[...] How money came to be what it is today, in capitalist modernity, may perhaps with the benefit of hindsight be reconstructed as a process of progressive dematerialization and abstraction, accompanied by growing commodification and state sponsorship. But how money functions in its present historical form is more difficult to say; where it is going from here, harder still. This social construction has always been beset with, and driven by, unanticipated consequences—caused by human action, but not controlled by it.

[...] State power and finance are, in fact, Siamese twins, sometimes at odds with one another but always interdependent. Money is, as it were, the oldest public–private partnership: at one and the same time private property and public good; tradeable commodity and central-bank monopoly; credit and debt; a creature of the market and of the ‘grey area’ between market and state. The relationship undergoes continuous permutation. Yet despite its ever-changing and often downright bizarre forms, money can be traced to just two sources, both located in the force-field between states and markets. One is the creativity of all sorts of traders seeking new devices—in the modern jargon—to cut transaction costs, from promissory notes to bitcoin, assisted and exploited in equal measure by a growing financial sector which buys and sells, for profit, the commercial paper used by traders to extend credit to one another. The second is the need of states to finance their activities through debt or taxes—usually both—and to keep their economies in good health by providing businesses with safe means of exchange and abundant opportunities for ‘plus-making’. [...]

Money speaks, it is said, and its first words are always: trust me. Given the obscure circumstances of its production, this seems to be asking a lot. As economic exchange became more extended and opportunities for confidence tricks—from John Law to Standard and Poor’s—proliferated, so trust in money, essential for the capitalist economy, had to be safeguarded by state authority. States, or their rulers, have since time immemorial made money trustworthy by certifying it with their stamp of approval. This afforded them an opening to appropriate a fraction of its value in the form of what is called seigniorage, as well as providing manifold occasions for abuse, such as debasing the currency. An important contribution to the credibility of states as stewards of money was the seventeenth-century invention of permanent public debt, in parallel with the transition from personal to parliamentary rule and the introduction of regular taxation. These developments guaranteed the state’s creditors the reliable servicing of outstanding balances. Public debt could now be subdivided into low-denomination debt certificates, and these could circulate as means of payment, because the state could be trusted to accept them in payment of taxes, or in exchange for whatever it had promised to deliver when issuing its debt as currency. Moreover, private credit as extended by banks to trustworthy debtors could be denominated in public debt, making the sovereign state the economy’s debtor of last resort.

[...] Finance can only be what it is if it partakes in the state, and the state develops into a value-creating economic agent as it extracts seigniorage from its money production and invites the financial industry to cash in. In fact, according to Vogl, states became sovereign by co-opting finance into their emerging sovereignty and parcelling out part of that sovereignty to the markets, thereby creating a private enclave within public authority endowed with a sovereignty of its own. Just as modern society could not have been monetized without state authority, so the state could only become society’s executive committee by making finance the executive committee of the state.

Money, then, emerges in what Vogl calls ‘zones of indeterminacy’, where private and public interests are reconciled by assigning public status to the former and privatizing the latter. The result is a complex interlocking of conflict and cooperation generative of, and benefiting from, what Vogl calls ‘seigniorial power’—a relationship in which the state and finance undertake to govern one another and, together, society at large. Zones of indeterminacy, Vogl writes, ‘have an ambiguous relation to both sides, they are encouraged and restricted by state authority, they can either boost or inhibit the exercise of political power, and they can stimulate or obstruct (for example through monopolization) market mechanisms’. Financial systems need state regulation to remain responsible and trustworthy, but too much regulation drives money away and thereby undermines the viability of the state. States, in turn, don’t just need robust banking systems for the economy but also credit for themselves, for which they must be in a credible position to promise conscientious repayment, with interest. If they default, they may lose access to financial markets, and their financial industry—and perhaps that of allied countries too—may have to default as well.

It is in crisis situations, when banks are about to collapse or states teeter on the edge of insolvency, that the liberal notion of a clear distinction between markets and the state is exposed as a myth. On such occasions, as financial and political elites join forces in a virtual boardroom, functional differentiation—the pet category of functionalist sociology—loses its meaning and sovereignty reveals a Schmittian face [...]

[...] central banks have historically moved back and forth between very different institutional forms: private, public and various combinations of the two. Far from constituting a rational-functionalist formation, they have performed widely diverse and often barely related functions—from the administration of state debt to the issuing of currency and the supervision of private banks—cobbled together more or less ad hoc according to political expediency, just as one would expect in a world of ‘indeterminacy’. What distinguishes them as a type is that they exist to protect finance from the fickleness of political rulers—absolutist or democratic—while providing the latter with at least the illusion of control over the fickleness of financial markets. Institutional independence is crucial, nowadays meaning above all insulation from electoral politics. Monetary questions must be de-politicized—which is to say, de-democratized. Central banks, Vogl argues, constitute a fourth power, overshadowing legislature, executive and judiciary, and integrating financial-market mechanisms into the practice of government.

Central banks’ claim to autonomous authority is based on their assumed, and asserted, technical competence. [...] Central bankers themselves have always been aware, although they hide it as best they can from the unwashed, that central banking is ‘not a science but an art’. This means that what they sell to the public as a quasi-natural science is in fact nothing more than intuitive empathy, an ability acquired by long having moved in the right circles to sense how capital will feel, good or bad, about what a government is planning to do in relation to financial markets. [...]

[...] Financialization for Vogl essentially involves the transfer of financial oversight to the financial markets themselves, ultimately establishing oversight of states by markets. Subjected to the dictates of capital accumulation, the relations that make up the infrastructure of social life are financialized, depoliticized and indeed de-socialized. Responsibility for economic order shifts from constitutional, potentially democratic, governments to ‘a patchwork of public entities, international organizations, treaties and private actors which superintends the privatization of regulation and, as a consequence, the marketization and informalization of law and legal institutions’. As governance is privatized, finance becomes the sole remaining sovereign. [...]