Money/Power in 2025: Goggles Must be Worn at All Times

Let me start with some severe understatement: the start of 2025 has had more than its share of money/power stories. For example:

• Musk’s attempted takeover of the US Treasury Payments System.

• The effort to neutralize or eliminate the FDIC.

• The previous item occurs just as bank regulators were pursuing all sorts of obvious fraud by the biggest banks.

• None of that is to mention crypto, where the proliferation of meme coins – read, rug pulls – including from the US President continues to run wild.¹

• An absolutely insane and dangerous stablecoin bill, introduced in the senate, which I hope to write about soon.

• Or Krugman, just today, on abolishing the CFPB.

It’s not that I haven’t been paying attention to as many of these stories as I can. It’s just that I’m neither a journalist nor a pundit, and I cannot imagine that what readers of this newsletter need from me is more hot takes. Since the US presidential election, my own substack feed has transformed rather radically from an eclectic group of newsletter-writers to a massive, heaving pile of hot-takers.

A big part of the political project currently underway in American politics is a pre-planned and very much intentional effort to distract and confuse us. (And I’m linking to NPR now, because they may not be around for much longer.)

In the face of all of this, perhaps I can offer something different – namely, the construction of some basic lenses through which to view the rapid-fire stream of events coming at us all. You can think of these as prescription utility goggles: they help you see better, but they also protect you from danger.

A Bank without a Regulator?

With that in mind let’s take not a single step back; let’s take a series of long strides back. A key plank of Trump 2.0 is to eliminate as much banking regulation as humanly conceivable. The goal, if possible, is literally to eliminate the regulators. If that’s not achievable, then the aim turns to preventing them from pursuing any enforcement actions whatsoever. And in the absence of that, the final plank involves altering or ignoring the law, such that violations of regulations become meaningless. We can stylize this by describing the goal as money, banking, and finance without any regulation whatsoever.

What would that look like?

Let me state the nub of it all up front, and then unpack it with care: the dominant and intuitive understanding of money, what most people think money is (in its essential nature) – that understanding absolutely and fundamentally depends on the system of banking regulation that has built up over the past 100 years (with legal and political roots that reach much further back than that – by many many centuries). How can I generalize so broadly? That is, what is it that almost everyone believes?

They believe that a dollar is a dollar. But it’s not: in its nature there is nothing about a dollar that makes it always worth a dollar.

A dollar is only worth a dollar because of the shape and structure of banks as institutions, a shape and structure that depends on the existence of bank regulators, regulation, deposit insurance, and a whole thicket of laws.

A “Pure” Theory of Money

To reach this conclusion we have to start with the impossible – “a” or “the” dollar itself. As I’ve said many times before, there is no such thing. Money is not an empirical thing, a concrete object; nor is it just an idea, a belief, or a fiction. Money is an “array,” because for there to be money we must observe four separate elements: a creditor; a debtor; a token (that represents the debt or symbolizes the creditor–debtor relation; and a denomination (number and name) of the debt. Any example of money must include all four dimensions, and any analysis of the properties, capacities, or being of money must treat this entire array.

With this in mind, let’s try to do the impossible: to imagine a “pure” theory of money, by which I mean only to try to grasp the nature of money outside the context of regulation, law, and political power. In this weird money state-of-nature (MSON), money would be just what it is now: a claim held by a creditor, on a debtor, in a money of account. Here is a hypothetical list of my money-assets within the MSON:

• A signed promissory note from Paul, saying he owes me $47.

• A bill of exchange I have drawn on Ashley, a merchant to whom I delivered goods, demanding she pay me or my agent $500 for the “value” of those goods.

• A deposit book, indicating I hold $2,000 in deposit at “Joe’s Finance Emporium.”

• A US Treasury bond, par-value $5,000, maturity date December 2045, coupon 4.800.

Now ask yourself this: if I came to you – in the state of nature! – with each of these money tokens and offered either to sell them to you outright (to swap my money-credits for yours) or to use them to buy something of value from you, how would you price my money-credits? First, notice what it means in each case for me to sell you these money-credits: for the first two, I am going to endorse the debt of Paul and Ashley, respectively, over to you. Paul and Ashley will then owe you, not me. How much either of these debts are worth will depend entirely on the extent to which you trust Paul and Ashley (whom you probably don’t even know) to pay you the monies owed.

In the third case, I’m going to write you a check drawn on the bank of Joe. You will need to cash that at Joe’s branch. Why? Well you can’t really deposit it at your own bank, because there is no consistent system of banking in this scenario. Joe’s Finance Emporium is so-named because it is, by definition, a shadow or wildcat bank. Joe is just some dude who says: if you make me a loan (i.e., deposit your money with me) I promise to pay you back on demand. There is therefore also no clearinghouse or central bank that would facilitate the payment between your bank and Joe – a payment that is absolutely necessary for you to deposit the check and have the money show up in your account. So really, it’s the same situation with Joe as it was with Ashley and Paul – do you have some reason to trust him? In each of these cases, you either want to tell me to go away, or to dramatically discount my claimed money-credits – that is, offer to pay me far less than face value for them.

The final example is the same, but different. In this case I’ve got a claim on the US government, but since I was smart enough to buy 10-year treasuries when they were cheap (and thus their yield was high), today I hold bonds with a coupon of 4.8% while the current yield is down to 4.5%. My bonds are worth more than par – roughly $5,100.

There are No Dollars in the State of Nature

In none of these cases is a dollar worth a dollar: sometimes it’s worth much less (maybe nothing) and sometimes it’s worth more. That’s the essential nature of money. We see it quite starkly in the money markets: where bonds are almost never (and even then, only serendipitously) worth par; where the value of options can change daily, and can move both for or against you (your options contract with a dealer is often like a deposit account at your bank, only it can turn negative); where swaps are often worth nothing, but might be worth a lot. Money claims are always and everywhere a claim on the future, and the future is always and everywhere uncertain. A pure dollar is a radically unstable, essentially volatile dollar that could be worth almost any conceivable price.

Yet outside the money markets, in the view of the world taken by almost everyone not in finance, we never see any of this. Most importantly, we don’t see it because of a complex, highly developed, and quite sophisticated system that is intentionally designed to prevent us from seeing it. (And this is a good thing!!)

The system described in the preceding section is, on the one hand, fiction. First, the promissory note and the bill of exchange themselves can only come into being as money-credits if they rest on a legal structure that enforces those contracts. Second, you cannot really have a shadow bank if you don’t have real banks with bank charters. Third, the massively complex system of government debt only functions within a money-market system that depends on a gigantic web of banking and other financial institutions, itself made possible by regulations, laws, agencies, etc.

On the other hand, we can think through the heuristic to see that even if we ignore all those historical truths, even within the terms posited by the fictional MSON, the result is chaos. If every single dollar is worth more or less than a dollar, and if every citizen or economic agent is constantly being forced to calculate the value of various dollars (based on necessarily incomplete information, because there are no institutions to provide such information), then the coordination of social and economic activity will be doomed to failure. A MSON doesn’t produce pure money, it produces no money.

The Banking System Turns Dollar-Denominated Debts into Dollars

Our fundamental understanding of a dollar, the dollars that we think of as the or a dollar, are themselves products of complex socio-political and legal-juridical practices and systems. They only come into being on the ground of these institutions, and they only continue to exist through the reiteration of these political, regulatory, and legal practices. It’s a complex system, but we can grasp its general contours in concise terms.

Banks make a dollar into a dollar. Banks are par machines. Every aspect of our basic grasp of the concept of money depends on the fact that almost all of us have almost always lived in capitalist social orders partially constituted by banks (and the enormous system of banking and finance that surrounds them). We think of a dollar as just a dollar because the banking system has done such a fantastic job of making it so. Everyday we deal with a wide variety of money-credits, yet we never really consider that they are money-credits, much less consider their variety. We just think of them as dollars, because when we write a check, or swipe or tap a card, banks transmit money claims on our behalf – because when we deposit a check or receive an ACH, banks credit our deposit account in seemingly pure dollars.

This is the other side of the magic of banks: not only do they create money seemingly sui generis, they also create and sustain par. They make it so that we never think of money as having a price of more or less than par.

But they do not do this on their own, they do not do it because of their nature as banks, and they cannot do it (cannot exist) in a state of nature. Nineteenth-century American banks were dramatically less successful at turning dollar-denominated debts into stable “dollars,” and much more successful in vaporizing money. Such banks – lacking a stable clearinghouse system, lacking a central bank, lacking deposit insurance – would have done more to illustrate the point that a dollar is not a dollar than to hide it. Banks failed all the time, and at epic scale. And contemporary readers have to understand: such “failure” did not mean what it has meant in the twenty-first century. Recent “failures” means the regulator steps in, and makes sure customers’ deposits get restored in some new bank. In the nineteenth century when your bank failed, you lost all your money.

Banks can thus be understood as the balance point, the site where we can swap one type of money-credit for a completely distinct type of money-credit, without even realizing we are making this kind of swap. When I “deposit” money in the bank I actually loan the bank money, and accept in return bank credit. Everyone does it without even thinking about it, because we always assume par as the constant price. Indeed, par is so essential that it remains totally invisible. We don’t think our deposits are being swapped at par; we just think it’s all a dollar.

But as our example of a so-called pure theory of money above shows, were it not for the regulatory environment that makes par possible, I would never deposit 10 $100 US Federal Reserve Notes at my local bank and accept a $1,000 credit to my deposit account. Why not? Because the Fed note is much better debt (because the Fed is a much better debtor) than an entry on my local bank’s spreadsheet. Each unit of dollar-denominated claims on the Fed is worth more than each unit of dollar-denominated claims on Wachovia. I ignore this. The existence of the FDIC supports me in ignoring it. In so doing, I (backed by the FDIC) provide the motor for the bank to run as a capitalist firm: it generates profits on the basis of my short-term loans of higher-quality credits.

Without banks – and their regulators – dollars are not stable as dollars. Without banks – and deposit insurance – the precarity of all money-credits, all forms of money, comes to the fore.

What Has Any of this Got to Do with Musk and Trump?

Quite a lot.

• It tells you what to look for.
  Ignore all the twaddle about innovation, disruption, and industry. Whenever you see “market cap” just read “bullshit.” If you cannot find the money array, realize you are looking at nothing more than a speculative asset (not money). And once you do, you can then trace the contours of the money array, you can then ask: who is the debtor; how is the creditor trying to transfer or change the money-claim; what is the relation of the debtor (often a bank!) or the money of account to US political sovereignty, to the international banking system, to economic warfare and a weaponized international economic system.²

• It lets you filter the various types of wrongs.
  Is it a direct scam, like Trump-coin, designed to line the president’s pocket? Or, is it an indirect attempt to let other people (say, folks in the crypto “industry”) run their own scams. Or, is it an effort to simply deny payment to valid creditors by illegally stopping payment. Notice that the winners and losers are different in all these cases (although they converge in the fact that, again and again, the losers are repeatedly the vulnerable, and marginal in society).

• It helps to delineate and circumscribe the field of possible outcomes.
  Here I mean to emphasize that “authoritarian money” is a contradiction in terms. Money is always an overlapping web of social, political, and legal relations. Musk cannot just force “X money” to be the money, anymore than the code for bitcoin can make virtual blockchain assets money. The current regime has all sorts of power, and they are wielding it. There are dozens of ways that they can undermine the integrity of the banking and financial system, erode the trust in dollar-denominated money-credits, and ultimately even produce monetary chaos and anarchy. But they cannot control money; they cannot stop rich people (and others) from seeking debtors and denominated money tokens less susceptible to the Musk-Trump crime and chaos.

The logic of the money array generates our money/power work goggles. Always put them on first, before trying to parse the stream of madness coming at you from both directions (Washington DC and Silicon Valley).

1. The conspicuous absence of any links within this bullet point owes to my refusal to unintentionally advertise for these scams.

2. See Underground Empire.