It was suggested in the previous post that the notion of ‘value of the currency’ adopted in Modern Monetary Theory (MMT) seems compatible with Marx’s theoretical framework, provided it is acceptable in that framework to consider a state currency, and not only gold or some other commodity, as “true” money. As was explained in the post, currency value in MMT can be defined as the amount of labor time a worker must perform in order to obtain a unit of the currency. An advantage of this definition, if applied in Marx’s framework, is that it offers an explanation for the value of fiat currency that can be expressed in terms of socially necessary labor time.heteconomist
Significance of MMT’s Definition of ‘Value of the Currency’
Peter Cooper
26 comments:
How is this any different than just saying that the value of money is whatever the current money price of labor is?.
But I'm also wondering what is gained for economic theory by trying to develop some kind of theory of value independently of a theory of acts of valuing. What is being explained here? What scientific role does this theory of value as such play?
It seems to me that all that is really important for economic theory are prices. Relative prices are ratios between various kinds of goods and services, based on the dispositions people have to exchange those goods and services for one another. If we know the exchange ratio between X and Y, we can speak of the Y price of X or the X price of Y.
One of the goods people exchange is money, and when we look at the relative price ratio of money and some good X, we can speak of the money price of X or the X price of money. Because money is a particularly important exchanged good, due to the fact that it is one of the goods exchanged in almost every exchange in an economically sophisticated society, we make a special point of the money price of X, and often refer to it as "the" price of X.
But the value people attach to money is fluid. They will value a given quantity of money based on their expectations of what they can receive in exchange for it, either now or at various more-or-less definite points in the future. And the fact that they actaully do assign value to money in certain ways underpins a self-sustaining human convention that all by itself explains why they are rational to assign that value.
How is this any different than just saying that the value of money is whatever the current money price of labor is?
That - the price at which people sell their labor - isn't enough. You also have to know what they want to buy with the money they get, and at what price. This is driven by purchases from the state = taxation nowadays, so this is just another way of putting Mosler's remarks that government spending and taxation basically determine things.
You are right that the only thing that matters is prices. Both labor sales - ultimately to the GOV, and taxation, purchases by labor from the government are the GOV & the NONGOV selling, in financial, creditary terms, nonfinancial things with prices. These two pricings constitute the dependence of this theory of value upon acts of valuing/pricing.
Finally, it can be very misleading to think of money as a "good", a commodity as usually understood in economics. Money is debt, a social, moral relationship, which can be treated as if it were a good by its negotiability, thereby being treated as a commodity, a good. So on the individual level we can treat it that way. But study whole societies, or individual transactions deeply, that way and you get neoclassical nonsense or worse.
The good of doing this is the same as the good of all of MMT, monetary economics, mathematics and philosophy - doing the accounting correctly. It is always completely trivial once it is done right, once you get it. But rarely obvious.
Dan,
Wray:
"(1) As R. W. Clower (1965) famously put it, money buys goods and goods buy money, but goods do not buy goods.
(2) Money is always debt; it cannot be a commodity from the first proposition because, if it were, that would mean that a particular good is buying goods. "
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1739727
As far as "money" (metonym alert) being "one the the goods people exchange...."
If we are using mass measures of the metals (gold/silver/copper) as "money" and we account for things in mass measures of these metals, I see your point about "money is a good"....
But if we instead are using state currency as "money" then I have to agree with Wray that "money" is not a "good"...
So it depends on what system we are using, ie mass measures of the 3 noble metals, or, state currency where what Peter is getting at is Warren's assertion that all prices are a function of what govt pays for/lends against goods and services... in this case labor...
rsp,
Well, C, I think of debt-mony as only one of several possible kinds of money. The important thing about money is that it is something that it is connvenient to exchange. The negotiable and portable debts of a third party are one thing people find convenient to exchange, but there can be other things.
Also, while I think bank money is genuine debt, I don't think the money the government issues is actual debt. When you are in possession of some of the government's money, that doesn't mean the government owes you anything. My view is that the doctrine that the government's money is a liability of the government is a phoney-baloney myth that central banks maintain so that they can put together a fictional "balance sheet" that gives the public some comfort by allowing them to imagine that the central bank is an enterprise structured like a conventional commercial bank, and that it keeps managerial track of its so-called "equity." But a central bank, as the ex nihilo issuer of the fundamental unit of financial transactions in the society, has no purely financial equity position in any economically meaningful sense, and it states such a position only as a rough ratioanlization for its money-supplying and price stability policies.
Here's an intro to the debate.
Wikipedia - Value (economics)
Matt, it seems to me that to say goods don't buy goods is just another way of saying that when people swap goods for goods, they don't call it "buying". If I swap you a 1969 Spider-Man comic book for your Carl Yastrzemski baseball card, we don't say I bought the card. If I swap you a $100 bill instead, we do say I bought the card. But I don't think there is any deep conceptual distinction here. A swap is a swap.
I think the most important contribution of MMT to the theory of money is just it's revival of chartalism: the recognition that one way for getting people to value some kind of thing is to require them to get some of it and give it to me. If I can make such a demand in conjunction with a believable promise that I will exact some kind of punishment on them if they fail to get me the stuff I am requesting, then I can succed in getting them to value that stuff. It can even be stuff I have manufactured myself.
There are a couple of paradoxes in economics and finance wrt to the meaning of "value" and its relationship to price.
1. In a transaction price cannot be equated to value since the buyer values the good more than the money cost of the good and the seller values the good more than the money price of the good, or the sale would not take place. Marx explained that in terms of C-M-C, M-C-M, and M-C-M' in Das Kapital I, 2.4. Keynes drew the distinction of liquidity preference to explaining this in developing his liquidity preference theory of value.
2. Market price, especially in financial markets, fluctuates even though fundamentals do not change. Value is usually conceived in terms of fundamentals and return, so it doesn't seem logical to equate price with value in cases like this when fundamentals do not change, which they seldom do in relation to price changes. So financial analysis uses concepts such as book value, replacement value, market value, and present or discounted value to clarify aspects of valuationl
"In a transaction price cannot be equated to value since the buyer values the good more than the money cost of the good and the seller values the good more than the money price of the good, or the sale would not take place."
Tom, that's not a paradox at all if one moves to an agent-relative theory of valuing and an understanding of diminishing marginal value. If I already have 101 grapefruits, the value I assign to keeping 101 grapefruits is hardly differs from the value I assign to losing one grapefruit and having 100 instead. But if I have zero pineapples than the value I assign to gaining one pineapple might be significantly higher than the value I assign to remaining with zero pineapples.
Similarly, if you already have 101 pineapples, the value you assign to keeping 101 pineapples is hardly differs from the value you assign to losing one pineapple and having 100 instead. But if you have zero grapefruits than the value you assign to gaining one grapefruit might be significantly higher than the value you assign to remaining with zero grapefruits.
Under these circumstances, when I trade you one grapefruit for one pineapple, each of us loses something he values very little and gains something he values much more. So the exchange makes perfect sense. The exchange only seems paradoxical if one insists on analyzing exchange behavior on the basis of a single uniform scale of impersonal value, and then tries to combine that view, incongruously, with the idea that an exchange won't occur unless it is mutually profitable.
No theory of the special role of money is needed to explain what is going on here. One can explain it even in the context of barter.
On market price and fundamentals, both can fluctuate, and os changes in market price can have different sources. Prices can fluctuate because of the uncertain processes by which information about fundamentals in an uncertain world is communicated to market participants. But even if there is perfect information about the fundamentals, tastes can change and prices could change for that reason.
So for example, the price of tuplips could move up and down because there is confusion and risk-fraught speculation about the supply conditions for tulips. But the price of tulips could also change because consumers can't decide how much they really love tulips.
Dan, I believe that is essentially the neoclassical theory of value based on diminishing utility that equates value with market price. That's one theory of value that's been advanced to address the issue.
Part I
Dan: Well, C, I think of debt-money as only one of several possible kinds of money.
There isn't, never was and can't be any other kind. The human race has only ever used one thing for money: the social/moral relation of credit/debt. And it always works fundamentally the same way. There is only one money system = accounting system.
One problem is using the word "debt" in a strange and unnatural way, to mean "debt for" (something). "Something" which is usually taken to be "realler" than the debt. That is not the usual and fundamental meaning of debt, which is abstract social/moral obligation - a very "real" relation between two persons. "Debt-for" can't be fundamental, because all physical things or services can be perishable or impossible or irreplicable: If a debt is incurred "for" some thing that then perishes, anybody would say that the debt remains, and that is how the law usually works and represents our primate social/moral concepts.
If anyone has been following Lord Keynes's discussions on mutuum debts, the point is that the mutuum debt is the most fundamental, most genuine. Other legal types are understood in terms of mutuum debts, because they stipulate an identity between two things spatially and temporally separated, and the acts of valuation Dan emphasizes above.
The important thing about money is that it is something that it is convenient to exchange. The negotiable and portable debts of a third party are one thing people find convenient to exchange, but there can be other things. No, that is not the important thing about money & debt. There was money & debt in Old Kingdom Egypt, but no exchange. John Henry's Mitchell Innes volume article and other Kelton/Henry articles covering OKE are very enlightening. The important thing about money and debt is that it is logically impossible to have the division of labor without credit, and the development of credit into money allowed the division of labor on a vast scale.
Finally, there simply is NO medium of exchange & never was or could be. Nothing has ever been used as a medium of exchange in human societies. That's not how monetary exchanges work. Geoffrey Gardiner, who is well worth reading many times, rightly focuses on this statement of Mitchell-Innes. The commodity /medium of exchange theory tries to imagine things as exchange based on bartering a medium of exchange. But if you look carefully, you see that a barter, chalk for cheese, transaction is not simpler but more complicated than a creditary transaction - because barter is composed of two creditary transactions that cancel each other. Deep down it is always credit.
Part II:
Also, while I think bank money is genuine debt, I don't think the money the government issues is actual debt. When you are in possession of some of the government's money, that doesn't mean the government owes you anything.
The government most certainly does "owe you something", and it works exactly the same now as if there were a gold standard, and it works exactly the same as with bank debt/money. See Mitchell-Innes. Or see common sense! If the government did not owe dollar holders, why on earth would anybody hold dollars? Dollar bills are actual government debt, no matter if people think they are or not. Some people get misled by a number of misleading MMT slogans that should be retired; it is just not factually true that the only thing that the government gives you when you give it a dollar is another dollar.
These bad concepts and totally useless and nonexistent distinctions lead to obviously wrong factual statements. Anything the government sells for some price - which includes the act of taxation - is by that act putting the currency on an anything-standard, exactly like (selling gold in) a gold standard. Using the "debt-for" construction, you can then say that the dollar is a "debt-for" that "anything", and that is just as true as a dollar being a "debt-for" a quantity of gold 100 years ago.
Not to harp on my dumb old example, but when I brought up Teddy Bears, you said things like the government doesn't maintain a store of Teddy Bears. Of course it does - that is what the Teddy Bears behind the gift shoppe counter and in the storeroom are. And the price tag is just an offer to sell a TB for some quantity of abstract social/moral debt = dollars. There is no difference whatsoever here with Fort Knox and a gold standard. There really is a real world difference between the correct MMT story and the bizarre things the familiar but bad concepts force one to say.
But a central bank, as the ex nihilo issuer of the fundamental unit of financial transactions in the society,
If you differentiate between the government/treasury and the central bank - the Treasury is the issuer of the fundamental unit, NOT the central bank. And this gets the history wrong, interchanging myth and truth and who is saying what. Thinking of money as credit/debt is what good Keynesian/creditary/institutional economists did in the middle of last century. Thinking of money as the fundamental concept and of the CB as the issuer is what the monetarist/neoclassicals/bastard Keynesians did. The "phoney-baloney myth that central banks maintain" is "thinking that the government's money is" NOT "a liability of the government".
The not-liability myth and the rest of the confused non-MMT stories make things so incredibly complicated, incoherent and wrong. The true and clear MMT story just requires careful thinking about fundamental concepts, a philosophical change of point of view at the beginning, of the kind so common and useful in classical philosophy and modern mathematics.
@ Tom Hickey (September 4, 2014 at 9:19 PM)
I know Wikipedia is an accessible source, but I strongly advise against relying on it for these purposes:
http://aussiemagpie.blogspot.com.au/2014/07/marxism-for-beginners-wikipedia.html
"It seems to me that all that is really important for economic theory are prices. Relative prices are ratios between various kinds of goods and services, based on the dispositions people have to exchange those goods and services for one another."
If that is the case, then you should be happy to settle for neoclassical microeconomics. As it is, it already explains the "ratios between various kinds of goods and services, based on the dispositions people have to exchange those goods and services for one another". And you say that's what's important.
Many would argue that explanation is false. But if you don't mind that, or you don't agree with that, you already have it and it's widely accepted.
"If the government did not owe dollar holders, why on earth would anybody hold dollars?"
Because the holders can accept authority? The holders are not libertarians?
(Calg your question here is in a strong libertarian context...)
The holders understand that we have come together under law and established that we collectively agree to use dollars so they just comply with the law?
No coercion or advantage ("owe") is required with these people, the coercion (jail) or advantage ("what's in it for ME?!" or "if I agree to use this, what am I owed?") is only required for the libertarians among us who have trouble with authority... (see bitcoin...)
If you are a bit libertarian you may not be able to understand this and want to drone on about "why?" ... people who understand authority will just comply with the law once it is established.
So you may be asking "why?" as a libertarian.... someone like myself would ask "why not?" as the law is clear ("is legal tender for all debts public and private...") and hence authority dictates it, so comply with authority or suffer the consequences... this is textbook authority 101..
Aristotle: "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." — " Ethica."
The key words here are "WE" and "OUR"...
rsp,
Sorry Calacagus, I think you position is too dogmatic. You are just choosing not regard conventional media of exchange that have emerged from time to time as entitled to the label money.
I also think that it makes no logical sense to classify something as a debt, if that debt is not a debt for something. If there is nothing that I owe a person, then I have no debt to him.
And if a society posseses debt instruments, but those debt instruments are not also used to carry out exchanges, then I would say that is a society in which those instruments are not yet playing the function of money.
Also, once you go on to say that there actually are no mediums of exchange, not even debt instruments, then it seems to me you have left the planet. This is a completely different question from the question as to whether barter has ever been an important independent feature of human societies. But making a swap of goods seem more complicated because it "cancels two debts" whereas an exchange with money cancels only one, seems inadequate to the facts of human contracts. In every exchange, there is an implicit of explicit contract relating to to what things will be exchanged, and on what terms. It can be, "X gives Y one comic book and Y gives X one baseball card", or it can be "X gives Y one comic book and Y gives X one hunderd dollars." There is no fundamental conceptual difference. It is all exchange. So there is a two-sided debt in both cases.
As to the idea "See Mitchell-Innes. Or see common sense! If the government did not owe dollar holders, why on earth would anybody hold dollars?" I think you are clinging to a myth in the same way the gold standard folks do. It is very easy to understand why someone someone would hold dollars even if they are not debt instruments with which the government is promising you something. You are willing to accept dollars in exchange for your labor, because you know you can take those dollars to the grocery store and the grocer will give you stuff in exchange for the dollars. And the grocer is willing to accpet the dollars because the grocer can also take them to his supplier and get stuff for them. And the supplier is willing to accept dollars, because he can take them to some laborers and get labor in exchange for them. At the end of the process, the supplier has obtained some labor, the grocer has obtained some supplies, and the labirers have obtained some gorceries. It's a perfectly understandable process, and there need be no "foundation" of value external to the exchange relations themselves to explain why it happens.
The government can do various things to help stabilize the exchange value of a dollar over time, including such things as requiring periodic deliveries of dollars to the government. But there is no meaningful debt or "liability" attached to a dollar. If the exchange value of dollars was hyperinflated away to nothing, and you took your old dollars to the government to demand payment of the "debt", you would be laughed at. All they owe you for the dollars is other dollars.
MMT, like almost everyone else, has been taken in by the fact that the Fed keeps a balance sheet, in which they record the dollars they issue as a liability. This is just one of those noble lies government tells, an anachronistic holdover from gold standard days. The balance sheet gives people comfort, and makes people think everything is ship-shape. But it's really something like a novel, telling a tale of a fictional reality that doesn't exist.
"If that is the case, then you should be happy to settle for neoclassical microeconomics."
No, neoclassical economics is also filled with models based on psychological and sociological nonsense, like the so-called rational expectations hypothesis (which would more accurately be called the "omniscient expectations hypothesis".) That's utterly goofy. People are crazy, limited and volatile. Also, neoclassical economics thinks there is a domain of pure economics that is distinct from the study of society, politics, moral relations and power, but there isn't.
I'm just talking about the value theory. We can understand the processes of how capital and power are accumulated and concentrated, and then used to dominate others, without making the assumption of a single, objective, agent-independent measure of value.
"If the government did not owe dollar holders, why on earth would anybody hold dollars?"
This seems to imply that state currency as a government liability is a necessary condition for currency demand, whereas MMT economists argue that it is a sufficient but not a necessary condition.
Moreover, it does not seem to be true historically. In ancient times, king owned the land, hence, the metals, and the crown operated the mines or minerals (salt -> salary), which at the time were largely surface operations. The king then used metals and minerals as assets to transfer private resources to crown use, chiefly for military use, instead of highly unpopular confiscation or pressed service.
Even today, coin is booked as a government asset, and they are accepted even though the composition is base metal.
So it seems to me that the sufficient condition is that government accept its own currency in satisfaction of obligations that it creates for others that is denominated in its currency, such as taxes, tariffs, fines and fees. IIRC, in the early days of the American republic, tariffs were a more significant source of federal revenue than taxes.
IN the digital age, why couldn't the Treasury and central bank functions be combined and the Treasury issue digital currency and book it as a government asset instead of a central bank liability, while ending government debt issuance? In fact, government could follow Chris Cook's suggestion and issue consols as (perpetual) stock that pays a dividend if it wants to issue safe assets with a return in addition to currency.
Now one can make an argument that this is still a government obligation, which it is, but it is not booked as a liability and no interest is involved, which clears up the accounting, a matter that seems to bother some. If someone wants to argue that, such as that currency is essentially a "tax credit" that creates an obligation on the part of government, I'm OK with it since I see the issue as largely semantic since operations are essentially the same.
But it seems to me that the main point is government as currency monopolist. If government is a sovereign currency monopolist, then it issues and withdraws currency at will and sets conditions for its use. That is is sufficient to make a currency operational.
A country can abandon currency sovereignty and even use a foreign currency, like Ecuador uses the US dollar, which means that the government has to obtain the dollars from revenue and borrowing, like any currency user.
Could a form of money be made operational otherwise? Of course, currency is a late comers in the history of money. Where "money" as an institution emerges is when obligations become enforceable, and money passes from merely a social construct to being a legal institution. This is where the role of the state wrt money begins rather than with currency issuance. But money as a unit of account and record of debt predates this by far.
A formal and enforceable obligation rather than a conventional or customary social "obligation" is a necessary condition for modern money and a modern monetary production economy, which is a often reason that emerging countries have difficulty emerging until the requisite institutional arrangements, especially legal ones, are in place.
I agree with everyone here (c:
but most of all I applaud Calgacus for an extremely clear presentation on the essence of money.
Others may disagree, but I think the fundamental point that C makes stands -- money is debt. Obviously, they are layers of social relations and conventions, and Dan K, Tom, and others make some good points. But the clarity of the underlying principle stands out for me...
With regard to Peter's excellent post on "value", I find it helpful to tie together the Marxist perspective with the MMT perspective. I read Kapital almost 40 years ago, before I'd ever heard of MMT or Post Keynesian economics, and the labor theory of value has always stuck with me as intuitively meaningful. When expressed as a minimum wage, the theory becomes a practical fact. So I find it has enormous practical significance.
Obviously there are other considerations, such as liquidity preference or taste, with regard to value. With Wray's paper, I'm beginning to incorporate these more systematically in my world view...
"But money as a unit of account and record of debt predates this by far. "
Tom, logically the metonym cannot predate the components...
iow at one time we had "silver" or "gold" and THEN some people came up with state currency (so now you have more than one system) and THEN within the language a metonym is created as a word that stands for either of the two, here we created the word "money" in the vernacular as a word that represented either of the two or more systems...
wiki uses the metonym "Hollywood" as and example of the metonym, so lets say at first there was one film studio in Hollywood, MGM, then, two other studios open in town, 20th Cent Fox and Warner Bros, so THEN the metonym "Hollywood" would be created to represent this group of film studios... if these two other studios never opened, you would just refer to "MGM", the metonym "hollywood" would not be necessary or make any sense ....
So in the ancient writings, you never see the metonym "money" appear so it is not correct to say that we had "money" 2,500 years ago... we didnt have "money" back then, we had 2 disparate systems...
rsp,
Matt, just because they didn't call it money doesn't mean it doesn't fit the description. We now trace the concepts of reciprocity, obligation and indebtedness to pre-human origins and the use of what we now call "money" to clay shards dating back millennia that are taken as evidence of early accounting and debt-like obligations.
These proto-ideas and behaviors arose through conventions that became customs which were eventually formalized institutionally in law, after which state money appears in a form recognizable today. The antecedent of state money in the form of a tangible token like a coin seems to lie in temple tokens that originated thousands of years before state coinage.
This is as ancient as Sumerian civilization. Regardless of how they conceptualized it at the time, this laid the foundation for what would later develop into modern monetary and financial systems.
So when Fred Flintstone put stone wheels on a basket that was "Detroit" doing that?????
I dont think so.... rsp,
Tom: This seems to imply that state currency as a government liability is a necessary condition for currency demand, whereas MMT economists argue that it is a sufficient but not a necessary condition.
That is not what MMT economists say. MMT economists say "money is credit and nothing but credit". Therefore "state currency as a government liability is a necessary condition to be state currency, as I said.
Moreover, it does not seem to be true historically. In ancient times, king owned the land, hence, the metals, and the crown operated the mines or minerals (salt -> salary) ..
I would like specific examples of what you mean here too; I don't think the example you give is paradigmatic or too common. How is the king to "use metals and minerals as assets to transfer private resources"? The transfer takes place by him selling these presumably desired materials - for credit, which the buyers had earlier acquired by doing the king a favor. This is state money as a government liability, government credit.
If someone wants to argue that, such as that currency is essentially a "tax credit" that creates an obligation on the part of government, I'm OK with it since I see the issue as largely semantic since operations are essentially the same.
One point is that one should use ordinary words in their usual meaning, and not follow irrational taboos on their usage where they manifestly apply. This deepens understanding of both ordinary word usage, and the taboo situation, here money and finance. The problem with money and finance is that everyone understands it so perfectly that even the craziest theories about it have limited local effect, but enormous global effect. This "semantic point" is the core of MMT. Everything else follows from it, becomes obvious and natural then, because of this deepening of understanding.
What governments or anybody else think and whether and how they ineptly do accounting is besides the point. The point is to do it correctly, to describe what is really going on.
On social construct vs enforceable obligation, while I don't think I agree, and don't think the points you make are accepted, that is beside my point, as is any distinction between currency and money, neither of which are latecomers IMHO. Understanding the social "obligation" and money & finance as such is the important thing, the thing that people get wrong. What is "mere" is the legal institution add-on, not the "social construct" of money and credit.
winterspeak Is a newly minted coin money?I
In comments, someone asked if a newly minted coin was a financial asset or not.
Here is my response -- it is not a financial asset, it is a real asset. A financial asset is an asset that has a corresponding non-equity liability. A real asset has no corresponding non-equity liability, and therefore get some nominal value associated with it and booked as equity. The details of how the nominal value get assigned can be important, but not in the context of this discussion (financial vs real assets).
A newly minted coin has no liability associated with it, and is therefore not a financial asset. If the coin belongs to the Mint that produced it, then it's nominal value would be booked as equity to that Government entity. The difference between its production cost and its nominal value would be true seignorage.
If the coin left the Mint and went into general circulation, it may not be counted as Government spending depending on how exactly the transfer happened. When the coin was deposited at a bank, then it would enter (for the first time) the reserve system as it would be booked as a deposit in the creditors account (credit bank liability), which would credit the banks reserve account (asset), which in turn would credit the reserve account (liability) held at the Fed, which would debit its (negative) equity entry. At this point, the coin has become a financial asset.
A far deeper discussion of this is at Mosler's.
Matt: The key words here are "WE" and "OUR"... Yes, right. I think we basically agree, but I are expressing things differently.
Because the holders can accept authority? Nobody can accept authority to this extent.
The holders understand that we have come together under law and established that we collectively agree to use dollars so they just comply with the law? Right, but the use of the dollars means that dollar-holders are owed, are creditors of the rest, of the whole community.
No coercion or advantage ("owe") is required with these people, the coercion (jail) or advantage ("what's in it for ME?!" or "if I agree to use this, what am I owed?") is only required for the libertarians among us who have trouble with authority... (see bitcoin...) Coercion does not relate this way to "owe" - which just means moral obligation. Tom criticized me from the opposite perspective, that I do not emphasize coercion, enforcement, legal obligation enough. In my reply above, I am closer to your perspective.
people who understand authority will just comply with the law once it is established. Nobody can comply with laws that cannot be complied with, that are imposed by sufficiently irrational authority. That is what overemphasis on "legal tender" can do. The king can't just say his coins are worth something. He has to make them worth something. The community can't just say the dollars are worth something, and anybody can use them - and then refuse to accept them - that is allow them to be actually used. Nobody can keep accepting dollars if his own are not accepted by others, without starving.
("is legal tender for all debts public and private...") and hence authority dictates it, so comply with authority or suffer the consequences... But you are bringing up coercion here. The important part is "all debts public" - which makes dollars state debt, makes holders owed by the state.
****
Also, I don't think it is correct to say money is metonym, or that there are two systems. All there ever was was debt/fiat/credit money. Gold and silver came much later, and were just an inessential, superfluous part of the money system for a while. Human beings have only ever had one money system / accounting system.
Dan K:Sorry Calgacus, I think you position is too dogmatic. You are just choosing not regard conventional media of exchange that have emerged from time to time as entitled to the label money.
No, I am not doing this. I am saying that these "conventional media of exchange" are not media of exchange the way the commodity theory has it, but that they are actually money-things that represent the true money, which is a credit-debt relationship.
I also think that it makes no logical sense to classify something as a debt, if that debt is not a debt for something. If there is nothing that I owe a person, then I have no debt to him.
Yet you and everybody else understand perfectly well such debts / obligations etc, which take some work to shoehorn into the "debt for" form. For they are the usual, universal meaning of "obligation" etc.
Somebody does a big favor for you. You & he feel he is owed "something" from you, another favor, which you perform for him later, and then you both agree you are quits. But these favors could be anything. Unless you are somehow talking about a Platonic Form of "favor" that you and he owe, which I am fine with, but I doubt you are, then there was just owing/credit/debt/trust/implicit promise between the two of you. An abstract, immaterial social relationship. There was nothing in particular that either of you owed the other, but each of you did owe the other.
So to the question of whether debts must be "debts for", the answer is yes and no. There need not be any particular thing owed, just anything both agree is good enough. Relations to be real have to really um relate to the rest of reality, but this is not impossible, but something everyone understands and sees. So real debts can't mean that "there is nothing I owe a person", true. But as I explained above, the modern US dollar most certainly is a "debt-for" many things.
So it is clear that there is no fundamental difference whatsoever between gold standard money and modern "fiat" money. Just as if a company once sold buggy whips and now sells cars doesn't change the its financial character and relations.
But there is no meaningful debt or "liability" attached to a dollar. If the exchange value of dollars was hyperinflated away to nothing, and you took your old dollars to the government to demand payment of the "debt", you would be laughed at. All they owe you for the dollars is other dollars.
This is like arguing that because someone is now dead, that they were never alive. The fact that there are debts which cannot be paid - e.g. the debtor is dead - does not mean that they were not real, good faith debts to start with. Hyperinflation = dead currency = effective "bankruptcy" for a currency/ gov = the gov has nothing to sell to the nongov of sufficient value to support the currency = nothing for sale in that currency/debt. In the real world, dollars are very clearly debts, "debts-for" even, and you and everybody else treat them that way in any financial interaction with the government.
More tomorrow.
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