Why money
matters

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Why Money Matters

A starting point for debate on money, power, and trust

In a world where the value of money is becoming increasingly abstract, one core question remains: what still makes money reliable and how do we maintain a grip on this? Since the decoupling from gold in the twentieth century, money is no longer a tangible asset, but a matter of trust. That trust is under pressure today due to digitization, globalization, and a growing gap between financial and real value.

The Euro, once intended as a symbol of European stability, seems in this context to be looking for a new, global role: that of an anchor in a floating system; the new gold.

If money is no longer backed by gold: what then does value rest upon?

The modern monetary system rests on a remarkable dynamic. Not central banks, but commercial banks create the majority of money by providing loans based on commercial risk assessments. This form of money creation results in excessive money creation during economic booms and actually hinders recovery during economic crises.

When credit exceeds the economy, a layer of paper wealth is created that becomes detached from tangible production. Globalization reinforces this effect: capital circulates rapidly across borders, while labor and raw materials respond slowly. As a result, the market is financially hyperactive, but economically often more sluggish than the real economy.

The financial crisis of 2008 and the policy of quantitative easing applied several times since then made this clearly visible. Central banks pumped an enormous amount of liquidity into the system to stimulate growth, but that capital mainly found its way into stocks and real estate: those with assets gained even more assets. Economic recovery remained unevenly distributed.

Who creates and manages the money, and who supervises?

The question of who may create and manage money is topical once again. The traditional distinction between the cash in our wallets ("Public" money issued by central banks) and the bank balance in our bank accounts ("Private" money created by commercial banks) is blurring.

No longer is there only the distinction between public and private money; new financial parties (from fintechs to crypto projects) have introduced a new form of money into our system: Shadow Money.

Shadow money includes lending, investment, and financing by unregulated companies such as hedge funds, money market funds, and crypto platforms that behave like commercial banks but are not subject to the same strict supervision.

As such, these new parties (also called shadow banks) have become part of the financial chain, while regulators try to get a grip on these new risks that are hidden from view. These parties, commercial banks and new financial actors, are entering territory that was once exclusively in public hands. Their innovation offers efficiency and freedom, but also raises existential questions: who guarantees stability if trust falters and who bears the loss of the risk taken?

The rise of crypto and stablecoins is a symptom of that searching trust. Cryptocurrencies promise independence but lack structural stability. Stablecoins attempt a hybrid model: digital, but linked to existing currencies. Yet they too build on private power, private infrastructure, and commercial incentives. That is why central banks are working on a public alternative: the Central Bank Digital Currency (CBDC). A digital Euro can strengthen democratic control over money, but at the same time touches on sensitive themes such as privacy and the boundary between protection and government power.

What happens if banks have a Social function, but a Commercial goal?

Banks play a crucial role in our society by providing loans, but their main goal remains making a profit. This tension is reinforced by rules that sometimes make lending difficult.

There is much criticism of the large influence of the banking sector in the political debate: while there are hundreds of meetings in Brussels with the banking lobby, societal representation hardly gets a hearing.

The transition of prominent politicians to the banking sector and from the banking sector to the regulators raises the question of whether we really decide democratically about our money. Central banks try to maintain the balance in this, but their relationship with the commercial banks remains complex and sometimes controversial.

When does the Financial economy stand above the Real one?

The relationship between the financial sector and the real economy has grown lopsided. Where money used to be the lubricant of production, production now seems to have become mainly a backdrop for financial appreciation. Derivative markets, once intended to hedge risks, have become autonomous speculations, many times larger than the global production value. Value arises less and less from labor or innovation, but more and more from risk and expectation models. With this, money becomes less of a means of exchange.

For Europe, this means that the Euro is in danger of becoming alienated from its own fundamental purpose: stability and social progress. To truly be "the new gold," the Euro must be reconnected with value creation that benefits society as a whole.

What does this do to opportunities, behavior, and mutual trust?

Today's monetary policy has deep societal effects. Low interest rates and ample money availability stimulate consumer investments but also encourage households toward risk-seeking behavior. Saving seems pointless; investing becomes the norm. The value of houses, stocks, and other assets increases, while access for newcomers decreases. Wealth concentrates in private hands, both with wealthy investors and institutional funds.

This shift has a cultural dimension. Money is no longer just a means to live, but a means to survive in a financial game. Younger generations experience assets as something that must be invested, not used. Houses become piggy banks, not places to live. Behind this behavior lies a broader erosion of trust: the citizen no longer entrusts their pension to the state and the state relies on markets to create growth.

Politics and power: the euro in a geopolitical field of force

No monetary system exists in isolation from power. Since the dollar functions as the world reserve currency, money is also geopolitical. The euro was once designed as a counterweight, but only in the coming years will it become clear whether it can truly fulfill that role. In the digital age, monetary autonomy becomes a security issue. The United States, China, and the European Union compete for the standard of the future: whoever controls the infrastructure of digital money, controls the value chain of trade and technology.

At the same time, Europe faces another, less visible power situation internally. Reform of money and banks is strongly slowed down in the EU by the influence of the traditional banking lobby. The current legal framework is built on a banking model in which lending is central, leaving hardly any room for real systemic change. As a result, rules around capital, liquidity, and supervision work not only protectively but also stultifyingly: they confirm the existing power relations instead of breaking them open.

Furthermore, Europe struggles internally with the regulation of its financial sector. "Too big to fail," the inability to let large banks fail without disrupting the system, remains an unsolved problem. Frameworks such as Basel III (for banks), MiCA (for crypto), and DORA (for digital operations) show the attempt at control, but are clearly a compromise between the regulator and the financial sector. But if rules always balance between public and commercial interests: where then does democratic legitimacy come from and who guards it?

What social contract fits money that is becoming increasingly digital and abstract?

The debate about money is ultimately a debate about trust. Not just trust in numbers on a bank account, but in the institutions that define value. Money reflects the relationship between citizen, market, and government. Therefore, the restoration of that trust requires a new social contract: transparent money creation, democratic control over digital currency, flexibility of payment in a digital world, and a reappraisal of money as a public good with a social purpose.

The digital Euro is a step in the right direction to reduce dependence on commercial parties in the monetary system and bring it back into public hands. This could restore the balance between Public and Private money, but will this actually happen?

The Euro can only become the new gold when it is seen not as a technical means of payment, but as public trust: stable, democratically legitimized, and connected to social value creation. If Europe wants to unite economic power, social justice, and political autonomy in one currency, what agreements belong to that and who gets to make them?