Inflation vs Deflation III
Nearly twenty years ago, I reached the finals of a karate tournament. It was the third and final point-fighting tournament of my brief career and the first one in which I wasn't ejected in the first match for "excessive contact". (I never liked point-fighting, which is essentially a version of tag.) My opponent in the final was a good friend from my dojo, a sort of pocket Hercules who could do six reps at 275 and whose nickname was Terminator.
Our sensei encouraged the referee to let things go for once, we both fully unleashed on the other, but after the scheduled two minutes was up and the score was only 2-2, the referee turned to our sensei before the overtime and said "do these guys fight each other every day or something?" No matter how fast and hard we threw our kicks and punches, it was very hard to penetrate the other's defenses because we both knew perfectly well what the other guy was intending.
In like manner, because Nate and I are both familiar, and more or less in accordance, with Austrian School economics, a lot of this debate is likely to strike readers less familiar with it as pointless. But rest assured, it is not. It is precisely because the windows of opportunity are going to be small that an amount of testing and probing for weakness is going to be required. Also, as a long-time reader of this blog, Nate is very familiar with my approach to critical discourse and is going to be exceedingly wary of the various traps I habitually lay for my interlocutors. So, be patient and try to resist the urge to try to leap ahead, because this is not going to proceed immediately to the superficially obvious chasm, which is the different opinions concerning debt, that separates us.
In his first response, Nate indicated his acceptance of the monetary tradition of Turgot with two critical addenda. He writes:
"We may give the name of commodity money to that sort of money that is at the same time a commercial commodity; and that of fiat money to money that comprises things with a special legal qualification. A third category may be called credit money, this being that sort of money which constitutes a claim against any physical or legal person. But these claims must not be both payable on demand and absolutely secure; if they were, there could be no difference between their value and that of the sum of money to which they referred, and they could not be subjected to an independent process of valuation on the part of those who dealt with them."
- Mises, The Theory of Money and Credit, p. 61
"The nominalists assert that the monetary unit, in modem countries at any rate, is not a concrete commodity unit that can be defined in suitable technical terms, but a nominal quantity of value about which nothing can be said except that it is created by law. Without touching upon the vague and nebulous nature of this phraseology, which will not sustain a moment's criticism from the point of view of the theory of value, let us simply ask: What, then, were the mark, the franc, and the pound, before 1914? Obviously, they were nothing but certain weights of gold."
- Mises, The Theory of Money and Credit, p. 66
The same, of course, is true of the thaler, or dollar, of which the U.S. version is 24.057 grams of silver. This, naturally, leads me to conclude with the following questions, to which I should like to see Nate's answers:
Our sensei encouraged the referee to let things go for once, we both fully unleashed on the other, but after the scheduled two minutes was up and the score was only 2-2, the referee turned to our sensei before the overtime and said "do these guys fight each other every day or something?" No matter how fast and hard we threw our kicks and punches, it was very hard to penetrate the other's defenses because we both knew perfectly well what the other guy was intending.
In like manner, because Nate and I are both familiar, and more or less in accordance, with Austrian School economics, a lot of this debate is likely to strike readers less familiar with it as pointless. But rest assured, it is not. It is precisely because the windows of opportunity are going to be small that an amount of testing and probing for weakness is going to be required. Also, as a long-time reader of this blog, Nate is very familiar with my approach to critical discourse and is going to be exceedingly wary of the various traps I habitually lay for my interlocutors. So, be patient and try to resist the urge to try to leap ahead, because this is not going to proceed immediately to the superficially obvious chasm, which is the different opinions concerning debt, that separates us.
In his first response, Nate indicated his acceptance of the monetary tradition of Turgot with two critical addenda. He writes:
Note that nowhere in either of Vox’s proposed definitions do we find this critical factor. Turgot omits it. Law omits it. Mises, Rothbard, Salerno.. and pretty much every other Austrian has agreed that the key factor of money is the fact that it completes a transaction. Completing a transaction is the one thing that money does, that nothing else does. In the interest of charity and goodwill… I will suggest that Turgot’s characteristics of money are all fine with me… provided that we remember that the value supposedly stored by the money is subjective, and, we add the requirement that I have hitherto beaten into the ground. It must serve to complete the transaction.I have no objection to either addendum and am content to accept it as a reasonable definition of money for the moment, although I reserve the right to propose alternative definitions should this definition prove to be insufficient in the course of the debate. So, this leaves us with the following characteristics of money:
- A medium of exchange
- A unit of expression
- An object of commerce i.e. an exchangeable good
- A tool of economic calculation
- An intrinsic store of subjective value
- A completer of transactions
Lots of things store value. Lots of things can be used to estimate value. Lots of things can be employed to aid in an exchange. Money does all of those things. But money is the only thing that does all of those things, and completes an exchange without creating a need for another transaction. True or false?Again, for the sake of argument and in the interest of charity and goodwill, I can only answer one way: true. Armed as we now are with this expanded definition of money, we can proceed to begin considering the question of the money supply. In doing so, I would recall to Nate the following two statements by Mises, with which we already know, from his previous post, he is almost surely familiar.
"We may give the name of commodity money to that sort of money that is at the same time a commercial commodity; and that of fiat money to money that comprises things with a special legal qualification. A third category may be called credit money, this being that sort of money which constitutes a claim against any physical or legal person. But these claims must not be both payable on demand and absolutely secure; if they were, there could be no difference between their value and that of the sum of money to which they referred, and they could not be subjected to an independent process of valuation on the part of those who dealt with them."
- Mises, The Theory of Money and Credit, p. 61
"The nominalists assert that the monetary unit, in modem countries at any rate, is not a concrete commodity unit that can be defined in suitable technical terms, but a nominal quantity of value about which nothing can be said except that it is created by law. Without touching upon the vague and nebulous nature of this phraseology, which will not sustain a moment's criticism from the point of view of the theory of value, let us simply ask: What, then, were the mark, the franc, and the pound, before 1914? Obviously, they were nothing but certain weights of gold."
- Mises, The Theory of Money and Credit, p. 66
The same, of course, is true of the thaler, or dollar, of which the U.S. version is 24.057 grams of silver. This, naturally, leads me to conclude with the following questions, to which I should like to see Nate's answers:
- Are gold and silver commodity money?
- Are the Federal Reserve Notes, in both cash and deposit form, commodity money or fiat money?
- Does TMS2 represent your definition of the money supply?
- What are the various components of TMS2, commodity money, fiat money, or some combination therein?
158 Comments:
You Just called Nate Terminator?
You just called Nate Terminator?
Congratulations on entirely missing the point. But in answer to your question, no. Although, ironically enough, Terminator's name was also Nate.
So Vox, who did eventually win the fight?
A third category may be called credit money, this being that sort of money which constitutes a claim against any physical or legal person. But these claims must not be both payable on demand and absolutely secure; if they were, there could be no difference between their value and that of the sum of money to which they referred, and they could not be subjected to an independent process of valuation on the part of those who dealt with them." -Mises
Ouch.
I'm still expecting Nate to come out on top in the end. But ouch.
So Vox, who did eventually win the fight?
Terminator did. It was sudden death and he got me with his patented front snap-kick after about 45 seconds. He used it as an uppercut and it was just about impossible to see coming. I read it a moment late and couldn't bring my elbow across to block it in time. The ref said it was the best match he'd ever seen below the black belt level.
I have an inflation question that has always plagued me. Let say that we were on a hard money standard of gold/silver and commerce is flowing well, the Austrian dreams of complete price stability were the norm and deflation is steady but observable due to the phenomenon of capital and labor efficiency.
What would the effect be of finding a LARGE supply of gold/silver that was not ever supposed to have existed? The mother lode so to speak. Would inflation hit as this excess commodity currency finds its way into the economy?
"Ouch.
I'm still expecting Nate to come out on top in the end. But ouch."
There isn't any ouch here mate. This isn't a shot intended to do harm. He is doing exactly what he described in the post. He is testing the defense to see how far I am willing to push things.
The battle is actually not even being fought over the definition of money.
Do you guys realize that yet?
"What would the effect be of finding a LARGE supply of gold/silver that was not ever supposed to have existed? The mother lode so to speak. Would inflation hit as this excess commodity currency finds its way into the economy?"
There would be inflation.
Prices would also seriously destabilize if a giant meteor made of diamonds and fire breathing sharks fell from the sky and wiped out a few continents.
No.
Time will tell.
Of course Nate. We're just watching you two lay out the terrain.
Do you guys realize that yet?
Yes, dear. For one, Vox just conditionally accepted your definition, for which we all must be exceedingly glad.
I just hope you can clarify the TMS2 issues without we in the peanut gallery having to study Michael Polaro's exceedingly colorful but tedious charts.
Due to the nature of Vox's questions... I do believe you should be sparred any chart reviews zen0.
mercifully.
If it helps... I view the charts often the way Vox views JamieR. Just appreciate the spectacle.
"What would the effect be of finding a LARGE supply of gold/silver that was not ever supposed to have existed? The mother lode so to speak. Would inflation hit as this excess commodity currency finds its way into the economy?"
There would be inflation.
This is absolutely correct, and actually happened in Spain, in the 1500's, as the massive amounts amounts of gold and silver looted from the Aztecs and Incas found their way back to the home country.
as I read these post, all I hear in my head is the theme from Karate Kid 'you're the best..around....and nothings ever going to keep you down!'
I'm kinda waiting for the sensei to decide to 'sweep the leg'
Prices in Spain had dropped during the 1400's. From 1500 to 1600, prices rose 300%. The government ran perpetual deficits. The gold and silver bled out of the country, and laws to try to prevent the outflow didn't work.
Imagine how much more screwed up the country could have been screwed-up if they had come up with the idea of a Federal Reserve.
MikeH
What would the effect be of finding a LARGE supply of gold/silver that was not ever supposed to have existed? The mother lode so to speak. Would inflation hit as this excess commodity currency finds its way into the economy?
If you're ever extremely bored and need to kill some time watch Money Masters. A gold standard is also susceptible to currency manipulation. Say China purchases large amounts of gold and then everyone is on a gold standard. China could drop a lot of gold on the market, driving the price of gold down, then purchase large amounts of gold again at a cheaper value.
Even with a gold standard you should still have regional and local currencies to offset manipulation with a free market of competing currencies. An example, say the US is back on a gold standard, states and counties should also make their own currency with fixed circulation based on population.
The problem isn't so much fiat money. It's central bankers, the fractional system, and an infinite printing machine, that sets the amount of currency in circulation to arbitrary speed.
Just break the wrist, and walk away. Break the wrist; walk away.
Down the road we'll find this is about the basic monetary units of the progressive liberal: the carrot and the stick.
Carrots are nice and lovely and carrot mines have been the cause of great wars and the downfall of the Incas due to the carrot-crazed Pizarros.
Sticks are shiny, useful, and come in many different sizes.
Together they comprise the main weapon in the liberal arsenal and main form of commie Merry Men robbery called welfare entitlements, which I call "happy-pensions," so no one will frown at being called criminally lazy sluggards too stupid to go into a library and better their lives and maybe discover fractal geometry.
The safety net turns out to be very useful if you're here illegally from Tierra del Fuego or Nepal or a congenital idiot. Too many carrots brought back from the New World sent Spain into terminal decline. America is headed there now. See ya at the bottom.
"A gold standard is also susceptible to currency manipulation. Say China purchases large amounts of gold and then everyone is on a gold standard. China could drop a lot of gold on the market, driving the price of gold down, then purchase large amounts of gold again at a cheaper value."
Russia did this very thing with Platinum.
So...if whether we are headed for inflation or deflation is depended on the definition of money, will the events of the near future actually provide the definition of money?
By the way...
My response to this is going to take some time... and anyone hoping that the agreement on characteristics of money will reduce the egg-head esoteric nature of the debate...
well...
probably not.
I recommend becoming fluent in german.
"So...if whether we are headed for inflation or deflation is depended on the definition of money, will the events of the near future actually provide the definition of money?"
No. The definition of money is not what will determine inflation vs deflation.
The definition of money is not what will determine inflation vs deflation.
You are so right ;)
But will inflation vs. deflation tell us if debt is money?
"But will inflation vs. deflation tell us if debt is money?"
No.
So we have commodity money, fiat money, and credit money in Mises' definition of the money supply.
So would Mises say that all of z1 is credit money?
I find Vox’s conditional acceptance suspect. Raising the distinctions between credit money, fiat money and commodity money can make it sound like they all refer to the same underlying concept, but the modifier may change the nature of the thing being named.
Is gay marriage marriage?
And in characteristic #5, he slipped in another modifier that changes the nature of the thing. How can subjective value be stored? It can be measured only relative to other things, proven by exchange.
Congratulations on entirely missing the point
Obviously.
So does credit money complete a transaction?
A third category may be called credit money, this being that sort of money which constitutes a claim against any physical or legal person.
As long as the claim is open, the transaction is not complete.
But money is the only thing that does all of those things, and completes an exchange without creating a need for another transaction. True or false?
Entirely false, for a practical definition of money. Money's entire value lies in being exchanged for something else, so clearly there is another transaction required to complete the exchange.
If I sell Nate a bushel of corn for $100, I'm out a bushel of corn and all I got for was a wad of smelly paper. Or maybe germ encrusted gold pieces, if we're living in an alternate hard-money universe. The money is literally of no use to me until I go see Vox and give it to him in exchange for a case of wine. That completes the transaction, which for me was trading a bushel of corn for a case of wine.
The fact that holding money does not complete the transaction is the relevant point to the inflation/deflation debate.
Say is the right economist for this problem.
literally of no use to me
But does it have value to you? Because you believe you can trade the paper or gold for something else that is worth -- to you -- the same as a bushel of corn, the transaction is complete.
The definition of money is not what will determine inflation vs deflation.
Indeed. The determining factor will be whichever direction the nomenklatura panic in last. Nate and Vox will have to at some point* get down to arguing about which direction they're more likely to panic, but I'm not sure it's predictable. Liberals and other statists lie so thoroughly, they even lie to themselves. Living in a delusion makes them unpredictable.
Which is a bad thing for someone in charge of the money supply.
* I am being patient, just speculating on the future.
Because you believe you can trade the paper or gold for something else that is worth -- to you -- the same as a bushel of corn, the transaction is complete.
No, that incorrect. If that - belief - was sufficient to complete the transaction, then a check or an IOU becomes money so long as I believe it will be honored.
Which is okay, if that's the definition you want to use, but it invalidates the rest of what Vox and Nate are agreeing on. Once you start talking about "completing the transaction", there's no defensible middle ground. You have to go all the way to Say's position that goods and services are traded for goods and services. If you stop somewhere short of that, it's entirely arbitrary. You could just as easily stop to either side of the point you chose.
Money is just something that some entity possesses on the prospect of exchanging it for something else in the future. Let's say I buy an upgrade for my laptop for Windows 8. I open the box and DVD case and just as I am about to install it I spill Basil Haydn bourbon all over it. I can't take back the upgrade because the case is opened and I have to buy an entire new laptop, one that has Windows 8 because my current laptop is ruined.
Now I have an unused copy of Windows 8 sitting around with no use for it. Let's say I am working on a project that doesn't afford me the time to look for someone who wants to exchange something I could use so I hang onto it. Under my definition, that unused copy of Windows 8 is money. Sure, other people might not consider it money for their purposes but, so what? For my subjection purposes and valuations it is money and has no other function.
Let's say I have a thousand dollars in bills in on pocket and a credit card with a thousand dollar limit in the other? Are they both money? Who knows. The interesting question is how do I behave with respect to those two different things? Some people might treat them similarly while others might not even get a credit card despite having the requisite credit score, which is actually an economic choice, in itself.
The question of the different measures of money isn't which is the "real" one but how do economic actors respond to changes in the different measures. Presumably, economic actors will respond differently to a large change in M2 versus a large change in Z1.
@ Jack Amok
If you stop somewhere short of that, it's entirely arbitrary. You could just as easily stop to either side of the point you chose.
Bingo. The "true" definition of money is about as important as how many angels can dance on the head of the pin if your not trying to model the behavior of economic actors.
The "true" definition of money is about as important as how many angels can dance on the head of the pin if your not trying to model the behavior of economic actors.
You keep saying that economics is all about creating models, people keep ignoring you.
Perhaps people disagree with that.
Presumably, economic actors will respond differently to a large change in M2 versus a large change in Z1.
That's the crux of the entire debate.
@ Jack Amok
Let's say someone asks my measurement. I tell them 5'6 and 135. They respond that I can't have two different measurements and ask the same question again.
The different measurements of the money supply are similar to my weight and height in that they are measuring different things and none of them are the "true" definition. Someone might ask about my height to consider choosing my for pickup basketball and my weight to consider me to play offensive line. Both measures are useful for what they measure.
"You have to go all the way to Say's position that goods and services are traded for goods and services. If you stop somewhere short of that, it's entirely arbitrary. You could just as easily stop to either side of the point you chose."
You cannot reduce it to "all I got was a wad of smelly paper" because, that wad of smelly paper, regardless of what it smells like or it represents, is by definition the most coveted commodity in your local economy.
That's why you took for the bushel in the first place.
" Presumably, economic actors will respond differently to a large change in M2 versus a large change in Z1."
The intriguing thing here is that you see this... but you don't see how it relates to what's being discussed right now.
This is why Vox keeps calling for patience.
"The "true" definition of money is about as important as how many angels can dance on the head of the pin if your not trying to model the behavior of economic actors."
A mathematician is sitting at a table with an economist. The mathematician says... "What is 2+2?"
The economist squints his eyes.. looks around the room... gets up and pulls the shades down on the windows. Then he leans in close and whispers... "I don't know... what do you want 2+2 to equal?"
You cannot reduce it to "all I got was a wad of smelly paper" because, that wad of smelly paper, regardless of what it smells like or it represents, is by definition the most coveted commodity in your local economy.
But it's only coveted because it can be exchanged for something else, thus making the transaction only partially complete.
The fact that money does not complete the transaction is the entire reason inflation and deflation are issues. If the two of you agree that money completes the transaction, you literally have nothing left to debate.
@ Josh
You keep saying that economics is all about creating models, people keep ignoring you.
Perhaps people disagree with that.
An economics that isn't primarily concerned with that is useful for what? Presumably Nate and Vox are interested in measurable outcomes and those outcomes are going to be the result of decisions and responses of various economic actors and how they engage in economic activity.
If you even acknowledge that then you are starting down the path of modeling behavior, whether or not you even realize it. Vox's post on the effects of the mass entrance of women into the workforce *was* an example of modeling behavior and it's effects, so he's already doing that.
That's the crux of the entire debate.
Is it? I don't see how it is even a debate. Let's say I buy a motorboat and a car, which are different things. It's highly likely that I will use those two markedly different things differently without needing to know about the "true essence" of those things. Things that are functionally different are going to generate different responses from actors and entail different uses.
@ Nate
The intriguing thing here is that you see this... but you don't see how it relates to what's being discussed right now.
What's being discussed is the "true" definition of money. If both are valid measures for what they measure then the difference between them has absolutely nothing to do with this essentialist, metaphysical discussion.
A discussion of practical function has nothing to do with "true" definitions.
If that - belief - was sufficient to complete the transaction, then a check or an IOU becomes money
No. Because with the check or note, there is still an open claim. The “store of (subjective) value” is different from “completer of transactions”.
Call like things, alike - Nietzsche
What he was saying was that analyzing the differences in function between things and how they are used is far more important than trying to get to their core "essence".
The entire debate over the complete-ness of a transaction is such a wild goose chase.
"What's being discussed is the "true" definition of money. "
No.
What is being discussed is the various characteristics of money. Defining the word "badger" and understanding and predicting badger behavior are not the same. Its the characteristics of the badger that matter.
And one cannot MODEL... if one is not entirely familiar with the proper characteristics.
@ Josh
When Vox asserts that more women entering the career workforce with reduce the total fertility rate he is already engaged in modeling behavior. Reasoning out cause and effect in human behavior produces a model of function.
"The entire debate over the complete-ness of a transaction is such a wild goose chase."
Given that it was accepted without complaint by Vox... it seems to me that the only folks chasing wild geese were those in the peanut gallery.
Nate:
"[it] is by definition the most coveted commodity in your local economy."
Is this a necessary part for your criteria of completeness?
Vox:
After the debate, will you give us your practical investing advice for the next few years?
@ Nate
What is being discussed is the various characteristics of money ... And one cannot MODEL... if one is not entirely familiar with the proper characteristics.
Different measures of money are going to be measuring different things that have different characteristics. Debt money and gold are going to have some different characteristics in how they function and how they are used by economic actors. In some circumstances they might function similarly and in some function differently.
Is gold always money? What about the gold in my wedding band? It's a custom ring so, hopefully, it will become a family heirloom.
@ Nate
Given that it was accepted without complaint by Vox.
You and Vox aren't the sum of all possible positions on the function of money.
No. Because with the check or note, there is still an open claim. The “store of (subjective) value” is different from “completer of transactions”.
Nonsense. The only difference between an IOU from Nate and one from Uncle Ben is how many people will accept it. Neither actually "stores" any value, otherwise neither inflation nor deflation could exist. Storing value is a fiction we indulge in in order to have a money supply. The value of a note (or a gold coin) is strictly what someone in the future will give me for it. Meaning, there is no difference between storing value and completing the transaction.
"But it's only coveted because it can be exchanged for something else, thus making the transaction only partially complete. "
No.
money is a commodity... always a commodity. its subjective value is not based on its exchange value. Its the other way around. People want it... so it is good and easy to exchange.
I fear I cannot say more here.
You and Vox aren't the sum of all possible positions on the function of money.
For the purpose of this debate, they are.
"And one cannot MODEL... if one is not entirely familiar with the proper characteristics."
Unfortunately the mentally challenged around here can't figure that part out in their infinite quest for everyone to agree/care with what they think
Aspie is gonna Aspie.
@ Nate
Let's offer the two following scenarios:
A) The Treasury increases the available face value paper currency by 1000 percent and physically gives an equal portion to every individual citizen
B) The Fed decreases the reserve requirements by .1 percent for banking institutions
Describing both those actions does not require any "true" answer to the question "what is money?" However, both are going to affect the money supply and affect different measures differently. The first is certainly going to be inflationary but the second is unlikely to do that. No, "true definition" of money is required to assess whether or not inflation occurs.
Hey Aspie, this isn't about you and no one cares what you think.
Shut Up, Asher.
@ Nate
If debt is not money then how would it affect economic activity, at all?
If debt is not money then how would it affect economic activity, at all?
Seriously?
Even if debt isn't money, it can have an enormous impact on economic activity. As the level of debt increases, the cost of servicing that debt increases, leaving less money available for other economic activities.
However, both are going to affect the money supply and affect different measures differently. The first is certainly going to be inflationary but the second is unlikely to do that. No, "true definition" of money is required to assess whether or not inflation occurs.
You can't determine if an action is going to be inflationary without defining what inflation is, and you cannot define what inflation is without defining what the money supply is.
@ Josh
As the level of debt increases, the cost of servicing that debt increases, leaving less money available for other economic activities.
It was a rhetorical question. Your answer indicates that debt is a *type* of money. Again, this is why the important question isn't "what is money" but how different economic actors respond to different factors in the economy.
"If debt is not money then how would it affect economic activity, at all?"
Keynesians say it doesn't.
@ Josh
You can't determine if an action is going to be inflationary without defining what inflation is
It's an increase in price levels in transactions denominated in a fiat currency. If I trade a derivative for a gallon of milk then that transaction is still denominated in a fiat currency, therefore, inflation is possible for that type of transaction. However, transactions involving milk for apples are not going to be susceptible to inflation, barring changes in the scarcity of the factors of production for apples and milk.
Let's say that some disease strikes a bunch of cows and signficantly decreases the ability to produce milk. The cost in apples of milk will rise, which would be a type of inflation but be don't call it that because trading apples for milk isn't denominated in a fiat currency.
Keynesians say it doesn't.
But they also say credit is a huge boost to the economy. Proving Keynesians are dolts.
Neither actually "stores" any value, otherwise neither inflation nor deflation could exist. Storing value is a fiction we indulge in in order to have a money supply.
You might be getting ahead of the debate…
I argued (at Nate’s, I think) thank subjective value cannot be stored. Which is why I objected to Vox slipping in that qualifier. But, they both accepted it, so my mistrust is not relevant.
Fiat money isn’t even an IOU. Yet is has functioned as a store of value. Because people who have stuff I want believe in it (and are compelled to get some to pay their taxes with).
When I trade FRNs for a backrub, the transaction is complete. (And for a few extra FRNs, I can be complete, too…)
You might be getting ahead of the debate…
Of course I am. A while back I pointed out that if Nate and Vox accept this transaction completeness definition of money anywhere short of Say's Law, they have nothing left to debate regarding inflation and deflation. So at some point they'll have to come back to this and undo their current agreement, or else end up circling each other pointlessly.
It's an increase in price levels in transactions denominated in a fiat currency.
No.
Of course I am. A while back I pointed out that if Nate and Vox accept this transaction completeness definition of money anywhere short of Say's Law, they have nothing left to debate regarding inflation and deflation. So at some point they'll have to come back to this and undo their current agreement, or else end up circling each other pointlessly.
Not necessarily. Recall that these things seldom go the way anyone anticipates. There are more things in Mises and Minsky than are dreamt of in your economics, Jack Amok.
@ Jack Amok
But they also say credit is a huge boost to the economy.
Credit existed before Keynesianism. Let's say all credit disappeared tomorrow. Would that be good for the economy?
@ Josh
No
There's an illuminating answer.
There are more things in Mises and Minsky than are dreamt of in your economics, Jack Amok.
Indeed, though they remain fictions all the same. I'm sure it will be an entertaining story, but in the end, will it settle anything?
There's an illuminating answer.
Look, if you think that inflation is simply an increase in prices, you haven't been following the debate. Or you're a Keynesian.
Credit existed before Keynesianism.
And fiscal idiocy existed before Keynesians decided to declare it a good idea too. I was observing that Keynesians are stupid because they think credit is good and debt is irrelevant, but they are inseparable. It's the fiscal equivalent of believing in a perpetual motion machine.
Or did you miss that part?
You agreed that money is a completer of a transaction.
But is it the only one?
Let's say all credit disappeared tomorrow. Would that be good for the economy?
In the short term, no.
In the long term, probably.
"So at some point they'll have to come back to this and undo their current agreement, or else end up circling each other pointlessly."
I had also assumed that this was likely and that Nate would be forced to undo their current agreement (And this was partially Vox's intent). I'm hoping it will be more interesting than just that though.
"I had also assumed that this was likely and that Nate would be forced to undo their current agreement (And this was partially Vox's intent). I'm hoping it will be more interesting than just that though."
Lets just say I don't think Vox is making the case you think he is making...
and I know I'm not.
@ Josh
The only thing I've seen here is an argument over the definition of money and not any explanation of inflation, at all.
Do you have one?
@ Josh
In the short term, no.
In the long term, probably.
Credit has been around for a very long time and arose organically. Let's say that ten bushels of wheat trade for a plow. Now let's say that I offer to give the general store eleven bushels of wheat in six months if they give me the plow now.
Is that a bad thing? Would you propose laws preventing private parties from engaging in such a deal?
@ Jack Amok
Are you saying that all credit is always bad? What if a plow trades for ten bushels of wheat. Let's say that I want to agree with the general store to give me a plow today in exchange for ten bushels of wheat in six months. Is that a bad thing? Would you support laws preventing such an agreement?
I'm in the back row of the peanut gallery and this esoteric economic discussion is confusing.
I am reminded of the predictions of how Y2K was to cause massive computer failure worldwide.
I think it did not happen because TPTB had too much to lose and took the necessary steps to prevent catastrophe.
Hyperinflation? Deflation? Or will TPTB do whatever it takes to prevent a financial collapse?
Was 2008 was a wake-up call to keep everyone focused on preventing more of the same?
"The only thing I've seen here is an argument over the definition of money and not any explanation of inflation, at all.
Do you have one?"
That's because you don't read very precisely. I mean... why come to Vox's blog if you're not even reading what he posts? Vox mentioned inflation and said something rather important about it in the opening post.
@ Jack Amok
erm, in exchange for eleven bushels of wheat in six months.
"Or will TPTB do whatever it takes to prevent a financial collapse?"
Will they?
Do they even have the ability to do so?
That was the case VD made in RGD.
"You agreed that money is a completer of a transaction.
But is it the only one?"
The point of the true false question was to establish that exclusivity. barter completes transactions but barter doesn't satisfy the other characteristics we agreed on.
The only thing I've seen here is an argument over the definition of money and not any explanation of inflation, at all.
Do you have one?
Vox gave numerous examples of definitions of inflation in his opening post.
My definition of inflation is an increase in the supply of money and credit.
Are you saying that all credit is always bad?
I'm not discussing the wisdom of credit, I'm saying that Keynesians are idiots because they think credit is good and debt irrelevant.
That mentality leads to credit bubbles and massive malinvestment, which are definitely bad.
I can't see how Vox could possibly win from this situation, having granted what he did.
This is not to say that Nate will certainly win, only that I can't believe Vox would grant that.
Since we're talking about the merits of credit, I like Denninger's distinction that self-extinguishing credit is essential, while open-ended credit is catastrophic.
The point of the true false question was to establish that exclusivity. barter completes transactions but barter doesn't satisfy the other characteristics we agreed on.
And money doesn't satisfy the completeness one, so any way you look at it, your argument is still a brick short of a load.
But I'll leave it be. You two have your strategies, we'll see how they play out. Though I may from time to time throw another bag of peanuts to remind you that you can't have inflation or deflation is Say's Law is incorrect.
argh, "if" Say's law is incorrect.
Markku:
"although I reserve the right to propose alternative definitions should this definition prove to be insufficient in the course of the debate."
"I can't see how Vox could possibly win from this situation, having granted what he did."
Oh? I wish that was comforting. I can see all kinds of ways he can win.
@ Josh
Vox gave numerous examples of definitions of inflation in his opening post.
No, he didn't. He gave there is no extant theory of economics that takes serious exception to Milton Friedman's statement that "inflation is always and everywhere a monetary phenomenon",, with which I tend to agree. But it is an explanation that is not an in-depth analysis and appears to reject Keynesian discussion of inflation. BTW, increase in prices demonminated in a fiat currency is clearly a monetary phenomenon, per that description.
My definition of inflation is an increase in the supply of money and credit.
Well, if you have to spend a bunch of time defining money then this isn't a very helpful description.
Markku:
"although I reserve the right to propose alternative definitions should this definition prove to be insufficient in the course of the debate."
It would look like an incredibly lame move if it is just an immediate reaction to what Nate does next. "Insufficient" means "more qualifiers need to be added", not "oops, on second thought, it doesn't have to complete the transaction after all".
" But it is an explanation that is not an in-depth analysis and appears to reject Keynesian discussion of inflation."
What?
Vox rejected John Maynard????
***GASP***
"And money doesn't satisfy the completeness one, so any way you look at it, your argument is still a brick short of a load."
It might be helpful if you looked at completeness in the sense of what legally concludes a transaction. I was having some trouble with this part too. If you pay $100 in cash to fill your truck with diesel, you have fulfilled your part of the bargain. The gas station has supplied you with diesel, and you have supplied him with $100 cash. If you get two miles down the road and suddenly your tank ruptures, spilling all the diesel you just bought, it's your bad luck. The gas station has still completed its part of the bargain, regardless. Similarly, if shortly after you purchase your fuel there's a major announcement that the Fed is going to be providing $10T in additional quantitative easing over the next 3 months, and the value of the $100 the gas station received suddenly drops by 80%, it's the gas station's bad luck. In other words, even though you may not think your $100 is a very good store of value, if the gas station accepts it as final legal payment for your transaction, and you have no other contractual duties to the gas station that remain unfulfilled, the transaction should be considered complete.
However, if you paid by check and the bank does not honor the check, or unknown to you, you paid with a counterfeit $100 bill, or your credit card was approved but your bank fails to credit the gas station's bank, you still owe the gas station $100.
@ Nate
Yeah, so do I. I'm not a Keynesian. Inflation as an increase in prices denominated in a fiat currency is not strictly a Keynesian definition. Some Keynesians might agree with it but consider it not very substantive or complete and want to go far beyond this. The populace at VP tends to have a bit too much of an "us vs the world" mentality.
I gave you an example of trading apples for milk where milk production falls causing the price of milk in apples to rise. We don't call that inflation but it has a lot of similarity in effect with having to exchange more dollars for milk.
The point of the true false question was to establish that exclusivity. barter completes transactions but barter doesn't satisfy the other characteristics we agreed on.
I was not clear. My point: If debt is an incomplete transaction, money isn't the only thing to complete the transaction.
Maybe I'm ahead of the debate and should be more patient.
If debt is an incomplete transaction, money isn't the only thing to complete the transaction.
Doesn't matter what completes it. Vox agreed that money has to complete a transaction for it to be money (necessary, not sufficient). So if debt doesn't do it, then we know that debt is NOT money. Even if something else might be.
Noah B, that's a good try, but your analogy - like my hypothetical gas tank that leaked all the diesel out over the road - has a couple of holes.
The government doing something to degrade the value of the $100 I gave the gas station after our transaction is exactly equal to my bank charging the gas station a deposit fee for cashing my check, or the credit card company charging a transaction fee. It's the value of the payment decreasing after I've driven away with my full tank. The biggest difference is that banks and credit card companies usually have more predictable fee structures, making it less disruptive.
And the bank not honoring my check is exactly the same thing as the government claiming the $100 bill is counterfeit - in both instances the agency controlling the medium of exchange is declaring the instrument fraudulent. That there can be fraudulent checks doesn't make checks any more "not money" than the specter of counterfeit dollars making real dollars not money. One may be much easier to fake than the other, but that's a difference of degree, not kind.
The real difference in kind between money and credit is that money - at least circulating money as opposed to EBTs - is anonymous. I wouldn't pay with a counterfeit $100 bill, I'd use $20's instead, because there are more of them and once my phony bills go into the till and get mixed up with the real ones there, it's much harder to find me and claim I still owe $100. But the check has my name on it... (well, assuming I'm not smrt enough to use a fake account).
But the question isn't fraud, it's stability of value. I'm liable for fraud, but I'm not liable for anything else that happens to my check. If the gas station loses my check before they can cash it, I'm not liable to replace it. OTOH, if the local utility company loses my check before it's credited to my account, I am liable to replace it. But then, if they lose a bundle of dollar bills I sent in before crediting my account, I'm still just as liable. Sending dollar bills through the mail didn't legally complete the transaction any more than sending a check (in fact, it made it less likely to be completed since cashing the check creates it's own receipt, while the cash is just there for the taking).
"Lots of things store value. Lots of things can be used to estimate value. Lots of things can be employed to aid in an exchange. Money does all of those things. But money is the only thing that does all of those things, and completes an exchange without creating a need for another transaction. True or false?"
I didn't grok the full weight of this on my first reading, and I believe I now see the trap Vox was referring to.
Doesn't matter what completes it.
I think it's what matters the most in this debate. The mountains of debt are either completed by money or by default.
I agree it doesn't matter if debt is money or not.
I think it's what matters the most in this debate.
Well, yes, it matters after we agree that Vox lost the debate. But that is currently the most pressing issue in the thread even if it might not be that nationally.
"And the bank not honoring my check is exactly the same thing as the government claiming the $100 bill is counterfeit - in both instances the agency controlling the medium of exchange is declaring the instrument fraudulent."
For our purposes here, those can be treated as the same thing. In both of these cases, the transaction has not been settled. You would still owe the gas station $100.
"That there can be fraudulent checks doesn't make checks any more "not money" than the specter of counterfeit dollars making real dollars not money. One may be much easier to fake than the other, but that's a difference of degree, not kind."
Whether it's a good check written on an overdrawn account, or a fraudulent check, or a counterfeit bill -- the key point is that the gas station didn't get what it was promised. Under current law, you would still owe the gas station $100 (more in the case of a back check, but let's set that aside). The check itself does not resolve your obligation to pay the gas station. Only the bank's acknowledgement of the check and payment on your behalf accomplishes this. This is why checks themselves aren't money by any widely accepted standard.
"I agree it doesn't matter if debt is money or not."
Well... it might when we start talking about the functioning of the bank lending.
Does the law define who is the owner of the item between the time a customer gave the seller a check, and the time the seller got the money from the bank?
I can't see how Vox could possibly win from this situation, having granted what he did.
Oh ye of little faith. Have ye forgotten Vox's First Law?
Does the law define who is the owner of the item between the time a customer gave the seller a check, and the time the seller got the money from the bank?
For the most part, the buyer is the owner as soon as they hand over the check and, ahem, complete the transaction. If the seller loses the check on the way to the bank, that's their tough luck. If the check is forged, that's fraud, same as using a forged banknote, and the buyer may be charted with criminal penalties, and perhaps required to make restitution, but they're still the owner of the item.
In fact, the laws against check kiting (for the little people) actually undermine Noah's notion of "legal completeness" because legally the transaction occurs at the moment I hand over the check or sign the credit card receipt. If my part of the transaction turns out to be bogus (exactly as if I'd passed a forged $20 bill), I'm guilty of fraud because I attempted to complete a transaction fraudulently. Legally, the transaction is complete when the buyer and seller agree it's complete. If some sellers want to wait until they can make sure the check will clear, that's fine, but it doesn't mean other sellers can't accept the check as it.
Markku, I don't believe that common law in the US and UK definitely specifies ownership during this time frame. Instead, both parties have ownership interests. The seller continues to have an interest in the property sold until a check is paid, which often results in a right of repossession and/or replevin. But the conditions under which property can be repossessed without involvement of the courts are fairly limited and usually require some form of consent by the party in actual possession. By contrast, one can recover property with force in many jurisdictions if property has been stolen and the legitimate owner is in immediate pursuit of the thief. But as soon as the trail goes cold, the right of the legitimate owner to recover the property with force immediately diminishes.
I am much less familiar with Civil law, which I believe applies in Finland.
Money completes a transaction at the individual level, by breaking a former credit relationship into two distinct stages. Money substitutes individual credit; one only need trust the money, not the person giving it to you. Which is why gold was used in ancient times by traveling merchants and kings doing transactions across long distances. Gold is the ultimate money because it requires no faith in the issuer.
Money does not complete the full transaction at the level of the macroeconomy. The ultimate goal of all people is to consume, and people cannot consume paper money or gold money (they can convert it into jewelry and consume it temporarily). However, after the creation of money, there is now money demand. People who didn't have a desire to go around hoarding other people's debts, suddenly want to collect money because it is much more useful (no tie to an individual debtor). Savers demand money as an (intermediate) final good. Their ultimate goal is consumption, but across time.
At the macro level, money is functioning similar to a debt. If you owe a large debt, at some point you must consume less and produce more in order to pay it. But if someone has a huge hoard of money and decides to spend it, this causes temporary "inflation" by bidding away existing goods, which at the society level means people will need to produce more in order to consume the same amount.
I'm not trying to redefine (or even define) money or debt, only think about it abstractly to grok how money and credit can be interchangeable. I think if you keep it as simple as possible, without even bringing up banking, government printing or anything, it is easier to understand how money and credit interact later with the introduction of banking, government printing presses, checks, etc.
functioning similar to a debt...functioning is not the best word. Money has some of the characteristics of debt.
There is no transaction at the level of the macroeconomy. Macro is just a bajillion microeconomies smudged together. If debt functions as money, it must do so in an individual transaction.
I'm guilty of fraud because I attempted to complete a transaction fraudulently
There are two ways to view what has happened.
A) The seller has given you possession of the item, but not ownership yet. When fraud is revealed, you are no longer legitimately in possession of the item and it needs to return to its owner,
or
B) You were the owner in the meantime, but after the fraud is revealed, you owe the item as damages to the seller, and it changes ownership a second time.
If the law doesn't explicitly say which is the case, then it may be difficult to tell which it is. It might be relevant when the item has sentimental value: Does the seller have the right to demand that exact item back (perhaps because he changed his mind on whether he should have sold it) or does the person who committed the fraud have the right to pay with money instead. Former if A, latter if B.
Isn't this where Nate says "there is no macro"?
"I'm guilty of fraud because I attempted to complete a transaction fraudulently."
But if you wrote a bad $30k check for a new car, not only are you guilty of fraud, the car doesn't belong to you. The transaction cannot be considered complete under such circumstances. You could say that a good check completes a transaction because there is money to back it up. A bad check does not, because the money isn't there. But the good check is inseparable from the money that backs it up, isn't it? If our objective is to determine the size of the money supply, counting the good check as well as the money that backs it up would lead to double counting.
I am still waiting for anyone to claim that all credit is inherently bad and whether or not they would favor laws punishing all credit-type agreements between private parties. Further, if government begins issuing fiat money then it is likely that credit will be a part of that currency if there is a central bank.
Inflation may be a monetary phenomenon but it's etiology is heavily political and involves the subject of a government that is of, by and for the people it governs.
I once asked Tad to define "legitimate government" and he failed, by his own admission. He admitted he couldn't define it. My definition of "legitimate government" is when the sentiments of the rulers are in line with the ruled. This allows for non-democratic forms of government to still be legitimate. Would anyone disagree that the government of Queen Elizabeth I was roundly considered a legitimate one?
By the way, even in my scenario A the seller wouldn't have the right to change his mind at will during that period, because there is an implicit agreement that ownership will be transferred. The question is, what happens if there are any anomalies from the customer's side.
But the good check is inseparable from the money that backs it up, isn't it?
RRRRRabbit Season!
(you were the one saying they were different).
Doh!
Isn't this where Nate says "there is no macro"?
Not just Nate.
Jack -- the problem, of course, is that when a seller receives a check, he has no way of knowing with certainty whether or not it will be honored. This knowledge comes only when the check clears, not at the time the check is received. Saying that a transaction was completed upon delivery of a check is only possible ex post facto.
There is no transaction at the level of the macroeconomy. Macro is just a bajillion microeconomies smudged together. If debt functions as money, it must do so in an individual transaction.
It's not macro level transactions, but the macro view across space and time. Money replaces debt, but it is unnecessarily complex to add in financial debt (credit money). The very first method of trade was flat out credit, trust. You give me goods today, I repay you later. There was no money. This evolved to tally sticks, you could take my "IOU" and transfer it to others. The transaction is complete, as some say, when the debt is repaid. In this case there is a third party intermediate who closed the loop when he brings the tally stick and demands payment.
So what does money do? It removes the need for the IOU, because possession of money implies the previous fulfillment. I have money, therefore I have already completed the first leg of a transaction with someone else in the economy. At the individual level, you see a completed transaction, but money is not a final good. Money is the credit! Instead of having faith in me, you have faith that this paper or gold can be exchanged later for the goods you desire. I'm talking as simplistically as possible here.
Jack, getting back to my main point, your statement that "the transaction is complete when the buyer and seller agree it's complete," is really all I was trying to convey in the first place. However, this seems to be contrary to your earlier statement that, "Money's entire value lies in being exchanged for something else, so clearly there is another transaction required to complete the exchange."
When someone buys something using a currency, they do not typically make any guarantees to the seller about the future purchasing power of that currency. While I very much agree with your first statement, I strongly disagree as to the requirement for "another transaction" in the future to complete an exchange.
To put the macro view another way: people used to make their own clothes. Today, there are dozens of companies, from fabric makers and designers, to marketing firms and retailers. Credit money, banking and financial markets are similarly added intermediate stages (complexity) on what is still at heart the same cycle. You can slice it into many smaller transactions, but the full cycle remains.
Maybe it's not what Nate intended, but I just took him to mean that the whole is nothing more than the sum of its parts.
Noah,
However, this seems to be contrary to your earlier statement that, "Money's entire value lies in being exchanged for something else, so clearly there is another transaction required to complete the exchange."
Except my earlier statement is in the context of trying to declare a finality to the transaction somewhere before the money has been exchanged for goods or services. If a check is no good to me until I exchange it for money, fine, but then money is no good to me until I exchange it for goods or services either. If you declare that money has value before it's been exchanged for goods and services, that value is only the perceived, expected value of goods and services it could be exchanged for. But if you're willing to consider perceived, expected value for money, you really have to consider it for checks too.
I'm not claiming checks complete a transaction any better than money does. They're equal in kind - vouchers the seller believes he will be able to exchange for goods or services someday. One may be more risky (or not - who would you rather take a check from, Vox or Ben Bernanke?), but that's the only difference.
When someone buys something using a currency, they do not typically make any guarantees to the seller about the future purchasing power of that currency. While I very much agree with your first statement, I strongly disagree as to the requirement for "another transaction" in the future to complete an exchange.
But how is this different from an IOU? I make no future guarantee as to the value of my IOU in exchange for your chickens. The IOU sits out there as extant demand, no different then money in your hand, strictly speaking at the most simple level. If you have money or an IOU, I know at some point you're going to come around and want to get something from me. (If you start adding complexity then you get into demand for money and savings, but this did not exist prior to money.)
Put it another way. In a single-turn economy, I give you an IOU, when I repay you, the IOU dies. What if there is $1. I give it to you. When you give it back to me, we burn it. We can add a third party(ies). The dollar/IOU passes through many hands, but when it comes back to me, I burn it. Then we get the bright idea: how about we don't destroy this IOU, since we keep trading over and over? Now we have money.
the transaction is complete when the buyer and seller agree it's complete,
If a prospective customer came to you and asked "I'm the legal owner of this item even before the check clears, right?" what would you say? I sure as hell would become suspicious at that point.
No, usually the implicit agreement is "We make this transaction according to the customary rules of purchasing things with checks". And the all-important question (with regards to checks - mortgages can still work according to different rules) is, what those rules are. In case of anomalies, does the buyer merely owe the seller compensation for breach of agreement (a separate transaction from the original one), or is he in possession of an item owned by the seller?
As for mortgages, if the bank owns the house before the debt is paid, the transaction is most definitely not complete, and such debt is clearly not money.
"If a check is no good to me until I exchange it for money, fine, but then money is no good to me until I exchange it for goods or services either."
The difference, though, is both a matter of law (and a matter of what the seller has agreed to, because in most cases, he has not waived any of his rights under the law). As the drawer of a check, it is my legal obligation to pay you if my bank fails to do so. If I give you cash, and you accept it, my obligation has ended. I have no duty to see that you are able to exchange cash for whatever it is that you want or need.
When you're talking about check vs money, all you're doing is reversing the transaction order and adding a step. I make good first, sell it for money, then buy a good. With a check: I buy good first, then make good, get money and cancel check.
You're just adding a layer of complexity into the economy by adding checking.
Thanks Roundtine for your explanations. It is helping my understanding (I think).
You're just adding a layer of complexity into the economy by adding checking.
The point is that Vox agreed that money has to complete a transaction for it to be money. If check doesn't complete it, checks cannot be part of inflation. But if THEY aren't, then what about credit cards? What about mortgages? What about all that debt in which Vox's case depends on? If it isn't money, Nate has won.
And remember, Nate winning doesn't mean that prices will go up, nor Vox winning means that they will go down against the dollar. It just means that one made a critical mistake in his argument.
As for mortgages, if the bank owns the house before the debt is paid, the transaction is most definitely not complete, and such debt is clearly not money.
Ah, but that's part of the legal agreement, not the inherent property of debt. Contracts can specify all sorts of things. Lots of mortgages say that if I pay it off early I have to pay extra. You can add whatever clauses you have the power to negotiate (some clauses not allowed by law of course).
Indeed, you're talking about "secured" debt, which is different than unsecured. If I don't pay my MasterCard bill, I don't have to give MC the 50" flat screen TV I charged on it. They just say nasty things about me to credit reporting bureaus.
Ah, but that's part of the legal agreement, not the inherent property of debt.
At the very least all mortgages that DO state that, can't be a part of any consideration of inflation or deflation. If they are the majority of them, Vox is in trouble.
> Entirely false, for a practical definition of money. Money's entire value lies in being exchanged for something else, so clearly there is another transaction required to complete the exchange.
5. An intrinsic store of subjective value.
I may be choosing to simply accumulate excess value. In which case, even by your terms, the exchange is complete. No one is forcing any party in an exchange to engage in any further exchanges.
> I don't see how it is even a debate.
Which surprises absolutely no one.
> A discussion of practical function has nothing to do with "true" definitions.
You do realize that's like saying the fact that water is a combination of one oxygen atom and two hydrogen atoms has nothing to do with it being wet, don't you?
Fiddle sticks! Inflation or deflation who knows. But once one or the other takes hold hyperbolically is there not enough history to base our prudent moves on? Oh, that's right, it depends on what the next definition of money is. ;)
My response is up.
I suspect you will find it...
controversial.
Yes, you didn't do at all what I thought you would. So, Vox still has a chance.
What did you think Nate was going to do?
Math. Going methodically through the types of debt that Vox's case for debt deflation consist of, and showing how the majority of them don't satisfy the condition he agreed upon. If the remaining money supply has now increased, the debate is over.
It might be better to do that after Vox lays out his case for debt deflation.
Well, right, perhaps the debate should be self-contained.
"Math. Going methodically through the types of debt that Vox's case for debt deflation consist of, and showing how the majority of them don't satisfy the condition he agreed upon. If the remaining money supply has now increased, the debate is over."
That won't work.
Obviously I'm not going to explain why right now... but trust me... that is not an option.
Will US bonds be money???
Pick a name
So, speaking of credit money -- I suppose that would have included bank notes when these were still in circulation and the bank didn't have enough gold or silver to redeem them all. Any other examples of this?
" I suppose that would have included bank notes when these were still in circulation and the bank didn't have enough gold or silver to redeem them all."
You Grok.
"You Grok."
I think so, but I did ask a dumb question. Obviously the FRN and many other national currencies used to be credit money. Now we're mostly just left with fiat currency.
We have fiat... but we have features of credit money in our fiat money. so its a special kind of stupid.
so its a special kind of stupid.
Yet more or less predictable, n'est pas? I mean, when one charade becomes too difficult to maintain, the con artist usually tries switching to another.
It seems Vox was able to take the high ground with this post but lost it again to Nate.
@ James Dixon
I may be choosing to simply accumulate excess value. In which case, even by your terms, the exchange is complete. No one is forcing any party in an exchange to engage in any further exchanges.
I pointed this out far up thread. People accept dollars for the purpose of exchanging them for something else in the future. If I accept a check for merchandise I am not *forced* to exchange it for dollars. Maybe I want to frame that check and put it on my wall, subjectivity and all that.
You do realize that's like saying the fact that water is a combination of one oxygen atom and two hydrogen atoms has nothing to do with it being wet, don't you?
The atomic structure of water has nothing to do with it feeling what we call wet. Lots of stuff that is not water feels wet. And water can be cooled far below freezing and not feel wet to the touch.
Math. Going methodically through the types of debt that Vox's case for debt deflation consist of, and showing how the majority of them don't satisfy the condition he agreed upon. If the remaining money supply has now increased, the debate is over.
That would have been the safe and obvious approach. Nate knows me too well to do that. And he was right to avoid doing so.
"I pointed this out far up thread. People accept dollars for the purpose of exchanging them for something else in the future."
guys...
seriously... why are you still stuck on this? There are much grander assertions being made. Wouldn't you rather argue over something different for a change?
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