This paper develops the framework of analysis of monetary systems put together by authors such as Macleod, Keynes, Innes, and Knapp. This framework does not focus on the functions performed by an object but rather on its financial characteristics. Anything issued by anybody can be a monetary instrument and any type of material can be used to make a monetary instrument, as these are unimportant determinants of what a monetary instrument is. What matters is the existence of specific financial characteristics. These characteristics lead to a stable nominal value (parity) in the proper financial environment. This framework of analysis leads the researcher to study how the fair value of a monetary instrument changes and how that change differs from changes in the value of the unit of account. It also provides a road map to understanding monetary history and why monetary instruments are held.Levy Institute
Monetary Mechanics: A Financial View
Éric Tymoigne
1 comment:
Well written. It makes clear the differences between government fiat and money and why there is so much more money than government fiat without resorting to usual confusing accounting gimmicks. It will be a helpful paper to reference after the taxes drive fiat explanation sinks in; once people are ready to begin to start thinking about the next level of savings and investment without becoming muddled in the banking and reserves non-sense that usually becomes a distraction from the larger point of the paper.
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