[OPE-L:2093] re: The Money Supply

From: C. J. Arthur (cjarthur@pavilion.co.uk)
Date: Tue Jan 11 2000 - 16:32:51 EST

[ show plain text ]

I generally support Claus Germer in this debate: here are some additional
It is clear that at a time of hyper-inflation (a permanent possibility with
inconvertible paper - and NB only for paper) non-commodity money fails in
one of its most essential functions, namely to serve as means of payment.
Vendors refuse barrows of notes and demand a proto-money such as packs of
cigarettes. The reason for failure as means of payment is that such paper
fails as store; it cannot conserve value between sale and purchase of
commodities. Even today in some countries it is advisable to change money
into goods as soon as you get it or place it in high interest accounts.
This proof that paper is not money is so clear and convincing it is really
surprising non-commodity money theories are still advocated. This can only
be explained by an empiricist prejudice: that hyper-inflation is rare and
can be neglected. But where conceptual issues are concerned, as here,
refutations cannot be dismissed on this ground. Planes rarely fall from the
sky but this does not mean the law of gravity is false. It just means
contervailing forces to gravity exist. Remove these and the plane falls
like a stone. Paper 'flies' only because it is supported by a social vote
of confidence. Remove that and its value goes into free fall.
Assume for the sake of argument gold plays no role today, the dollar
serving as 'world money' (i.e. pseudo-money). The conclusion to be drawn is
that we live in a moneyless economy. It is an interesting confidence trick
since everyone has an interest in assuring everyone else that this is OK.
Since this is the economy we live in it obviously requires study to see how
it works. The main conceptual issue to be solved is how pseudo-money can
substitute for real money for long periods. Value form theory can make a
contribution here I'm sure, but it should always retain a theoretical leg
in a real money base i.e. commodity money.
Chris A
PS On measure - I suggest here are three ways of doing it a) imediate as
when weights balance on a pair of scales b) through a higher mediation;
since weight is a force and the tension in a spring is a force these can be
balanced, conversely the pair of scales measures mass because we can strip
out gravity c) indirectly through a well established theory of physical
effects as in the way atmospheric pressure or heat can be correlated with
strips of mercury.
But I do not see how inconvertible paper can measure value since there is a
hiatus between them. Such paper is 'weightless'.

P. S. Please note that I have a new Email address,
but the old one will also run until next summer. (To be doubly sure load both!)

This archive was generated by hypermail 2b29 : Mon Jan 31 2000 - 07:00:06 EST