Clearing Union

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Excerpted from Luigi Doria and Luca Fantacci:

“To overcome the “fetish of liquidity”, Keynes advocates a monetary reform, based on a radically different conception of money, understood as a mere intermediary, which passes from hand to hand, is received and dispensed, and disappears, when its work is done, from the sum of a nation’s wealth.

To describe his proposal for a new postwar economic order, Keynes chooses a term that well expresses what money ought to do: “to clear”, to disappear in favor of the circulation of actual goods. “Clearing” is a gerund, and we should hear the motility of the verbal form: the “clearing” of all accounts must be anticipated from the beginning as the ideal of the system in order for the latter to converge towards this goal by appropriate adjustments.

In the Clearing Union, money is a pure unit of account and means of payment, bancor, used to denominate and settle debts between member states. Bancor balances are created to finance temporary trade deficits, only to be destroyed by trade flows in the opposite direction. Bancor is not a store of value: positive (just as negative) balances are subject to charges, to discourage hoarding and facilitate the return towards equilibrium. Such charges are a form of demurrage, intended to make money circulate and eventually disappear.

Money designed to disappear raises the question of the very nature of the economic communality and the shape of a community in which such money can disappear in circulation.

A community can establish a clearing system only if it thinks anew the economic relationships that interweave its members, if its members accept not to withdraw from the circle of “economic communication” by seeking refuge in money, and if they question the idea that debtor-creditor relationships can be secured by an indefinite commodification and procrastination of debts.

What does all this mean for the debate on the crisis of European money and debt? Until now, the debate has concentrated on bargaining the conditions by which surplus countries guarantee debts of deficit countries against the pressure of global financial markets and the monetary thinking they embody. Is this the only way to interpret European communality and the economic responsibility it implies? Or can we rethink and reform the European monetary union in view of a European clearing system, which would allow all debtors and creditors to share the common burden of basic uncertainty towards the future?

The concept of clearing is also relevant for the issue of local currencies. To think creatively about complementary currencies means to ask how money can do what it ought to within an economic community that redefines itself in the very act of establishing its own currency. It means to think the local and the political in the light of an “economic communication” that is neither old nor new, but yet and ever possible.” (