Review of Money: The Unauthorized Biography by Felix Martin

To better understand money, the Chief Strategy Officer of Xapo (Ted Rogers) recommended the following resources:

1) Bitcoin and the History of Money, Rob Marsh

2) Debt: The First 5,000 Years, David Graeber

3) Shelling Out, Nick Szabo

4) Money: The Unauthorized Biography, Felix Martin 

Rogers stated “If you don’t have time to read all three, read the book by Felix Martin. If you don’t have time to read it, read it anyway. Martin crystallizes everything you need to know about money into a very readable 273 pages. It’s essential reading for Bitcoiners.”


Alarm bells started ringing immediately when I scanned the index to look for Bitcoin. Felix Martin does not mention Bitcoin once in the entire book. Writing a book about money in June 2013 without acknowledging bitcoin when it was already a global phenomenon is incomprehensible. 

By failing to be aware of the monetary present, his book about monetary history loses a lot of credibility .

Outside of the book, Martin has written some articles on Bitcoin to tell us why it won’t work. Martin does not believe that bitcoin will be successful, claiming that Bitcoin is Pointless as currency” and “Bitcoin lovers are lying to themselves”.


Felix Martin begins by describing the conventional theory of money (commodity money emerged out of barter) which he states is entirely false.

The conventional theory of money claims that:

* Barter was replaced by a Medium of Exchange. Metals have historically been the most popular medium of exchange (especially gold and silver).

* Barter —-> Commodity Money —–> Credit

* Money is coinage, and credit is just a representation of that coinage

* The monetary standard should be fixed (can’t manipulate the supply of it).


Martin says that this above theory is entirely false. The idea that economies used to run on barter is a myth. It never happened. Not a single researcher has been able to find a society that regularly conducted it’s trade by barter. Economic transactions before money were social obligations, not barter.



The Truth About Money (According to Felix Martin)

Money is credit, and coinage is just a physical representation of that credit.

Most currency doesn’t even exist as banknotes. Today’s financial system is just made up of digital records. 90% in the US and 97% of currency in the UK has no physical existence at all.

Money is not a commodity such as gold or silver. Money is transferable credit. Wealth is not the actual metal dug from the ground. It is not the metal, it’s the trust.

Money does not have to be tangible. It’s just an agreement, a consensus between a group of people. It’s not something visible that we see, it’s just a representation of wealth. Spontaneous economic co-operation.

Money does not have to be a metal coin (England had a tally stick system that recorded and documented transactions).

Money is a concept of universally applicable economic value. A dollar, or a pound, or a euro, or a yen is not a physical thing but a unit of measurement.

Universal economic value is is different from a physical unit of measurement. It is a property of the social rather than the physical world – it’s the central component of a technology for organizing society so its standard needs to be political as well.

Money is an accounting technology:

* An abstract unit of value in which money is denominated

* A system of accounts, which keeps track of the individuals balances as they trade with each other .



Yap Island: While the monetary system of Yap appears to use giant stones as tokens, in fact it relies on an oral history of ownership. Being too large to move, buying an item with these stones is as easy as saying it no longer belongs to you. As long as the transaction is recorded in the oral history, it will now be owned by the person you passed it on to—no physical movement of the stone is required.



Can Anyone Create Their Own Money?

Martin concedes that anyone can create IOUs – and depending on how other people rate the creditworthiness and liquidity of those IOUs, they can circulate as money (as long as these IOUs are denominated in dollars or euros or pounds or whatever)

But, he claims, what anyone cannot do is issue their own money – regardless of how creditworthy an issuer they are – denominated in their own private, monetary unit. The IOUs would be quite literally meaningless. It would be as absurd for you or I to decide unilaterally on our own monetary standard as it was for Humpty-Dumpty to claim to Alice that his words mean just what he wants them.

Reasons why Government Currencies Are More Successful

1) No private issuer enjoys the same extent for its markets (Network effect)

2) Capacity to coerce demand  (tax, laws)

3) Psychological confidence in society

Governments are terrified of losing their monopoly over money. Private currencies (such as the Brixton Pound) are too small to be an existential threat, so governments generally treat them as harmless sideshows but if they ever gain traction, history shows that governments will resort to force to keep their monopoly and power. The British Crown banned the colonies from printing their own money. Emperor Wu in China jealously guarded the management and issuance of the monetary standard.


Felix Martin’s Secret to Harnessing Money’s Benefits While Avoiding Its Flaws

Since money isn’t a physical thing, the monetary standard should not be fixed.

Money doesn’t have to be restrained (like the gold standard) it can be intrinsically flexible fiat money to optimize economic efficiency and social justice.

There is little doubt that under most circumstances, low and stable inflation is a good thing for both the distribution of wealth and income, and the stimulation of economic prosperity. The correct remedy for an incipient recession is a larger supply of sovereign money to meet the excess demand and restore confidence. Deliberate management of the monetary standard is needed to meet challenges of growth and distribution.

Redistribution is required in order to even things up between different members of society. The job of money is to achieve this objective. There is nothing wrong with adjusting the monetary standard because the purpose is not to achieve accuracy, but fairness and prosperity.

Fiscal redistribution (tax) is one way of doing things – and quite rightly the usual way in normal times. But the nature of monetary society is such that unsustainable inequalities that cannot feasibly be corrected in this way will occur from time to time. When that happens, it is time to move the fulcrum to restore balance (print money to redistribute). Only democratic politics can decide when, and by how much.

A Democratically Elected Government Needs to Flexibly Manage Money As Needed

The flaw in flexible monetary standards in previous attempts is that it was an absolute monarch or tyrant deciding the policy. Instead, it needs to be a democratic government because “only the compromise of democratic politics can durably decide what is fair; and only the promises of democratic governments can reliably last”.

The sovereign issuer of money must have the ability to vary the supply of money to match the needs of private commerce, public finance, and the balance between private creditors and debtors.

The right criteria for choosing its standard are not consistency and accuracy – as they are for a physical unit of measurement – but fairness, or political justice, or whatever you want to call the characteristic quality of a well-governed society.

Central Banks shouldn’t be independent. Monetary policy is intensely political; so in monetary policy, as in all policy, the challenge is to govern well – not to pretend there is no need for governing. And if we have any faith whatsoever in our liberal, democratic systems, the only way of doing that is to re-establish the link between the policy and its policy-makers.

The banking sector is really a lot like the civil service. Money is a technology of government – ideally, of self government – and banks are its bureaucracy. So the bureaucratic virtues of reliability, a public service ethic, and risk aversion are just as important in banking as entrepreneurial energy.

By its nature, money permits social mobility and the accumulation of wealth and power over others. Any fixed standard of monetary value will therefore necessarily become obsolete – and that obsolescence spells mortal danger, for it is the root of civil strife. Instead, the state must be vigilant to ensure that the architecture of financial obligations reflects what society believes to be fair. Only politics – democratic politics, in constant activity – can furnish such an evolving standard. And only law – its debate, codification, and rule – can enact it.

So long as citizens permit the sovereign a discretionary power to re-calibrate the financial distribution of risks by adjusting the monetary standard when it becomes unfair, sovereign money can work. This is why the conventional understanding of money as a physical thing is so dangerous. Whereas with physical concepts it is essential that the standard we use to measure and manipulate them should be an immutable or even a natural constant, with the social concept of value exactly the opposite is true. If money is to generate a just society then it is essential not that the standard of economic value is irrevocably fixed, but that it is unflinchingly responsive to the demands of democratic politics.

Since money is a tool for organizing society, and since the only authority with the political legitimacy to command how society should be arranged is by definition the sovereign, any redesign of money must maximize the room for monetary policy.

This is the secret, Martin claims, of harnessing money’s benefits while avoiding its flaws.



I agree with Felix Martin that money doesn’t need to be a physical thing or have tangible intrinsic value. However, Martin goes on to make quite a leap of logic by claiming that since it’s not a tangible thing, we need a nice democratically elected government to be in charge of it to deliver “social justice” and rid the world of the evil consequences of unrestrained free markets.

Martin’s 2013 vision for the future of money couldn’t be further from what is actually occurring with Bitcoin. He proposes that money should be issued and controlled by a central authority, specifically a democratically elected one, which can control the money supply to fix the problems which he perceives stem from a lack of government intervention. His agenda is arbitrary wealth distribution to achieve “social justice”. This is completely the opposite of Bitcoin which is a peer to peer system with no central authority. Nobody can adjust the money supply as only 21 million coins will ever exist. Satoshi Nakamoto didn’t create Bitcoin to “maximize room for monetary policy”.

Martin’s obsession with “social justice” is understandable on some level, but is entirely misplaced. This vague undefined concept of “social justice” doesn’t need to be centrally planned. It’s not the role of a group calling themselves the state, or the role of money itself to provide social justice. That can be done at the individual level or in voluntary groups and organizations. For example, charities like Sean’s Outpost are feeding homeless people through voluntary bitcoin donations.

Ultimately, Felix Martin brings no new ideas to the table with this book. It’s the same old stuff spouted by the IMF, World Bank and the thousands of Keynesian academics living comfortable lives on the government dole.


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