The conventional way of thinking about the monetary system implies that we live in a world of ´fiat money’. The state – typically represented by the central bank—is conceived as the primary authority that creates and controls money. This notion gives rise to discussions over monetary sovereignty: about its alleged loss (be it due to technocratic rule, monetary globalization or shadow banking) and the need to restore democratic control; or about the dangers of fiat money and the need to overcome it, for example with blockchain technologies. This paper argues that the notion of fiat money that informs these discussions about monetary sovereignty is conceptually and historically misleading. A more accurate look at the history of the modern monetary system shows us that the instruments we perceive as fiat money today emerged as forms of private debt which over time have adopted ‘moneyness’ and systemic relevance. They have been put under public control only in systemic financial crises when public authorities felt forced to intervene—a process I call ‘private credit money accommodation’. This accommodation theory challenges existing ideas about monetary sovereignty in International Political Economy and calls for rethinking our conceptualization of politics and democracy vis-à-vis the monetary system.
To be presented at the International Studies Association’s annual convention, Toronto (03/2019)