Re: Keynesian Christmas!-- and the collapsiing international

[Warren Mosler <mosler@xxxxxxxx>]

"Alan G. Isaac" wrote:

> On Fri, 28 Dec 2001, Warren Mosler wrote:
> > The new currency will function just fine if it is acceptable for
> > payment of taxes.
>
> Thought experiment:
> A country introduces two currencies, both of which
> are acceptable in the payment of taxes but one of which has a higher
> expected rate of inflation.

How can that be?  I assume you are assuming it's just people 'guessing'
which is what 'expected' means.

> (Keep things simple: only these point
> expectations matter for the asset decision.)  Who will hold the high
> inflation *currency*?

No one holding excess units of currency would probably hold 'that' one.

>
>
> As always, expectations are a crucial determinant of asset holding.
>

Point?  To be 'successful' it is not required that anyone wish to hold
the currency as an 'asset.'  NYC subway tokens function perfectly
well even though generally not held as assets, for example (even with
'0' bid overnight interest rates).  But note that NYC can only
issue/sell
more tokens than it collects (deficit spend tokens) if someone decides
to hold them as an asset
for some period of time.

Best,
w

>
> Cheers,
> Alan Isaac