What is money = how does it matter? The pragmatic criterion of truth lies in the difference something makes.
For example, when it is reported that US corporations are holding several "trillion dollars in cash," this doesn't mean cash deposits or physical currency but cash equivalents.
Cash and cash equivalents are the most liquid assets found within the asset portion of a company's balance sheet. Cash equivalents are assets that are readily convertible into cash, such as money market holdings, short-term government bonds or Treasury bills, marketable securities and commercial paper. Cash equivalents are distinguished from other investments through their short-term existence; they mature within 3 months whereas short-term investments are 12 months or less, and long-term investments are any investments that mature in excess of 12 months. Another important condition a cash equivalent needs to satisfy is that the investment should have insignificant risk of change in value; thus, common stock cannot be considered a cash equivalent, but preferred stock acquired shortly before its redemption date can be. These highly liquid financial instruments that are so near their maturity and that there is significant risk of change in value due to fluctuation of interest rates are known as cash equivalents. Although cash equivalents are not cash, they are generally presented on the statement of financial position together with cash using the title "Cash and Cash Equivalents"— Wikipedia
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Teaching the market monetarists about moneyJohn Carney | Senior Editor
((h/t) Stephanie Kelton on FB)
Teaching the market monetarists about moneyJohn Carney | Senior Editor
((h/t) Stephanie Kelton on FB)
market monetarists don't want to know.
ReplyDeleteCarney from the piece: "The definition of money, however, is notoriously hard to pin down. In fact, as Milton Friedman and Anna Schwartz argued, it may be impossible to pin down on an abstract level."
ReplyDeleteExactly.... this is imo a prime example of how metonymy works against us.... the word "money" here is a perfect metonym ....
rsp,
Right. The term is so ambiguous it can be used to mean anything one wants it to. That's what it is best to avoid the term altogether and to specify what one actually means — as Warren says.
ReplyDeleteUnless, of course, one chooses to leave the meaning ambiguous for some reason. One could title a book or paper "Money" and then specify various meanings operationally, for instance.
Right when Warren says "a free floating, non-convertible currency" we know imo with academic/professional levels of precision what he is referring to...
ReplyDeleteIf we then start talking about "money" nobody knows what anybody is even talking about AND WE GET NOWHERE.... and end up in rabbit holes waxing about "what is money?" like a bunch of morons...
rsp,