Key excerpt from del Mar's book 'History of Monetary Systems' (c.1895) that comments upon what I view as a thousands of years old conflict between forces that see "money" as a lawful human construct, and forces that see "money" as otherwise. From the Preface:
If in view of the existing monetary conflict, the reader should be led to inquire whether this is a " monometallic" or " bimetallic '' work, the answer is, It is neither. These terms, and many others employed in the monetary literature of to-day, the author regards as misleading. They involve doctrines which are fallacious, and defeat a correct comprehension of this difficult subject, by pro- moting the discussion of false issues, or the adoption of make-shift or mischievous measures. Monometallism and bimetallism both imply that money consists of a metal or metals, and that this is what measures value. The implication is erroneous ; the theory is physically impossible. (Value is not a thing, nor an attribute of things; it is a' relation, a numerical relation, which appears in exchange.) Such a relation cannot be accurately measured without the use of numbers, limited by law, and embodied in a set of concrete symbols, suitable for transference from hand to hand. It is this set of symbols which, by metonym, is called money.
In the Greek and Roman republics it was called (with a far more correct appre- hension of its character) nomisma and nummus, because the law (nomos) was alone competent to create it. The number of the symbols may be limited, but rudely ; the limit may even — though equitably it should not — be left to the chances of conquest or mining discoveries, still, repeated experiments prove that it is the number of the symbols that definitively measures value, not the quantity or quality or merit of the materials of which they may be composed,...This is quite a forceful logical and mathematical argument made by del Mar that properly, at least here in the West, "money" is solely an authorized legal construct used for exchange. But many people today, even though they live here in the West, simply WILL NOT ACCEPT THIS, and zealously cling to the non-Western beliefs that "money" is either properly thought of as a "debt" of some sort or otherwise and more popularly a weight of a metal.
Our history DICTATES that here in the West, "money" is nomisma, or a medium of exchange solely based on the DICTATES of the authority of our civil law. Those who assert otherwise are some sort of interlopers or usurpers of our Western traditions and advocates of lawlessness.
11 comments:
Matt,
one of del Mar's important contributions was his ascertaining that gold never pays from the point of view of society as a whole. That is, the "cost of production" is always greater than the value of the metal. This was even true of the Comstock lode, the greatest "gold strike" of the 19th century. Writers on money have been consistently confused in this, supposing seigniorage to be the difference between the monetary value and the commodity value (cost of production) of the money token. In reality, seigniorage was simply the sovereign's price for monetizing the metal. Since no sovereign post-rome could effectively control the supply of precious metal commodities, they lost doubly as they began charging lower fees to try to bring more metals into their mints.
Unrelated: Good Felix Salmon article, "Who is speaking for the poor?".
http://blogs.reuters.com/felix-salmon/2012/09/06/who-is-speaking-for-the-poor/
Contains evisceration of a mean-spirited/ignorant Fortune article by Nina Easton incredibly titled "Stop Bashing the Rich" http://finance.fortune.cnn.com/2012/09/06/stop-bashing-rich/
David,
" seigniorage was simply the sovereign's price for monetizing the metal."
Good point, sounds like the MMT view as the state as monopoly price setter, here simply setting the price of the metal.... the strength of the state I guess would dictate the ability of a state to attract the metal...
kudos again for bringing to our attention the writings of Del Mar....
rsp,
Could you expand on the "cost of production" is always greater than the value of the metal?
DAB,
del Mar in the preface to "The Science of Money" puts it this way:
it was shown from personal observations and practical tests made in the principal mining districts of California, Australia, Nevada, and other countries, where mining for these metals had been conducted by free labourers and under economical conditions, that the present value of these metals was far less than the average cost of their production ; and that mining for them was kept up, not because of any proofs that it was remunerative, but in consequence of the gambling character of the pursuit and the hope entertained by each adventurer that his mine would prove a fortunate exception to the rest.
Practically speaking, the precious metals must be undervalued for them to be useful as money. The "various nefarious schemes," such as fractional reserve banking, paper government notes, or setting the price by government fiat become actually necessary or else the real commodity value of the metals will have such a deflationary effect on prices that economies will be effectively reduced to barter. Some people claim to consider this desirable.
Found this in Aristotles 'Athenian Constitution'
"Part 10
These seem to be the democratic features of his laws; but in addition, before the period of his legislation, he carried through his abolition of debts, and after it his increase in the standards of weights and measures, and of the currency. During his administration the measures were made larger than those of Pheidon, and the mina, which previously had a standard of seventy drachmas, was raised to the full hundred. The standard coin in earlier times was the two-drachma piece. He also made weights corresponding with the coinage, sixty-three minas going to the talent; and the odd three minas were distributed among the staters and the other values.
So you see here that the weight measures (mina/talent) were separate from the VALUES assigned to the different coins such as the stater mentioned here.
Among the "other values" probably was the drachma.
Link to the "Athenian Contitution"
http://classics.mit.edu/Aristotle/athenian_const.1.1.html
Our history DICTATES that here in the West, "money" is nomisma, or a medium of exchange solely based on the DICTATES of the authority of our civil law. That's perilously close to the "legal tender" misrepresentation of the state theory / chartalism , which Mises and sometimes Schumpeter misunderstood the theory to be.
zealously cling to the non-Western beliefs that "money" is either properly thought of as a "debt" ... Well, that's the belief that MMT zealously clings to. Money is the same East & West. If anything, Eastern e.g. Chinese thought tends more toward the common sense / state theory. As evinced in the continued current enormous economic progress of China, the lack of "legal tender" in their thought, and in the traces of Chartalist thought that Forstater has found reaching back to the Sung dynasty.
calg,
I dont think Warren looks at "money" as "a debt" primarily if at all. Warren uses the analogy of himself with a 9mm blocking the exit, etc...
Here is the operative demarcation between "east" and "west":
East: "15 Now they weigh for him thirty pieces of silver." Mat 26:15
West: "19 Exhibit to Me the poll tax 'NOMISMA'." Mat 22:19
What anyone did 1000 years later in the FAR east is immaterial to the world affairs and a confusion factor.
Nowhere in these ancient Greek writings is there any mention of govt relying on the concept of 'debt' to impart 'value' on their nomisma.
This is Aristotle:
"Nomisma by itself is a mere device which has value only by nomos (law) and not by nature; so that a change of convention between those who use it, is sufficient to deprive it of value and its power to satisfy our wants." — Aristotle, "Politica."
"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."
NO MENTION OF "DEBT" ANYWHERE HERE.
People who bring "debt" into this discussion are confusing the issue. And opening the door to the issuance of govt "debt" and then it follows that govt "is borrowing".
Here is Del Mar on this phenom:
"doctrines which are fallacious, and defeat a correct comprehension of this difficult subject, by pro- moting the discussion of false issues, "
"Debt" is a FALSE ISSUE in this.
Here is something to to look into:
Both Hudson and Wray have written extensively on "the history of money", right?
Do any of their books have the word 'nomisma' in them?
I dont have Wray's book but if you do could you check to see if that word is in there for me?
Also, Warren has a link to a paper from Innes c 1913 at his blogsite and a search of that paper by Innes by myself returned no results for "nomisma".
This whole concept of the ancient Greek system of 'nomisma' has been obscured and perhaps covered over.
This is a VERY SERIOUS OMISSION in the historic record of "money".
If you write a book about "the history of money" here in the west and your book doesnt have the word "nomisma" in it, your book is not very good.
Matt "I dont think Warren looks at "money" as "a debt" primarily if at all."
Warren has said quite explicitly that currency is a tax credit. That means govt liability and non-govt asset. The liability lies with the govt, so "vertical" transaction and "outside" money.
All liabilities are payables, ie., funds owed, so in that sense "debt."
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