1. Randy Wray being very reluctant to say that demand deposits are money. Moneyness is a matter of degree, but if all the things that could conceivably be money were lined up in order of their moneyness, then demand deposits would sit right at the top of the list neck and neck with cash as a near rival. So to have such reluctance to call demand deposits money is just unhelpful.
2. Warren Mosler claiming that QE does not increase the money supply.
This is now the opposite of the Wray problem. Wray was too reluctant to call something money when it blatantly is money and now Mosler is too keen to label something as money when it has rather dubious moneyness - namely government bonds. What percentage of goods and services in our economy is purchased with government bonds? Close to nill I would guess.
3. Randy Wray saying of debt fee money: "it's a non sequitur, it's impossible"
This is simply false. Debt is an IOU. An IOU is a thing which literally or metaphorically has the following form:
I/we/organisation 'X' agree to give the bearer of this thing, some stuff 'Y' at some future time.
The holder of this thing can, at that future time, take the IOU to X and say "Now please can I exchange this IOU for Y". Indeed this exchange will probably be enforceable by law. Once the exchange has taken place the IOU has now done its job and will expire. X may as well destroy the IOU - it will be of no value to them.
So a reasonable test of whether something is an IOU or not is to ask: who is X and what is Y. If you can not answer that then the thing is not an IOU. In addition to that, if Y is simply the same as the thing in question then again that thing is not an IOU.
As an example let us consider demand deposits. Are they IOU's? Let's consider X and Y:
X is: your bank
Y is: cash
The test has been passed, so indeed demand deposits are an IOU.
Now consider coins - i.e. ordinary coins you can buy things with - obviously money. Can you identify X and Y?... Good luck, because I can't. Coins are money but they are not debt.
As another example, take bitcoins which are definitely not debt (Wray says they are not money). This is slightly messy because in recent years their moneyness has diminished but certainly around 5 years ago people were buying and selling goods and services in bitcoin. Unfortunately some design flaws meant that it was a little awkward to use and it tended to be reserved for people of a geeky disposition. But even today there are people (mostly criminals!) that will buy and sell things (mostly illegal things!) with bitcoin. So just as you can say cigarettes are money *in prisons* you can also say that today bitcoins are money *amongst criminals*.
A counter argument I have heard about bitcoin is along the lines of "their inherent value is zero therefore in the long run they will fail" - even if that were perfectly true, that statement is not an argument against bitcoin being money now. Plenty of currencies have ultimately failed due to excessive printing or other issues but that never stopped those same currencies functioning perfectly well as money for many years, perhaps many decades, before their ultimate failure.
Posts
