This essay summarizes the case for considering money as a legal institution. The Western liberal tradition, represented here by John Locke's iconic account of money, describes money as an item that emerged from barter before the state existed.
Considered as historical practice, money is instead a method of representing and moving resources within a group. It is a way of entailing or fixing material value in a standard that gains currency because of its unique character. As the second half of the essay details, the relationships that make money work are matters of governance carried out in law.Money as a legal construct — as Chartalism holds.
Money as a legal institution (PDF)
Christine A. Desan | Leo Gottlieb Professor of Law, Harvard University
(h/t Rohan Grey on FB)
112 comments:
Rodger Erickson, I wish I could understand half of what you say on this website. Do you speak the way you write? lol… i mean no disrespect when I say the way you communicate on MNE reminds me of Dennis Miller commentating Monday Night Football. Maybe I'm just the idiot. It also reminds me of a artsy friend of mine getting mad at me cause I said he's too poetic I can't understand him.
Cheers.
Roger, I think you miss the political potential of her project.
And as far as the impact of writing books attempting to explain reality, I fail to see why we should be any less skeptical of pontificating blog posts attempting to do the same thing, yet we're all still clicking on this site.
I couldn't access Desan's paper, but I agree with Roger Erickson. This smells like an academic desperate to keep herself employed and futhering her career by getting a paper published.
Rohan,
Do you view the word/term "money" as a metonym?
I do.
Is it a good idea from a legal scholarship standpoint to be chasing a metonym like this?
It seems to me to be an imprecise exercise to be chasing a metonym from a legal standpoint...
If I examine the ancient writings in "the Western tradition", I cannot find a word that is the equivalent of "money"...
Aristotle explained the ancient Geeek 'nomisma' (which cannot be accurately translated as "money" as this word is not a metonym) thus:
"Nomisma by itself is a mere device which has value only by nomos (law) and not by nature" Aristotle 'Politica' 350 BC
So Aristotle documents the fact that they used 'nomisma' which has the word 'law' right in the term over 2000 years ago.
So how can Christine investigate today whether or not "money" is 'a legal institution' what is the specific form she is talking about?
If she is talking about state currency like Aristotle is talking about here, then OF COURSE it is a 'legal institution' they put the word "LAW" right in the term over 2000 years ago..
What is the LEGAL identity of the type of "money" she is investigating? I would think that legal precision would be important to a lawyer...
iow here is the wiki on Metonymy:
http://en.wikipedia.org/wiki/Metonymy
They use as an example this:
"For instance, "Hollywood" is used as a metonym for the U.S. film industry because of the fame and cultural identity of Hollywood, a district of the city of Los Angeles, California, as the historical center of film studios and film stars."
So you can't sue "Hollywood" can you? You cant take "Hollywood" to court no?
Is not 'legal precision' a big part of the law? I'm not a lawyer...
Can we examine a metonym 'from the point of view of the law' other than to conclude metonymy is best avoided from a standpoint of the law?
Dont we have to have more legal precision than this?
rsp,
"money .... is a way of entailing or fixing material value .... because of its unique character."
If you consider the word "money" a metonym, BY DEFINITION it is NOT legally unique...
There is nothing "unique" about this word "money" other than it seems to be able to confuse a lot of people that should know better...
Unique: "being the only one of its kind; unlike anything else."
"Money" is NOT unique.
rsp,
JK,
Roger is an evolutionary biologist and as such, in my view he is increasingly agitated when he sees that we as a social species have already been through a lot of this and settled it before and it doesnt make sense that we seem to be going back over the same things in our social evolution..
Really runs against Roger's grain .... mine too! (engineer, I can see that our current system ('nomisma') was designed at least over 2000 years ago! Frustrating!!!!)
rsp,
Ralph - Chris has tenure at Harvard Law School and is at the apex of a pretty large network of scholars working on capitalism in America. I know her well and have spoken to her at length about these issues, and like me, they keep her up at night. So I'm not what it is that you're "smelling" since you haven't actually read the paper, but i don't think it's coming from her direction. Would you level the same cynical criticism to one of the MMT economists if they published a new paper? I am surprised by the negative response, to be honest.
Matt,
I mean, sure, money is a metonym just like "Justice" or "Democracy" or "the State" or "Law" or "Contract" or "Property" is a metonym. I don't think your classification has as much conceptual or practical significance as you are giving it. To say Nomisma isn't a metonym is only true to the extent "nomos" isn't a metonym, which i would say it is. There is not a single thing called a "law", even though textualists act like there is sometimes when they get overexcited. Law is an indirect reference to a set of processes, institutions, beliefs, so if nomisma relies on a definition of "nomos", then it's arguably a second-order metonym anyway.
In terms of a word that is equivalent, what about the Hebrey mmon, i.e. ממון?
In regards to "what specific form is she talking about" and your subsequent mildly condescending point about legal precision, did you actually read the article? I find it hard to see how you'd be asking those questions if you did.
"Can we examine a metonym 'from the point of view of the law' other than to conclude metonymy is best avoided from a standpoint of the law?" - see above. I would suggest reflecting on other words you use regularly that you think are acceptable to discuss from a legal perspective, and asking yourself whether or not they are really very different from the type of metonymy you identify with money.
"If you consider the word "money" a metonym, BY DEFINITION it is NOT legally unique…" - i'm not sure what your point here is. Can you name another word that functions the same in society as money? I can't see how you can. Cash isn't money. Currency isn't money. Finance isn't money. Trust isn't money. Law isn't money. Gold isn't money. Money is money. The fact that the social forces and institutions it refers to are fluid does not mean it's social function as a word is not unique.
So Roger, I taken then that you reject Knapp's theory of money as well?
Rohan,
We have another Harvard lawyer in the WH right now that thinks (as recently as two weeks ago) the "the govt can soon run out of money"...
Maybe he can run out of "money", who knows what he means by this word IT IS IMPRECISE...
I can tell these Harvard people one thing though, they cannot run out of USDs today...
Can you see my larger point here?
No it is not that Harvard people are morons, it is that if we use PRECISE terminology in our discussions especially in legal matters/ matters of law we can avoid a lot of confusion...
In electronics, we don't have "current thingies" we have Amperes, we dont have "potential doohickies" we have Volts, and EVERYBODY in the field knows what we are talking about when we have professional matters before us...
There is too much discussion about "what is money?" it is a fools errand to try to uniquely define metonymy...
Can we be more specific in these matters? When we get in the game of trying to define metonymy we have already lost...
rsp
Rohan,
Earth to Christine: If she is talking about a 'nomisma' system, this legal matter was already settled 'in the west' over 2,000 years ago...
rsp,
Rohan,
Economists and Lawyers have gotten us into this mess... I dont want to read anything they write its a waste of time...
rsp,
I agree with Dan.
Matt, the idea of there being a "precise" terminology in law is a fool's errand.
What is "Constitutional"? What is "legal"? What is "a law"? Pointing out that Obama lied once in a comment whose implied meaning is very clear isn't a particularly persuasive way of making your case.
I'd suggest reading some Felix Cohen on functionalism in the law before continuing this line of argument.
And again, I don't think you grasp what she is trying to do here. She is not suggesting something has changed since Aristotle. She is building a persuasive case, because despite your assertion, the matter isn't "settled" any more than the question of what "law" is is settled, despite Holmes making a pretty clear case over a center ago. Simply saying "Aristotle used the word nomisma once. Therefore money is a creature of law" Isn't going to get us anywhere when it comes to convincing other people.
And while I am trying very hard to constructively engage rather than simply +1'ing Dan & y's comments, when you write something like
"Economists and Lawyers have gotten us into this mess... I dont want to read anything they write its a waste of time…"
to a *law student* in a *voluntary comment,* responding to my reply to your *earlier voluntary comment* responding a post about a *legal article* on *law and economics* on an *economics blog*, it's hard to continue to take what you're saying seriously.
If you are merely trying to point out that you're so much smarter than all of us here on this blog and you don't need to be involved in this dialogue because it has nothing new to teach you, well then go for your life. I wish you and your reform efforts the best of luck. But don't waste my time pretending to be interested in substantive engagement, please.
Wow, a massive case of Ready, Fire, Aim! going on with the hostility towards this paper. Maybe the title is throwing people off? Here are a some completely appropriate alternate titles:
If it's not Chartalism, it's Crap
MMT for Legal Scholars
A Legal Framework For Mauling Money Morons
It really couldn't be any more "in paradigm", why are people shooting friendlies on sight?
I think Ms. Desan's new paper is pretty much consistent with the Austrian point of view while purposefully stepping back from the obvious so as to not be attacked by "progressives" and other authoritarians. Clearly, we know gold and silver were subjectively valued by people just because we know from history that they valued these metals (but we can't, of course, read other peoples' minds). The fact that the state could mint coins of consistent weight and purity does not show that the value of the coins came from an authoritarian state pronouncement. The fact that the state required payment of taxes in a particular form of money does not necessarily give value to that form of money for use in commerce unless a) such money had independent value; or else b) the citizens were threatened by the state with violence for using another form of money in commerce. The paper notes literally the use of gold and silver coins for centuries. The paper is completely inconsistent with the silly and baseless statist theory of money.
I note that Ms. Desan again fails to mention that the US Constitution was written so as to specifically preclude the issuance of paper money by either the nation or state governments, which, of course, makes it illegal. Farley Grubb's paper demonstrated this and I believe the Grubb paper was cited for background on understanding a prior Ms. Desan speech as recommended by Rohan Grey.
http://tinyurl.com/kngmlpp
Rohan,
I take back the comment about lawyers (but not yet economists ;)
I am not trying to 'prove myself smarter" etc..
You are/will be smarter I'm sure on matters of 'law' than I ever was/shall ever be... Dan K is probably smarter period than I ever was/ will ever be...
However, to a person who is 'scientific' (like perhaps myself) this paper is a 32 page tautology...
What is the purpose of this paper by Christine here?
(Dan perhaps write it up? There are MANY of us out here like perhaps Roger and myself who are literally left scratching our heads when we look at stuff like this... why do we need this? This is all an accounting system that humans designed over 2000 years ago... it is not that complicated...)
I'm not exaggerating, I literally do not understand why a paper like this has to be written... we have been over this a thousand times...
Rohan,
Here is an 'exercise':
You asset here: "Pointing out that Obama lied"... ok counselor here is an exercise for you, to "lie" I assume you have to know that what you are saying is false? "fraud" requires foreknowledge of falsehoods? ... you are arguing facts that ARE NOT IN EVIDENCE counselor.... where is your EVIDENCE that the President knows that our govt cannot "run out of money" counselor?
Follow the rules of evidence and document to me where he has stated otherwise... and I mean the 'rules of evidence' where you have to provide quotes/recordings/transcripts, etc... shouldn't be hard the President's words are often documented...
I dont think you will find it...
He is NOT lying... THIS is the problem...
If you follow the rules of evidence and prove me wrong, I will stand corrected no problem and will be able to move on from there... in a way I hope you can prove me wrong and I can perhaps then get past my belief that he (and btw MANY others) LITERALLY thinks we can 'run out of money'...
rsp,
Bob,
Our ancestors were not 'coerced' again here is Aristotle on their 'nomisma' back then:
"By virtue of voluntary convention nomisma has become the medium of exchange. We call it nomisma, because its efficacy is due not to nature but to nomos (law), and because it is always in our power to control it." — Aristotle, " Ethica."
It was a 'voluntary' convention Bob, none of your dreaded 'coercion' needed....
Warren's "guy at the door with a 9mm" story is FALSE... don't worry your little libertarian head Bob...
rsp.
give up bob you delusional clown
Rohan,
? I made not insinuation about the political impact of her statement.
My comment was ENTIRELY about the state of the electorate that any & all political actions must work upon.
Matt,
Now you're being more reasonable again, at least at the outset.
The purpose of the paper is explained well by Kreitner's paper here:
http://www.annualreviews.org/eprint/MrfhZCjFM6Sc4AgiURtR/full/10.1146/annurev-lawsocsci-102811-173902
Basically, there is no real body of legal scholarship around money, with the exception of a Hurst book that relied on a number of causally incorrect claims because he was too dependent on Friedman and Schwartz's history in his research. So she is trying to land the groundwork for a new body of scholarship, that will allow reconsideration of various Law and Economics issues (contract, property, financial regulation etc) from a starting point that acknowledges the fundamental as well as superficial legal nature of the monetary system, Bob's comments not withstanding (to which I will respond below).
The reason we need this is because the conversation being had among legal scholars is NOT this conversation, just like the conversation being had by most economists is not this conversation. It's like asking why MMT focuses on the things it does - the answer is read a newspaper, speak to someone on the street, etc. These are the arguments that need to be made, and Desan is providing the type of case that makes sense to lawyers and legal scholars so that they will be able to translate the conversation into their own terms.
Moreover, "This is all an accounting system that humans designed over 2000 years ago... it is not that complicated…" - that is untrue. The accounting system changes on a regular basis. Check out the 1967 Budget Commission under LBJ. In order to understand that commission's implications, you need to appreciate the legislative history, the political pressures, the political and legal role of budgetary forecasts, etc. Similarly with the Treasury-Fed Accord history. Simply saying "we new of fiat money and double entry accounting 2000 years ago" barely scratches the surface of the legal complexity of the world we live in, and consequently, the legal complexity of how monetary-legal technologies interact with it.
"where is your EVIDENCE that the President knows that our govt cannot "run out of money" counselor"
"Follow the rules of evidence and document to me where he has stated otherwise... and I mean the 'rules of evidence' where you have to provide quotes/recordings/transcripts, etc... shouldn't be hard the President's words are often documented…"
You're getting dangerously close to that bullshit-arrogant tone again, Matt. I don't have much respect for the "rules of evidence," and quoting that phrase at me like it's supposed to impress me or appeal to my lawyer side is not going to get you any points with me or with anyone else who has more than a Law and Order understanding of legal process.
There is no doubt at all that most politicians at the top are aware that we can't run out of money. The idea that politicians are so stupid as to inculcate themselves in ways that can be proved in a court of law is laughable. One of the first things a good lawyer learns is the value of the phrase "pick up the phone." Nowadays, of course, even those are tracked, so the conversations probably happen more in person, or a least, on secure lines. But Obama has enough good information coming to him that he knows the issue isn't "running out." It's political rhetoric, pure and simple.
But
See, e.g.
http://www.youtube.com/watch?v=UfW5oI1DvvQ
and
http://www.businessinsider.com/the-biggest-tragedy-in-economics-2012-9#ixzz2dvzvytE1
There is no way Clinton knows and Obama doesn't, or that Alan Greenspan and Warren Buffet knows but Timmy Geithner doesn't. These people are a phone call away from each other.
Roger,
I'm confused about this:
"Academics will have forever to write books attempting to explain unfolding reality ... AFTER we're done surfing each wave."
Do you not see a value on the electorate from having this paper written? I see an important causal chain from legal academia to law students to policymakers and change agents to public perception, so I see this is an oblique but potentially very powerful way of doing exactly what you're asking her to do when you say "put the book down." She's a historian, so crafting a new constitutional-political story of money, a la Jack Balkin's idea of Constitutional Redemption, is her way of fighting that fight the best way she can.
Bob,
Your idea of individuals being threatened for using another form of money in commerce is a very contorted interpretation of how "commerce" works - individuals can use certain other forms of money in commerce today (maybe not all), they just can't use it for settling legally imposed liabilities, including debts for contractual violation. That's where the real power comes in, because no matter how we first deal, if the state imposes a debt in a contractual dispute, it's equivalent to a tax and is done in the state's unit of account, which it asserts the right to do as lawmaker. Moreover, the state determines what goods are alienable and thus marketable in a legally recognized way, so it's always involved in regulating commerce.
As for the Constitution specifically precluding paper money, I don't believe there is anything in the Constitution precluding the national government. Can you provide a cite to Grubb on this?
More generally, are you and I reading the same paper re: consistency with Austrian versus state theory?
Not only do I know that Desan is on board with the state theory of money because I have personally talked about it with her at length, its *in the actual title of the paper*.
Some choice quotes for Bob:
Some choice quotes:
"According to most accounts, the Western Roman Empire ran its highly monetized economy on a fiscal base: it drove coin into circulation by spending and taxing robustly to support its expansive military and administrative state. Indeed, Simon Esmode-Cleary argues that the British economy collapsed so completely in the 5th century because it was tied so closely to the Roman system: when imperial taxation ended, so also did the pump putting money into the system. There is little doubt that the economic meltdown in post-imperial Britain—a recent history calls the event catastrophic—occurred when the systems of exchange supported by Rome fell apart. For two centuries, the archaeological record suggests that money ceased to function. People lived of their own, rather than by specializing their production to any significant extent.26 Their experience suggests that when a working money arrived, people would attach a premium to it as cash."
. . .
In any case, by the end of the 8th century, English rulers made their authorship of coin unambiguous Their authority was imprinted on their money: like the coin of the Roman Empire, it carried their names and portraits and was produced by moneyers they controlled. Both dues and tax burdens and exchange increased, along with specialization in production of commodities like pottery.. . .
The practice of making commodity money provides another form of evidence that corroborates the ‘real’ story. Note that in the account above, tokens produced by the stakeholder acted as the unit of account. The tokens could be made of anything, as long as they were exclusive to the stakeholder and could not be imitated; otherwise, people could fraudulently multiply the number of receipts that circulated.33 Making tokens out of a material that was scarce, durable, and difficult to work—thus long-lasting and hard to counterfeit—made great sense under the circumstances.
. . .
By definition, the system identified the value of silver in coined form with the value of the tax obligation. When a person turned in 230 pennies in taxes, he or she used it only for its fiscal value.35 Hypothetically, the taxpayer could hand over the pound of bullion, leaving the government to make coin and pay itself its minting fee. (The tax and the fee could be conceptualized together as a larger levy.) Despite that possibility, people went to the mints and paid for coin independent of the time their taxes were due. They acted because they valued the cash services of money: when others felt the same way, prices in coin were low because people would give more goods for each coin. That is, they preferred having money to having bullion, even bullion that amounted to a greater amount of silver. People ‘bought’ coin, then, because although they received less silver from the mint, they received it in the form of coin—and coin carried a premium that made the cost worthwhile. Eventually, as people continued to go to the mint to buy coin, prices would rise: pennies would lose value because more were circulating, all else equal. At a certain point, prices would be high enough that inhabitants would rather have their silver bullion than a greater supply of coins, and they would stop going to the mints.
In its very design, free minting showcased both the fiscal component of money’s value and the fact that coin often bore a premium as cash over silver bullion. As the system operated, it compelled people to buy enough coin to cover their obligations to the government; otherwise, they would pay the consequences in confiscated assets."
... and some more:
The Case, authoritatively discussed elsewhere in this volume, vigorously confirmed the Queen’s authority.38 ‘[T]he most precious and pure metal’ could not be money, the jurists reasoned, without ‘the extrinsic good’ provided by the sovereign form. It was not the ‘natural material of the body of money,’ that composed it, they continued, quoting Molinaeus (Charles DuMoulin), ‘but its imposed value that is the form and substance of money.’ That was ‘not of a physical body, but rather a contrived one.’39 Invoking civilian as well as common law sources, they returned to Molinaeus (‘By law it matters not whether more or less silver is contained within it, so long as it is official (publica), genuine, and legitimate’), quoted Balaus (‘With coinage, one should pay more attention to its use and circulation than to its substance’), and finally came to Seneca (‘Both the man who owes gold coins and the man who owes leather imprinted with an official stamp is said to be in debt.’)40 Each authority suggested that money was a matter collectively engineered to entail value anchored by its use in a polity.
. . .
Money persists over time because, or insofar as, it is institutionalized. The
relationships described above are matters of governance. They are carried out in law, understood expansively to include the wide variety of formal and informal practices of decision and enforcement that communities adopt to channel human interaction.
. . .
In fact, a community determines which goods and services can be alienated and thus what counts as a ‘commodity’ when it decides what items or services money can buy. The sale of land, chartered and unchartered, was a complex issue in the second half of the millenium; feudalism would take its character in part from those conditions.51 Similarly, a contemporary code (AD 880) imposed restrictions on any sale involving ‘slaves, or horses, or oxen.’ Other provisions required transactions over a certain amount to be witnessed or made only in town.52 Presumably, transactions involving money would not be enforced if they were improperly made or inappropriately targeted a resource that could not be considered a ‘commodity.’ Later societies would return, notoriously, to allow the sale of Africans.
. . .
The point is that the very definition of what can be ‘sold’ is determined by working out the legal operation of money. The outcome, created by keeping money out of some transactions and demanding it for others, shapes what we recognize as ‘the market.’ When we consider that conclusion in light of money’s formative role engendering exchange in the first place, the market loses its aura of autonomy. Rather, the market has been dependent on its medium, money, from start to finish. And money, it turns out, has been dependent on law, that very human project of decision that defines our obligations, the government’s commitments, its structure, and what we call commodities.
when imperial taxation ended, so also did the pump putting money into the system. There is little doubt that the economic meltdown in post-imperial Britain—a recent history calls the event catastrophic—occurred when the systems of exchange supported by Rome fell apart.
Cause and effect are reversed here. People were no longer safe enough to engage in commerce. Economies do not require a government "pump" of money into the "system". Reversing cause and effect is endemic among the state theory of money crowd.
The tokens could be made of anything, as long as they were exclusive to the stakeholder and could not be imitated; otherwise, people could fraudulently multiply the number of receipts that circulated.
Which leaves you with gold and silver which everyone already loved and treasured, its value being purely subjective in commerce while both metals possess certain objective qualities making them perfect for money.
In its very design, free minting showcased both the fiscal component of money’s value and the fact that coin often bore a premium as cash over silver bullion. As the system operated, it compelled people to buy enough coin to cover their obligations to the government; otherwise, they would pay the consequences in confiscated assets.
That says nothing about the value of coins, per se. Pay your taxes or have your stuff confiscated.
That was ‘not of a physical body, but rather a contrived one
Wow. A government court ruling in favor of government theft and fraud. I'm impressed. Who knew?
Money persists over time because, or insofar as, it is institutionalized. The relationships described above are matters of governance. They are carried out in law, understood expansively to include the wide variety of formal and informal practices of decision and enforcement that communities adopt to channel human interaction.
There's no evidence for that statement. Gold and silver as money persisted over time because the inherent nature of those metals made them the best form of money and because people cherished them for whatever reason. The fact that the thuggist state figured out ways to loot the populace with rules about money doesn't change that.
In fact, a community determines which goods and services can be alienated and thus what counts as a ‘commodity’ when it decides what items or services money can buy.
The thuggist government might have had the guns and machetes to prohibit certain types of transactions, but that did not cause people to value or cherish commodities or anything else.
The point is that the very definition of what can be ‘sold’ is determined by working out the legal operation of money. The outcome, created by keeping money out of some transactions and demanding it for others, shapes what we recognize as ‘the market.’
I disagree. Using force to prohibit certain transactions is certainly NOT THE MARKET, but its opposite.
The entire statist theory of money fails the test of Occam's Razor. Informal, subjective and voluntary valuation and selection of gold and silver as money by humans is a much simpler theory than a claim that money was invented AND formally selected by the thuggist government. As stated in the paper, societies repeatedly discovered the same form of money over and over. The argument is about as successful as arguing for a state theory of shoes.
Being "progressives" and therefore authoritarian, you just can't stand the idea of a free, voluntary and organic society based upon unique individual desires and a renunciation of fraud and the initiation of violence. But there is plenty in this paper that demonstrates the informal, voluntary and organic nature of the origin of money.
The Grubb link is here and above:
http://tinyurl.com/kngmlpp
"People were no longer safe enough to engage in commerce" - is this because the "thuggish" state wasn't there to protect their private property titles with its threat of force?
"Which leaves you with gold and silver which everyone already loved and treasured, its value being purely subjective in commerce while both metals possess certain objective qualities making them perfect for money."
Maybe in some contexts. In others, it leaves you with tally sticks, or signed paper, or digital balances at the Fed. The point is that the decision is a political one made by the state based on the monetary technology available to it at the time.
"That says nothing about the value of coins, per se. Pay your taxes or have your stuff confiscated."
That's circular. Chartalism says the value of the coin is in it's tax-credit function. You say "no, there is no intrinsic value in the coin, just in the tax payment" . . . yeah, exactly?!
"A government court ruling in favor of government theft and fraud."
Bob, you can cry foul on originalist grounds, and try and equate changing the rules of the game with 'theft' as much as you want, but the idea that there is some abstract system of "real" legal rules above the state is a bit ridiculous to me. The creation and maintenance of private property law is the original Adam & Eve sin of the state when it comes "theft and fraud." Taxation is a derivative issue, and really quite secondary until you begin your analysis with an interested in protecting the propertied class uber alles.
"Gold and silver as money persisted over time because the inherent nature of those metals made them the best form of money and because people cherished them for whatever reason. The fact that the thuggist state figured out ways to loot the populace with rules about money doesn't change that"
The only technological aspects you've mentioned are ones that appear to me to be equally well served by a range of legal instruments today, and "for whatever reason" is a pretty weak justification. As Desan points out in her talk at Columbia, the idea of a poor community choosing to voluntarily store wealth in gold because it's shiny or durable or something, rather than in something of more functional value when not being used as a medium of exchange, is pretty unpersuasive. Moreover, in order to "loot" the populace, someone has to have a preceding valid claim of ownership. You constantly assert this claim and never prove it.
"The thuggist government might have had the guns and machetes to prohibit certain types of transactions, but that did not cause people to value or cherish commodities or anything else. . . . I disagree. Using force to prohibit certain transactions is certainly NOT THE MARKET, but its opposite."
Please, Bob. No one is saying people enjoy legal power being exercised. The point here is that it altered behavior. And the "market" only exists to the extent property rights, and contracts, exist. So you always have state power preceding the market. Polanyi was all over these 70 years ago. You can stick your fingers in your ears and hum your disagreement, but it doesn't make it less true.
"The entire statist theory of money fails the test of Occam's Razor"
This is ridiculous. The Occam's razor is simple. States valued a stable and hard-to-replicate medium when choosing their media of payment. In many contexts, the most convenient technology that met that criteria was gold and silver. When it ceased to be the most convenient, thanks to paper money and banking and now, digital technologies, gold became less important.
Your theory requires a range of assumptions about why people use gold, how property rights get enforced, how contracts get enforced, etc.
Thanks for the Grubb link - didn't realize that's what you were linking to before.
And ok, I see what you're talking about. But we've been over this before. Not only is Grubb arguing from a particular type of originalist approach to the Constitution (which makes sense in the context of his historical approach, but is by no means the only possibly valid method of Constitutional interpretation by the Court), it also ignores that the fight today over control over money is not over the media, it's over the unit of account and the preservation of a particular price level through taxation. There is nothing in the Constitution or in Grubb's paper, as far as I can see, that precludes the minting of a trillion dollar coin. The only thing the state needs to maintain the nominal price of that coin is its tax power.
Rohan,
Your evidence is hearsay...
You write above:
"States valued a stable and hard-to-replicate medium when choosing their media of payment. In many contexts, the most convenient technology that met that criteria was gold and silver. When it ceased to be the most convenient, thanks to paper money and banking and now, digital technologies, gold became less important. "
OK, this is evidence that YOU know what is going on... based on my reading YOUR writing here, I know for a FACT that YOU know how our current arrangements work and YOU are well informed and know what is going on...
But that doesnt mean everyone else does...
Can you go into court solely with a "nobody can be that stupid..." type of argument? Dont you have to have at least SOME evidence to back up your claims?
Look, going around saying that the POTUS is lying is a very serious charge... you should have to be able to back that up...
I didnt even vote for O and I have to come to his defense here...
Christine writes here: "The government’s new
agents still produce tokens, issuing deposits instead of coin. But there the similarity ends.
The production of money is more prolific—it rests on the representation of future
earnings rather than the acquired capital of bullion. It is also more fragile—it fails more
frequently because that promise is harder to cash out than a pound of silver."
This MAY imply that she thinks we can "run out of money" too, just like the President says...
Quick experiment, next time you talk to her, just ask her if she thinks we can "run out of money"... see how she responds...
rsp,
Rohan -- Thank you for your spirited defense of Prof. Desan. I don't have time to read her paper but the abstract told me it was most likely in paradigm. Your quotes confirmed my belief. We need many such papers to get to the right conversation.
I am surprised at Matt. The title of the paper is, it seems to me, just what he has been arguing for years on this website; that money is a construct of the government system of laws, nomisma.
Matt -- "Can you go into court solely with a "nobody can be that stupid..." type of argument?"
How about "ignorance of the law is no excuse"?
And, I think Rohan's logic that if Clinton knows, Obama knows, etc. is persuasive. It may not fit some arbitrary "rules of evidence", but this isn't a court and rules of evidence don't necessarily provide truth.
I think Matt Franko has reasons to be worried about this analysis from Rohan Grey:
States valued a stable and hard-to-replicate medium when choosing their media of payment. In many contexts, the most convenient technology that met that criteria was gold and silver. When it ceased to be the most convenient, thanks to paper money and banking and now, digital technologies, gold became less important.
This destroys the statist theory of money. States employed a PRE-EXISTING form of money already beloved by most everyone to adopt for their nefarious schemes of looting, pillage, rape, theft, fraud and murder. They did not arbitrarily adopt 85 pound bags of belly button lint as money which suddenly became valuable for use in commerce because states demanded to be paid taxes with bags of belly button lint. And states generally are not going to want to be paid in something that does not already have a ready market value. Further, the entire statist theory of money is based upon the ludicrous and baseless assumption that the state must inject money into society and then tax it back in order to make "the economy" move. A bunch of nonsense.
As Mises noted in 1917, Knapp did not even have a theory of exchange. The money statists still do not.
http://mises.org/books/Theory_money_Credit/AppendixA.aspx
Thank you, John.
Again, Matt, playing "lawyer" isn't gaining you any points here. This isn't a court of law, and i'm not bringing a criminal charge against the President. I have no problem with accepting hearsay, although the weight i put on it depends on a range of factors.
For one thing, I don't have the ability to conduct discovery and put him under oath, nor other members of his cabinet or Congress, which is would what happen in this country prior to a trial if I were going to try and prove this. I also don't have the ability to subpoena government memos and internal emails.
"Can you go into court solely with a "nobody can be that stupid..." type of argument? Dont you have to have at least SOME evidence to back up your claims?"
The platinum coin debate alone is sufficient in my mind to prove this point. Even if the President believed that the legality of the coin was in jeopardy, the underlying point that the Mint can issue coins indefinitely (for example, a $25 palladium coin) without having to "borrow" the money is enough to render false his claims we have "run out of money."
"Look, going around saying that the POTUS is lying is a very serious charge... you should have to be able to back that up…"
This isn't the "Court of Matt Franko." I don't have to back up things according to your arbitrarily determined burden of proof and poorly constructed pseudo-rules of evidence, and to be honest, this entire conversation is a rather annoying distraction from the article itself, which should have been the focus of this entire post had you not derailed it with your self-indulgent ranting which, given your time spent on this blog in the past, you should have known better than to attempt.
Regarding Chris Desan's quote - you realize she is talking about banks here, and explicitly contrasting their fragility with state issued money, right? The conclusion you are trying to draw has nothing to do with what she is saying.
----
Bob,
It doesn't "destroy the statist theory of money." If you read what I said, the criteria that made gold attractive was not that it was a "pre-existing form of money," anymore than one can say bitstreams secured by digital cryptography was a "pre-existing form of money" before we started using it for e-commerce. It was that it had certain physical properties. Something else, like a particular kind of shell, may have had similar properties in a different climate. Are diamonds also a "pre-existing form of money" to you, Bob?
As for this:
"They did not arbitrarily adopt 85 pound bags of belly button lint as money which suddenly became valuable for use in commerce because states demanded to be paid taxes with bags of belly button lint."
This is merely restating your entire general objection to the tax-driven money approach, so i don't particularly want to have that entire argument again, but check out p. 58 onward:
http://cas.umkc.edu/econ/economics/faculty/Forstater/papers/Forstater2005/RiPE%20Forstater.pdf
"And states generally are not going to want to be paid in something that does not already have a ready market value."
Maybe you should read the Desan paper again. The point isn't state accumulation of the tokens. It's state accumulation of the goods and services the tokens will buy when they release the tokens to those requiring them for future tax liability settlement.
"Further, the entire statist theory of money is based upon the ludicrous and baseless assumption that the state must inject money into society and then tax it back in order to make "the economy" move."
No. The last bit should say "to transfer resources to the public sector". And that's not an argument, just a whine. Would you like some cheese to go with it?
weird the words bob uses to describe metal:
"loved", "treasured", "cherished", "beloved".
It's like he's literally in love with metal. I wonder if he also has sexual feelings for it too.
These Spaniards seem to have had an extreme but "organic" attachment to gold.
http://www.flickr.com/photos/bob_roddis/8525140770/
Shells
At about 1200 B.C. in China, cowry shells became the first medium of exchange, or money. The cowry has served as money throughout history even to the middle of this century.
First Metal Money
China, in 1,000 B.C., produced mock cowry shells at the end of the Stone Age. They can be thought of as the original development of metal currency. In addition, tools made of metal, like knives and spades, were also used in China as money.... The Chinese coins were usually made out of base metals which had holes in them so that you could put the coins together to make a chain.
Silver
At about 500 B.C., pieces of silver were the earliest coins. Eventually in time they took the appearance of today and were imprinted with numerous gods and emperors to mark their value. These coins were first shown in Lydia, or Turkey, during this time, but the methods were used over and over again, and further improved upon by the Greek, Persian, Macedonian, and Roman empires. Not like Chinese coins, which relied on base metals, these new coins were composed from scarce metals such as bronze, gold, and silver, which had a lot of intrinsic value.
Leather Currency
In 118 B.C., banknotes in the form of leather money were used in China. One-foot square pieces of white deerskin edged in vivid colors were exchanged for goods. This is believed to be the beginning of a kind of paper money.
Paper Currency
From the ninth century to the fifteenth century A.D., in China, the first actual paper currency was used as money.
The History of Money
one of the many problems with using scarce metal as money is that there's always the temptation to go and steal it from other parts of the world when your domestic supply is insufficient.
The last bit should say "to transfer resources to the public sector".
Which, of course, is at odds with the peace, safety and prosperity of the citizenry. And which has nothing to do with the citizens adopting a medium or media of exchange.
@ y
Money tokens developed first in China and the Chinese apparently did not use precious metals as money tokens over their history. They also never became a colonial power although warlordism was rampant. Still the Chinese did not turn outward as the West did in search of gold and silver, even though they were generally ahead in military technology until the industrial revolution in the West. The Chinese invented gunpowder, for instance.
"Which, of course, is at odds with the peace, safety and prosperity of the citizenry. And which has nothing to do with the citizens adopting a medium or media of exchange."
It's not if those resources are then used to promote public purpose, including upholding your precious private property rights and right of contract.
It sounds like your argument goes like this:
Step 1. Imagine a world with a rule of law but no state with the resources to uphold it.
Step 2. ???
Step 3. Profit
It's a waste of time arguing with folks who believe that cultural phenomena and institutional arrangement don't influence human behavior and deny that human societies are complex adaptive systems in which the relationships are as significant as the element and often more so. It's like arguing with people who don't believe in science and think that the world was created in a week about 6000 years ago.
The argument goes like this:
1. A significant number of people decide to eschew fraud and the initiation of force because, inter alia, those activities are criminal and wrong.
2. They decide to voluntarily purchase and provide for defense and litigation services.
3. They live in peace and prosperity.
It's a waste of time arguing with folks who believe that cultural phenomena and institutional arrangement don't influence human behavior and deny that human societies are complex adaptive systems in which the relationships are as significant as the element and often more so.
I agree. MMTers apparently do not believe in voluntary organic cultural norms and that norms such as money are exclusively the result of diktats from a magic omniscient authoritarian state.
Austrian analysis is based upon those peaceful, voluntary and most often informal social relationships that make up a civilized society. MMT, being based upon authoritarian diktats, is profoundly anti-social and anti-society.
The argument goes like this:
1. A significant number of people decide to eschew fraud and the initiation of force because, inter alia, those activities are criminal and wrong.
*they decide to identify themselves vis-a-vis everyone else by adopting the collective name "tribe" and everyone outside of the "tribe" is henceforth an outlaw and beyond the tribe's protection*
2. They decide to voluntarily purchase and provide for defense and litigation services.
*and everyone who disagrees with them is violently excluded from the property that the "tribe" has claimed for themselves*
3. They live in peace and prosperity.
*while everyone who is not a part of the tribe lives in fear and under coercion because they are excluded from accessing those global commons previously available to them before the advent of the "peaceful" tribe*
Bob, do you have any evidence of that ever happening on any kind of societal scale that suggests it could be scaled up as a paradigm to replace modern states and for stateless globalization?
Of course, this is possible small scale. I have studied communities close up and lived in communities organized similarly. I can say from personal experience, it is very difficult to perpetuate over time, and I have seen some communities descend into chaos, although other voluntary associative, cooperative and communal groups have managed to last for decades on the basis of rules consensually arrived at with disputes resolved by consensus and mediation.
But the transaction cost is high in terms of time, commitment, tolerance, patience, etc. It's a great learning experience but few people are likely to choose to accept that level of doing one's own psychological work and giving others space to do theirs. Humans are social animals, but they don't come socialized out of the box. Moreover, in biology the free rider problem arises very early.
I think it would be instructive to have some libertarian experiments to study and if they are successful on a small scale to investigate the plausibility of scaling them up. But asserting that this would just happen has no basis as far as I can see from empirical studies in psychology and social science.
My anecdotal conclusion from observation and experience is that the decisive factor is the level of collective consciousness of the group involved.
What motivated Rothbard was primarily his hatred of poor people, especially poor black people, and the belief in his innate superiority to such people. What he hated the most was seeing what he considered to be inferior poor black people receiving welfare and public services, and being allowed to go where they pleased and be treated as equals. This motivated him to come up with endless shitty nonsense arguments to try and justify his basic hatred and narcissism.
Rothbard was concerned about war not so much because he hated war itself, but because he hated government, because government in his mind equalled poor inferior black people getting stuff they didn't deserve. As he said: "The beauty of nonstate – interprivate, if you want to put it that way, warfare is that it has to be pinpointed—it has to be, in order not to commit suicide in the process—and so that the scale of weaponry has to be reduced to, say, machine-gun level."
Rohan,
You are assuming the President has the critical thinking skills to be able to 'connect the dots' from the PPCS issue over to a revelation that "we can't run out of money"...
That's not the way his brain works...
YOU may possess the critical thinking skills but that doesnt mean everybody else has the same skills in this area as yourself..
I think PPCS got shot down because they did a 'legal review' at Treasury and the Fed and came back and told the WH that it was not a legal option... THAT IS THE END OF IT FOR HIM... he doesnt keep thinking about it... it is 'settled' for him...
See my post above, YOU possess 'critical thinking' skills, he does NOT (I assert..) he learns thru 'rote learning', ie his counsel says its a "no go" so guess what? He has learned it is a "no go"... he doesnt "think it thru" from there...
so he continues to think we can "run out of money" he just again said so in a speech 2 weeks ago...
This whole thing is a cognition problem not some sort of 'control fraud' or whatever...
rsp,
PS although you are obviously a 'critical thinker', imo you should seek not to discount your legal training in general, it looks like you sometimes are willing to do this... fyi.
John,
" It may not fit some arbitrary "rules of evidence"..."
The 'rules of evidence' are specifically not arbitrary...
http://en.wikipedia.org/wiki/Rules_of_evidence
"the law" as I look at it is primarily created to remove any "arbitrariness" in general...
There is probably a tenured Harvard law professor that even just specializes in this part of our legal system ;)
rsp,
Hey Bob,
"Further, the entire statist theory of money is based upon the ludicrous and baseless assumption that the state must inject money into society and then tax it back in order to make "the economy" move. A bunch of nonsense."
Look at what Aristotle wrote here:
"By virtue of voluntary convention nomisma has become the medium of exchange. We call it nomisma, because its efficacy is due not to nature but to nomos (law), and because it is always in our power to control it." — Aristotle, " Ethica."
Bob,
Could instead of threatening you with a 9mm, could we get you to VOLUNTEER to sometimes use state currency like the ancient Greeks did here documented by Aristotle? FD: you would from time to time have to pay a small, symbolic poll tax...
If we didnt 'coerce' you but rather just ASKED you to do it (nicely of course...) Would you do it then?
Or is it completely out of the question for you?
rsp,
I think I would try to express it: until human consciousness, be it thought of as social and complex or individual and atomistic 'knows' the Self within - then what is on the outside can never ever be understood as it is; or conditioned to better reflect reality. Best analogy I know comes from the Gita: chariot of the body, horses as the senses pulling the body hither and thither, mind as the reins trying to control the horses, Arjuna as the heart - the Intelligence holding the reins, Krishna as the SELF advising Arjuna on the battlefield of life.
Arjuna is lined up against all of his relatives, people he grew up with and played with as a child (his favourite concepts). Krishna is telling him to slay them as they are dead anyway. Arjuna is bewildered! Krishna says not to worry, he has a powerful ally.
Without knowledge of the Self it is like flying a kite without a string. Sometimes I think the most profound and beautiful of our conceptions of life are already there, timeless; buried in the 'raincloud of knowable things' and noise of the modern world - we just need to dig them out and polish them up, understand and attain. Rather than fly off into an imaginary future, discover, uncover what we already have - what we already have been given. Could that not also be a solution? Not even GDP can change that!!
Matt,
this is the translation of Aristotle they have on wikipedia:
"...but money has become by convention a sort of representative of demand; and this is why it has the name 'money' (nomisma)-because it exists not by nature but by law (nomos) and it is in our power to change it and make it useless."
Aristotle, Nicomachean Ethics [1133b 1].
It's a bit different to yours.
Right y,
You can see here with your translation that the person who translated it used a metonym 'money' where one was not used by Aristotle.... what this translator is trying to do is make it more understandable to people today, but while they do this they lose certain details.... same thing happens all the time with Biblical translations (KJV, etc...)
Ive read in the ancient Greek both the words 'nomisma' and 'argurion'...
They are two different things...
Aristotle is documenting their rejection of 'argurion' or 'silver' here, perhaps 'gold' too which they termed 'chruson' where he says 'not by nature...' and their preference for their 'device' termed 'nomisma' or 'of law'....
Its the same way in the Greek Scriptures, (so-called 'New Testament') if you look at the original Greek which you can do in the original Greek language Codexes (oldest Carbon dated 2nd century in Greek)
The infamous Ceasar's poll tax denarius is termed 'nomisma' while there are other many other references to Israel's 'argurion' and 'chruson'... two completely different systems... never conflated via metonymy by either Aristotle (Greek philosopher) or the Apostle Matthew (Israelite tax collector...) or Luke (Greek physician...)
I submit there is no ancient Greek word equivalent to the English language metonym "money"... Perhaps there is a word they had that would be a metonym to identify either system for convenience or something but I have not been able to find it... I dont know why a metonym would be needed for convenience as the systems never interfaced...
Rohan mentioned 'mammon' the other day but I have that as 'wealth' rather than "money"... maybe you could say these concepts (money=wealth) are the same but not nomisma (the coins of which are always counted) or the 3 metals (argurion, chruson and chalkos) silver/gold/copper, which are always weighed...
so there were the two systems operating side by side back then at least in the area of Judea you had the 'nomisma' system operated by the Greeks/Romans and the metals being operated by the Israelites... but I can find no word like our contemporary word "money" that seeks to conflate these two disparate systems...
I dont think this dual system would necessarily lead to chaos as long as everybody knew what the heck was going on... ie NOBODY in authority or otherwise back then thought they could "run out of money" think about this it is absurd...
Just like today, if some day we are successful and get everyone to finally realize that we're not "out of money" tax revenues will collapse (hopefully via orderly changes in the tax laws...) as govt doesnt need the taxes to be able to spend...
I dont necessarily agree with the MMT position that heavy taxes will still be required to 'manage aggregate demand' as think about it barter networks will take off, alternative currencies, Bob can use silver/gold if he wants to... but as long as people generally voluntarily use the state currency and exhibit their willingness by paying a small poll tax, the govt should no problem be able to obtain provision for public purpose.... I think most people would still use the state currency no problem because it is so convenient...
I guess Bob might not... ;)
rsp,
y,
here is Aristotle (this is pretty good I havent read it in a while...
http://classics.mit.edu/Aristotle/nicomachaen.5.v.html
Where ever this translator has "money" the Greek word is 'nomisma' its not a metonym its a very specific term of art... you can see how this translator has to actually put the actual Greek words in ( ) as Aristotle explains the origins of the terminology...
" The builder, then, must get from the shoemaker the latter's work, and must himself give him in return his own. If, then, first there is proportionate equality of goods, and then reciprocal action takes place, the result we mention will be effected. If not, the bargain is not equal, and does not hold; for there is nothing to prevent the work of the one being better than that of the other; they must therefore be equated. (And this is true of the other arts also; for they would have been destroyed if what the patient suffered had not been just what the agent did, and of the same amount and kind.) For it is not two doctors that associate for exchange, but a doctor and a farmer, or in general people who are different and unequal; but these must be equated. This is why all things that are exchanged must be somehow comparable. It is for this end that money has been introduced, and it becomes in a sense an intermediate; for it measures all things, and therefore the excess and the defect-how many shoes are equal to a house or to a given amount of food. The number of shoes exchanged for a house (or for a given amount of food) must therefore correspond to the ratio of builder to shoemaker. For if this be not so, there will be no exchange and no intercourse. And this proportion will not be effected unless the goods are somehow equal. All goods must therefore be measured by some one thing, as we said before. Now this unit is in truth demand, which holds all things together (for if men did not need one another's goods at all, or did not need them equally, there would be either no exchange or not the same exchange); but money has become by convention a sort of representative of demand; and this is why it has the name 'money' (nomisma)-because it exists not by nature but by law (nomos) and it is in our power to change it and make it useless. There will, then, be reciprocity when the terms have been equated so that as farmer is to shoemaker, the amount of the shoemaker's work is to that of the farmer's work for which it exchanges. But we must not bring them into a figure of proportion when they have already exchanged (otherwise one extreme will have both excesses), but when they still have their own goods. Thus they are equals and associates just because this equality can be effected in their case....... That demand holds things together as a single unit is shown by the fact that when men do not need one another, i.e. when neither needs the other or one does not need the other, they do not exchange, as we do when some one wants what one has oneself, e.g. when people permit the exportation of corn in exchange for wine. This equation therefore must be established. And for the future exchange-that if we do not need a thing now we shall have it if ever we do need it-money is as it were our surety; for it must be possible for us to get what we want by bringing the money. Now the same thing happens to money itself as to goods-it is not always worth the same; yet it tends to be steadier. This is why all goods must have a price set on them; for then there will always be exchange, and if so, association of man with man. Money, then, acting as a measure, makes goods commensurate and equates them; for neither would there have been association if there were not exchange, nor exchange if there were not equality, nor equality if there were not commensurability. ....... That exchange took place thus before there was money is plain; for it makes no difference whether it is five beds that exchange for a house, or the money value of five beds."
sounds pretty good... rsp,
the ancient Greek word for money was simply 'nomisma'.
If that were true, then why does the translator have to write it this way:
"and this is why it has the name 'money' (nomisma)-because it exists not by nature but by law (nomos)"
rather than this way:
"and this is why it has the name 'money' -because it exists not by nature but by law"
?????
Or are you saying that there is some sort of English language etymology relationship between "law" and "money"?
in the original text it would be
""and this is why it has the name nomisma - because it exists not by nature but by law"
Because nomisma was their word for money, the translator included it to clarify:
"and this is why it has the name 'money' (nomisma) - because it exists not by nature but by law (nomos)"
money (n.) 
mid-13c., "coinage, metal currency," from Old French monoie "money, coin, currency; change" (Modern French monnaie), from Latin moneta "place for coining money, mint; coined money, money, coinage," from Moneta, a title or surname of the Roman goddess Juno, in or near whose temple money was coined; perhaps from monere "advise, warn" (see monitor (n.)), with the sense of "admonishing goddess," which is sensible, but the etymology is difficult. Extended early 19c. to include paper money.
Online Etymological Dictionary
English "money" not the same as Greek "nomisma." Modern Greek nomisma corresponds to English "currency," i.e, state money, which is a creature of law.
Matt,
PPCS was literally minting a trillion dollars. How can you not draw those dots?
Neither of us know the man personally, so perhaps you're right. We can't be sure. But i'm not at all convinced by your take on him. I see no evidence he is stupid, or thinks through "rote learning", or that he is naive to how law works.
I see it much more plausible that, like Clinton, there are certain things he can say and can't say. It's also consistent with all of the responses I've heard about from other politicians, and friends of mine who work in politics.
Moreover, the idea that there is a "legal review" that Obama believes in is pretty laughable. He goes "this is what we want, can you make it legal", and his team go to work on it. Viz. John Yoo torture memos. This is how power works.
I also don't "discount" my legal training. It is precisely because of my legal training that I don't "believe" in the law the way you do. I've seen behind the Wizard of Oz's mask. There is a guy pulling strings. So when you say something like this:
"It may not fit some arbitrary "rules of evidence"..."The 'rules of evidence' are specifically not arbitrary..."the law" as I look at it is primarily created to remove any "arbitrariness" in general…"
It makes me want to pull rank with my legal training, and tell you to check out some legal realism ASAP. Holmes (Path of the Law), Cohen (Transcendental Nonsense and the Functional Approach), Jerome Frank (Law and the Modern Mind), anything by Karl Llewellyn, and Warren Samuels on Thurman Arnold (called "Legal Realism and the Burden of Symbolism).
Rohan that is disappointing...not that you disagree with me but the corruption you are reporting...
Pretty sad state of affairs wrt our legal system looks like... this probably shouldnt be surprising to me...
rsp
y,
"Money" is like a broad category which includes different "devices" or legal systems we can arrange to facilitate a 'medium of exchange' if you will..
"state currency" or in Greek 'nomisma' is just one form... we can use weights of metals too (although I dont recommend it...)
The word was created in English during times of chaos when there were all kinds of systems extant in the nations of the west so the common people probably came up with a 'slang' term for the whole mess and termed it all "money" or something... for convenience in language..
I still assert the Greeks didnt have an equivalent word because they existed during a time when there was little to no chaos in their society... so they could remain legally precise in their terminology/language...
This is obviously not the case today.... so we see ourselves (the general public) still attracted to the metonymy... (present company excepted...)
rsp,
Matt, law has always been a tool of power. Prior to law was custom and custom was reflective of communal reciprocity.
Law arises when command systems replaced communal one at the time that agriculture replaced hunting-gathering as the primary mode of production. With the advent of surplus economies came the need for settling disputes and imposing rules based on the command systems under temple, palace and military rule. In this way, law was overlaid on custom and took precedence. Initially law was chiefly by decree, either that the of the gods in religious law or the ruler under the palace and military for the purpose of ordering (governing) society when tribal councils were not longer a sufficient means with the population growth and diversity. This was reflected in asymmetry. All were not equal before the law, nor was the law designed for the common welfare. These are liberal ideals to which a lot of lip service is paid but which are yet to be realized in practice. In many instances, law is just a veneer to dupe the rubes into believing that they are not being taken advantage of.
Matt,
The word 'money' would have developed out of either the latin, or later the french following the Norman conquest of England. It wasn't a 'made up' word.
The original latin word 'moneta' had a specific history and meaning:
"In Roman mythology, Moneta was a title given to two separate goddesses: the goddess of memory (identified with the Greek goddess Mnemosyne) and an epithet of Juno, called Juno Moneta. The latter's name is source of numerous words in English and the Romance languages, including the word "money".
The goddess Moneta was created largely under the influence of Greek religion as a cognate of Mnemosyne, the goddess of memory and the mother of the Muses. The goddess's name is derived from Latin monēre (which means to remind, warn, or instruct)....
The epithet Moneta given to Juno more likely derives from the Greek word "moneres" and means "alone, unique"."
Memory, remind, warn, instruct, alone, unique.
Sounds a lot like a description of money as a contract, accounting, debt.
I think the Obama administration rejected the platinum coin option for several political reasons, the chief one being that the spectacle if minting and depositing a trillion dollar coin would be seen around the world as the death knell for US prestige and a descent into banana republic money printing. It would send global markets into chaos as they grappled with the idea that the United States no longer possessed a competent political system or mature institutions for conducting fiscal and monetary policy.
Agree, Dan. I don't think it should ever be used, I just want the political option to remain valid on the table and for it to be exploited for pedagogical reasons as much as possible.
Dan Kervick +1
That's my general impression. They aren't stupid. Obama probably realized "yes, ok, this is would be legally possible, but…'
For those of us familiar with MMT et al. we welcome the opportunity for a national discussion on the implications of minting a platinimum coin for a trillion dollars. It's not hard to imagine how those in power, while recognizing that it's possible, have no interest in opening up that can of worms.
So, from that, when Obama says "we're broke" … I think there's Doublethink going on here.
Doublethink - "the act of ordinary people simultaneously accepting two mutually contradictory beliefs as correct"
Meaning, (1) if he were to be pressed with interegative questioning, he could be brought to admit that yes technically the U.S. government can't run out of money. But at the same time, (2) he can also repress that understanding and honestly say "we're broke" and mean it. I think what he means is ~the U.S. government cannot not continue to keep spending so much more than tax revenue without negative consequences~
It's very possible that he honestly believes both (1) and (2), and therefore is not lying per se. I guess it's sort-of lying. But it's still possible he can hold both beliefs as true. Doublethink.
Alexander Hamilton understood devaluation as a national default.
Christine Desan
The purpose of fiat money has always been as a scam for the elite to loot the citizenry. This is why the ability to create money out of thin air is never allowed to be expressed openly. Most people are and should be appalled when they learn this is happening. Except for authoritarian MMTers.
The platinum coin, in addition to being illegal and unconstitutional, would have shown the citizenry the precise and insane nature of creating money out of nothing and the elite does not want that process understood.
Page 2 of Farley Grubb:
At the Constitutional Convention the founding fathers decided by explicit vote not to include the power to emit bills of credit and (debatably) not to include the power to charter banks among the powers granted to the national government. Footnote 4
4 A common error repeated often in the literature is the claim that the Convention intentionally crafted a Constitution where Congress was allowed the power to emit bills of credit. For example, see Baack (653); Ferguson (1969, 254, 258); Nettels (98-99); Rolnick, Smith, and Weber (3); Schweitzer (311). The analysis here, if nothing else, is a valuable corrective in showing that under almost any logically consistent and coherent interpretation such a claim cannot be easily sustained. See also footnote 23.
http://www.modernmoneynetwork.org/uploads/1/2/5/3/12534585/grubb_-_us_constitution_and_monetary_powers.pdf
It's funny how bob always claims to speak for "most people", despite being part of a miniscule extreme far-right fringe group of deranged narcissists that "most people" wouldn't touch with a barge pole.
You're a seriously delusional individual, bob. Seek help.
JK,
'Doublethink': This is close to my point, he is having major problems discerning truth on this issue.... he cant "think it thru" to a logical conclusion... he's not a 'critical thinker'...
Tom had a post up a few days ago about people who were 'scientific' being more 'moral', so we can see here if he was 'scientific' or a 'critical thinker' he would value truth higher than he apparently does... iow he would 'think it through' and come up with a singular conclusion that was true for him...
So he is able to proceed even though as you describe: "he accepts 2 contrary beliefs..." I submit none of us could do that...
Or maybe we could act that way on the surface immediately just to avoid chaos, but at the same time we would order the assembly of a team to come up with an orderly transition plan... (I dont see that being done either...unless Summers is going to go in and do that but I am not holding my breath...)
rsp,
y,
of course words are not "made up from nowhere" what are you trying to say if you tell someone "google it" that they cannot use Bing or Yahoo or ask.com?
Or if you say "Xerox" this for me" that they cannot use a Canon copier?
This is how metonymy works, you come up with a new word or application of word that has a broad meaning for convenience...
Like you say "google it" instead of "Please proceed to access your favorite internet search engine of choice and enter the subject word into the text box and hit return and peruse the results until you find the information you are looking for ...."
They come from convenience...
"money" is a term of convenience...
'nomisma' is a specific term... 'argurion' is a specific term... They are more precise words than "money"....
Like we have 'vegetables' (money) and we have 'carrots' (nomisma/state currency) and 'beets' (argurion/silver)... etc..
Like in biology they have 'kingdom, phylum, class, order, family, genus, species' (which I learned 40 years ago via rote btw)... "money" is a higher order term in a hierarchical terminology...
y,
You're going to have to walk me thru this one:
"Memory, remind, warn, instruct, alone, unique. Sounds a lot like a description of money as a contract, accounting, debt."
I'm not following this...
rsp,
I suppose that "y" runs into average people all of the time who:
1. Know that fiat funny money is created out of thin air;
2. Think that's a good thing; and
3. Believe that unconstrained fiat funny money creation in the hands of the government would completely solve the problem of scarcity in the universe.
So what, you think that when people look at a dollar bill they believe it must have been dug up out of the ground? Anyone who's ever bothered to ask knows that fiat money is created 'out of thin air'. In my experience most people understand that money is a social construct, a way of keeping count. It's mainly just weird people like yourself who believe it should be a shiny metal fetish object to be "cherished" and "beloved".
MMT doesn't argue that "unconstrained fiat funny money creation in the hands of the government would completely solve the problem of scarcity in the universe" so as usual you're talking out of your ignorant ass.
Scott Sumner recently pointed to the "hot potato effect" (HPE) in the context of market monetarism, where he imagines that fear of loss of purchasing power will holders of money into goods, thereby increasing spending on capital and consumer good, reducing saving and liquidity preference and increasing NGDP.
If ordinary people were reluctant to hold paper, it is true that they would treat it like a hot potato on receiving it and quickly try to unload it for something hard, but this would not reduce saving desire and so would not necessarily increase spending. People could and likely would just convert their cash to other saving vehicles, such as harder currencies, which is reason that the Swiss franc is a safe haven, or buy money-like assets such as gold that do not affect GDP.
We saw a HPE during the Asia currency crisis, for example, and now with the rupee. However, that is not the case with stronger paper currencies like the USD, in spite of their being fiat. Moreover, the historically low interest rate suggests a historically high liquidity preference and the amount of cash in circulation is historically high.
There is no evidence of the dollar being a hot potato, and the call of the market monetarists to turn it into one through Fed policy suggests that also.
Matt Franko,
I see your point that you've also been making a smiliar point to Obama experiencing Doublethink and he's 'unable to think it through'…
But then you said it's possible he just doesn't value truth as much as we do. I think that admission supports what Rohan was saying earlier about Obama lying…
It's equally possible that Obama has 'thought it through' and has valued 'not opening that can of worms' more than 'the truth'.
So, it's possible he's experiecing Doublethink, but it's also posibble he's lying (for whatever reasons).
I think it's reasonable to make the leap and suggest Obama is lying.
Either way, does it really matter if we call them ignorant or evil? They're not being honest either knowingly or not knowingly, or somewhere in between (doublethink). I think for every person it's going to be somewhere unique on the spectrum.
why are you arguing that she shouldn't be writing papers? If she wants to get involved in 'hanging ten' I'm sure she can do that too. I'm puzzled by your response to this paper.
Agree, y. Still puzzled.
and Roger, I again, think you miss the significance here when you say this:
'It is, however, mostly a topic for those within the legal profession. Most others will hear of it ONLY during occasional court cases.
What's it mean for all the thousands of other discipline-specific jargon?
http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2012
Unfortunately, not much.
Economists noting semantic symbols as a legal institution? Whether that occurs or not, don't count on it changing public policy overnight. Economics would have to become a subset of law, for any meaningful convergence of the slangs the two professions use."
The Legal profession is a) the politician class and their legislative drafters, b) those primarily responsible for crafting policy at the end of the day, and c) those with whom the buck stops on any other form of idea (try to scale up an illegal currency operation, see how far you go).
Moreover, the language of law is the language of human rights, of the social compact, and of the constitutional myth that unifies the country.
When you win the lawyer argument, you win the ball game. No other field has anywhere near the authority, apart from economists who essentially appropriated it because we were too lazy to do the math and let them. So yes, I agree economics should be an extension of legal thinking.
See, e.g. Warren Samuels on Legal Realism and the Burden of Symbolism.
And again, I say "what do you mean, hang ten?" I'm puzzled why it is ok for certain others on this blog and elsewhere to devote hours to writing posts that barely anyone reads, with no real policy change strategy linked to it, whereas someone like Desan that can potentially shape the minds of an entire generation of policymakers and national leaders (think Mankiw's Ec10 for lawyers) is getting shit. It baffles me.
y,
I wont speak for Roger but for myself I just dont see any large value in stuff like this...
I AM NOT SAYING SHE IS WRONG OR WASTING HER TIME OR SHE IS A MORON... AND 'I AM RIGHT' OR WHATEVER...
I just dont understand the significance of this type of thing... It could be just me and my brain does not work this way...
I cannot understand why we have to go back to John Lock or Aristotle or Alexander Hamilton when we have brains in the here and now that can analyze and understand how to operate the monetary system of our economy for our own purposes TODAY...
Why do we need John Locke's permission??? or Aristotle's? What are we saying here: "Well John Locke looked at things this way so perhaps we should too"? or what?
Look I understand that these people have their historic places and we can read their stuff and it can be mentally stimulating and may help us see something we were missing, etc... get things in perspective, etc.. ok I get it.... I actually like to do this type of thing myself from time to time...
But are we going back to read the Wright Bros to figure out how to design an F-16? Please!
Can we get in the here and now?
We have ALL in govt/academia/media going around saying the govt is like a household and "we're out of money!" they are either lying or complete morons (take your f-ing pick!) all efforts should be brought to bear on exposing this outrage...
they are ALL either frauds or negligent, we have to expose this to as many people as possible...
I dont see how an analysis of Lockes stuff from back when we under the gold/silver systems can be of any significant relative value TODAY ....
Are we "waiting for the lawyers to catch up" or something? Do we have to? Maybe we do.... maybe this is the way it has to work and I need to develop more patience...
Sorry for the rant, bad day...
rsp,
What the value in this sort of stuff?
In one word
I-N-S-T-I-T-U-T-I-O-N-A-L-I-S-M
MMT is institutionalist.
UMKC economics is an institutionalist department.
Chartalism is institutionalist.
"Hyman Minsky's work represents one of the most important links between Post Keynesians and Institutionalists"
— Dimitri B. Papadimitriou and L. Randall Wray in The Economic Contributions of Hyman Minsky: Varieties of Capitalism and Institutional Reform
Money is the basis of monetary economics, and money as currency is first and foremost a legal institution in modern states. Moreover, debt, the other dimension of money in the broad sense, is also a legal institution. Without the solid basis in law they have neither currency nor debt could function the way they do in modern economies, any more than a market can, which is also a legal institution. All these institutions are constituted of institutional arrangements that are precisely specified in law and enforceable in the legal system.
Failure to take this sufficiently into account leads to all sorts of nonsense in economics other than as simplified conceptual models that don't model current reality.
Rohan,
this blog is #129 in the country in terms of economic influence:
http://www.onalyticaindexes.com/2013/07/31/top-200-influential-economic-blogs-aug-2013-2/
We're ahead of WaPo's WonkBlog, CNBCs, Fox, any of the Peterson associated blogs, Roubini, many others... take a look.
We might be close to cracking the top 100 if you take out the Austrian ones ahead of us...
(NEP of course is at 45 rising...)
It all adds up... there is probably a small army of biologists out there that read Roger's stuff... and it makes sense to them...
btw, "the jury is still out" on whether she "gets it" or not (pardon the pun;) (ask her if she thinks we can 'run out of money' that is the 'tell'...)
rsp,
Matt,
"I'm not following this..."
The English word 'money' originally comes from the Latin 'Moneta'.
'Moneta' was the name of the Roman goddess of memory.
Moneta was also an epithet or title given to the goddess Juno.
‘Juno Moneta’ was the aspect of Juno associated with memory.
The temple of Juno Moneta was a place where historical and official records were kept, including the books of the magistrates, and the records of annually elected consuls.
According to Ovid, Juno Moneta "maintained in her temple an unimpeachable record of historical events".
The temple of Juno Moneta was where Roman money was minted.
-----------
A ‘record’ is: "a thing constituting a piece of evidence about the past, especially an account kept in writing or some other permanent form… Origin: from Latin recordari 'remember'.
-----------------
Money – moneta – memory – remember - record - account
Money is a record. It is “a system of accounting” (Graeber).
Money is a record. It is “a system of accounting” (Graeber).
But you cannot account with fiat funny money. As Taylor Conant tries to so politely point out to Warren Mosler:
This is an incredibly important point overlooked by almost all participants in this debate. There are two things to note here. First, because the government hasn't made any "real" promises (ie, "A 5lb. chicken in every senior citizen's pot"), the real social safety net supposedly provided by Social Security, Medicare, etc., is ALWAYS up for negotiation within the political process, meaning that at any time what the political process actually decides to provide beneficiaries with and what they thought they were bargaining for when they contributed to the system (for example, what they gave up in real terms at the time in taxes versus what they get back out in real terms in benefits) might be vastly different. No explicit (real) promise can be kept because no explicit (real) promise has been given. Second, the fact that the government hasn't made any promises in real terms doesn't change the fact that whatever it ultimately gives out to beneficiaries in nominal terms WILL have a real cost to the non-beneficiaries in society as far as what they'll have to forgo.
I think this point bears dwelling on and repeating because time and time again I have seen the MMT disciples respond to concerns about this future resource allocation problem by attacking critics for being so simple-minded as to think we'd "run out of dollars" because it's "just an accounting problem." ie, "Social Security can't go insolvent because the government can create more dollars to satisfy the dollar-denominated obligations at will". This is not what I, in being critical on this point, have ever been worried about (the supply of dollars). What I have been critical about is that in real terms the promises being made will either not be kept in the way future beneficiaries are expecting, or else they will not be kept in the way non-beneficiaries will be expecting. That is, in real terms, either future beneficiaries will get a lot less out of the system than they thought, or those funding the system will put in a lot more (and have a lot less to keep for themselves) than they thought. Either way, some group is going to be disappointed and there is no magic solution to leave both groups satisfied in real terms.
http://publicdebates.blogspot.com/
"Promises" made with fiat funny money are non-existent and would fail as terms of a contract for lack of specificity. As Alexander Hamilton said, such a devaluation is a shameful national default. Certainly everyone but you Neo-Leninist MMTers can see that.
Y, Rohan,
You're misrepresenting things your own way.
All I'm saying is that:
1) we need MORE attention to the Middle Class, Jane/Joe Sixpack audience FIRST.
2) As a prerequisite for every in-discipline effort.
That does NOT preclude anyone's effort of any sort whatsoever. It simply asks people to also write for general audiences too, and actually first. Or at minimum, one for one.
Otherwise, as we all know, data piles up in depots, un-accessed, un-used & un-leveraged by the functioning electorate.
Stockpiling data & context awareness in specialty venues is not much different than hoarding most fiat currency in the hands of the 1%.
Currency is information. Information & context awareness are meaningless if not adequately dispersed.
What's the problem with that concept?
Look at Tom's comment here:
http://mikenormaneconomics.blogspot.com/2013/09/what-is-question-looking-beyond-islm.html
then move along?
Again, there is a good reason for an MMTer to NOT quote Alexander Hamilton because, inter alia, it will tend to refute everything that MMTers claim to be true about money. The "dollar" as mentioned in the Constitution was an existing foreign Spanish coin and the 1761 standard for the coin was 377 grains of fine silver. Dollars were the primary unit of account and money in circulation during the period leading up the establishment of the Constitution.
As Treasury Secretary, Hamilton wrote:
"A resolution of Congress, of the 6th of July, 1785, declares that the money unit of the United States shall be a dollar; and another resolution of the 8th of August, 1786, fixes that dollar at 375 grains and 64 hundredths of a grain of fine silver."
Hamilton then proposed that the Dollar be defined as 371 grains and 1/4 of a grain of pure silver which he stated was "within a small fraction of the mean of the two last emissions of dollars—the only ones which are now found in common circulation". ON THE ESTABLISHMENT OF A MINT. Communicated to the House of Representatives, January 28, 1791.
http://tinyurl.com/o6fa82n
In the same communication, Hamilton also states that the quantity of gold and silver in the new coins cannot be less than before without disturbing prices and causing inflation:
It supposes that the coins now in circulation are to be considered as bullion, or, in other words, as raw material. But the fact is, that the adoption of them as money has caused them to become the fabric; it has invested them with the character and office of coins, and has given them a sanction and efficacy, equivalent to that of the stamp of the sovereign. The prices of all our commodities, at home and abroad, and of all foreign commodities in our markets, have found their level in conformity to this principle. The foreign coins may be divested of the privilege they have hitherto been permitted to enjoy, and may of course be left to find their value in the market as a raw material. But the quantity of gold and silver in the national coins, corresponding with a given sum, cannot be made less than heretofore, without disturbing the balance of intrinsic value, and making every acre of land, as well as every bushel of wheat, of less actual worth than in time past.******
A general revolution in prices, though only nominally and in appearance, could not fail to distract the ideas of the community, and would be apt to breed discontents as well among all those who live on the income of their money as among the poorer classes of the people, to whom the necessaries of life would seem to have become dearer. In the confusion of such a state of things, ideas of value would not improbably adhere to the old coins, which, from that circumstance, instead of feeling the effect of the loss of their privilege as money, would, perhaps, bear a price in the market, relatively to the new ones, in exact proportion to weight. The frequency of the demand for the metals to pay foreign balances, would contribute to this effect.
Among the evils attendant on such an operation are these: creditors, both of the public and of individuals, would lose a part of their property; public and private credit would receive a wound; the effective revenues of the government would be diminished. There is scarcely any point, in the economy of national affairs, of greater moment than the uniform preservation of the intrinsic value of the money unit. On this the security and steady value of property essentially depend.
Thus,
1. The government can run out of dollars.
2. The value of the dollar in commerce did not arise upon diktat of the state.
3. We know from Farley Grubb that fiat money is illegal and unconstitutional in the USA.
4. The purpose of fiat money is to avoid accounting, so that the government can win power by making ephemeral "promises" that it really has no intention to keep and fail for vagueness.
ISLMists, lol.
bob, see Warren Mosler's replies to Tyler Conant below the first article:
http://publicdebates.blogspot.com/
Mosler: ****To the best of my knowledge in fact it's emphasized by all credible mmt proponents I know of. It's a case of the obvious, as explained in my book.
Except:
a) It's never really explained and
b) It is fatal to MMT and fatal to civilized society.
Bob, if you guys persist long enough you might be able to get future originalist presidents and an originalist senate to appoint and confirm enough members of the Supreme Court that agree with this to reverse precedent and require the US to issue only metal coins according to original specification.
And I did not quote Hamilton because I agreed with what he said, but as an example of how he never meant America to be a democracy "of the people, by the people, and for the people, but rather a republic controlled not longer by the privilege of birth but rather by the privilege of wealth. He wanted to make America along British lines, only replacing the monarchy with a strong executive and the hereditary aristocracy by the wealthy. But the rest was a copy of British institutions, and for Hamilton the closer the better, since he held them to be the best yet devised by man.
1. A dollar is not a spanish milled dollar coin these days is it, you stupid person.
2. The prices in your local shop are not set by diktat and no one said they were, you stupid person.
3. We know that Farley Grubb has an opinion, you stupid person.
4. You understand next to nothing about money or the history of money, you stupid person.
a) It's never really explained
Of course inflation is explained in terms of availability of real resources relative to money creation, both currency and bank money. Austrians just disagree with the explanation because they have a non-standard definition of inflation and see "fractional reserve banking" as "counterfeiting."
b) It is fatal to MMT and fatal to civilized society.
China never had precious metal-based commodity money or a money of "intrinsic value," and they developed one of the high civilizations. They were not eclipsed by the West due to their monetary system but because they remained closed to the rest of the world, taking themselves to be the center of the universe, which is what "Middle Kingdom" actually means. Prior to the rise of the industrial age in the West, they possessed superior technology.
y,
Well maybe the uninitiated came up with 'money' because it is a derivation of 'moneta' which was the location of the mint... They say "we're out of money!" short for "We're out of that stuff that comes from moneta!"
See 'rote learning': "one who engages in rote learning may give the wrong impression of having understood what they have written or said."
they didnt understand it they just knew they needed it and came up with a slang term for it...
Under the nomisma system, they had sub-categories of coins with differing relative value...
They had the denarius (made of silver), the stater (I believe of silver also, the drachma (Greek, of silver), as (of copper alloy), aureus (of gold) perhaps others...
So these all came under the category of 'nomisma'... Aristotle above explains the origin of the term they defined for their system that they at one point designed and provides also a system design objective in the paragraph above...
http://en.wikipedia.org/wiki/Design_objective
So you cant ask today: "What is nomisma?" Aristotle records and defined that system for you as it survives in 'Politics' and 'Ethics' and documented much of their whole process for it over 2,000 years ago..
However, as recently as Dec 2010 Wray STILL has to write a paper trying to figure out what 'money' is titled "Money" here:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1739727
Graeber above "money is a record" ... Wray from the paper "money is debt"... you: "money is an accounting system"
Here are equivalent statements: "vegetables are carrots".... "vegetables are beets", "vegetables are broccoli", etc...
This is all an absurdity (to me anyway, and perhaps to Roger too) this is chasing around a metonymy and is all BACKWARDS and is not helpful...
ie You dont see Aristotle above asking "What is nonmisma?" He's going over their system design objectives and associated terminology...
One of Roger's main points is that you have to have objectives FIRST... THEN the system details and associated terminology follows... Its like we have had a term foisted upon us and now are trying to figure out what it is supposed to mean...
We're chasing the slang terminology all around and have no objectives... Roger has observed social species and they are not supposed to act this way... it violates observed biological principles and btw engineering principles also... probably others..
rsp,
ps As far as the "goddess", Paul 'outs' her type right here:
"it is covered in those who are perishing, in whom the god of this eon blinds the apprehensions of the unbelieving" 2 Cor 4:3
She is part of a power that can literally blind the apprehensions of these people...
"Stupid and blind!" Mat 23:17
We fortunately have been made able to see...
"Aristotle records and defined that system"
He doesn't give much detail though, does he (?) beyond saying that money "exists not by nature but by law and it is in our power to change it and make it useless", and that "the same thing happens to money itself as to goods-it is not always worth the same; yet it tends to be steadier".
Did he give any more details elsewhere that you know of?
Mr. Hickey:
The Desan paper purports to be an examination of the historical and legal foundations of money. In such an alleged "legal" paper, Desan failed to mention a) that the dollar was a specific Spanish coin and was mentioned in the Constitution (and therefore cannot be created with keystrokes) or b) that it spontaneously arose as the primary money of commerce in the colonies prior to the enactment of the Constitution (say goodbye to the "statist theory of money"). She failed to mention that neither the Federal nor state governments have the power or authority to emit "bills of credit" or paper money. She failed to mention that the dollar created by the Coinage Act of 1792 was intended to follow the Constitution AND to replicate the pre-existing dollar already in commerce in order to maintain relatively stable prices and to not rob either creditors or the poor of their property.
If you want to argue that the plain and unambiguous words of the Constitution and the historical record should be ignored for some reason, then say so, but you should acknowledge the words and facts that you are ignoring and expressly state and explain why they should be ignored. MMTers can do nothing but ignore the truth and call names.
Take it up with the Supreme Court, Bob.
The 'Spanish milled dollar' coin isn't mentioned anywhere in the Constitution.
The 'Spanish milled dollar' is mentioned in the coinage act of 1792, which is no longer in effect.
The 'Spanish milled dollar' coin was issued by the Spanish Empire.
The Spanish Empire plundered silver from the New World, minted it into coins, and spent the new coins into circulation - massively increasing the money supply as a result. So your beloved Spanish dollar was the result of both aggression and money creation on a vast scale.
y,
Not been able to find much more (some details in other Greek classics can be picked up thru context via other authors...)
y,
It was over 2,000 years ago we're probably lucky to have what we have... and even that relies on translation and information intergrity being maintained thru out the milleniums...
It should be enough if you understand monetary systems and understand related human authority... libertarians may have trouble with it.
rsp,
Roger,
"It simply asks people to also write for general audiences too, and actually first. Or at minimum, one for one."
That's a very silly a priori rule to demand people to follow in all situations. I see no evidence it is a good thing to tactically bind ourselves to one playbook. We have plenty of people who can do the public translation of Desan's work. And arguably her participation in our *public* *free* *livestreamed* seminar on Thursday, *on this very paper*, is the type of 1-for-1 thing you are asking from her.
Your assertion, "Otherwise, as we all know, data piles up in depots, un-accessed, un-used & un-leveraged by the functioning electorate", is not necessarily true at all. Viz. Michael Woodford.
I don't think you have the insider knowledge or are thinking deeply enough through the tactical reasoning behind her decision to focus her energy where she does. The work she is doing will have huge ripple effects, and without the dense academic backing no op-ed or populist is going to cut the mustard.
Maybe you can focus more time on developing a feasible alternative roadmap that would achieve better results, and bringing it to bear, and less on broadside swipes at Desan for the way she is trying to do it from her vantage point.
----
Ugh, Bob.
Desan failed to mention a) that the dollar was a specific Spanish coin and was mentioned in the Constitution (and therefore cannot be created with keystrokes)
No. There is no mention in the Constitution of a requirement that the dollar remain synonymous with the spanish coin standard of 377 grains of fine silver. I don't see any evidence that Hamilton's concern about changing the grain content of a coin made its way into the words of constitution. The words "regulate the value thereof" seem quite open and ambiguous, compared to, say, "maintain the value thereof at 377 grains of fine silver." Now you may have a preference for a particularly narrow strain of originalism. Fine. But you don't have an originalist court, and there is no constitutional requirement that judges adopt originalism. So rather than trying to convince us that a particular act is unconstitutional under your originalist framing, how bout you try to convince people that your originalist framing is worth being taken seriously in the first place?
http://www.modernmoneynetwork.org/uploads/1/2/5/3/12534585/grubb_-_the_constitutional_creation_of_a_common_currency_in_the_u.s._1748-1811-monetary_stabilization_versus_merchant_rent_seeking..pdf
You will have to make a much more detailed and supported claim than that if you want a debate on this issue to get off the ground.
or b) that it spontaneously arose as the primary money of commerce in the colonies prior to the enactment of the Constitution
Try again:
http://www.lerner.udel.edu/sites/default/files/imce/economics/WorkingPapers/2012/UD-WP-2012-07.pdf
http://www.nber.org/papers/w13974
http://ideas.repec.org/p/dlw/wpaper/12-08..html
"She failed to mention that neither the Federal nor state governments have the power or authority to emit "bills of credit" or paper money."
Bob, you cannot simply just repeat the same argument without acknowledging we have had this conversation already. As I said before, nothing about the coinage requirement specifies the face value of the coins, which is the crucial issue today because, unlike then, the media in which the dollar is expressed is not a significant aspect of its overall value. So even if the government can only mint coins, not bills of credit, there is NOTHING in the constitution explicitly preventing it from issuing trillion dollar gold coins (only statute). Unlike back then, the government has a lot more stabilizing capacity through taxation to maintain the purchasing power of a trillion points of its unit of account, regardless of medium, so doing so would not necessarily lead to the devaluation of the currency that may have happened back then. So the point is academic.
Rohan,
You may well be right. Not sure why you're angry about this, and I apologize for ticking you off.
If C. Desan's essay changes the course of history, I'll be among the 1st to laud her.
My thesis is laid out here.
http://mikenormaneconomics.blogspot.com/2013/09/what-is-question-looking-beyond-islm.html
I just think we need to focus on DEFINING SUCCESS first, and then letting the bulk of the electorate define for themselves HOW to get there. (Gen. Patton's thesis.
http://www.brainyquote.com/quotes/quotes/g/georgespa106027.html )
All academics can adjust theory to fit immense, distributed and DISCOVERED operations AFTER the new operations are already selected by massively parallel trial and error.
Just don't see any reason to get your dander up about diverse opinions.
We're SUPPOSED to generate many opinions, and then select from them based on operational feedback. No reason to argue excessively beforehand.
The only intent that ever matters is a quiet resolve to say "Let's find out."
Bob,
""Promises" made with fiat funny money are non-existent and would fail as terms of a contract for lack of specificity. As Alexander Hamilton said, such a devaluation is a shameful national default. Certainly everyone but you Neo-Leninist MMTers can see that."
This is crap. I don't know who trained you at law school, Bob, but legal nominalism is a longstanding and widely accepted principle in monetary obligations:
See, e.g. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1763741
----
Matt, i'm not going to ask her whether she thinks we can run out of money. I know she doesn't think that, as i've said to you before. I've talked to her about this stuff at length, and if you read her stuff, you would know that as well. If you are unhappy with that and want to cross examine her to satisfy your own doubts, email her yourself and see what she says. Or, alternatively, you could watch the seminar she participated in at the MMN when we talked about the platinum coin in the question period and see her reaction.
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Roger,
I'm not angry, I am puzzled and somewhat frustrated that this conversation needs to be had among a group of people who are generally supportive of similar efforts and generally know better - particularly since we talked about this the other day and you mentioned that the original comment was the product of the article catching you at an off moment, and yet after what I thought was a resolution and meeting of the minds, you went ahead and reposted your same claim with minor additions that doubled down on, rather than changed, your original point.
Moreover, I am not "getting my dander up" about diverse opinions - as I said above, I welcome constructive discussion about alternative methods of achieving change (I personally think there are many definitions of success that may be valid here, and the biggest thing to do is remove the splinter in the collective conscious's eye, but i'm open to other pathways).
But what you did wasn't suggest an alternative method of achieving change, or note ways of improving Desan's work, it was to criticize the value of her work at all and suggest she give up on it in favor of "saving the middle class", a strategy which you have yet to articulate into an actual on-the-ground roadmap, apart from the writing of explanatory articles and blog posts on sites like this. I have no problem with that approach at this stage, but find it cognitively dissonant to adopt this approach and then criticize Desan for doing the same thing in an adjacent medium.
I also find this kind of language:
"If C. Desan's essay changes the course of history, I'll be among the 1st to laud her."
To be part of the same problem. Why are you sitting on the sidelines rather than thinking of how to help? It is very puzzling to me that this particular article continues to be singled out for attack, when it is merely the adoption of the same strategy that made MMT so successful in the adjacent, high-power discipline of law [and yes, Matt, lawyers do need to "catch up". When we get there, the landscape won't look the same ever again]. Would you even be here if people like Bill Mitchell, Randy Wray, Warren Mosler and Stephanie Kelton hadn't done, in their own field, exactly what Desan is trying to do for lawyers? Haven't you been working to help them achieve this goal? Simply saying "this conversation is sooooo stale" and passively-aggressively wishing Desan good luck is unhelpful, and comes across as a double standard given the level of grassroots support others in the Modern Money crowd continue to receive.
Desan's paper is a reframing that has the capacity to bring into the conversation a large number of important stakeholders and change agents. Whether it does so or not depends not just on the paper's existence, but on how it is interpreted and incorporated into general arguments by others in the movement, including yourself and readers on this blog. So a dismissive attitude is at best unhelpful, and at worst actively harmful to that cause.
Most generally, it is quite sad to me that out of everyone in this comments section, the person who has made the most meaningful attempt to substantively engage with the paper is Bob Roddis (appreciated, even if i do play hardball with you in debate), with Tom Hickey and Y providing valuable additions to that discussion. I would appreciate it a lot if you and Matt stopped trying hijack the conversation towards what you each want to talk about, and start engaging with the substance of the paper that was the basis of this post?
Rohan Grey:
This Grubb paper you noted for me is fantastic on its facts.
“The Constitutional Creation of a Common Currency in the U.S. 1748-1811: Monetary Stabilization Versus Merchant Rent Seeking.”
http://www.modernmoneynetwork.org/uploads/1/2/5/3/12534585/grubb_-_the_constitutional_creation_of_a_common_currency_in_the_u.s._1748-1811-monetary_stabilization_versus_merchant_rent_seeking..pdf
In 1787 would-be bankers saw paper-money-creation power as a profit bonanza whose potential could be reaped only if they could be rid of competing government paper money. The U.S. dollar currency union was a counterrevolution led by merchant-bankers intent on usurping state and federal sovereign power over monetary matters to enhance their personal power and wealth.
Naturally, his grasp of economics is limited and mostly contrary.
Neither the state nor Federal governments can issue paper money. The fact that the motive was to grant this “power” to private banks is irrelevant. There’s nothing else to say.
As Murray Rothbard demonstrated in “The Panic of 1819”, this practice of fractional reserve banking was simply fraudulent and should have been prohibited simply because it was fraudulent.
http://mises.org/rothbard/panic1819.pdf
This really isn’t a dispute about history. It’s a dispute about the nature of human action and thus economic theory. The historical facts you guys keep citing only reinforce Austrian analysis.
Bob, the debate here is about how the current system operates in a general way, that is, in potential, and how it actually operates in special cases like the US, given voluntary restrictions. It is also about the policy space that this affords and how to use it optimally for public purpose and distributed prosperity.
It is also about the differences between the existing monetary system (non-convertible, flex rate) in general in contrast other monetary systems (convertible, fixed rate) in general and what this implies for economic theory and policy.
You prefer the restricted policy space of a convertible fixed rate system, which Austrian economics recommends with an eye to private purpose and monetary stability. We prefer the more expansive policy space of a non-convertible flex rate system since it is better suited to meet public purpose including full employment and welfare provision as established as a purpose of government in the preamble to the US Constitution.
Two different and opposed political views both of which have their advantages and disadvantages depending on one's viewpoint. We see the world differently and I assume vote accordingly.
Farley Grubb states:
This new U.S. Constitution, ratified by the states and then adopted by Congress in 1789, profoundly altered the nation’s monetary structure. It was nothing short of revolutionary (Ferguson 1983, 404-405). Before the U.S. Constitution, the principal “inside” paper
money in circulation was issued directly by government legislatures and backed not by specie (the “outside” money of the times) but by the issuing government’s future taxes.2 Very few banks existed—none before 1782 and only three by 1787. AFTER THE U.S. CONSTITUTION, GOVERNMENTS WERE PROHIBITED FROM ISSUING PAPER MONEY. Instead, government chartered, but privately run and largely unregulated, banks proliferated—numbering 76 by 1805—and filled the inside paper money void by issuing banknotes backed by fractional reserves in specie. By banning the chief alternative competitor, the U.S. Constitution established the legal framework that allowed for the ascendance in the U.S. of the modern bank-based financial system.
http://www.modernmoneynetwork.org/uploads/1/2/5/3/12534585/grubb_-_us_constitution_and_monetary_powers.pdf
ht2 Rohan Grey
Farley Grubb states:
VIII. Epilogue
Today the U.S. has the same written Constitution in terms of monetary powers that the founding fathers created in 1787. Yet we have a national paper money that is backed not by specie but only by federal government taxes, or the good faith and credit of the federal government—a government that also has power to institute price and exchange rate controls on said currency (Rockoff). This paper money is also a legal tender, with the legal tender clause “This note is legal tender for all debts, public and private” printed on each note. It is issued by the Federal Reserve Banking system that, while only a quasi-government agency in the strict legal sense, is about as close to a national banking system incorporated by the federal government as one can get. Unless we take the original intent of the founding fathers in their debates and votes at the 1787 Convention on monetary/banking powers to be a devious ruse, then it is hard not to conclude that we have strayed far away from what they tried to prohibit constitutionally.
http://www.modernmoneynetwork.org/uploads/1/2/5/3/12534585/grubb_-_us_constitution_and_monetary_powers.pdf
"money in circulation was issued directly by government legislatures and backed not by specie (the “outside” money of the times) but by the issuing government’s future taxes."
This hits the crux of much confusion:
Yoking Public Initiative (policy space & policy agility) to
#1) a static asset (some commodity, including specie)
#2) a dynamic asset (future taxes)
#1 seems more stable to some, esp during "quiet" times; and, to be fair, SOME examples of that can be found (lets ignore accumulating statistics for the time being)
#2 seems more stable to others, esp during crisis times, when policy space/agility is make or break;
also to be fair, examples of that can certainly be found (again, let's defer accumulating statistics, for the time being)
Going forward is a judgement call.
It really comes down to arguments on whether we want MORE tools in our cultural toolkit, or whether we're afraid of our ability to use advanced tools.
This question is NOT one for even all economists to decide. (Every process is too important to be left to the supposed process owners.) Instead of over analysis of and argument over ... insufficient data, the context NEEDS outside oversight.
That kind of oversight is exactly NOT what we're getting.
We need some national conferences on this topic, to bring in more perspectives and more data ... and those conferences can NOT be of, by and for economists. The conference discussions should be of, for and by average Jane's and Joe's from OTHER disciplines (weighted towards Main St, not Wall St).
That's my story, and I'm sticking to it.
My money would be on the DoD not tolerating a return to the Gold Std. We made the switch in order to mobilize to end the GD & then win WWII. Fat chance most US institutions giving up that national agility ... but of course people are free to try to convince the electorate to go back to smaller vs expanded policy toolkits.
ps: the topic of fractional reserve banking keeps coming up
Note: there is NO fractional reserve banking in a fiat currency regime;
Unless you imagine some ways to fractionate Public Initiative.
ps: ps: seeing the specific directions this discussion has gone; I've removed my prior comments
As Rohan notes, all my personal thoughts were on threads I'm interested in.
It's a dangerous topic to dictate what diverse audiences may & may not add to any particular discussion. Diversity is not just hijacking narrow discussions. That's a dangerously limiting approach to OpenSource and democracy concepts.
Nevertheless, my personal interests were not being reciprocated by anyone here, so I don't mind accepting that and letting the discussion tune itself to the dominant signal flow. Some of that I can also comment on (see immediately above).
enjoy
Roger - I'm glad you didn't feel pressured to do that, although I understand your motivation. I personally have no problem with things remaining in the record, although i think this issue probably speaks to the need to transform, if possible, to some sort of Reddit system of comment weighting (if possible) so that people can contribute their own divergent thoughts at will without concern for diverting attention from the focal point of general conversation.
Bob - "Neither the state nor Federal governments can issue paper money. The fact that the motive was to grant this “power” to private banks is irrelevant. There’s nothing else to say."
You are adopting an extremely stylized interpretation of the history. The states HAD paper money. It only became illegal because the Federal government tried to make it so in an anti-democratic coup, so one could see the shift back towards paper money as more of a redress of an original ill than anything to mourn. The fact that this is anti-original intent goes to the living constitution vs originalist interpretation of constitutional law we had earlier, which there isn't a single answer on (it's a political issue) - Jack Balkin's work on living originalism and redemptive constitutions (http://www.law.yale.edu/about/14139.htm) is good on this.
To ignore the legality of paper money prior to the Constitution, and then to rely on the constitutional text as proof of some more general metaphysical principle (other than perhaps that oligarchy and power-grabbing are constantly recurring themes throughout history) is ridiculous.
Moreover, NOTHING here supports the inherent superiority of gold/silver currency. You need to make your case against the state paper monies if you really believe that, not by holding up some aristocratic slave-owners' opinions as triumphant proof.
It's not their constitution, it's ours - or at least, all of yours (I am an Australian citizen).
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