Inflation, a question of quality and not quantity

Bitcoin proponents present their popular monetary instrument as a return to “real” currency, protected from inflation because it is beyond the reach of any state or bank manipulation. The idea is not new: it is maintained by a number of political currents inspired by the quantity theory of money (TQM), which defends the idea that inflation is always and everywhere linked to an excess of money in circulation.

However, this idea is far from reaching a consensus among economists. Proponents of the antiquantity theory of money (TAM) assume the opposite causality: it is the price level that determines the amount of money in circulation. The supply of money is endogenous in the sense that it results from the demand for credit by households and businesses. There cannot be “too much” or “not enough”. An expression of the conflict of distribution, inflation is never monetary in origin. The task of the authorities is to redirect money creation into socially useful branches of activity. Unlike the doctrine of central bank independence, a quantitative inspiration, it presupposes democratic elections.

The qualitative theory of money constitutes a third possibility: it rejects the concept of money supply. The challenge for the authorities is not to control the amount of money, the rediscovery of “real” money (TQM) or its democratic allocation among sectors (TAM), but rather to guarantee that what serves as money does not lose its character as money. general equivalent, i.e. a tool collectively accepted as representing economic value. According to the latter current, inflation results neither from unrestrained monetary creation (TQM) nor from social conflicts (TAM). It is not central banks, states or unions that are to blame, but rather the market nature of economies. In fact, there is no guarantee that the value to be sold corresponds to the value bought: inflation arises precisely from this difference.

Getting rid of them presupposes replacing the market with institutions capable of confirming the social usefulness of production activities directly, without going through the exchange of their products as commodities. If market mechanisms can exist, such an economy is not market because it does not play a leading role. Bitcoin proponents note the real problem: credit money is not inherently money. But their remedy is perhaps worse than the disease: if qualitative theory is to be believed, the solution lies more in the expansion of the non-market sphere than in the growth of markets.

Raphaƫl Porcherot, economist, teacher-researcher at Sorbonne-Paris-Nord University

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