Papers presented by Maylis Avaro since 2019

2024 Providence, Rhode Island

"Averting Money Troubles in late 19th century: Bank of France, Michel Foucault and Judith Butler"

Abstract:

Since Friedman (1969), many economists think about money creation as helicopter drops. The idea gained traction again during the Covid-19 pandemic. However, money does not fly from helicopter, it is rather always issued against something. Money creation typically resulted from the pilot (central banker) landing on a financial market segment and standing or being ready to swap with the public its banknotes against some assets. This paper studies the operational procedures used by Bank of France in late 19th century and show that the pilot of the helicopter pays great attention to whom received the money. The reason is that money creation is temporary and to avoid fiscal transfer, the monetary authority has to manage the risk of failure of its counterparties, to repay in due time. In a nutshell, money creation involved screening and surveillance of all counterparties of the bank of issue. We use the case of the Bank of France to study how such surveillance of the public was done. We borrow from Michel Foucault’s Discipline and Punish, to interpret the central bank’s surveillance system and from Judith Butler’s Gender troubles to interpret the “grey” areas that reveals the criteria under which the pilot decides to monetize private agent’s debts. Using the archives of the Bank of France, we document systematic differences in terms of the type of collateral pledged by banks or non-banks. To secure their lending with the Bank of France, banks relied on techniques akin to micro-finance such as personal guarantees while non-banks pledged mostly liquid securities. Yet we did not find any evidence of insider lending, or cronyism in the choice of the volume of discount by the Bank of France. These patterns can be understood as banks being agents providing relationship lending services in an economy in which defaults were very costly.

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