Re: Keynesian Christmas!-- and the collapsiing international

["Alan G. Isaac" <aisaac@xxxxxxxxxxxx>]

> "Alan G. Isaac" wrote:
>> As always, expectations are a crucial determinant of asset holding.

On Sun, 30 Dec 2001, Warren Mosler wrote:
> 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.

If currency is not expected to hold its value (i.e., serve as a store
of value) it will not be held.  Currency is held as an asset, it is
just not held (it the developed world) for its superior rate of return
characteristics.

The subway token example works fine.  If NYC announces that tokens
will no longer be accepted starting tomorrow, people will unload their
tokens today.  (Unless they are *expected* to have value because they
are desired, e.g., as collectors items---another value linked to
expectations of future values.)

Cheers,
Alan

PS To equate expectations with `just guessing' is quite a misleading
rhetorical move.  Actions always depend on expected outcomes, and
often these expectations are quite well founded and quite dissimilar
to `just guessing'.  If talk about future inflation is `just guessing'
then you are ready to take the following bet: you pay me $1000 next
Jan 1 if measured US inflation over the year has been less than 10%,
and I'll pay you $1000 if it has been more than 10%.  (Indeed, with
you apparently diffuse priors, you should take the bet even at 50% or
even 500%.)