Lugano, Switzerland, December 2011




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 argument 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 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 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 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 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 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.


Bernard Schmitt, Université de Fribourg, Université de Bourgogne

Alvaro Cencini, Università della Svizzera italiana

Sergio Rossi, Université de Fribourg


Oliver Simon Baer, Université de Fribourg

Jean-Luc Bailly, Université de Bourgogne

Edoardo Beretta, Università della Svizzera italiana

Xavier Bradley, Université de Bourgogne

Andrea Carrera

José Cerqueira, University of Angola

Cristophe Chabin, Paris

Taieb Chtioui, Université d’El Manar (Tunisie)

Mauro Citraro, Scuola Universitaria Professionale della Svizzera italiana

Marcello Corti, Ufficio federale di statistica

Niklas Damiris, University of Stanford

Curzio De Gottardi, Banca dello Stato del Canton Ticino

Marco Desogus, Università della Svizzera italiana

Guy Devillebichot, Université de Toulouse 1

Igor Franchini, Università della Svizzera italiana

Claude Gnos, Université de Bourgogne

Pierre Gueneau, Paris

Edouard Maciejewski, Former IMF Assistant Director and Mission Chief

Pierre Piégay, Université de Bourgogne

Nadia Piffaretti, The World Bank

Maurizio Rotanzi, Università della Svizzera italiana

Julián Sánchez, Autonomous University of Madrid

Carol Theal, Università della Svizzera italiana

Joseba Felix Tobar-Arbulu, Euskal Herriko Unibertsitatea (Universidad del País Vasco)

Jean Tramuset, Paris