing in the 18^th century, explained how the acceptance and circulation of a ‘chosen commodity’ that serves as ‘a common denominator or common measure of value’ allowed for an easy comparison of the values of all other goods, and thereby overcame the problem of the ‘double coincidence’ of wants.^{Footnote 94} As a mere medium to facilitate exchange, money in neoclassical conceptions is neutral, hence, as Ingham underlines, quoting Schumpeter, money can be discarded in the analysis of the fundamental features of the economic process, indeed, ‘it must be discarded just as a veil must be drawn aside if we are to see the face behind it’.Footnote ⁹⁵ For this reason, neoclassical economists tend to understand the essence of moneyness as being in its exchangeability, and to equate the validity of money with its economic value, which is thought to be determined endogenously and influenced by the operations of the ‘real’ economy. (Hence Krugman’s focus on the ‘underlying’ economy in his OCA-inspired approach).

The under-theorisation of money in neoclassical economics contrasts with the work of other heterodox economists and sociologists who have devoted considerable energies to trying to relate the tensions between the different functions that money needs to play in capitalism. For example, both Keynes and Weber developed theories based on typologies of different types of money – ‘commodity money’, ‘fiat/limited money’ and ‘administered/managed money’ – that acknowledge the tensions between different monetary functions.Footnote ⁹⁶ The neoclassical conception of money is also explicitly challenged by what are variously called the ‘claim’ or nominalist’ theorisations of money, which posits that the nature of money lies not in its role in exchange, but in its capacity to measure abstract value as the ‘money of account’.Footnote ⁹⁷ As Otero-Iglesias recounts, for these schools, ‘which can be traced back to Plato, Schumpeter, and Keynes, and counts among its adherents most historians, sociologists and anthropologists who have studied money’,Footnote ⁹⁸ orthodox economic theory has failed to explain how the unit of account function is generated. Neoclassical perspectives assume that through continuous ‘higgling’ rational utility-maximising individuals are able to ‘transform the myriad bilateral exchange ratios between all the different commodities, based on individual preferences, into a single price for any uniform good’.Footnote ⁹⁹ However, as Ingham underlines, it is difficult to see how a money of account could emerge from myriad bilateral barter exchange ratios based upon subjective preferences, as ‘one hundred goods could possibly yield 4,950 exchange rates’.Footnote ¹⁰⁰ For many heterodox thinkers, ‘the very idea of money, which is to say, of abstract accounting for value, is logically anterior and historically prior to market exchange’.Footnote ¹⁰¹ Chartalists and theorists who have a ‘state’ centric theory of money, like Knapp,Footnote ¹⁰² are persuaded that money is, in terms of its historical evolution and functioning, more accurately understood as a public credit medium that derives its authority from the state. Chartalist scholarship mobilises historical analyses to support this understanding of the nature of money, arguing that monies in different times and places consistently emerge ‘a means for accounting for and settling debts, the most important of which are tax debts’.Footnote ¹⁰³ In his recent endorsement of the chartalist approach, Otero-Iglesias argues that the dominant economic focus on neutral money as a symbolic medium of exchange for the market ‘diverts attention from the fact that money consists in the social network of credit and debt of the capitalist economy’.Footnote ¹⁰⁴ He charges Krugman’s OCA theory as having limited explanatory capacity ‘because it emanates from the commodity-exchange (generally referred to as the ‘metallist’) theory of money, which overlooks the necessity of a sovereign authority to underpin any given monetary space’.Footnote ¹⁰⁵ A chartalist approach is a more helpful theoretical device to grasp the fundamental weaknesses of EMU’, he contends.

Chartalist and nominalist theories of money stress that what the state accepts as payment in taxes, or what it ordains as legal tender, is decisive in determining what counts as money within a given economy, even if this money is not created in the first instance by the state. On this understanding, the processes by which commercial banks create and distribute credit does not negate the fundamentally public character of money as it is still the sovereign unit of account that is being accepted as payment for discharging debts and in payment for taxes. These approaches also offer a useful means to distinguish between money and near-money equivalents. For example, with regard to the ongoing debate over whether bitcoin is money or not, under a chartalist lens, bitcoin is not money unless bitcoin will be accepted in payment for taxes or else is explicitly designated as legal tender in a particular jurisdiction.Footnote ¹⁰⁶ Nevertheless, strong Chartalism also encounters challenges in terms of its explanatory power. Chartalism was criticised by Austrian economists MengerFootnote ¹⁰⁷ and von MisesFootnote ¹⁰⁸ for failing to settle the question of how money gets an economic value. These approaches are only able to establish that money is a valid means of payment, which is not the same as explaining money’s purchasing power with respect to a universe of commodities – a characteristic that, for many economists, is a fundamental criterion for moneyness.Footnote ¹⁰⁹ While heterodox theorists like Otero-Iglesias are persuasive in their arguments that money as an institution is ‘logically anterior and historically prior to market exchange’ – a position that leads to a focus on money as credit, and a stance also adopted by legal scholars – the starting point of money as an ‘abstract’ unit of account is problematic. Strong Chartalism cannot explain how money comes to be redeemable for the payment of goods in specific ratios, as it doesn’t explain how the unit has a substantive economic value. While a pound in weight and a meter in length can be objectively measured in the material world, a euro as a unit of account only has meaning if it is measured by reference to the social world: what is the meaning of 1 euro in abstract terms? Its economic value is only realised in the context of economic and social relations. Indeed, it is often highlighted that the precursor to the euro was a unit of account, the ECU, but this unit has no significance until it was used to measure the relative value of Member State currencies against one another through the use of a weighted ratio of existing rates of exchange. Credit theorists of money, perhaps most notably Keynes,Footnote ¹¹⁰ and neo-chartalist scholars, such as InnesFootnote ¹¹¹ and Wray,Footnote ¹¹² share the convictions of chartalists concerning the origins of money as being a unit of account and a public credit medium, but they offer more advanced analyses of the interactions between public credit and production and trade in the political economy. As I discuss below in Section 3 on advancing legal theories of money, in contrast to Monetarist perspectives that regard money as a stock that can be manipulated by the exogenous interventions of central banks, and in a departure from strong Chartalism, which stresses the control of the state over the money supply, many credit theorists and neo-chartalists argue that capitalist-bank credit money is produced through a more complex (and endogenous) process tethered to financing capitalist production. The consequence, as recognised by these scholars, is that central banks and governments cannot determine the value of legal tender in terms of its purchasing power. As I will go on to argue, this suggests that legal theories of money need to be extended to encompass the study of the legal entitlements through which demand for capitalist credit money is effectuated.

In order to highlight the critical question of how money comes to have an economic value, it is worth reflecting, albeit briefly, on how other disciplines have approached the nature of money. Philosophers turn to recognitional conceptions to understand money, pursuant to which ‘something is money if and only if it is recognized, accepted, or declared to be money (where ‘acceptance’ refers to a certain mental state as opposed to an act of accepting something as payment)’.Footnote ¹¹³ This framing accommodates aspects of both orthodox functionalism, where the focus is on what money does, and chartalist formalism, where the focus is on what money is: ‘One view is that you are recognizing that the function of the thing is to be a medium of exchange (whether or not it fulfils this function); another view is that you are recognizing that the holder of the thing has certain rights, for instance, the right to repay public or private debts with it.’Footnote ¹¹⁴ However, recognitional approaches stress that neither functionalist approaches or more formalist accounts are adequate on their own in terms of explaining the nature of money in the social world. Passinsky offers an important discussion on this issue, and I now quote from her at length:

Passinky’s analysis speaks to the two sides of monetary constitutions: the interaction between government actions that bestow recognition on a particular token, and the requirement – also widely acknowledged in sociological writing on money and the role of trust – for users of money to have faith in the value of the unit, and to continue, through their economic interactions, to bestow value into the unit designated as legal tender by the authorities. As I will now demonstrate, Passinky’s analysis highlights an important tendency in legal scholarship on money, which focuses predominantly on supply-side questions of how credit is administered when there is another side to the legal constitution of money, which concerns how a broad spectrum of laws that are shaping entitlements in the ‘real’ economy configure demand for money and condition the endogenous creation of credit in line with patterns of production and exchange, both within and beyond the eurozone. Passinsky’s analysis and her discussion of how to answer to the question of how bitcoin and other virtual currencies should be classified for legal and regulatory purposes also opens up a further discussion about the legal nature of money. As opposed to discovering a single constellation of laws that regulate the creditor–debtor relationships and thereby create and ‘constitute’ sovereign credit money, Passinsky points to a situation in which different forms of money are created and validated through distinct legal regimes in accordance with diverse judgements about the particular values that are promoted by the legal recognition of money. As she writes:

Her analysis would further imply that perhaps ‘moneyness’ is never an absolute but only a relative quality, and that different constituencies and individuals experience money differently, depending on how their legal entitlements are configured. So what do other legal scholars have to say about the relationship between money, the state, and the legal order? I now move to examine in more depth recent work that has pioneered a ‘constitutional’ approach to the study of money.

C. Legal and constitutional theories of money

Legal scholars writing about money have sought to answer the question of the legal nature of money in different ways. Some begin by seeking to explain what money ‘is’ in legal terms by studying the impacts of the multiple definitions given to aspects of money under different bodies of law.Footnote ¹¹⁷ For the purposes of this article, I am interested in those legal theories – notably the ’constitutional’ approaches of Desan and Feichtner, and the work of legal scholars working on finance – that seek to understand the role of the state and law in creating money and making it operational in the political economy.Footnote ¹¹⁸ The writings of this group of scholars demonstrates that in spite of the prominent role played by private banks in administering access to credit, when the role of states in licensing private banks and establishing the infrastructure to produce private credit money is appreciated, ‘states appear to exercise almost complete control over the legal, fiscal, and even physical machinery necessary to create money and ensure its widespread use amongst its citizenry’.Footnote ¹¹⁹ Legal scholarship on money to date has focused significantly on both challenging the accounts of neoclassical perspectives on the relationship between money and value, and on tracing the complex and changing operations of money in different periods of history, in the case of Desan, as well as under different governance frameworks, such as those for the euro,Footnote ¹²⁰ and governance frameworks that shape the operations of global finance.Footnote ¹²¹

Desan’s constitutional approach is attentive to the intersecting interests of governments and capital, as well as to the mutually reinforcing roles of public and private law in enabling money to circulate, and to enable market exchange and wider processes of valorisation.Footnote ¹²² Legal theories thus break the impasse of strong Chartalism, considerably nuancing accounts of the monolithic ‘state’ in some state and chartalist writing on money. In one important example, Desan shows how, in the 18^th century, the English government determined to share its authority over money creation with commercial banks: ‘Erecting an architecture that privileged one bank’s notes, it ordained them “money” and compensated the investors who issued them’ installing ‘a new theory at the heart of the political economy – the theory that individuals pursuing profits produced money.Footnote ¹²³ The character of money as credit matters, Desan underlines, because ‘credit money enters circulation selectively’; ‘it is an advance (a credit) made to some people relative to others. Thus money, inherent to the way it is constructed as credit, comes into use as a resource that some participants acquire first’^{Footnote 124} – ‘it is spent or loaned to certain hands.’^{Footnote 125} Against the presentation of economists who would see ‘free’ markets as democratic, Desan shows that not all citizens are all equal in the price mechanism – some are more favoured than others, and they are favoured by the state. Desan’s conception of money is similar to that of the post-Keynesian school of heterodox economic theory, which holds that ‘while money is created, in the modern economy, by private banks, its origins lie with the state and sovereign authority. The state is not only the largest borrower, but it also uses legal and coercive powers to establish its currency’.Footnote ¹²⁶

By revealing the fundamentally public nature of money making, and by underscoring how the capacities of financial institutions in the economy to issue credit and administer money are furnished by the state, legal theorists suggest that governments can choose to manage money differently.^{Footnote 127} While not all legal theorists of money necessarily endorse Modern Monetary Theory,Footnote ¹²⁸ some of these arguments dovetail with those of scholars arguing that governments can take control of their fully-fiat currencies and can move away from the restrictive ‘ordoliberal iron cage’Footnote ¹²⁹ that is seen to influence current approaches to monetary policy and government spending in the EU (and in other countries around the world). There is a move by this community of scholars to try to ‘democratise’ money, and to make money a tool to address economic and social inequalities by rethinking and reforming monetary designs at the level of the state, as well as at the EU level. The fact that central banks don’t just modulate the money supply but are also allocating a public resource, government-backed credit, has been rendered visible in both the global financial crisis and the coronavirus pandemic as governments have engaged in monetary financing to distribute funds to banks and to purchase ‘toxic’ assets to stabilise the financial system. In the US, proposals have been advanced that ordinary people should also be allowed to open deposit accounts directly at the Fed, and that the Fed should take steps to tackle climate change.^{Footnote 130} As central banks are already engaging in monetary financing and are funneling credit to particular constituencies, it is reasoned, a debate need to be had about which constituencies should benefit from this process, and on what basis. Indeed, as the recent speech of ECB president, Isabel Schnabel would attest, there is some evidence that this is precisely the approach that the ECB has begun to take.Footnote ¹³¹ While the role of monetary policy in addressing inequality is discussed, the most developed aspect of the ECB’s new policy agenda concerns the use of monetary policy to address climate change.Footnote ¹³²

There is a tendency in much legal writing on money to prioritise a focus on creditor–debtor relationships to the neglect of another dimension of the monetary constitution: the role of diverse legal regimes and the state in prescribing for the treatment of money – even fiat money – as a commodity. The writings of Polanyi,Footnote ¹³³ Keynes,Footnote ¹³⁴ Marx,Footnote ¹³⁵ and Weber,Footnote ¹³⁶ and, more recently, of Beggs,Footnote ¹³⁷ and LapavitsasFootnote ¹³⁸ offer theories of the nature of money that recognise the complexities of its production and circulation in capitalist political economies. To give one example of these hybrid approaches, as discussed by Frerichs, Polanyi defines ‘actual money’, in its uncommodified state, as ‘a token of purchasing power which … comes into being through the mechanism of banking or state finance’, but ‘his interest is in how money is “commodified”, that is, left to the logic of the market, while the state loses its monetary authority’.Footnote ¹³⁹ Polanyi’s analysis of the rise and fall of the market economy in the long 19^th century in which ‘[b]elief in the gold standard was the faith of the age’Footnote ¹⁴⁰ demonstrates how states ‘regulated money by trying to institute a self-regulatory mechanism through gold legislation and strictures on the national central banks diminishing their role in smoothing out monetary imbalances in earlier epochs’.Footnote ¹⁴¹ As Desan and others have shown, money is a governance project involving both public and private law, but one of the effects of particular public legal dispensations is that, while it may formally ‘be’ public credit, money can be treated in law as a commodity and made to perform in accordance with a commodity logic.Footnote ¹⁴² The Classical Gold Standard is the archetypal example of the attempt to forge a commodity-standard money through international cooperation, domestic legislation, and institutional practice, but Graeber highlights the significance of much earlier developments in the commodification of money. He argues that the beginnings of capitalism were not only fermented by the delegation of power to produce money to private banks, which is central in Desan’s account, but also by the legalisation of interest-bearing loans: ‘the commodification of money properly understood.’Footnote ¹⁴³ The lift of the ban on usury allowed the ‘economy of credit’ of the Middle Ages to turn into an ‘economy of interest’, as we still know it today.Footnote ¹⁴⁴

The focus of legal scholars on the public dimensions of money place creditor–debtor relationships in the foreground of the analysis, and results in a focus on the supply side of money. A consequence of this approach is that it leads to the underweighting of the other side of the monetary constitution: how laws and regulations that lead to the treatment of money as a commodity now substantially shape developments in the ‘real’ economy, which impacts in turn upon how the sovereign regulates access to credit. Although the breakdown of the Bretton Woods system of fixed exchange rates and the move away from a US dollar backed by gold is commonly described as a shift towards a world of ‘fully-fiat’ currencies, meaning that, at least in theory, governments lost the constraint of having to back reserves with supplies of gold, these developments were catalysed by practices in financial institutions that were implicitly authorised by nation states and that destabilised the post-war settlement by subverting restrictions on capital controls; practices that led to the development of a global forex market in which the fully-fiat currencies of many leading economies are priced and traded for their exchange values, and in which credit money is created and distributed by private banks for a price. As Kreitner underlines, while the formal culture of gold politics and gold legislation was abandoned with the move to fixed-exchange rates under Bretton Woods, since the 1970s, a requirement for participation in a global economy characterised by capital controls has been adherence to a set of internationally-negotiated regulations that effectively re-instate a market-based mechanism for regulation of credit production that treats money not as a fully-fiat medium that can be utilised by governments at will, but rationalises it as a scarce commodity.Footnote ¹⁴⁵ Kreitner’s analysis supports the position of Beggs, who, in a recent rejection of Chartalism, underlines that while states are clearly involved in the reproduction of money, the sense in which money is a ‘creature of the state’ is limited.Footnote ¹⁴⁶ The role of the state in establishing and maintaining the unit of account is ‘only a part of the relations through which money is reproduced’, he argues.Footnote ¹⁴⁷ By explicating constraints on states that are endemic within capitalist political economy, Beggs reaches an important conclusion: ‘To the extent that authorities are not indifferent to the results of markets’ disposal, managing money requires that they orient their rules and actions strategically within that context. In this sense, money makes the state even as the state makes money.’Footnote ¹⁴⁸ The question that Beggs’ analysis leaves unanswered is a question that has preoccupied many generations of legal scholars, which is the extent to which markets, or, put differently, the constraints endemic within capitalist political economy, can meaningfully be understood as being a product of legal relations, or whether legal scholars perhaps over-estimate the productive power of the law in the formation of social relations and institutional dynamics.Footnote ¹⁴⁹ If markets, or relations of production and exchange, are understood as being constituted by law, then the state is also ‘making’ the monetary power that then operates to constrain it. Indeed, this is what I will seek to argue.

I will now move on to advance legal thinking on the nature of money by addressing two neglected dimensions of money’s operations in the global political economy: first, the question of how money comes to have an economic value and the extent to which the regulation of credit impacts on price formation, and, second, the transnational legal operations of contemporary credit monies and their operations as currency in international exchange and global finance.

A. Bringing back value: the other side of money’s legal constitution

Thus far, legal theorists of money have either adopted an account of the relationship between money and economic value (that is, its purchasing power against a universe of commodities) that comes close to a chartalist position that stresses the role of government in determining the substantive value of money, or they have side-stepped the question of how money comes to have an economic value in a given point in time. Chartalist approaches stress that money is fundamentally a token that is accepted as payment for tax. Indeed, such was the emphasis that some neo-Chartalists like Innes placed on the role of the state in creating and regulating money’s value that he argued at the height of the Gold Standard that there was no such thing as a ‘metallic’ standard of money.Footnote ¹⁵¹ In a sense, Innes was right, since there was nothing natural or ‘self-regulating’ about the gold standard, which emerged out of specific agreements between states and legislative measures to implement the standard domestically – states that were grappling with the controversies and distributional dilemmas of ‘gold politics’ at home.Footnote ¹⁵² Nevertheless, as the work of Beggs make clear, chartalist approaches are not able to explain how the production of credit influences processes of price formation and value distributions in the wider economy. ‘The mint prints the bills, but not the price lists’,Footnote ¹⁵³ Beggs underlines, arguing that the state can insure the formal validity of a type of money through legislation, but ‘this formal power implies nothing as to the substantive validity of money; that is, the rate at which it will be accepted in exchange for commodities’.Footnote ¹⁵⁴ For Beggs, chartalist approaches, and the legal theories that appear to follow them in stressing the role of the state in authorising the assignation of credit money by commercial banks in accordance with a conception of creditworthiness, are confusing the matter of the substantive value of money with its validity. As Ingham – a sociologist and political economist – underlines, money needs an authority to exist, it is an expression of sovereignty, but ‘the substantive value of money is another question’.Footnote ¹⁵⁵

Legal theorists of money have been primarily concerned to challenge neoclassical perspectives on value, as the work of Desan does to great effect.Footnote ¹⁵⁶ That being the case, legal theorists have thus far evaded a fraught debate among a wider community of scholars writing about money that specifically considers the relationship between supply-side, or monetarist, theories of money that stress that activist monetary policy should be the preferred mechanism to influence the relationship between the substantive value of money and ‘price lists’, and the more demand-oriented theories of Keynes and post-Keynesians, who place greater emphasis on the role of governments in using fiscal measures and other legal tools to influence quantities of money in the economy and the value of money relative to price lists. The most persuasive theories of money are those that grapple with the complex and hybrid role of governments in this process, and to be fully convincing legal approaches must also address this dimension of the debate. One important strand of scholarship on the Theory of the Money Circuit argues that the relationship of money to prices and economic growth must be understood in accordance with ‘the actual structure of relationships that constitute the capitalist monetary circuit’.Footnote ¹⁵⁷ Theorists in this tradition, notably Graziani and Parguex and Seccareccia, argue that attention needs to be paid to how relationships between banks and firms, firms and workers, and banks and banks are configured, and to how these configurations influence the relative purchasing power of money and the volume of money in circulation.Footnote ¹⁵⁸ Legal scholars have begun to develop accounts of the relationships between these different institutional constellations. However, they have focused predominantly on elaborating the relationship of states to banks, as well as banks to financial markets. Questions of how the configuration of labour plays into these dynamics have not yet featured prominently in work by legal theorists, though some, notably Goldoni, are moving in this direction.Footnote ¹⁵⁹ As Ingham underlines, the state ‘not only establishes the valuableness of money by its declaration or what it will accept in payment of taxation; it also determines its substantive value by influencing what must be done in the economy in order to earn the income to pay the tax’.Footnote ¹⁶⁰ Desan mobilises the concept of ‘credit-worthiness’ to develop an account of ways in which the state configures the demand for money and distributes it within a given society. However, the focus is primarily on the role of banks, when a more Keynesian, demand-oriented understanding of how credit is created would posit that a further set of legal questions are relevant, such as which legal regimes enable some actors to generate effective demand for credit and which legal regimes permit particular actors to be regarded as creditworthy by money lenders in the first place. A focus on the demand for credit suggests that law enters the picture earlier, and that legal theories of money should also consider questions such as the extent to which property ownership and the legal structures governing collateral are necessary to produce credit; who is able to monetise property in order to receive rents and other income streams, there by eschewing the need to take out interest-bearing loans; and also how wage relations are configured by the state – or by the EU – and its laws.

While Neoclassical accounts of money ‘blackbox’ the unit of account in models of how the economy works,Footnote ¹⁶¹ the debate over the relationship between money, prices, and directions in growth has primarily taken place between different schools of heterodox economists, all of whom argue that money is much more than a ‘neutral veil’ over economic relations, and all of whom also agree that the origins of money lie with the states and how it configures banking, but many of whom disagree on the impact that volumes of state money have on the price level over the long term. In short, while monetarists subscribe to a quantity theory of money that stresses that the volume of money circulating has a significant impact on the price level, meaning that too much money causes inflation and diminishes the purchasing power of money, Keynesians, and, more recently, post-Keynesians, argue that bank notes are issued in response to demand for the facilitation of production and trade, which means that there can never be excessive credit as long as demand reflects a need for money to finance capitalist production.Footnote ¹⁶² These post-Keynesian arguments have led to a substantial body of work, MMT, that revises what are contended to be the outdated monetarist foundations of monetary policy. Monetarism is recast as a political agenda masquerading as a technical science of money that seeks to further neoliberal values of a strong-but-small state; as a political programme that has the effect of substantial strengthening the position of private actors and financial institutions relative to other constituencies. As discussed earlier, until recently, the monetary constitution of the EU strictly prohibited monetary financing by the ECB for states while effectively authorising what can be regarded as a form of monetary financing for private finance by virtue of the ECB’s role as the LOLR and ‘market maker of last resort’ (MMLR).Footnote ¹⁶³ The EU’s monetary constitution largely reflects a monetarist, supply-side conception of money that posits that it should be actors in the private economy supported by private banks, in the first instance, who grow the economy, subject to assistance in the form of ‘technical’ monetary policy implemented by independent central banks administering interest rates to manage price stability. This vision is the opposite of a more Keynesian approach that would posit that interventions into the regulation and management of labour markets or tax policies are more effective mechanisms to keep flows of money in line with the needs of capitalist monetary circuits.

Ingham argues that a monetarist focus on the money supply is misleading. He finds that money’s value, its purchasing power, is ‘also determined by long-run equilibrium between quantities of money and goods’,Footnote ¹⁶⁴ which, if cast in legal terms, suggests the need for a much broader conception of the laws that configure money in a capitalist economy: one that considers how laws and legal relations condition the ‘capitalist money circuit’. Ingham acknowledges that changes ‘in the balance of power between capital and labour, and between producers and consumers, affects the purchasing power of money’, but he also states that ‘arguably the pivotal struggle is between creditors and debtors’.Footnote ¹⁶⁵ For Ingham and others, the fetish of independent central banking and the structures of the EU’s monetary constitution clearly prioritise the interests of creditors over debtors as ‘in the era of pure credit-money, the credibility resides in governments’ and central banks’ transparent maintenance of sound money practice’, which is understood as requiring the positions of creditors are safeguarded by the minimisation of risk through default or the erosion of the value of the debt through inflation’.Footnote ¹⁶⁶ His account demonstrates that the monetarist position that holds that fiscal measures by the public sector are ‘politically or socially motivated and that they can increase national debt, fan inflationary tendencies and lead to a successive crowding-out of the private sector through public sector entities’,Footnote ¹⁶⁷ hides how its own account is political, and how it leads to the funnelling of credit to private actors, which also has a damaging array of macro-economic impacts; notably leading to an influx of irresponsible lending into private housing markets in advance of the global financial crisis, as well as into Southern economies in the lead up to the sovereign debt crisis. Nevertheless, while noting that the struggle between creditors and debtors is arguably more significant that the balance of power between capital and labour in determining the substantive value of money, in a substantial qualification to this position, Ingham recognises that money is not ‘pure credit money’ in the contemporary political economy; it has a commodity element. As he writes, ’in open capitalist economies under a floating exchange rate regime, the attempt to manipulate a currency’s external exchange rate is a more prevalent means of altering the domestic purchasing power of money’.Footnote ¹⁶⁸

Ingham’s innovation is to unite the ‘real’-economy orientation of neoclassicals and Marxists with heterodox and sociological perspectives by arguing that ‘the process of the production of money’ through credit ‘has an impact on estimations of its future value’ in the real economy.Footnote ¹⁶⁹ Although Ingham follows heterodox economists who stress the nature of money as credit and see money as a ‘non-neutral ‘force of production’,Footnote ¹⁷⁰ he is sympathetic to the argument that processes of credit creation are only ‘relatively’ independent of underlying dynamics of production and trade, which means that ‘the value of money is affected by its status as a commodity, and, consequently, it can largely be explained in terms of supply and demand’.Footnote ¹⁷¹ Like Polanyi, he is interested in how public credit is ‘commodified’ and ‘left to the logic of the market, while the state loses its monetary authority’.Footnote ¹⁷² On Ingham’s reading, the way in which credit is organised and distributed by banks backed by the state significantly conditions the investment decisions and actions of actors in the ‘real’ economy – an argument that is similar to the approach taken by Desan. Ingham follows the heterodox perspective that sees ‘Prices, rates of interest and so on’ as independent forces in the economy, and not merely as symbols of the actual substructure of the ‘real’ economy’.Footnote ¹⁷³ Legal scholars have also argued that the way that governments and central banks configure such socially-constructed ‘systemically significant prices’,Footnote ¹⁷⁴ and the way that those price signals are interpreted by actors that are ‘cognitively embedded’ in particular ways of thinking about their significance,Footnote ¹⁷⁵ leads market actors as social agents to impact on the circuits of value production and to influence the ‘real’ economy. Hence the production of credit and monetary policy are ‘forces’ of production that are not separate from the ‘real’ economy. As I will go on to discuss, however, the heterodox perspective tends to cast these tools as tools of the State, when an analysis of development in contemporary finance would recognise that interest rates, exchanges rates, commodity prices, and debt valuations are to a significant extent shaped by the practices of financial institutions developing private contracts that challenge forms of monetary regulation by governments and central banks.

The implications of Ingham’s analysis on the hybrid nature of what I will denote ‘commodity-fiat money’ are manifold.Footnote ¹⁷⁶ First, his arguments significantly disrupt the monetarist fixation on the importance of the supply of money that has substantially shaped the EU’s monetary constitution. Monetarists understand money as a stock; as a supply that state and monetary authorities can regulate with to particular ends and effects, manipulating the supply of credit through interest rates that shape how private banks loan money, which ultimately impacts on the price level. For Ingham and others, money is also produced through a demand-side configuration and is loaned by banks ‘in the normal course of financing capitalist production’.Footnote ¹⁷⁷ This means that the total stock of money is also a result of demands that are legally constructed and vindicated as credit-worthy, and that thereby pull capitalist credit money into existence. A more hybrid approach suggests that money is much more than a creature of the state; it is a creature made through a confluence of different legal regimes, public and private, that displays a commodity logic and is responsive to patterns of production and exchange. In legal terms, a more expansive approach to the nature of the ‘monetary constitution’ would recognise that money is not just produced and distributed through those state-backed legal structures regulating banks and the banking system, but also through legal structures that constitute demand for money in the economy. Analysis of monetary constitutions should extend to how tax liabilities are structured, how wages are configured through minimum wages and employment laws, how labour mobility and supply-chain factors shape production and exchange, and, going back to the root, as it were, how property rights are interpreted and enforced.Footnote ¹⁷⁸ On a strong reading of this account, governments and central banks have ‘little or no choice’ to provide the reserves of state money needed to accommodate any level of endogenous demand for money’.Footnote ¹⁷⁹ Money should be understood to be created not only at the behest of the state through the creation of credit, but as a response to a demand by actors who are legally able to command state money in return for the provision of services (wages) or trade in goods and services, or from other ways of generating income, including rents and investments.Footnote ¹⁸⁰ Significantly, as I will now go on to discuss, money is also flowing in and out of the economy based on its balance of payments in trade and investment from the international political economy, and it is impacted by the generation of forms of collateral-based credit outside of any single state’s ‘monetary jurisdiction’.

B. Remaking the state? The transnational dimension of monetary constitutions

I have just argued that in addition to a focus on how credit creation is legally configured, consideration of monetary constitutions must extend to the laws and legal structures that impact on the endogenous demand for money in capitalist circuits of production and exchange. Viewed through an expanded legal theory of money that would place greater emphasis on how the relative capacities of different market actors to command credit money in the political economy are shaped by law, current debates in the eurozone about the relationship between monetary policy and price stability, and about the potential role of the ECB in addressing design flaws that prejudice the interests of ‘peripheral’ countries have a further dimension. The capabilities of monetary authorities to alter the design of money are significantly shaped by the functions that money is required to play within capitalism, and, significantly, within financialised capitalism. I have also suggested that while money is widely understood as credit-fiat money in much recent scholarship, closer scrutiny of the legal frameworks and governance paradigms through which money operates reveals that credit-fiat monies can be commodified and made to function in accordance with a ‘commodity logic’.Footnote ¹⁸¹

I will now build on this analysis to address what I argue is another limitation of current legal scholarship on money, which is its tendency to underweight the international operations of money as currency, and to overlook the fact that many of the legal regimes that operationalise money in the global political economy are ‘transnational’ in character. By offering a (necessarily) selective analysis of some of the transnational dimensions of contemporary monetary constitutions, including the significance of exchange rate regimes, shadow banking, and derivatives markets, I will develop my argument that in order to address design faults in the eurozone, greater attention must be paid not only to the public dimensions of ostensibly private money-creation, but to the legal capacities that the collective of political authorities in the global political economy is conferring on financial actors with regard to insulating their wealth from redistributive policies.