The prevalent understanding adhered to by most contemporary social scientists sees money as a commodity that does not differ fundamentally from a house or a car. Sociologist Aaron Sahr argues that this is a grave misconception—one that prevents us from developing an adequate understanding of the transformation of contemporary capitalism—or of why the amount of money circulating worldwide has increased exponentially in recent decades. Money, he asserts, is not a commodity. Money is credit, a promise to pay.
A viable theory of money must offer convincing explanations for empirical observations, especially those related to private banks’ lending practices. The understanding that private banks distribute their clients’ savings or the monetary reserves supplied by central banks is still widespread. In fact, they generate assets through lending. In other words, they create money out of thin air. Lending is no longer a simple act of trading—in this case, with capital—but rather a practice with which value is created. Scarcity is considered a necessary condition for defining a social activity as being an economic practice. But banks do not depend on scarce resources. Consequently, money should be viewed as a para-economic structure, and lending as a para-economic practice.
In scrutinizing the lending activities of banks as social relations rather than as a mode of distributing scarce resources, Money's Promise highlights the significance of trust. Because any relationship between debtors and creditors entails risks, any promise of payment depends on trust. Aaron Sahr examines the recent history of trust and mistrust in banking, in particular the willingness of financial actors to engage in trust-based relationships in the era known as the »Golden Age of Finance« (1970-2008). In the nearly four decades that ended with the crisis of 2008, creditors’ readiness to trust debtors rose remarkably, at the same time manifestations of distrust declined. Sahr’s examines this »euphoric« constellation of trust and distrust and offers new insights into such highly topical questions as the ascent of derivatives, the significance of shadow banking, the role of rating agencies and algorithmic risk calculation, and governments' retreat from administrative regulation.