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mickslam
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Nick: I fully agree - the medium of exchange function comes before the store of value function of money. Stores of value are not useful as money because they are stores of value - they must also possess the ability to be a useful medium of exchange. The question: "if money is only a medium of exchange and never a store of value is your contention that general gluts could happen? It seems *obvious* that it is the desire of people to move demand from time period to time period that make general gluts possible." is not quite nonsense, but misses the point about general gluts nearly entirely. Why would the entire world decide to put off consumption for the future when this additional consumption would actually increase their future wealth? Or in other words, why would the world as a whole decide to pass up a free lunch? Because that is what the world is doing right now - passing on the only free lunch. Some economists think: there cannot be a free lunch, so there cannot be a general glut. However, by any reasonable intrepretation of the data, there is a free lunch - the question is what to do with it. I think the point you are trying to make is if the medium of exchange becomes a "too good" store of value, it loses the "medium of exchange" trait. For example, if money made 20% per year in real terms, would anyone want to use it as a medium of exchange? Of course not - it would be too valuable for this use. In general, we want a medium of exchange that stores value about as well as real world goods. If it is much worse, then we get inflation. If it is far better, then we get deflation. But the real problem comes when there is great uncertainty about the future value of real assets, and the medium of exchange is a good to very good store of value. Then you get a general glut. I have actually had this argument/discussion many times, and people tend not to understand it very well. I would also argue that the "ability to extinguish tax liabilities" comes before these two traits, but that it besides the point you are trying to make. Determinant: I nearly fully agree. T-bills are money. Ask the CME, or really anybody who uses T-Bills on a regular basis. I also have a much larger theory about how these depressionary recessions start. They start when there isn't enough money to satisfy the trading that needs to be done. People start to use other things as money-like assets. In the late 1990s, you could use stock to buy other real world assets. Once people found out that this wasn't real money, then the entire scheme collapsed. Then real estate combined with CP became money like. But it isn't money, and cannot extinguish tax liabilities. It all comes down to what you can "trade" your "money" for easily. And the one thing about real money - you always, always know you can go give it to the tax collector, and they will accept it in trade. No other asset has that 100% odds of being a negotiable instrument accepted at full value, except real money.
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