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Isn’t this fascinating?

For those confused by this, and who wonder what they do with this ‘money’, please remember what money is: it is simply a debt.

OK. That means all that new money created by QE is a debt then, doesn’t it?

15 thoughts on “Isn’t this fascinating?”

  1. And there was me thinking that this “money” thing was a token system representing an agreed-upon generalized “value” to settle debt.

  2. Spud’s deductive processes are reminiscent of someone trying to inserts a square peg into a round hole. He can get three corners in but it won’t accept the fourth. So he tries with a different three corners & so on. And then he starts hammering. But it’s just not going to go in the hole

  3. ‘So the more money I have, the more debt I’m in?’

    Yes, Jimmers. That’s why you have to give it all to me.

  4. The mighty professor is showing us benighted fools who were using it as a means of exchange how stupid we are. We should all revert to barter.

  5. @TMB
    It’s still a medium of exchange; one the government would like to get rid of because it is untraceable. It’s becoming less and less a store of value.

  6. When money was backed by precious metals, the phrase “I promise to pay” on a banknote indicated that the issuing bank was ready to hand over gold or silver in exchange.

    At some point Prof Potato read this phrase, and (amongst many other things) it has befuddled his thinking ever since.

    More logical MMTers agree that what gives a particular government’s paper money (some) value today is that government’s willingness to accept that money in payment of taxes. But the Potato remains stuck on the notion that paper money is just a “promise to pay”…

  7. @j77

    Interesting whether “revert to barter” is actually a true statement. Economists like Adam Smith and William Jevons seem to have believed that money replaced an earlier system of trade by barter, and displaced it because of the efficiency advantages compared to the double coincidence of wants problem. “Commodity money” eg the use of arrowheads as a medium of exchange are certainly suggestive of some kind of intermediate form.

    But many anthropologists seem more sceptical that pre-monetary societies generally had an economic system based on tit-for-tat bartering to perform everyday transactions. This was something that Graeber was very insistent on – that actually the whole system of social organisation was different and less transactional in early societies, with a fairly limited role for barter (often highly ritualised and with diplomatic as well as economic functions) during engagements with other tribes.

  8. @ MBE
    OK, but if so arrowheads were a form of money.
    Alternatives that don’t involve money such as spontaneous favours that are remembered and may be returned directly or indirectly have values where ethical standards command total obedience but are difficult to manage.
    Pre-barter societies obviously existed (as some still exist) but they are, let alone were, highly inefficient.

  9. Incidentally “Money serves as a medium of exchange, as a store of value, and as a unit of account” is still what appears in the Econ 101 textbooks. I think (Timmy knows more than me) this is just a restatement of the neoclassical tradition. With particular emphasis on “medium of exchange”, eg the Jevons stuff about the double coincidence.

    But the credit theory of money (money as a way of representing a debt: is also a very old one, and long predates both the Econ 101 textbooks of any poster’s youth, and the MMT crowd who have co-opted it. It was certainly being argued in recognisably modern form (again, minus some of the MMT baggage that’s nowadays associated with it) well before 1900, often in distinction to “metallism”. And its proponents saw it as having intellectual roots as far back as the ancient Greeks. In terms of practice rather than theory, the earliest societies who used money were dealing with it (or at least this was Graeber’s contention) in terms of credit, and the operative role it was playing was “unit of account” more than “means of exchange”. Think tally sticks.

    No idea whether Graeber is (pre-) historically correct, and besides, the way folk conceptualised something thousands of years ago needn’t be the basis for how we think of it today. But the issue of money as credit is a more subtle one than incantations of textbooks old or new suggest. Or a certain professor is likely to grasp.

  10. @j77

    I’m not sure at which point Graeber-the-activist takes over, seeing in other societies an alternative model that modern societies could or should be reshaped in the form of, versus Graeber-the-anthropologist – my suspicion is there’s very little of the pure-and-simple anthropologist in his work, which is why I don’t trust him as a source, but he does give extensive citations and quotations to suggest he isn’t just making all his examples up to prove his points.

    To the extent that I understand Graeber’s main thrust, it is interesting that your first suggested alternative is basically barter by another name, with favours-to-be-returned just another transactional relationship. I suspect Graeber would argue that, like Adam Smith, you’ve been so conditioned by our money-based economic system to think of interactions as transactional, that you have both failed to imagine what non-transactional models of society might exist, and perhaps as a consequence, failed to enquire into the anthropological literature to see just how diverse these alternative models of society are. And unless he was massively misrepresenting that literature, it does seem there are plenty of examples of societies run along lines that Adam Smith had no conception of, when he rather naively assumed the only alternative to money (and therefore the system it replaced) was barter. Graeber argues the anthropological evidence points to alternative systems transitioning to money-based societies, with little evidence of substantially barter-based societies ever existing (even as a transitional form, so in Graeber’s view it would be meaningless to talk of “pre-barter” societies).

    Having said that, none of those alternative models produced anything resembling a modern industrial civilisation – which some of the harder “back to the soil” eco-Luddites might see as a point in their favour, but seems unlikely to win widespread public support, and probably just supports your point about what’s workable in a more complex society.

    Regardless of whether Graeber is right or wrong about money “always” being (intimately linked with) debt, the intellectual tradition of “money as debt” definitely goes back a century before him.

  11. @ MBE
    I said “*may* be returned” not “will” – I accept that the latter *would* be a form of money.
    I don’t even keep track of favours in general although I cannot fail to be conscious that I am massively indebted to one lady and a couple of gentlemen who have given me scores of lifts to athletics matches over the last twenty years.

  12. @j77

    Point taken. I think Graeber would argue the fact you’re thinking about returns at all – whether certain or uncertain – is a sign you’re trapped in a very particular paradigm. Not that I’ve not seen any evidence of his supposed alternatives working on a large scale in a modern society…

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