ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Money and ‘Demonetisation’

The Fetish of Fiat

Like in the rest of contemporary capitalism, the Indian monetary system is based on state-backed credit money. Yet this hierarchical system of credit/social relations appears to us as a system of fiat money. This fetish of fiat money, analogous to Marx’s commodity fetish, is produced in the operation of credit system. The institutional and political arrangements of the Indian state amplify this inherent fetish. This conjuncture of elements produces a particularly robust fetish of fiat money in India, giving the Indian state more degrees of freedom over money than other states enjoy, a margin that the current government is now exploiting.

 

What can theories of money tell us about the demonetisation of the vast bulk of the currency at a stroke via the 8 November announcement? Which of these theories has a purchase on our present monetary crisis?

This crisis seems to have confirmed the idea that we live in a world of fiat money, whereby the states sovereign power is expressed as a declaration that otherwise worthless pieces of paper have economic value.

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