Re: Is Money Credit?

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

John:

Re. the following:

>  If Gunnar is looking for a general principle to cover money, it should
> be  "purchasing power"  NOT  "credit".

Comment:

Thanks for reaffirming my point!

For, in Market Economies, "purchasing power" resides in the IOU or "debt"
attribute of Money.

It is otherwise in the case of Ration Coupons, which pass for "money" in
Command Economies.

Gunnar

----- Original Message -----
From: "John Gelles" <indexed-savings@xxxxxxxxxxxxx>
To: "Proceedings of PKT Forum" <pkt@xxxxxxxxxxxxxxxx>; "Gunnar Tomasson"
<gunnar.tomasson@xxxxxxxxxxx>
Cc: "Curtiss Priest" <bmslib@xxxxxxx>; "John Gelles"
<indexed-savings@xxxxxxxxxxxxx>
Sent: Sunday, June 22, 2003 6:45 PM
Subject: Re: Is Money Credit?


> A friend of Gunnar Tomasson (reform-minded economist)
> wrote to Gunnar's discussion forum -- "Is Money Credit?"
>
> The friend said --
>
>         "Money, in its  MOST  ADVANCED  form, can never
>           be a promise to pay something else -- the  'something
>           else'  would be money.   Money is an entity in itself,
>           and mixing it with the concept of credit will only
>           confuse it.
>
>         "While credit may improperly be made into money,
>           money, in itself, is never credit -- it is money.
>
>
> Gunnar replied that -- Credit is a general principle and that it
> covered money.
>
>
> Gunnar might have been more specific:  The most advanced
> form of money is naked fiat money -- declared by law to be
> all you need to pay to discharge any debt.
>
> The promise implied by such naked fiat money is made by its
> sovereign creator -- a nation with courts empowered to resolve
> disputes over debt and its legal payment (or discharge).
>
> The promise is made to the claimant, creditor or lender who is
> obliged to accept money in exchange for debt. The promise states
> that the money paid and accepted will hold value over a reasonable
> time and will be able to purchase real things equal in value to the
> debt that has been discharged.
>
> When the implied promise is kept, the naked fiat money is as
> good as or better as any other money -- like IOU's, banknotes, and
> gold coins.
>
> When the implied promise is not kept, AND the naked fiat money
> is worthless or nearly so, it is NOT money.   It is a worthless or
> nearly worthless implied promise.
>
> How long is a reasonable time?  Usually one purchasing cycle,
> normally one year or less.  In volatile times, the strength of
> naked fiat money can be compared to that of gold coins:  If gold
> is not holding value, no money will -- and, effectively, there is
> no money;  there may be no enforceable debt either.  ( It may be
> that only guns, knives and bombs are useful tools to get your
> hands on food you do not already possess and can defend against
> all others.)
>
>                                 HOWEVER:
>
> In the end, Gunnar's friend is right -- naked fiat money, not IOU's
> or other simple debt, are the kind of money needed in hard times.
>
> Naked money only can save a nation when debt and debt-based
> money has failed it.  That is why he friend correctly points out
> that credit improperly made into money may have to be augmented
> by the real thing -- naked fiat money that carries an implied promise
> -- and thereafter makes good on that promise of purchasing power.
>
> If Gunnar is looking for a general principle to cover money, it should
> be  "purchasing power"  NOT  "credit".
>
> John Gelles
>
>
>
>
>
>
>