As the predominant form of "Currency School" economics today, Keynesianism's chief tenet is that "money" consists exclusively of State-emitted bills of credit. That sounds innocuous enough until we know what it entails.
Prior to the "Financial Revolution" of the 17th century and up through the early 19th century, the non-owning free worker (politically with the status of an adult, but economically with the status of a child) was relatively rare. As we have seen, it was then that the rediscovery of commercial banking and the development of central banking made it possible to finance new technologies and even entire industries by abandoning past reductions in consumption as the chief source of financing for new capital, and using future increases in production.
Before then, "money" consisted of coin, occasional negotiable instruments, and a tremendous amount of barter. Money, in fact, doesn't have to take a specific form in order to be money. It merely has to be accepted in payment of a debt. "Bills of exchange" representing the present value of something of value the bearer expected to receive in the future from the issuer (and in which the issuer had a private property stake) could be used to finance new capital without first having to cut consumption and save.
The availability of this "new" source of financing made the Industrial Revolution possible. Due to the demand for collateral on the part of a bank or other lender accepting a bill, however, this method of finance also restricted ownership of the new capital to the already wealthy. Having existing savings to offer the new commercial banks to securitize loans made to finance new capital, the rich were, as a rule, the only ones able to own the new machinery. Consequently, the rich were able to control the economy — and the development of economic theory — for their own benefit.
Nor was the situation improved when, as a result of the "Currency Crisis of 1797" the Bank of England suspended convertibility of banknotes into gold. Governments realized they could issue fiat money backed only by government debt. This changed the definition of money from anything that can be accepted in settlement of a debt, to whatever the State issued or sanctioned and had the power to force on an economy — bills of credit. This creates a situation Keynes claimed was ideal in the opening passages of his Treatise on Money (1930).
By being able to issue what amounts to general claims against the wealth of society backed only by the State's power to tax future production, governments are able to exercise a de facto ownership of a nation's wealth where Hobbes only asserted a theory. Speculation in what is today known as "sovereign debt" began to be a significant portion of the business of the financial markets. The "Panic of 1825," presumed to be the event that ushered in the "business cycle," was not caused by fluctuations in private sector production of marketable goods and services. That had been going on since the dawn of civilization and before. The Panic of 1825 was caused by government manipulation of the currency and the issuance of vast amounts of non-productive debt paper to finance State operations and programs, primarily by the new republics in Central and South America — one of which, the "Republic of Poyais," did not even exist.
By this means governments are today able to exercise effective control over the economy to the extent government currency backed by debt displaces private sector money backed by hard assets. Government debt money also accelerates the devolution of society from contract to status. Taxes are, in part, collected on the basis of ability to pay, while growing reliance on government mandated or supported jobs, wages and benefits funded increasingly by debt imposes a condition of dependency on the part of the recipient. The political status of citizens shifts from all being equal, to being divided into a large number of special interest groups of differing status, depending on the power of a group to garner government-funded benefits and special treatment.
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