Elena Esposito

The Mysteries of Money

Money has always elicited suspicion and mistrust. Luther’s famous definition of money as the “devil’s dung” 1 is part of a long tradition that associates money with the devil. This is because money is incomprehensible and threatens both the established order and the harmony of things and the world. In the Middle Ages, it was taken for granted that money was “a cabala difficult to understand” 2, not only because it was technical and therefore complicated, but also because it was the source of absurd paradoxes – for example, money that is lent out comes back to the source in the same amount, thereby multiplying the mass of circulating money. This happens in such a way that the quantity of money is simultaneously both the same and not the same. Puzzles of this kind can be found everywhere and, until the 17th century, a genuine theory of money was not available. In the 17th century, however, the contrast between the traditional contempt for money and the new discovery that “everything can be bought with money”3 became apparent. This instrument, money, elicited both excitement and uneasiness because it seemed capable, through the attribution of a value, of putting such different things as a working day, a load of exotic fabrics, family goods and the cost of a loan on equal footing and allowing for their comparison, ultimately dissolving many of the traditional social structures4.

Today the functioning to money is becoming even more improbable: not only money homogenizes all goods and values, making them comparable, but also seems to be able to level out all risks and the relationship to the future. The economy offers the possibility for insuring (paying) against the worrying prospect of a future damage (from any source). One can make an insurance, which (as the term itself says) compensates risk with a safety, albeit only an economic safety. If one is worried that he/she will become ill, suffer an accident, or hurt others, insurance provides no guarantee that the dreaded event will not transpire, only that one will receive a sum of money in the event that it does. Money has no inherent use; nevertheless, it has the strange feature of providing reassurance against uncertainty for any and every person. Whether metal or paper, money has no utility. So, why has it become so useful?

Even today there is no theory that can explain convincingly the functioning of the money and its conditions. Economists themselves find that a real theory of money is needed. Neoclassical economic theory, they say, relies implicitly on the model of barter5. This model is actually set as the theory of a system that works without money, where goods are what really matters, and money is only an abstraction that comes about in a second time. One thinks of a “real” system (the market) that operates by distributing goods, with the “veil of money” laid on top of it. Economists should tear this veil and switch from the “metaphysical” plan of flimsy entities to the genuine plan of the forces that produce wealth6. Money, in this view, emerges from the market as its consequence and does not have any power by itself. It cannot create any real wealth, only illusory wealth. According to critics, this approach completely overlooks the real power and true nature of money. It is not a metaphysical entity, but a very real and concrete given. It is not that money emerges from the market, but that the market and its power are consequences of the monetarization of the economy7. Money may be abstract, but it is a “real abstraction” 8, and we must explain it as such.

The weakness of economics is revealed in its ambiguous definition of the function of money and the standard distinction of the three tasks it performs: measure of values, means of payment and means of exchange9. In fact, the relationship of the three functions is very vague. It is hard to understand which came first and whether it is possible to derive one from the others. Is there a primary function? What is it? How does it affect the other tasks of money?

The big advantage of money is that it leaves the moment when one must spend it completely open. Because it is abstract and indeterminate, its value remains, even if one waits before spending it. It remains available even when one defers the decision in view of other situations, other partners or different conditions. The meaning and function of money lies in this temporal delay, in the possibility that is offered by money for using time to increase decision and choice options10. This was Keynes’ opinion, for example. He explicitly stated that the importance of money lies in its being “a link between the present and the future” 11, which becomes necessary when the future is unknown and hence “perfidious” and threatening.

This function of money is only necessary in a modern economy, which (like any other part of society) faces an unknown and indeterminate future, while knowing that it depends on present decisions. The future is therefore frightening, but can nonetheless – and, in fact, must - be acted upon. We do not know what will happen in the future. However, although our expectations may be false, the value of money nevertheless remains and we can use it in different conditions than we had initially expected. Money allows us to act even if we cannot control the consequences, because it allows us to postpone decisions or actions while retaining its value. We do not need to decide how we will spend the money today, and we can operate in such a way as to have money in the future, in order to be able to decide later. Only in a world of uncertainty can money have this function, since it acts as a “bridge” between the (usually wrong) plans of the past, the current expectations and the expectations for a puzzling future12.

Shackle stated it explicitly. Money is not primarily a store of value; value changes and transforms. Nor is it a means of exchange; we do not know what to exchange or where to get it. It is, however, a “medium of deferment and of search” 13. This is its primary function; this performance is the starting point from which to explain its functioning. We need money in a world that is oriented towards an unknown future, because the sense of monetarization lies in the possibility of postponing the choice to a later day, when one will have more information. The advantage of money is that it allows us to operationalize our lack of knowledge. This is possible because, having no value of its own, money remains entirely indeterminate. It does not bind future choices, apart from the simple fact that one will eventually have to make a choice – namely, to spend. When bartering, ignorance puts one at a disadvantage because one does not know if and where he/she will find the goods he/she is interested in. However, in a monetarized economy, it does not have this effect because money allows one to use time to search for additional information about how to get these goods. Money, in other words, is a tool that deals with the uncertainty of the future in the present.


This protection against a threatening future (evident in the case of insurance) is indeed the basic feature of all economic operations, and is, in fact, the real function of the economy. While it is true that payments are always meant to satisfy needs, and are, therefore, generally considered to be the primary function of the economy14, a thorough examination of the concept of need appears to be extremely tricky, and is so heavily influenced by the economy itself that its function becomes implausible. It becomes a demand generated by the very economy that has to satisfy it15. What are the real needs, and how can they be determined? Where must the demarcation line between basic needs and induced needs, luxury needs and demonstrative needs, be drawn?

If needs were an anthropological given or an elementary requirement, they would be restricted to the lower strata of society and, therefore, more or less quickly satisfied (we do not have many basic needs). However, needs are never exhausted and therefore do not disappear. In this view, one cannot explain the spread of the needs that spare no member of society. One cannot even explain the fact that there is never enough money, however rich we are, because there is no limit to the abstract urgency of needs. This is due to money itself and not to the needs. Money, which one can spend as one sees fit (even in ways that one doesn’t yet know), represents in its abstractness the generality of all possible needs. We need money now because we do not know what we may need in the future, and we are, therefore, always in need, not of goods, but of money. Rather than satisfy needs, the monetary economy seems to generate the needs upon which it operates. Without money, there would not be the needs that money serves to satisfy.

If needs are never exhausted and affect all members of society, then perhaps they don’t have to do with what we need today, but instead address the indeterminate horizon where uncertainty is never controlled, the open and unpredictable future, where we never know which needs may arise. We cannot know what we will need, and we therefore need more and more money in order to deal with this uncertainty. The reference of money thereby becomes the uncertainty of the future, and not needs themselves. This becomes the true reference of the economy. The economy, one should say, is not concerned with material needs, but with time, the open, uncertain and recursive time that appears as risk and tends to merge into the economy. Eric Voegelin stated this almost a century ago: “Time is the meaning of the economy”16. The point is to understand how the economy produces and manages time.


How can this abstract entity with no value of its own drive the mass of goods and values that make up the very concrete wealth of modern society? How can it motivate everyone without having a specific object? We do not know what we or others want now, or may want in the future, but everyone wants money17. Very different performances are all compensated in the same way - with payment.

Sociology always answers this question in the same way. Money works because it represents a social relation, or because it is a social relation consisting of obligations and claims among the participants in the economy18. So argued Weber, who wrote that an exchange that makes use of money is always “community acting”, referring implicitly to the potential acting of others and ultimately to all participants19. Money is accepted only because one expects to use it in future transactions. This depends not only on the counterparty, but also on all potential others who could be interested in exchanging, whom one also expects to accept money. Every monetary transaction, even if timely and concrete, among people one knows and may trust, extends beyond this level and refers to the entire community, to all possible anonymous and indeterminate transactions, among unknown people and in still unknown moments. As Simmel observes20, money can fulfil this symbolic function and connect the punctuality of every single exchange with the totality of the goods and the people because it is completely devoid of its own value. As the history of money shows, every residue of intrinsic value becomes an obstacle to the primary function of money. Its value lies only in its ability to convert into other values. Its use as a means lies only in its ability to become an end. As a symbol for each value, this means that the absence of value becomes the last value and the last aim for which everybody strives. The concrete confidence in people and the relationships between different individuals turns into an abstract “systemic confidence” in the functioning of the economy as a whole.

Money is able to motivate anyone, even to do things that would otherwise be irrational (as demonstrated by the widespread desire to have a job – that is, to labour). In this social “homogenising” function, combining a variety of individual and quite heterogeneous motivations without any conflict, money seems to assume the role formerly fulfilled by religious motivation, which was also valid for everyone. Monetary motivation, according to Burke, can be seen as “a technical substitute for God”, because God was the unitary instance that could collect the diversity of all motives21. In this sense, money (according to Simmel, among others) can be seen as “the God of our time” 22, a secular and socialized God who addresses indifferently disparate motives and objects.


If money has always been mysterious, today the mystery has taken on another dimension, raising new still obscure enigmas. In recent decades the economy has changed profoundly, especially for the much greater relevance of finance and for the introduction of abstract and transparent instruments as financial derivatives. Some propose that we consider them a new form of money, specific to financial capitalism and its movements, highly abstract and connected with the availability of computers23. However, why should they be a new kind of money? How do these tools superimpose on the function and the operating mode of money which has given rise to the modern self- referential and future-oriented economy?

As we have seen, money works on the basis of its peculiar ability for homogenization. Monetarization makes the property of very different goods (furniture, jewelry, food, as well as land and labour) equivalent by converting them into a quantity (a sum of money) that can be compared and exchanged with any other sum of money. From the point of view of the capital they represent, all goods are equivalent and, hence, homogeneous. Money can bind the future because it makes every property equivalent to any other. Thus, it allows the availability (or the transfer) of present goods equivalent to the indeterminate goods it makes accessible in the future. We attributed the primary function of money to this performance, to its ability to act as the medium of deferment. The classic functions of means of exchange and store of value remain consequences of this performance. If derivatives are a particular kind of money, do they also do something similar? How?

Bryan and Rafferty maintain that derivatives are a new form of money because they have a specific ability to bind the future by relying on a peculiar form of homogenization (blending)24, a second-level homogenization which presupposes the abstraction of modern economy and the transformation of goods into capital. Derivatives are able to equate different forms of capital (and not different forms of goods), which can be converted25. In the previous economy, one distinguished between different kinds of capital: production capital, commercial capital (linking offer and demand), credit capital, generated by the circulation of capital itself. In the traffic of derivatives, all forms of capital become equivalent, because they can be converted one into the other in order to generate the liquidity that circulates in the market.

What is the mechanism that allows derivatives to gain this degree of freedom? In the traffic of derivatives, the dynamics of investment is independent from property. One can invest on a title, thereby influencing its movements and achieving profits or losses without needing to own it. As in short selling, where one sells something one does not have, with derivatives, it is enough to be able to manage certain transactions, speculating on trends and expectations. When dealing with futures, one invests on the future movements of an asset that one does not possess (and will often never possess, given that the future will be sold before the expiry). Options give even the freedom of never needing to possess anything. CDS (credit default swaps), among the most innovative financial instruments, allow to enter into a kind of insurance without requiring that the buyer actually own the assets for which he/she wants protection, or even that he/she really suffer a loss. It is as if one were insured against the fire of a home he/she does not own, or against the risk of accidents of someone else’s car. If the damage occurs, then one collects the repayment without undergoing the damage. This independence of money from property is a fundamental novelty and represents a decisive change in the operations of finance and the economy as a whole.

The reference to property is, of course, central to economic dynamics, and constitutes the link with the “real world”. Monetarisation gave rise to the modern economy, with its autonomous dynamics guided by its own criteria when money realized a “second codification” of property, making the corresponding time binding much more flexible and fungible26. The first form of protection against the uncertainty of the future was supplied by property, which gave the holder the possibility of enjoying goods even if others aspired to them. When goods are scarce and of interest to many, the owner has the recognized faculty of providing them as he/she sees fit, even if he/she does so poorly (wasting or using them inadequately). If something belongs to me, I am free to spoil it or make it go bad, even if others need it. Society (that is, others) guarantees me in this condition (an amazingly unlikely combination).

Monetarisation makes this mechanism much more efficient. It starts the autonomous dynamics that define the economy and make it largely independent from the specific characteristics of goods. Property remains the prerequisite, with the (unlikely) forms of social support it relies on. However, it is translated into an abstract measure (the price) that circulates independently and is not constrained by the specificity of the context. If my property has been paid 1000, I can spend these 1000 to obtain any other good with unspecified characteristics without caring about the fact that the original transaction had to do with apples, houses or livestock. Money always presupposes property, but makes it abstract and independent from the specificity of the object (I can change it into any goods), from the social relation with the parties (I can pay anyone), and from the time of the transaction (it can be anytime).

Derivatives seem to untie the relation of money with property, allowing one to buy and sell securities that he/she does not possess. In financial markets, only money circulates, without any coupling with property. Is it still money? How? One can say that it is a new form of money, which presupposes the abstraction achieved by monetarisation, but takes it a step further. It abstracts from the specificity of the capital, making every form of capital convertible into any other, and finally equivalent to money itself. Untied from property, the circulation of investments (the “new” money) becomes pure liquidity, which proceeds freely, transforming money into money – that is, buying and selling money in order to buy and sell (only) further money. As the “first” monetarisation achieved independence from the characteristics of the goods (again, a sum of money is the same if one has sold horses or wheat), so too did the “second” monetarisation achieve independence from the characteristics of the capital. In derivative markets, one can earn, even if the “underlying” is doing badly, in the same way as one can lose, even if the stock is increasing. One does not depend on the investment. One does not own it, not even partially as in the case of stocks. Instead, one depends on the observation of investments in the market – that is, on the speed and intensity of capital movements, whatever they refer to.

The most evident function of derivatives (also recognized by their opponents) is to create liquidity, greatly increasing the mass of circulating money. Every kind of capital can be used as “underlying” in order to generate additional traffic of currency, to enter new investments, to retreat and invest again. The markets become more mobile, flexible and dynamic. This money, in exorbitant amounts, circulating at very high speeds and seemingly unlimited, however, is different from the money we have known for centuries, which is the basis of modern monetarisation. It is different because it can increase indeterminately. It does not need to remain coupled to the property of goods and assets. The money expressed by derivatives is also different because of its second level “blending” function. It not only homogenizes the various forms of capital, but also deletes the very distinction between capital and money. Ultimately, everything becomes liquid. Money itself takes on the features of capital (for example, it can generate further money27).

As Myron Scholes pointed out in his Nobel prize acceptance speech (1997), speaking about the progressive confusion of the distinction between debt and asset, every capital can be immediately translated into money, even when it is negative capital (that is, a debt). Even a debt can become the basis for creating wealth, as is shown through the use of the pyramid of debts by banks. Banks lend money. Traditionally, this money was thought to be that deposited by customers. Today, however, the guarantees at the basis of the circulation of capital are increasingly the debts of those contracting loans or mortgages, which flow in other banks and transform into cash. In practices such as securitization28, one cedes activities or goods through the emission and placement of bonds. These can be real estate, contracts or other, but the transferred goods are more and more often credits (the debts of customers), transferred to others on payment of cash. The maneuver has little to do with the concrete goods (properties) at the base of the pyramid (such as houses or cars which are often the object of other loans), but relies on a hazardous and reckless use of time. The goods are always the same, but different payments (those of the borrowers, those of the first bank and then those of all other financial operators) overlap each other – that is, there are several deferments, several spaces of time overlap each other. The maneuver, as the crisis or the outbreak of speculative bubbles has repeatedly shown, does not work when these times pile up. Everyone wants to cash in at the same time and the game of deferments implodes on itself.

As traditional money is based on the homogenization of goods to bind the future, so derivatives, realizing the dizzying performance of the creation of the future, achieve a second level of homogenization to bind time in a new way. They can thus be considered a new form of money. In this case, however, the presupposition is a new step of abstraction that allows for a formerly inconceivable freedom of movement - a “dematerialization” that leads to the financial replication of any investment, without needing the money to make it. At this level, it no longer makes much sense to keep the distinction between real economy and paper economy, since everything is homogenized in an indistinct flow of abstract money.

Derivatives are a highly self-referential form of money in the sense that they do not refer to anything external, but only to money and its circulation. In financial markets, money stays for further money. Its value is created, not in reference to the world, but in reference to the future. In its new financial form, it becomes even more evident that money is time, and indeed the circle of derivatives, either vicious or virtuous, only makes sense if time comes into play, unfolding the tautology in an orientation towards the future. In Rotman’s terms, a derivative is a form of money (Xenomoney) that creates its reference by itself, “a sign that creates itself out of the future”29. The value is generated in the present calculation of future performances, which in turn become part of the present.

  1. Luther 1883, p. 391.
  2. Braudel 1967, p. 365.
  3. Rice Vaughn 1675, quoted in Appleby 1978, p. 199.
  4. Luhmann 1988a, p. 230ff. talks here of money as symbolic and diabolical medium at a time.
  5. Cf. for example Hicks 1967; Aglietta/Orléan 1982, p. 13; Robinson 1971.
  6. The criticism of this model can be found already in Keynes 1936, pp. 18ff. Cf. also Robinson 1971, pp. 64ff; Smithin 2000. For a discussion of the illusion of neutrality of money see Ingham 2004, pp. 15ff.
  7. Cf. Ingham 2000, p. 17.
  8. According to the expression of Sohn-Rethel 1990.
  9. Cf. for example Hicks 1967; Bloch 1954, p. 35; but also Polany 1957, pp. 296-331 It.tr.; Ingham 2004. Weber 1922, pp. 70ff. It.tr. defines money on the basis of its dual nature of means of exchange and means of payment, which leads to the possibility to serve as a reference for future still indeterminate opportunities to use it.
  10. An often mysterious entity as interest becomes thus understandable: interest measure and reveals this temporal relevance of money.
  11. Keynes 1936, p. 293.
  12. Cf. Davidson 1978, p. 146; Goodhart 1994, p. 55ff. It.tr.; Moore 1979, p. 123ff.
  13. Shackle 1990, p. 213; 1972, p. 160.
  14. Also from a sociologicalperspective: think Parsons and the placement of the economic subsystem in the box of AGIL dedicated to adaptation, namely to the acquisition of energy in order to satisfy needs. Cf. also Weber 1922.
  15. Cf. Luhmann 1988a, p. 59f.; 1992, p. 39.
  16. Voegelin 1925, p. 204.
  17. To the extent that, as Luhmann somewhat provocatively observed referring to the claims of Trade Unions, the “cathegorical ottative” of modern society is “more money!”.
  18. A updated discussion can be found in Ingham 2004.
  19. Weber 1922, vol.II, p. 314 It.tr.
  20. Simmel 1889, p. 49 It.tr. 1900, p. 219 e 338f. It.tr.
  21. Burke 1969, p. 92ff.,110ff.
  22. Simmel 1889, p. 65 It.tr.
  23. Cf. Rotman 1987; Pryke/Allen 2000; Bryan/Rafferty 2007; Li Puma/Lee 2005.
  24. Bryan/Rafferty 2007, pp. 140f.
  25. Cf. Li Puma/Lee 2005, p. 411.

  26. Cf. Luhmann 1988, pp. 197ff.
  27. This is the thesis of Bryan/Rafferty 2007, p. 153.
  28. We will see it more specifically in ch.11.
  29. Rotman 1987, p. 153 Germ. tr.