More on Money and Social Possibilities

In my previous post, I mentioned Karl Polanyi’s argument that early capitalism included an attempt to integrate money completely into the logic of a pure market economy, eventually through the introduction of a gold standard in which money was conceived as a ‘commodity’. I then suggested that the eventual breakdown of the gold standard, and the subsequent breakdown of Bretton Woods, opened up social possibilities that we have so far failed to make effective use of, even though (on the basis of MMT) a flexible exchange-rate fiat currency system seems to offer scope for greater economic democracy.

Money is Always Social

In response to my argument, JKH drew my attention to an interesting post written by David Andolfatto in March this year, in which he points out that money – irrespective of the particular system in place – is always what I have been referring to as a social relation and what Andolfatto describes more specifically as a ‘promise’. This raises the question – as JKH observes – of whether it makes sense to place so much emphasis, as I have done, on differences between a gold standard and a flexible exchange-rate fiat currency system. This interesting question provides a context for me to draw out some of the implications of Polanyi’s argument concerning the attempt to treat money as a commodity. But before that, I should summarize a point made by Andolfatto.

In his post, Andolfatto acknowledges that some economists (i.e. chartalists) point to the tax basis of demand for the currency. In his interpretation of money as a promise, he notes that this would make the basis of fiat money the government’s promise to extinguish tax liabilities. He does not, however, align himself with this view, instead stressing ‘scarcity’ as the determiner of money’s value, and notes that, on this interpretation, the currency issuer’s commitment to preserve the value of the currency by keeping it sufficiently scarce is the operative promise.

Both these aspects – the tax obligation and scarcity – are actually stressed in MMT explanations of the value of the currency. For instance, in the MMT view fiscal policy should be aimed at keeping money creation and destruction at levels consistent with full employment and price stability. This book chapter by Pavlina Tcherneva gives an accessible introduction to the neo-chartalist perspective, and of course Randall Wray’s influential book, Understanding Modern Money (no free link available), is an important presentation of the argument.

Andolfatto writes:

…. a point that I have been trying to make for some time now. The “gold standard” is nothing more than a promise made “out of thin air” by the government. Look at how easily Roosevelt abrogated that promise in 1933. What makes people believe that the same thing cannot happen again?

In relation to this, JKH raises “the radical idea that the gold standard itself is a form of self-imposed constraint ranking parri passu in logical terms with the type of self-imposed constraints categorized by MMT as applied to today’s fiat systems”.

I strongly agree with the observation that, at any time, a monetary system can break down or be ended. Money – as opposed to the ‘money thing’ (currency, etc.) – is a social relation, and this social relation only remains in a particular configuration for as long as it is considered viable, favorable or inescapable to those who are party to it. A particular construction of the social relation money is always contingent on it being adhered to, no matter what the monetary system. This is as true of a gold standard as it is of a common currency arrangement or flexible exchange-rate fiat currency system.

But, again, this raises the question of why I am stressing the distinction between a gold standard or commodity-backed money system in contrast to fiat money. This gives me the opportunity to elaborate on an aspect of my previous post.

Money is Not a Commodity

The main insight of Polanyi that I emphasized previously is that throughout history money had long been recognized as a social relation, or more specifically a debt relation, but that with the industrial revolution there was an attempt through the gold standard to tie money more closely to the market economy by making it a ‘commodity’. This is a difficult task, because money is not actually a commodity. In fact, Polanyi calls money under the gold standard a ‘fictitious commodity’, because (like labor and nature) it is not produced for sale in a market.

Since money was only a fictitious commodity, an attempt was made to equate it – a social relation – to an actual commodity, i.e. gold. So, under the gold standard, money’s value would supposedly be determined by the value of gold. It was an attempt to reduce a social relation to a thing, no less than the ‘money thing’ itself is merely a thing. This is the money fetish taken to a new extreme. The social relation is not merely signified by the ‘money thing’, but an attempt is made to objectify it in a thing (gold).

Even though gold is indeed a thing, this attempt to maintain a gold standard was still utterly a social decision. Society was still logically prior to money. However, society was attempting to behave as if this was not the case. It was an attempt by society to be guided by ‘natural’ market forces (which is another mystification, since markets are also a social construction) to the point that money was to be a thing found in nature (gold) rather than in a relation between people. Real money (the real social relation) was supposedly reduced to a thing (gold).

Since the gold standard was still unavoidably a social construction, I agree that it could have been ended at any time, and in fact was ended. Even so, for as long as it was in operation, it impinged on policy freedom.

This attempt by society to turn the social relation money into a thing with ‘natural’ properties seems to have contributed to the mystified view of money held by the gold bugs. It may also have contributed to confusion among some Marxists.

For Marx, the value of money under capitalism is the socially necessary labor time required to obtain it. Since, under the gold standard, money was to be defined as gold, the conditions of production in the gold sector therefore influenced the amount of socially necessary labor time required to obtain a unit of money. What this seems to obscure, for some Marxists, is that money in Marx’s theory is still a social relation, and its ‘commodity form’ merely a fetish. The social aspect of money, in Marx’s theory, is the equating of socially necessary labor time with the value of money. Gold plays no essential role in this, even under a gold standard, and it is still possible to argue today that the value of money, as it pertains to commodity production, is based on socially necessary labor time.

Academic MMTers do actually argue something similar: that a job-guarantee wage would determine the (domestic) value of the currency. In Marx’s terms, the job-guarantee wage would indicate the amount of ‘simple labor time’ necessary to obtain money.

Socially necessary labor time is, by definition, socially determined. It is not a thing and no inanimate object can determine how much labor time is required to obtain a unit of money. That is a social decision, made by real people acting in relation to each other.

Implications of the Social Nature of Money

In terms of the implications of this for the comparison between different monetary systems, I think the observation that all constraints on money are ultimately self-imposed (which I have expressed as “society is logically prior to money”) makes clear that the restrictions are only binding for as long as they are deemed viable, helpful or inescapable. Nevertheless, I think there will be a hierarchy in terms of how restrictive constraints are under different monetary systems for as long as those systems remain in place, and also a hierarchy in terms of how difficult (or costly) it is to relax or abandon the self-imposed constraints. For example, the period of the gold standard was interrupted by a world war, during which the monetary system proved untenable. The return to a gold standard was followed soon after by a Great Depression. And there was another world war not so long after the gold standard was abandoned. I’m not sure how much can be made of any of this – maybe I’ll have a better idea after reading the rest of Polanyi’s book – but to me it seems likely that abiding by and ultimately reneging on the gold standard held more far-reaching consequences than, for instance, the US Congress relaxing one of its self-imposed constraints (e.g. the debt ceiling).

The other implication I want to draw out of all this is that the breakdown of a gold standard and resumption of fiat money seems to represent a significant step forward in social terms. The attempt under a gold standard to reduce social relations (e.g. a promise) to a thing – an inanimate object, gold – suggests an incredible vote of no confidence in humanity. Of course, it was illusory. There was no escaping the fact that, ultimately, the success of social relations depend on people, not things. Attributing mystical powers to a thing as a safeguard against breakdowns in human relations is a superstitious act.

For this reason, I find it strange when some people (e.g. gold bugs) seem to view the break from a gold standard or commodity-backed money system with skepticism, and suggest that, being based on nothing ‘real’, it will not last, or cannot be sustained. This is unfortunate for at least two reasons. First, such notions are incorrect. Social relations (e.g. promises) are real. They are immaterial but real. Second, rather than doubting the sustainability of money (a social relation) that is not reduced to a thing, it makes more sense to consider what the abandonment of such a monetary system means in terms of democratic potential and the scope for human development.

27 thoughts on “More on Money and Social Possibilities

  1. Powerhouse post.

    Technical sidebar:

    As you quoted, in the previous post I suggested “the radical idea that the gold standard itself is a form of self-imposed constraint ranking parri passu in logical terms with the type of self-imposed constraints categorized by MMT as applied to today’s fiat systems”.

    Up front, I should have modified this slightly.

    It stands, but it should include the additional point that MMT recognizes the inflation constraint as the legitimate constraint under a fiat system.

    This might take the form of MMT type policy responses in the face of undesirable inflation measure behavior (e.g. CPI type measures).

    So the MMT categorization would include both the legitimate inflation constraint, plus the set of self-imposed ones relating to the accounting configuration for the CB/Treasury balance sheets, etc.

    The corresponding gold standard categorization also includes a “legitimate” inflation constraint in the form of gold pricing (the potential differentiation between a gold pricing constraint and a gold quantity constraint I’ll leave for a bit).

    One question is whether there is a corresponding set of “self-imposed constraints” under a gold standard. I once had a quick blog discussion with Mosler touching on this point. My question was, why can’t a gold standard operate under a bond free Treasury/CB environment just as easily as a fiat system can? One of the MMT points about government bonds is that they are assumed to be liquid – that is a basis for the MMT argument that the inflation consequences of issuing excess reserves shouldn’t be anything more or less than the inflation consequences of issuing bonds. That logic is rational I think. And BTW, the same argument means that the presumed liquidity protection inherent in bonds issued by a gold standard Treasury shouldn’t be any more effective than zero duratoin reserves – because bond holders can always sell their bonds for cash and use that to redeem for gold.

    That’s just a sidebar, for starters.

  2. P.S.

    Or, alternatively, and more along my prior argument, the “legitimate” inflation constraint of either the gold price or the CPI (for e.g.) also ranks as a self-imposed constraint in either case, albeit at a higher logical level than those that have to do with central banking balance sheet machinery.

  3. Quick and very dirty:

    Maybe money is a materially reservable social relation.

    Gold is a reserve (not just the existing stock, but the potential future mining flow).

    The flow of labour from unemployed to employed is a reserve (e.g. MMT).

    The flow of real goods and services is a reserve (e.g. CPI pricing).

    The reserve is not the social relation.

    But it is inherent that the social relation prices the reserve.

  4. Thanks for this Peter.

    Secular accounts hold that the Romans fixed labor at 1 denarius per day throughout the empire by law. If so, they used that as their wage price anchor and got their price stability that way.

    The Greek Scriptures refer to the denarius as nomisma, which looks like a derivation of the Greek word for “law”, nomia, and reveal that the poll tax was payable in denarius. So there is your social relation, the tax law.

    My review of recent archeological finds in the UK of these Roman nomisma show they varied in size and thickness so the weight of the commodity they were struck from didn’t matter.

    So this looked like it worked for them back then as human energy seems like it was the key energy source back then, which ultimately comes from the sun (ie free). Even beasts of burden have to eat feed which comes from human agriculture. Ships at sea using wind, etc.. Looks like all you would have to do is fix the day wage by law and then get your price stability.

    Once we went away from the sun exclusively and underground for hydrocarbons, coal and then petroleum, and then started to use these new chemical energy sources to displace human labor, this looks like perhaps where it went haywire. And this is perhaps where Marx came in and started to measure labor in terms of producing commodities or something… I need to develop these thoughts further.

    But thanks again, I think you are on track here with starting to look at “money things” as either representing a lawful social relationship or a commodity.


  5. JKH: I’ll need some time to reflect on your comments, but off the bat your “quick and dirty” summary looks really good to me except I am not sure exactly what is meant by “materially observable social relation” at the top. I really like how you encapsulate the point that “it is inherent that the social relation prices the reserve”, which underscores the social nature of the alternative monetary and pricing systems you so succinctly categorize and describe.

    I am not sure what the answer is to the question you addressed to Warren Mosler. Did he give an answer? My understanding of a gold standard was that the most serious self-imposed difficulty was the requirement to keep the quantity of money in a certain relationship to gold reserves. Is this a misconception on my part?

    Matt: Thanks for the interesting historical information. If I try to combine Marx, for whom money represents an amount of socially necessary labor time, and chartalism, for which money is a tax credit, setting the payment of an hour’s labor seems to be the most transparent way to specify the social relation. It makes clear how much socially necessary labor time must be expended to meet the tax obligation. Maybe … 🙂

  6. Peter C,

    You take money — “currency, etc.” in your example — and call that “the money thing”. You take the culture which permits transactions to take place, you blur the culture and the transactions together, and you call this blur “money”. I don’t buy it.

    We do not exchange “social relations” when we exchange money. Money is “a medium of exchange”. Pretty standard stuff. Whether money is gold or paper or “numbers in a spreadsheet” does not matter. Money is a container of value and is useful for the exchange of value. Money is one of the things exchanged. Money is a thing.

    The acceptance of money is not a thing. You might say that it is the acceptance that gives money its value. Sure: Value is always in the eye of the beholder. But ask any working-man to show you “money” and he is liable to pull out a dollar and wave it in your face. Some things are obvious.

    You deny the obvious. You point out again and again in the post that money is not a thing, but a social relation. You contradict what people know to be true. That is why you are forced to say it repeatedly.

    And why do you wish to call money “the money thing”? To free-up the word “money” for your own purposes, it seems, which have something to do with “social possibilities”.

    It is fortunate that the workers, though unconsciously, are instinctively more reasonable economists…


    The Roman empire’s plan for price stability did not work.

  7. Art,

    Says who? Milton Friedman!… LOL Was he there? Please.. these monetarist morons dont even know what “inflation” is today, how can we believe what they say about what happened 2,000 years ago this is absurd… LOL

    Tell you what, I’ll take the sacred scriptures and the archeological record, and you can have the monetarist moron Friedman!

    😉 Resp,

    PS Peter please keep going don’t get discouraged…

  8. Good discussion!

    Art– I like your attempt to bring this down to earth. To me, money is a thing which denotes social relationships. It is something you can pull out of your pocket and hold up as with other things. But it is not a commodity. Your common-sensical working man would say that a commodity is something that is bought and sold, with money being on the other side (the non-commodity side) of these transactions.

    Your common sense working man would say that money is a token produced by the government. It is not something that has intrinsic value aside from the societal agreement, enforced by government, to use money as the medium of exchange. Your common sense working man would not see gold as money, since no one uses gold for that purpose these days.

    So I guess I really don’t see where you disagree with Peter, aside from some relatively arbitrary semantic issues. Don’t we all agree that money is a thing that society, as represented by the government, creates as a medium of exchange? Whether money is gold or paper or “numbers in a spreadsheet” does not matter…

  9. Very good post!

    My contribution…

    Human social coordination gives returns proportional to scale. Money is a type of social coordination system.

    Amounts of money are used as
    – a means of valuing goods and services in the absolute integers and credits or debts in the integers,
    – as titles for access to goods and services and for agreeing / discharging liabilities.

    Frequently people understand the physical realization of ‘amounts of money’ as ‘money’.

    Money exists through several currencies. A currency is a sub-system of money corresponding to a designated unit of account.

    Currencies make up for a plural concept of model: there are several “monies” and they can be exchanged at a rate.

    Each currency has a monopoly issuer, the holder of the unit’s name.

    Money and currencies can be fiat or representative. Amounts of a fiat currency represent only themselves. The only obligation the issue assumes regarding any physically issued amount of currency is to substitute it by an amount of the same value.

    Fiat currencies and fiat money have as only source (or backup) of value the social coordination of the economies that use them. AS such hey are to be seen as money proper. Non-fiat is best viewed as proto-money, a stage of social coordination that money already facilitates, through the obvious individual benefits, but that does not recognize that money values social coordination. Therefore, attempts to “give value” to amounts of currency through its conversion to metals or other currencies follow.

    A fiat currency needs to support two types of currency issuance: variable net value currency and zero net value currency. The first is issued by government spending G or buying X of other currencies.

    The actual net value of currency issued as variable is established by the disissuance operations of taxation T and selling M of other currencies.

    The yearly variation of Net Value of Issued currency (NVI) is given by:

    NVI = (G-T) + (X-M)

    The first parcel is Net Government Spending (NGS), the second the current account (CA).

    Usually, one targets a near zero CA, so for NVI to be positive NGS must be positive. An indication of the state of widespread confusion that goes around the planet is the description of positive NGS as ‘public deficit’ and of accumulated NGS as “public debt”. The amounts of money in question are seen with the opposite sign! 18 degrees Celsius do not mean that you are in an environment with a gentle temperature; they mean that you are frozen!

    Currency with zero net value is issued as credit / debt by banks. Having nearly all currency issued as credit /debt raises issues of stability. Credit / debt money has – if not properly regulated – a Minskian (hard) oscillatory dynamics.

    If a government assumes the management of its fiat currency in the public interest then through adequate setting of G and T and adequate regulation of credit it becomes possible to maintain a steady or increasing level of monetized production, distributing wealth in a way more consistent with statistical distribution of capabilities.

    This possibility appears quite independent of a capitalist or post-capitalist arrangement. It only requires monetization of production and management of currencies in the public interest. A capitalist arrangement complicates things bit does not rule out the possibility.

    A world where this possibility is realized should appear quite more calm and interesting than the actual. Other than “debt” problems people could address realistically more interesting issues: energy sources, poverty eradication, space travel, etc

  10. Hi peterc – when two little babies are left alone in a room, they will smile and coo at each other, interact and enjoy each others company. When a toy is introduced, sure enough one will pick it up and clock the other over the head with it. There you have both the social relation and ‘money’ – (and the necessity for rules).

    When the social relation becomes more important than ‘money’ – there you have the potential for a myriad of solutions.

    The mind (ego) is pretty useless without the human heart in governance!

    Cheers …

  11. Franko: “Says who? Milton Friedman!… LOL Was he there?”

    Were YOU there?

    “Tell you what, I’ll take the sacred scriptures and the archeological record, and you can have the monetarist moron Friedman!”

    This is precisely what is wrong with MMT: it is accepted as “sacred scriptures” rather than as logical discourse. In this way, sadly, MMT is very much like the Austrian school.

  12. Art,

    I was trying to show (probably not skillfully) how the historic records of western civilization may indicate that civil governments were once knowledgeable in operating these systems, and that somewhere along the line for some reason we went off the rails. Doesnt have anything to do with MMT. And if you have links to any original reference materials Freidman may have used to come up with his historic inflation claims I would be grateful if you would forward as this is an area that interests me.

    Art, These details that Peter is after here do matter. You can’t just say “money is money, everybody knows what it is”, it is more complicated than that.

    It matters in regards to how our governments set these systems up, has a direct result in the types of ultimate economic outcomes we can achieve as a society, and Peter is in the process of showing why this is and identifying the factors. Peter has made a breakthru here imo as far as things I have ever read.

    Art for example take for instance blood. If you are trying to remove a laundry stain, it’s probably ok to think “blood is blood” to figure out what to use to get the stain out, but if you are health professional setting up a transfusion, it cannot be that “blood is blood”.

    It should be the same with the economic academe and govt economic policy makers, details matter just as much here as there are life and death issues ultimately decided by macro policy.

    This is what professionals are supposed to do, get into the details not try to dumb things down.

    So I perhaps see your and Dan’s point that it is sometimes nice to “keep it simple” and “if it ain’t broke don’t fix it”, but that cannot be the prerogative of the consummate professional. And our western economies are indeed broken and need fixing! Do you agree? Resp,

    PS Apologize for calling Milton Freidman a moron… 😉

  13. “…throughout history money had long been recognized as a social relation, or more specifically a debt relation…”

    How are we to distinguish between money I earn or steal or find on the sidewalk, and money which I borrow and must repay? I call the one “money” and the other “debt”.

    I have heard many times “money is debt” but those three words fail to distinguish an essential difference.

  14. Thanks for the encouragement, Matt. Don’t worry, I’m not going anywhere. I just have to think, read or sleep sometimes. 🙂

    I’m enjoying the robust discussion. I haven’t had time to engage fully with it yet for reasons mentioned in the intro to my latest post.

    I had set aside last weekend to read a couple of books, or at least finish the one by Polanyi, which any self-respecting student of political economy should have read years ago. Instead, I seem to have spent the last 72 hours writing.

  15. ” I call the one “money” and the other “debt”

    If you find a Reichsmark note on the sidewalk, do you still call it money?

    If not, then what are you paying to ensure that the stuff you call money acts like money?

  16. Hi Neil.
    “If you find a Reichsmark note on the sidewalk, do you still call it money?”

    If I lived in that time and place, and had them in my wallet, it was most certainly money. But you ask if I still call it money. I say the culture and the transactions are gone, so the Reichsmark is no longer used as a medium of exchange.

    If I lived at that time and NOT in that place, it would not have been money for me, just as these days in the U.S. even Canadian coins are not money. They don’t work in the machines.

    The nation that issues money is not money. The society in which money is used is not money. The culture that accepts a particular form of money is not money. And the transaction is not money. the money is the money. The standard of value is the money.

    I don’t understand your second question, what am I paying.

    The problem with money today is not whether or not money is debt. The problem is excessive credit reliance: We have come to use credit for money.

    The difference between credit and money is the cost of interest.

    Debt is only the record of credit-in-use.

    This is all very simple, far simpler than the post suggests.

  17. peterc,

    My discussion with Mosler was open ended, at least from my perspective. I had approached it on the basis that MMT specifies “borrowing” and bonds as a self-imposed constraint that is not applicable to fiat systems, but that is applicable to fixed rate convertible systems such as gold. I couldn’t see why the second application was necessary for reasons explained in my previous comment here. I kept probing on this, but am not sure where he ended up on it. (Interestingly, it now occurs to me that fixed rate non-marketable deposits (perhaps issued by the CB) would provide more liquidity protection against gold runs in a gold standard system than would marketable government bonds.)

  18. Art:

    How are we to distinguish between money I earn or steal or find on the sidewalk, and money which I borrow and must repay? I call the one “money” and the other “debt”.

    I have heard many times “money is debt” but those three words fail to distinguish an essential difference.

    Maybe it would be helpful to look at this from an accounting perspective. You are right in the sense that money and debt are not the same thing, at least for the individual. But you must also allow the question as to which social arrangements allow this simplification to remain ‘fact’.

    Money, whether fiat or under a gold standard, is, broadly speaking, a liability of the government sector (to which I count the central bank), and an asset of an individual or institution within ther private sector. One could call this socialized debt. I get the upside, but society as a whole has to make up for the down side. This down side can be managed in different ways, the neo chartalist story being, that under a pure fiat system the potential, if understood correctly, outweighs the risks. And being able to manage ones own interest rates is certainly a strong tool to have.

    So, to recap, one could say that money is a socialized obligation, namely the promise of society to itself to be able to deliver real goods and services to the holders of its obligations in future. Debt, on the other hand, is the private obligation to repay someone with such a social obligation. Debt does not equal debt.

    The really interesting question to me, is what institutional arrangements are needed so that the potential of fiat outweighs its very obvious risks. One can look at this from an enlightenment perspective, i.e. it’s a question of educating people, which is where I see MMT’s strenght. One can look at the realistically attainable potential inherent in democratic institutions to actually harness fiat in a beneficial way.

    And regarding this last point, one could claim there is an inconsistency in the chartalist story as often presented. The early post war period is usually heralded as a shining example of what is possible under fiat, although it was the time of Bretton Woods, whereas the time after 1972 (73?) is usually derided as the epitome of neoliberal cynicism etc.. Now, there are obviously enough arguments to show why it isn’t fiat itself, but its misuse, and many other problems not pertaining to money at all, that delivered these results. But I don’t think the idea that gold standard = stable, fiat = unstable can be brushed aside quite that easily. I’d say there are various layers of arguements, political, moral and otherwise, that dilute the MMT story to the point where one has to ask whether it’s complete and in that sense whether it’s honest the way it is presented.

  19. peterc,

    Perhaps all quantity constraints on monetary operations of any type and in any system are illusory, for purposes of understanding monetary policy.

    We know bank reserves are nearly meaningless in fiat systems – in the sense of any substantive effect on commercial bank credit activity for example. They are useful operationally, usually in a very marginal sense, in controlling policy interest rate tracking, but that’s mostly it.

    It’s about price (interest rates), not quantity (reserves). That holds for the MMT intepretation of fiat, but maybe it holds for a lot more.

    In the same way, I wonder if a gold quantity constraint is nearly meaningless. France dramatically altered its “gold coverage” ratio around the time of the depression. They must have had other objectives in mind, given their nimbleness in dealing so flexibly with the notion and quantification of a gold quantity constraint.

    And its unclear to me why in theory a central bank couldn’t target the price of gold rather than the CPI, without necessarily involving itself as the central control agent for gold inventory. The central bank could still tighten or ease policy with standard interest rate policy, in response to a gold price move as opposed to a CPI move. It’s as wacky an idea as the conventional gold standard itself, but it serves to distinguish between gold quantity management and gold price management.

    All of which is to say, maybe its always about price, rather than quantity, as far as central banking is concerned, whatever the system.

    Which is to say any connection of money to some commodity like thing is illusory, because the connection to quantity as a policy reference point is inherently unreliable.

    We need to abandon the notion that “spreadsheets” are somehow a unique reflection of an MMT interpreted fiat money world.

    “Spreadsheets” will always be, even in a Ron Paul world. In legal version, they capture the idea of “social relation” fairly well I think. So I think your idea is not a bad starting point for the meaning of money.

  20. JKH: Very interesting. I wondered if that was what you were getting at; i.e. that it has always been about price, not quantity. Although I am not qualified to confirm your thought, it has me intrigued and I had wondered something similar. I noticed, for example, in my recent reading of Kalecki (in his writings of the thirties and forties), that his arguments concerning CB control of interest rates seemed very similar to what is argued more recently in endogenous money theory and MMT, although that of course was after the abandonment of the gold standard. I am going to have to give this all more thought. Thanks for elaborating on your thinking. This last comment has clarified things for me quite a lot.

    Which is to say any connection of money to some commodity like thing is illusory, because the connection to quantity as a policy reference point is inherently unreliable.

    I agree. Thanks.

  21. two “very interestings” makes my blog day, thanks

    here’s something else

    set aside the recent extended discussion about “form”, “consolidation”, etc. regarding MMT presentation

    now consider the “general case” as Scott defines it

    is it possible that the “general case” could be made “uber-general” in the sense of being a hierarchical point of departure not only for floating rate convertible systems, but for fixed rate systems such as gold, or the Eurozone as well (in the context of my point above)

    I know that directly conflicts with the existing fixed/floating bifurcation usually enunicated by MMT (e.g. Mosler)

    But I find it to be an attractive idea

  22. JKH: Personally, I think the greater the generality that can be achieved the better, if the conceptualization holds together. Not sure what the academic MMTers would make of it, but to me it seems worth exploring.

  23. JKH: Ill make that three very interestings, although I am a day late (damn work obligations!)

    Art; Glad to see you over here. All of you really need to check out Arts blog. Its very well researched and thought out. He’s on the same journey most of us here are on.

    Excellent post Peter. Im still trying to process it all but I cant find anything to disagree with.

    This whole discussion stirs up many thoughts Ive had at various times. One being my response to people who like to say about MMT “Oh thats JUST accounting!” JUST accounting!!?? It seems to be that we account for things that are valuable. Does anyone ever keep track of things they do not care about? That which we account the most closely for can be safely assumed, I believe, to be that which we value the most.

    I think this is why Moslers description of scorekeeper is very apt, and maybe should include referee too. Our social game of money is very important, maybe the most important thing we do. Because of its importance we would never trust some private individual to keep score for all of us. We know there would be way too much possibility of rigging the game in his favor so we impart this duty to elected people who are supposedly “neutral”. I think this is why we have evolved to “State” money because private money is even more corruptible than state money, completely subject to the whims of an individual.

    I hope this hasnt been incoherent rambling but this is what came out of my head after reading all this.

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