Like blood in Goethe’s Faust, money ‘is a very special fluid’. It circulates in the body political-economic, whose sustenance depends on its liquidity.footnote1 And it is surrounded by mystery. In fact, money is easily the most unpredictable and least governable human institution we have ever known. Allegedly invented as a general equivalent, to serve as an accounting unit, means of exchange and store of value, it has over time penetrated into the remotest corners of social life, constantly assuming new forms and springing fresh surprises. Even Keynes had to admit that his attempt at A Treatise on Money (1930) ran into ‘many problems and perplexities’. 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.

Money, the product of finance, is an enigma and always has been. Even the chief engineers of the revitalization of global capitalism by way of its financialization in the late twentieth century, the Alan Greenspans and Gordon Browns, did not know what was growing under their hands. To reassure themselves—and everyone else—they resolved that ‘market participants’ would, if left to pursue their own interests, build the most stable of all possible financial worlds. Public regulators merely had to clean up the mess whenever a bubble burst, as it inevitably would. Debates about the causes and consequences of the 2008 collapse have so far had little effect on the direction of long-term underlying trends. The global money supply continues to expand considerably faster than the world economy, as it has since the 1970s. Broad money was 59 per cent of global gdp in 1970, 104 per cent in 2000 and 125 per cent in 2015; and yet there has been almost no inflation in the leading capitalist economies since the 1980s, even though interest rates are at record lows—close to zero, sometimes even negative. Nobody can really explain this. Indeed, discussions are still ongoing about what caused the high inflation of the 1920s and—less dramatic—the 1970s. What is growing, alongside money, is debt: up from 246 per cent of global gdp in 2000 to 321 per cent in 2016. This includes both public and private debt. Public debt increased markedly after 2008, while private household debt in the United States now exceeds the gdp of China, itself one of the most indebted countries in the world. Debt is a promise of future repayment with interest: a promise that one must believe. While it is clear that there must be a limit to debt—the point at which the promise of repayment becomes unrealistic—nobody knows exactly where this limit is, nor what would happen if it was exceeded.

Joseph Vogl’s The Ascendancy of Finance does not try to settle these questions. What it does do, however, is to lead us into the heart of darkness of today’s financialized capitalism, the place where money is made and whence it spreads. A professor of German literature at Humboldt University, Berlin, Vogl was a translator of Foucault, Deleuze and Lyotard in the 1990s, and has since focused on the inter-relations of political philosophy, literature and economic theory. Kalkul und Leidenschaft (2008) analysed the marriage of Enlightenment-era ‘calculus and passion’ in Leviathan, Wilhelm Meister and Lillo’s London Merchant. Two years later, Das Gespenst des Kapitals (published in English as Spectre of Capital) detected a strain of secularized theodicy within liberal economic thought which Vogl dubbed Oikodizee. Now, in The Ascendancy of Finance, Vogl skips over money’s long prehistory and social anthropology—on cowry shells and camels, see, inter alia, David Graeber, Debt: The First 5,000 Years (2011)—to transport the reader to the early modern period, which saw the rise of both the modern state and large-scale finance. That their births coincided, Vogl argues, is no accident. 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’. How these processes work together to create modern money is impressively described by Vogl over two chapters.

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.

Today’s money of paper notes and electronic ledgers represents a complex pyramid of private and public promises of future settlement of present accounts, secured and securitized in virtually unending chains of formal contracts and informal understandings. How could people—and peoples—have entrusted their lives to this dubious co-production of banks and states, this accident-prone social construction, despite the long history of financial scandals and crises extending from the seventeenth century to our own times? In elegant historical-institutionalist fashion, Vogl recounts the long story of modern money’s development, tracing the co-evolution of sovereign states and financial markets—each needing the other in defence of its own credit and credibility. Drawing on impressive historical and philosophical erudition, Vogl sets out from early modern theorists of the state and state sovereignty—we encounter inter alia Montchrétien, Naudé, Malebranche, Leibniz, Rousseau, Smith. They are read in the light of the heavy dependence of public finance and national-economic prosperity on the goodwill of private capitalists—the latter, in turn, reliant on the state’s readiness to use its monopoly of legitimate violence in support of enterprising financial adventurers who, like alchemists, transmute the dirt of debt into the gold of legal tender.