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What is money? (II)

Summary:
What is money? (II) Currently the credit theory dominates monetary theorizing and policy debate. So, policy analyses implicitly make assumptions about money as if its properties qua  money were those of a form of debt credit. Currently prominent examples include Minsky as well as proponents of Modern Money Theory (MMT). Hyman Minsky, who has been as infl uential as any money theorist in recent times, coined in passing, in a substantive piece, the familiar and frequently repeated aphorism that ‘everyone can create money; the problem is to get it accepted’ . Underpinning this clearly is the credit theory. If the nature of money lies in the nature of credit/debt, then any and all credit/debt is money, even that momentarily accepted between friends or

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What is money? (II)

Currently the credit theory dominates monetary theorizing and policy debate. So, policy analyses implicitly make assumptions about money as if its properties qua  money were those of a form of debt credit.

What is money? (II)Currently prominent examples include Minsky as well as proponents of Modern Money Theory (MMT). Hyman Minsky, who has been as infl uential as any money theorist in recent times, coined in passing, in a substantive piece, the familiar and frequently repeated aphorism that ‘everyone can create money; the problem is to get it accepted’ . Underpinning this clearly is the credit theory. If the nature of money lies in the nature of credit/debt, then any and all credit/debt is money, even that momentarily accepted between friends or relatives. So, anyone can indeed create money. Credit theorists must accept this. Alfred Mitchell Innes, perhaps the most influential credit theorist, embraced this. He thought that, therefore, any credit/debt ought to serve as a general means of payment. Minsky clearly does not accept the latter implication and was pointing to a problem of how a money qua  a form of debt is to become accepted. MMT proponents follow suit. The story they tell is very much like the one outlined just now re government debt and taxation. In my view, no aspect of the story withstands scrutiny. It is bank debt (positioned as money) not government debt that is involved in money constitution, government taxes and fines are not a debt in any technical or legal sense, and it is far from obvious that people accept to hold money just because they have to use some of it to pay taxes, etc.

Tony Lawson

Lars Pålsson Syll
Professor at Malmö University. Primary research interest - the philosophy, history and methodology of economics.

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