Keynote speech by Claudio Borio at the website of the Bank for International Settlements:
Few issues in economics have generated such heated debates as the nature of money and its role in the economy. What is money? How is it related to debt? How does it influence economic activity? The recent mainstream economic literature is an unfortunate exception. Bar a few who have sailed into these waters, money has been allowed to sink by the macroeconomics profession. And with little or no regrets.
Today, I would like to raise it from the seabed. To do so, I will look to an older intellectual tradition in which I grew up. I would thus like to revisit the basics of monetary economics and draw lessons that concern the relationship between money, debt, trust and central banking.
I approach the topic with some trepidation. So much has been written by scholars much better equipped than me, including a number in the audience. Still, I hope to shed some new light on some old questions. A number of the points I will be making are well known and generally accepted; others more speculative and controversial.
My focus will be the on the monetary system, defined technically as money plus the transfer mechanisms to execute payments.2 Logically, it makes little sense to talk about one without the other. But payments have too often been taken for granted in the academic literature, old and new. In the process, we have lost some valuable insights.
Let me highlight three takeaways.