[Pen-l] Re: money [was: Skidelsky on Keynes

[John Vertegaal <vertegaa@xxxxxxxxx>]

Jim Devine wrote:
> [after a sojourn of living with a broken internet connection and
> various kludges.]
>
> John Vertegaal had written:
> > > > I'm still waiting for some economist to explain how money after having been created out of nothing, when someone at an issuing bank accepts a promissory note to have it paid back with interest later, turns into a positive, free and clear "thing", different from representing a to be repaid debt.<<<
>
> me:
> > > First, in a market system, fiat money has a price above zero (that is,
> > > it can actually buy goods, services, and assets) because the central
> > > bank (as agent of the state) keeps it scarce.
>
> John:
> > This still begs the question what money actually is. Is your "scarcity"
> > axiomatic or does it derive from more basic axioms?
>
> "scarcity" of a marketable good, service, or asset simply refers to a
> good with a positive price. It's not derived from axioms but
> definitional.
Ok, and as you said yourself to I believe Charles B, "a definition isn't
going to convince anybody". I guess that means: unless you can point it
out as a source of conflict, it'll stand, take it or leave it; which is
fair enough, I won't challenge you on that. It will add another axiom to
your theory though.


> Money is the "universal equivalent." It can be used to buy absolutely
> everything else that's for sale on markets (commodities). To be a
> useful, "base" money (currency) it has to be more than just scarce: it
> must be acceptable (e.g., non-toxic), durable, homogeneous, portable,
> and divisible. Credit or bookkeeping money must be backed by such base
> money and faith in and the good credit of the borrowers and lenders.
Nothing in the above that would indicate money to be non-axiomatic, so
that's another one? Any idea how many of them altogether in your theory?
In mine, the identity of money rolls out of a total of _three_ axioms, 
it doesn't look like your theory going to beat that. Would you agree 
that the theory requiring the least amount of axioms is the most general 
and therefore is a superior one (all else being equal and no ideologies 
entering the picture)?


> me:
> > > Then, there's the bookkeeping money that banks issue, when they lend,
> > > the "promissory note[s] to have it paid back with interest later."
> > > This is first and foremost backed by fiat money (bank reserves). It is
> > > also based on faith in the debtors, who are promising to pay back.
> > > It's also based on faith in the banks who "borrow" our deposits to
> > > make the loans.
>
> John:
> > Fair enough, but from my perspective, you're leaving out something vitally
> > important, namely that our economic system is accounted for on the
> > principles of _double_entry bookkeeping. In such a system, any notion of
> > accumulating assets that exceed liabilities is inconceivable. In other words
> > it is a system of _debt_ acquisition and a subsequent resolution, for a
> > specific ultimate purpose; which, in order to keep the system itself
> > meaningful, has to be situated outside the economic system as such, having
> > lost all its economic mensuration.
>
> huh? If assets cannot exceed liabilities, there's no net worth, no
> equity, no capital!
>  
Right, in terms of an economic flow, these "quantities" are immaterial.
$0, $1T, $1Q, it's all the same. They could be faked to be at any level,
it doesn't make one iota of difference. e.g. Is one's ability to draw
returns altered by having misled creditors about the value of one's
collateral, instead of having played the game like one is supposed to?
So now the question becomes, what is the purpose of an economy? Is it to
accumulate irrelevant quantities (stocks), or does it exist to provide
us with a standard of living (flow)? Do Marxians have a way of
identifying capital value, that would prove it not to be irrelevant, or
is that axiomatic too? Isn't adhering to the idea of capital being a
root cause of economic activity, being unnecessarily apologetic to 
capitalist "power"?


> In the right-hand column of a double entry books,
> there's an entry at the bottom, i.e., net worth = assets minus
> liabilities.
Right, and what is this "net worth" worth in the absence a return; or,
IOW, in terms of itself?


> Someone owning equity can use that M to hire labor-power to produce
> new commodities C that can be sold for a larger amount M', so there's
> a surplus-value M'-M. Some of that surplus-value can then be
> accumulated, raising the equity. In theory at least, no new debt
> accumulation is required for this process to occur.
I'm not challenging Marxism on the grounds that it is internally
inconsistent. That's my beef with Keynesianism. Maybe it has its
paradoxes too, but all I'm aware of is lots of induction in theory and
an inefficiency that cannot be avoided in practice. "They pretend to pay
us and we pretend to work" pretty well sums it up. What's the point of
abolishing profits, if a similar objective can be achieved through
profit sharing? There is no need for those in the non-profit sectors, to
miss out on productivity increases in the private sector either, if
that's a concern.


> > Marxians may recognize this supra-economic [??] domain to consist of use values; and all of us happen to
> > occupy it too, just supplying our vitality to the economic sphere and
> > obtaining the bulk of our standard of living in return. I'm working on
> > drawing a schematic representation of this. ...
>
> we live in a world of use-values, but we also live in a
> commodity-producing economy where these use-values have
> exchange-value. Further, we live under capitalism, where surplus-value
> can be produced.

supra = above, i.e. outside the economic domain; having a different
scheme of values. Having to account for identical output in terms of two
incompatible sets of value within the same domain, doesn't strike me as
being particularly enlightening; to say the least. I adapted H. Daly's
ecol_econ_feedback depiction by moving the human population into the
ecological domain. Feedbacks in the form of pollution/destruction will
be altering use values. Infrastructure not being charged with having to
provide monetary returns, e.g. roads, bridges, the output of home and
civil (armed) services, etc., exist in the eco_sphere too. There is no
financial limit to any involvement; if it can be produced, we can pay
for it. The vertically integrated economy only borrows a portion of our
avails and with loans equaling deposits, it nets to zero. I apologize
for any lack of readability, unless you have a real big screen, you'll
probably have to zoom out (losing the overview) to read it all.

John V

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