Is money a credit or a debt?

["John Gelles" <indexed-savings@xxxxxxxxxxxxx>]

Gunnar seems determined to call both Treasury Notes
(bonds, etc.) and Naked Fiat Money " gov't debt" -- and
to deny the semantic use of "gov't credit" to anyone
who uses it as a category that included Naked Fiat
Money (NFM).

IF  NFM were gov't debt:  When is it due ?  What is its
nominal rate of interest ?  With what do you pay it ?

Liu (whom I side with on this) says there is no nominal
interest on NFM;  but its real "interest" rate (cost to
society) is the rate of inflation.

Assuming low inflation is necessary and good, this means
there is no real cost to society, or anyone but an exposed
fixed rate creditor (fixed rate rentier), for the use of NFM
in small enough amounts to avoid disruptive inflation.

By focusing on price effects, Liu and I are making the
case for NFM.  Confusion arises when we look at central
bank notes.  They used to be bank debts.  Now with central
banking a mature discipline, using Fiat Money (FM), it's
hard to maintain a difference between Lincoln's greenbacks
-- pure NFM and Greenspan's necessary liquidity, done
with banknotes, and somewhat related to credit worthiness
and underlying (if remote) assets-- pure FM.

Since Greenspan's FM carries the "legal tender" words and
power of NFM, it would seem that both FM and NFM
have too much in common to justify this disagreement
over which is a credit and which a debt.  Yet, if the
Treasury went back to creating greenback NFM, there
would be a significant difference. And Liu and I would
be pleased if in doing such a radical thing governments
would move responsibility for driving the economy off
the backs of consumers (so they could save their money)
and on the back of Congress where it belongs.

Liu will probably disagree with my lumping of us
together on this issue -- so let me retract any part of the
lumping he objects to.

John Gelles


---------------- IN REPLY TO Message ----------------------
From: Gunnar Tómasson
To: pkt@xxxxxxxxxxxxxxxx
Cc: Gang8 ; wrayr@xxxxxxxx
Sent: Monday, July 21, 2003 8:27 AM
Subject: Re: [TNF] 30-year Treasuries


Henry wrote:

> > It is cheaper for government to issue new
> > money (non-interest bearing state credit instrument) through the Fed
> > than to issue sovereign debts through the Treasury.

Comment:

On p. 4 of 'Understanding Modern Money', Randy Wray wrote, inter alia, as follows:

"We can begin with the recognition that the modern state imposes and enforces a tax liability on its citizens, and, importantly,
chooses 'that which is necessary to pay taxer' (twintopt).  If a state decided that it would accept only beaver pelts in payment of
taxes, the population would have to organize itself to ensure that it obtained the requisite number of beaver pelts; if the tax
liability were sufficiently difficult to meet, beaver pelts would carry high relative value.  Of course, all modern states impose a
monetary tax liability and generally accept only money in payment of taxes.  Not coincidentally, all modern states require that
these monetary tax payments be made in the form of the state's own currency.  That currency, in turn, is nothing more than the
government's liability."

The logic of Randy's view of "new money" as "the government's liability" strikes me as unassailable.

Gunnar




----- Original Message -----
From: "Gary Santos" <evs@xxxxxxxxxxxx>
To: <TheNewForum@xxxxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>;
<a-list@xxxxxxxxxxxxxxxxxxx>
Sent: Sunday, July 20, 2003 6:41 AM
Subject: Re: [TNF] 30-year Treasuries


> "The agencies have also been hedging their interst rate exposures with
> derivatives. There is on-going investigation that will eventually reveal
> very unwelcome disclosures, the tip of the iceberg having been hinted in
> recent weeks."
> --------------------------------
> Henry,
>
> What sort of investigation? How rolled over derivatives are booked?
>
> Gary
>
>
> ----- Original Message -----
> From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
> To: <pkt@xxxxxxxxxxxxxxxx>; <a-list@xxxxxxxxxxxxxxxxxxx>;
> <TheNewForum@xxxxxxxxxxxxxxx>
> Sent: Sunday, July 20, 2003 5:54 AM
> Subject: [TNF] 30-year Treasuries
>