Monetary Trust and Monetary Mythology, or: There Is No Transparent Central Bank

Students of money routinely refer to trust a necessary condition for the existence and stability of this social institution. But what does it mean to say that people have trust in money? Any attempt to answer this question, this paper argues, must account for a common-sensical, yet under-appreciated observation – money users do not, by and large, comprehend the institutional architecture of money. As Geoffrey Ingham and others have argued, monetary trust requires the institutional underpinnings of the financial claims circulating as money to be ‘naturalised’, and thus rendered invisible. Developing this argument further, the paper describes the naturalisation of contemporary credit money in terms of a clearly circumscribed and thus identifiable mythology – the illusion of non-hierarchical money, the myth of banks-as-intermediaries, and the myth of exogenous money. In other words, money is naturalised as a quantity under the direct control of the central bank. During times of financial stability and low inflation, this image has fostered monetary trust, thus playing into the hands of the central bank. With the monetary base expanding as a result of quantitative easing, however, the notion of a tight link between outside and inside money has had the opposite effect on monetary trust. Episodes from recent monetary history serve to illustrate this argument.