Re: Is Money Credit?

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

Curtiss:

Good to make your acquaintance!

Here is what another of your MIT colleagues (my 1963-1965 connection was up
the street) had to say on "money":

"One special problem in the theory of value has been touched upon at various
places in the previous discussions, namely, the value of money itself.
Probably more has been written upon this subject than upon any other in
economics, and most of the issues raised are not germaine to the present
investigation. [.e., Demand for Money].   However, it is a fair question as
to the relationship between the demand for money and the ordinal preferences
fields met in utility theory.  In this connection, I have reference to none
of the tenuous concepts of money, as a numeraire commodity, or as a
composite commodity, but, to money proper, the distinguishing features of
which are the indirect usefulness, not for its own sake but for what it can
buy, its conventional acceptability, its not being "used up" by use, etc.
etc." (Paul A. Samuelson, Foundations of Economic Analysis, 'A Note On The
Demand For Money'.)

I underscore "the distinguishing features of which are the indirect
usefulness, not for its own sake but for what it can buy."

Now, there are two - and only two - means whereby "money" can "buy" whatever
money can buy.

1.  In a Market Economy, "money" can buy the final output equivalent of
whatever factor inputs to final output you have made.

2.  In a Command Economy, "money" can buy the final output equivalent of
whatever the Commander In Chief views as your due.

Alas, a Market Economy is transformed into a Command Economy when the
Commander In Chief commands that the Money Printing Press create what our
friend John Gelles referred to as "purchasing power" for distribution to all
and sundry who have made NO Factor Contribution to Final Output - yet,
demand their own "fair" share thereof.

Hence James Mill's dictum that "hanging a thousand times repeated is not too
severe a punishment" for anyone who would subvert Sound Money.

Of course, all this was some 130 years before Keynes concluded - and
promoted the idea through the General Theory - that Subversion Of Money was
preferable to World Depression rooted in Maldistribution of Income.

Now, after 60 years of Keynes, the world economy is on - or beyond - the
brink of disaster.

Debt-financed Final Demand has proved to be a bad second-best solution to
FAIR income distribution.

In this respect, Keynes wrote in Preface to 'Tract on Monetary Reform'
something to the effect that the world's problems were NOT rooted in the
failure of bankers to "understand" the business of banking.'

Instead, Keynes suggested that the root cause of failure resided with
Economists, who had yet to come up with Monetary Economics worth a damn.

In this respect, I advised Paul A. Samuelson in spring of 1978 that his
"hypothesis" that real-world market economies were "system[s] in "stable"
equilibrium or motion" (Foundations, p. 5) was off-the-wall considering that
the "supply" of New Money is NOT constrained by the Factor Cost, which is
ZERO.

But, Jekill-and-Hyde-wise - and with James Mill long gone - we could not
agree on the facts of the matter.

Gunnar



----- Original Message -----
From: "W. Curtiss Priest" <bmslib@xxxxxxx>
To: "John Gelles" <indexed-savings@xxxxxxxxxxxxx>
Cc: "Proceedings of PKT Forum" <pkt@xxxxxxxxxxxxxxxx>; "Gunnar Tomasson"
<gunnar.tomasson@xxxxxxxxxxx>; "List, LWSIDE1" <lwside1@xxxxxxxxxxxxxxx>;
"List, Debt" <debt@xxxxxxxxxxxxxxxx>; "List, Concord Coalition"
<concordcoalition@xxxxxxxxxxx>
Sent: Sunday, June 22, 2003 8:53 PM
Subject: Re: Is Money Credit?


> John Gelles wrote:
> >
> > A friend of Gunnar Tomasson ...
>
> It was "The Creature from Jekyll Island" by G. Edward Griffin
> that aptly addressed this issue of money and credit.
>
> What Griffin aptly notes is that, currently, the labor
> to mine gold is approximately equal to the cost of gold.
>
> Griffin, thereby, suggests that basing money on gold is
> not unreasonable.
>
> ***
>
> In contrast, money by fiat is only as valuable as the
> governments that back money by fiat.
>
> This does not make fiat money worthless, but, fiat money
> is a bit of an illusion.
>
> Most "modern industrialized nations" understand that they
> may not just "print money" -- as this undermines all
> outstanding monies, pensions, etc.
>
> Those that argue for a "gold standard" are simply arguing
> for a basis that requires "manual effort" and, thereby,
> requires that the money basis be grounded in "effort."
> (the effort of mining more gold)
>
> Only by this, can one be assured that a government does
> not print money into a state of hyperinflation.
>
> I have written in CITS debt watches, that debts can be
> ameliorated by hyperinflation, but, any country that has
> tried a course that leads to hyperinflation has led to
> a travesty.
>
> As I have also said in various CITS debt watches:
>
>
http://groups.google.com/groups?hl=en&lr=&ie=ISO-8859-1&scoring=d&q=%22cits+debt+watch%22
>
> [please rejoin this line with no space if split]
>
> that booms cannot escape busts.  And that the best solution
> to escaping busts, is to eliminate booms.  (I often cite
> Kindelberger, a Sr. colleague of mine at MIT.)
>
> This author is not completely convinced that a set of
> "guiding principles" can be established (far beyond what
> the U.S. SEC requires) to accomplish the further continuance
> of booms.
>
> But, this author is convinced that all booms are followed
> by the requisite bust, to tidy up the whole affair.
>
> Regards,
>
> W. Curtiss Priest,
> Editor, CITS Debt Watch
> Member, AEA
>
> --
>
>
>    W. Curtiss Priest, Director, CITS
>    Research Affiliate, Comparative Media Studies, MIT
>       Center for Information, Technology & Society
>          466 Pleasant St., Melrose, MA  02176
>    781-662-4044  BMSLIB@xxxxxxx http://Cybertrails.org
>