MANIFESTO

Lugano, Switzerland, December 2011

A MANIFESTO CONCERNING THE DEVELOPMENT
AND DISSEMINATION OF QUANTUM
MACROECONOMICS

It is odd but in the beginning of the Third Millennium the

majority of economists continues to consider money as
marginal and nonessential, if not irrelevant, to economic
theory. The arguments to the contrary found in the
writings of Keynes as well as in that of other important
classical authors in political economy mostly go
unheeded. In short, the concept of money is still rarely
approached or viewed as the starting point for explaining
how existing economic systems really work.
Nevertheless, everybody acknowledges that
contemporary economic systems are essentially
monetary. It would be impossible to address the
problems that plague our economies if one merely
considered “real” variables.

As the most recent economic crisis worsens, there is

increasingly widespread scepticism concerning the
solutions proposed by economists, whose credibility
appears to be inversely proportional to the complexity of
the models they use. These models are based on a deeply-
rooted dichotomy between the ‘real’ sector and the
‘nominal’ or monetary sector, inevitably distancing the
latter from the real world where they exist inseparably.
Let us be clear: these models hold a fair amount of
interest from a mathematical-analytical viewpoint; but,
as theoretical explanations appropriate to the field of
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 economics, they lack empirical confirmation, logical-
conceptual foundations, or practical-concrete
application.

Given this sorry state of affairs, a reconstruction of

economic theory integrating money with production is
urgently called for. The analysis undertaken by Bernard
Schmitt over the last forty years demonstrates how
monetary macroeconomics can effectively contribute to
solving the problems that repeatedly arise in economic
systems at both the national and international levels. In
his quantum monetary analysis, production is conceived
as an emission, an instantaneous event through which
physical output is given a monetary form, and is issued as
a “quantum of time”. In fact, the concept of “emission”
applies also to monetary payments, money being issued in
a circular movement involving its creation and its
simultaneous bookkeeping destruction.

To appreciate the power of Schmitt’s analysis, its basic

and elemental starting point should be clearly introduced
as it is the principle on which our banking and the entire
economic system depend: double-entry book-
keeping. Issued by banks as a numerical form expressive
of any production output, money can be neither a
commodity nor a simple ‘veil’. Its manner of existence is
inseparable from that of the goods with which it is
associated and identified. And it is precisely because
money is a numerical form or expression with goods as
its content, that production can be accounted for
numerically. Being integrated into production, money
provides its numerical, economic expression. At the
same time, the goods themselves that are produced,
inasmuch as they represent the “object” of money, are
evidence of money’s purchasing power. If money and
output were not made to be identified with each other,
we would have no way of expressing the value of goods or
explaining the purchasing power of money, and
consequently, no reference point rendering monetary
imbalances explicable.

Monetary imbalances can be apprehended through the

analysis of the integration of money with production. It
is only once the purchasing power has been determined
by giving output its numerical form that it is possible to
identify its variations and seek out their causes. Inflation
and deflation represent imbalances of much greater
complexity than is usually understood. In this respect,
there is a great deal of confusion regarding concepts that
are similar only on the surface, thus, for example, the
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 increase in the cost of life and the rise in inflation are
economic phenomena that should be rigorously
distinguished, one from the other.

The proposed causes of such pathologies, together with

the proposed remedies, are numerous. Although
repeatedly repudiated by the facts, traditional analysis
continues to persist even though it remains unable to
cope. To escape its grip one must abandon any attempt
to explain inflation and deflation by observing the
behaviour of economic agents. Such a microeconomic
approach proves of no help in understanding what are
essentially macroeconomic occurrences, since the latter
call for the elaboration of lawful principles able to
account for the governance of the economy approached
systemically, as a whole. These laws, which are structural
in character, provide the logical framework within which
the various economic agents operate, and are
independent from their behaviour. It should be noted at
this point that the only laws specific to current
economies are those deriving from the nature and
presence of money. Specifically, an analysis of bank
money and its operations is required as indispensable
starting point to any economic analysis worthy of the
name.

A monetary analysis of production and circulation can

provide the elements for constructing macroeconomic
theory based on objective criteria. The subject-matter of
such theory is not primarily the economic behaviour of
individuals and groups itself but rather the monetary
structure that provides the systemic framework within
which these individuals and groups operate. The
monetary system is shaped by a series of laws that are
essentially logical in nature, of which the accounting
structure of our banking systems should be an
instantiation. Conceived in this light, economic theory is
then one of the hard sciences, with all the strengths and
weaknesses this implies. On the other hand, precisely
because its aims are thus circumscribed, it is reasonable
to suppose that a comprehensive and univocal
understanding can, in principle, be reached: being a
creation of humankind, the economic system does not
lie beyond our powers of comprehension.

Quantum monetary analysis is also applicable to the

field of international transactions. Whilst it is true that a
change from a national to an international framework can
alter the character of the problems involved, the core
nature of money remains unchanged. At an international
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 level it is still not easy to speak of money emissions as an
obvious fact. Despite certain brave attempts, to supply
the world with a genuinely international unit of account
and means of payment like Keynes’s bancor, at present
there is no common means of conveying international
payments. The absence of a payment system has effects
on the international level similar to those found at a
national level. Interestingly, it can be further shown that
monetary disorders pertaining to the international
payment system manifest themselves more clearly and
hence their analysis should be (though not always is)
easier.
The concept of nation is essential in understanding the
problems concerning international payments. Even now,
it is not unusual for economists to confuse nation or
country with the State and the sum of its residents. Just
as macroeconomics would be no more than an
aggregation of microeconomic agents, forming the true
basis of economic analysis, so nation would be treated as
no more than the simple sum of its residents. If this were
true, then the concept of nation would be of little
relevance to monetary analysis: a nation would exist only
legally and its economic existence would have no
independent and practical consequences.
However, monetary analysis shows that a nation is
coextensive with the set of its residents and, has thus an
existence sui generis. This conceptual, logical point must
be recognized and never forgotten, if we are to avoid the
deep structural imbalances currently affecting
international payments.

For decades, economists have been pursuing the pipe

dream of using a fixed exchange rate system, largely
considered as the best tool in encouraging growth in
international transactions. However, repeated attempts
to set up such a system (the gold standard, the Bretton
Woods agreements, the European Monetary
System) have never been successful. Indeed, all these
attempts at providing a fixed exchange rate system failed
and gave rise to a regime in which exchange rates are left
to fluctuate freely (more or less) and in which uncertainty
and speculation contribute to accentuating monetary and
financial disorder. It is therefore of vital importance to
understand why our international payment systems have
been unable to work under a fixed exchange rate regime.
Actually, the answer is simple: if a ‘natural’ fixed exchange
rate system is to work properly, then currencies must
never be approached as commodities and treated as
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 objects of trade. So long as money continues to be
considered a net asset, any currency will be exchanged
against some other currency in a system of relative
exchange rates. A ‘naturally’ fixed exchange rate system
would be one in which international payments in no way
serve to feed a market where currencies are bought and
sold as if they were a commodity. Shifting from relative
to absolute exchange rates means a shift from instability
to stability in exchange rates, since it involves removing
once and for all currencies from the marketplace.
The problem of external debt is yet another interesting
and related area of application for our monetary theory.
As with the case of inflation and deflation, traditional
analysis is incapable of supplying an adequate
explanation. In accord with the approach usually applied
to study internal imbalances, the problem of external
debt is seen as easily attributable to real factors
pertaining to the behavior of economic agents. A
country’s high level of debt is claimed to arise essentially
from its people having lived too long beyond their means,
having taken out loans that have reached levels too high
to be repaid. Some international institutions have
encouraged a widespread acceptance of this assessment
forcing the indebted countries to shoulder the blame for
the crisis situation in which they find themselves.
Although this assessment has subsequently been
modified – indebted countries now share responsibility
with their creditors-, the analysis of this problem has
always been based on decisions made by the agents who
originated the request for credit and must now repay
the debt.

The bottom line is that external debt has nearly always

been considered in the same way as the debts contracted
between residents of a single country, forgetting that a
common monetary space at international level has yet to
be instituted and recognized as such. Projecting onto a
realm that does not properly exist, economists fancy that
the world does possess a true system of international
payments and that monetary homogeneity is already an
established fact at the international level. If this were the
case, then debt problems would be exclusively financial in
nature and it would be perfectly correct to analyse
external debt in the same way as internal debt is
analysed. Unfortunately, the payment system that exists
today at international level is far from being satisfactory
and so the goal of monetary homogeneity is beyond its
reach. In fact, under the current circumstances, the
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 problem of external debt is not only financial in nature,
but also monetary. Quantum monetary analysis shows, in
fact, that a pathological, monetary discrepancy arises
each time a country benefits from a foreign loan. Because
of the present non-system of international payments, a
difference appears between money outflows and inflows,
which results in the pathological duplication of the
borrowing country’s external debt.
The economic-financial crisis that is at present the
subject of intense debate in a range of countries, from
the least to the most developed, can be overcome only if
its structural causes have been determined, where by
structural causes we mean those that have their origin in
the systems of national and international payments.
Measures suggested to date almost exclusively relate to
the most evident manifestations of the crisis, its
symptoms, and have been limited to attempts to contain
its propagation, so far without success. However, there is
a much more urgent need to undertake a diagnosis that,
by identifying root causes, would enable preventative
action, thus blocking its very formation. This is what
should be expected from any economic analysis and is
indeed the goal of quantum macroeconomics, which,
besides explaining the underlying mechanisms of the
crisis, proposes structural remedies, i.e. reforms of the
systems of national and international
payments,enabling the crisis to be overcome before it
worsens to such an extent that social tensions escalate
into a spiral of violence with far reaching and potential
very oppressive implications.
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