RE: state power theory of money

["Forstater, Mathew" <ForstaterM@xxxxxxxx>]

the argument as it has been developed recently is that there are "horizontal" and "vertical" components of the money supply process.  The horizontal component is the state money component.  The "vertical" component covers most of these other instruments you refer to, which are basically understood as leveraging of state money.  see Wray's UNDERSTANDING MODERN MONEY, Elgar, 1998 or my own "A General Framework for the Analysis of Currencies and other Commodities" in P. Davidson and J. Kregel, eds., FULL EMPLOYMENT AND PRICE STABILITY IN A GLOBAL ECONOMY, Edward Elgar, 1999.

-----Original Message-----
From: Steve Diamond [mailto:sdiamond@xxxxxxx]
Sent: Wednesday, January 09, 2002 10:04 PM
To: pen-l@xxxxxxxxxxxxxxxxxxx
>Subject: [PEN-L:21277] state power theory of money


David Friedman, the anarcho-capitalist son of Milton, has a piece arguing
for private money.  The problem I see with the state power/fiat money
argument is that there are lots of instruments out there that should qualify
as money that are not creatures of state creation.  A recent article in one
of the Hayekian journals actually makes this kind of argument in a
discussion of money market funds - which, of course, have no reserve
requirements.

Stephen F. Diamond
School of Law
Santa Clara University
sdiamond@xxxxxxx