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Money Delusions

Dissects deluded views of what money is

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Posted on August 25, 2017September 20, 2017

The great QE unwind is coming

MD: We here at MD know without equivocation that there is no role for a central bank to play in a “proper” MOE process (i.e. real money). So we are always interested in reading articles about what a central bank is doing or should be doing. We know in advance, both are wrong headed. Let’s see what we shall see.

Commentary: The great QE unwind is coming

By Said N. Haidar · August 24, 2017 11:00 am · Updated 11:36 am

After ending quantitative easing in 2014, the Federal Reserve now plans to begin shrinking its balance sheet over the next several years by tapering the reinvestment of its Treasury and mortgage-backed security holdings.

MD: “Tapering” the “reinvestment”? The Fed doesn’t make investments. It has nothing to invest. It’s balance sheet is nothing but a list of broken promises from the treasury and crap taken off failed elite traders at face value … a record of counterfeiting. It has no way of removing them from its balance sheet. They only go away when the Fed goes away.

During the same period, U.S. deficits are projected to grow substantially — notwithstanding the possible enactment of any of President Donald Trump’s major proposed legislative initiatives, which would likely cause deficits to swell even further.

MD: What? US deficits? Have they made a trading promise and not delivered? Everything the USA government spends is counterfeit. All the taxes they collect goes straight to the money changers as tribute (they call it interest).

Increasing U.S. deficits will require the Treasury to ramp up bond issuance. As a greater risk premium will be required to attract new buyers to absorb both the U.S. primary deficit and the Fed’s reduction in its holdings, the U.S. yield curve is likely to steepen. Price concessions into Treasury auctions will likely increase as well.

MD: Ramp up “bond issuance”? They never repay the bonds. They just roll them over. That’s default. That’s counterfeiting. The buyer’s of those bonds claim the government must pay them tribute (interest). The buyers pay nothing for those bonds. When the bonds are rolled over, the buyers get back what they paid … nothing. In the meantime, they get tribute (interest). It comes from the taxes government steals from us. It’s just paper work. It’s a complete scam. You and I need not apply.

The European Central Bank, for its part, is increasingly expected to begin winding down its QE program in 2018. This is likely to bring steeper European yield curves, putting additional pressure on the U.S. curve to steepen further.

MD: Just how are they going to “wind down” the QE program? If they are talking about the crappy loans they bought from the scamming money changers at face value, who are they going to sell those to? The same money changers … right? For pennies on the dollar … right? Who will again claim they’re in trouble and demand a bailout … which pays them face value for something they picked up for pennies on the dollar. What’s not to love about that scam.

Related Coverage

Market experts focused on political risks Investors start to prep for market disruptions It’s time for the Fed to raise interest rates Balance-sheet unwind to start ‘relatively soon’ – Fed Federal Reserve unwinding has​ managers, investors at ready
 MD: And there’s that fiction of “interest rates”. In a proper MOE process interest collections exactly equal defaults experienced … as they’re experienced. Divide by whatever you like to deceive yourself with rates. The process is only concerned with the absolute amount.

By communicating the end of QE in advance and increasing the rate of reduction gradually, the Fed hopes to avoid the “taper tantrum” that roiled markets from 2013 until early 2016, when U.S. equities, and global assets more generally, were subject to periodic risk-off episodes.

MD: Right. Bring those frogs up to boil slowly so they don’t jump out of the pot.

The aim of QE was to push flows into more productive investments — not just financial assets. Unfortunately, evidence for increased economic activity from QE is relatively weak.

MD: What do they know about investments … let alone productive ones? A proper MOE process leaves all that up to traders. And traders “will” deliver as promised … or they will not be allowed to create money. With a proper MOE process and real money, governments are quickly removed as the deadbeat traders they are. The interest collections they must pay are equal to the money they want to create. Net it out, they create zero money. Their counterfeiting game is over.

Yet QE did have an impact. It artificially flattened yield curves, weakened the country’s currency, allowed poorly performing companies to roll over debt and inflated asset prices.

MD: It had a huge impact. If turned losing trades into winning trades for the money changers. It’s a scam.

By depressing yields on government securities, QE encouraged yield-seeking behavior. Many analysts note that the growth of central bank balance sheets has been eerily correlated with the increased value of global risk assets and U.S. equities.

MD: See how arbitrary they view interest collections? We at MD know exactly what interest collections should be. They should always be equal to defaults experienced … at the moment they are experienced in real time.

In June, the Federal Open Market Committee raised interest rates by 25 basis points for the third consecutive quarter. The Fed did so, based on internal Phillips curve models, which predict that low levels of unemployment lead to increasing inflation. As the Fed starts to implement its balance sheet runoff, it may find it increasingly difficult to maintain its rate hiking cycle.

MD: Wet finger … place in air … ah … feels like 1/4% to me, how about you?

Balance sheet reduction is likely to commence in the fourth quarter for both U.S. Treasury holdings and mortgage-backed securities. The combined maximum rate of reduction is $10 billion a month but rising incrementally to a maximum $50 billion a month by the fourth quarter of 2018.

MD: Ok. They’re going to sell $10 billion dollars of face value junk … and what, get $1B in return … from the money changers … who just counterfeit the money for them in the first place? What an ugly joke!

While the Fed has previously tapered its purchases, and in fact ended purchases for brief periods twice, neither it nor any other major central bank that has engaged in QE has actually tried to shrink its balance sheet thereafter. What’s odd is that the Fed and other central banks have made claims about the efficacy of QE, but when the policy goes into reverse, they seem to think there won’t be any meaningful effect.

MD: Remember QE (Quantitative Easing) is a newly made up term. Debt monetization was no longer working … it was too revealing of what they were doing.

The Fed says it hopes the process will “run quietly in the background” and not amount to policy tightening. We shall see. I believe that Fed balance sheet shrinkage could have substantially greater effects on both bond markets and financial markets, generally, than conventional interest rate increases.

MD: Policy tightening? What policy? Tightening what? They will counterfeit whatever they need to to pay their employees, their suppliers, their money changers, and their dependents.

Since QE purchases ended, the Fed has continued to reinvest the coupon and principal payments of both Treasuries and MBS holdings. Starting in October, the Fed will likely reduce reinvestments of purchases of Treasuries by $6 billion a month, while reducing MBS reinvestments by $4 billion a month.

In 2018 the Fed will allow up to $180 billion of Treasuries and up to $120 billion of MBS to run off. Thereafter, it will allow up to $360 billion of Treasuries and up to $240 billion of MBS runoff.

MD: To “run off”? What does that mean? Where are they going to run off to? Is that a new word for “write off”?

This is likely to come against a backdrop of a rising U.S. deficit, which is projected to rise to more than $1 trillion by 2022 (vs. $500 billion in 2015). These projections, moreover, do not include the possible enactment of any of President Trump’s likely deficit-raising policies on fiscal spending, defense increases, infrastructure spending or tax cuts.

MD: Remember. With a proper MOE process and “real” money, there is no Fed. And money changers can’t exist with the time value of money locked at zero .. so there are no money changers. And the governments they institute can no longer be sustained with counterfeiting. Up until then, all this nonsense about deficits is just that … nonsense. It is just pushing fiction around a columnar pad. If we owe France a billion Francs, well, we’ll have to sell something to someone for a billion Francs … and being a deadbeat, it won’t be counterfeit dollars. How about the capital building?

In the Treasury market, increased supply at auctions will grow steadily throughout 2018, which will likely result in significant yield curve steepening. Rather than being used as a liquidity point for investors to buy large quantities of bonds, Treasury auctions will be more difficult to digest.

MD: This is all based on that old “improper” MOE process nonsense that perpetual supply/demand balance of the money is not needed. We’ll shoot for a 2% leak and deliver a 4% leak. Well, if you go into a restaurant and buy a steak … and then don’t pay for it, you will have hell to pay. If you pay with a credit card but don’t pay your statement, you will have hell to pay.

It is therefore likely that as net new issuance increases (accounting for the reduction in Fed purchases), we will see significant stress and concessions into Treasury auctions. This will coincide with the Congressional Budget Office forecasts of net funding needs approaching, or even exceeding, the levels that existed in 2009 and 2010.

MD: When the jig is up, the auctions will fail (at 10,000% interest). game over. Right now, they’re buying their own crap at these auctions … and creating new crap to do it.

After years of financial repression, with yields at historic lows and financial institutions on much firmer footing, and with an upturn in global synchronized growth, appetite for government securities is waning. Hence, we expect to see a steeper yield curve and wider MBS spreads.

MD: Yields are at historic lows because counterfeiting costs nothing.

More importantly we expect to see substantially more difficulty for the U.S. and European governments to issue debt at auctions and syndications. We might even see bond market vigilantes start to impose fiscal discipline on the U.S. government.

MD: Ah … “bond market vigilantes.” Ask Venezuela what they think about those guys. Here at MD where we know what “real” money is … and what Fed money is not  … we need to keep an air sickness bag close at all times.

Said N. Haidar is founder and chief investment officer of Haidar Capital Management, New York. This article represents the views of the authors. It was submitted and edited under Pensions & Investments guidelines, but is not a product of P&I’s editorial team.

Posted on August 25, 2017June 19, 2022

Wikipedia: Nash – Ideal Money

 MD: It has been suggested that we at MD study Nash’s “ideal money” as an assignment (presumably to see it disproves our case) … by someone who won’t admit what we describe here is indisputable … or even give evidence they have even read the less than 500 words that present the principles of “real” money. As usual the assignment comes from those who resort to just handing out reading assignments … rather than reading our simple 500 words. This one is of particular interest because it claims “ideal money”. The “proper” MOE process described here at MD maintains the only “real” money imaginable … so it “has” to be as ideal as anything out there or proposed to be out there:
  • It is in perpetual free supply;
  • it maintains perpetual perfect supply demand balance of the money itself (zero inflation);
  • it imposes no restraint nor interest load on responsible traders;
  • it is fair in imposing interest loads on irresponsible traders commensurate with their propensity to default;
  • it maintains perpetual perfect transparency of the creation and destruction of the money process itself;
  • it requires no resources (reserves) at all;
  • the cost of its operation is negligable;
  • it is measured using an unvarying scale (the HUL);
  • there is not money to made in operating it (as there is in insurance … i.e. investment income)
  • and its behavior is totally objective and the results easily provable;
There is “nothing” more ideal … so this should be interesting. Nash looks like an egghead … I presume he will think like one too. Expect lots of footnotes.

Ideal money

From Wikipedia, the free encyclopedia
This article contains too many or too-lengthy quotations for an encyclopedic entry. Please help improve the article by editing it to take facts from excessively quoted material and rewrite them as sourced original prose. Consider transferring direct quotations to Wikiquote. (April 2015)

John Forbes Nash, Jr.

Ideal money is a theoretical notion promulgated by John Nash (Nobel Laureate in Economics), to stabilize international currencies. It is a solution to the Triffin dilemma which is generally about the conflict of economic interests between the short-term domestic and long-term international objectives when a currency used in a country is also a world reserve currency in the meantime.

MD: “To stabilize international currencies”? Tilt!!! Real money is an inherently and perfectly stable process. It has the automatic negative feedback mechanism of immediately mopping up defaults with interest collections of like amount. Now, with a statement like that first thing out of the chute, we here at MD know its silly to read further. But we’ve been given the assignment. We trudge on.

“Triffin dilemma”? Conflict of economic interests? A “proper” MOE process has no sensitivities to such things at all. There is no difference between short term and long term. The time value of money is provably 1.0000. When a proper MOE process exists anywhere, there is no such thing as a world reserve currency. “All” monies either come from a proper process or they are competed out of existence in an instant. Thus all moneys exchange at a constant rate … 1.000 if denominated in HULs (Hours of Unskilled Labor). And no “real” money requires “reserves” of any kind whatever!

Contents

  • 1 Introduction
    • 1.1 How does the idea of Ideal Money appear
    • 1.2 Main value standard of ideal money
    • 1.3 Why gold can not be an ideal money
  • 2 Related factors mentioned in Nash’s lecture
    • 2.1 Welfare Economics
    • 2.2 Money, Utility, and Game Theory
    • 2.3 “Keynesians”
  • 3 Asymptotically ideal money
    • 3.1 Main idea
    • 3.2 Currencies may become (asymptotically) ideal money
      • 3.2.1 Euro
  • 4 References
  • 5 External links

Introduction

How does the idea of Ideal Money appear

“Money can be recognized as a technological development comparable to the wheel and of similar antiquity. Among the more recent developments in the technology that facilitates transfers of utility (in the sense of game theory) are systems like those of EZ Pass, by means of which vehicles traversing toll bridges or toll highways can pay their toll fees without stopping for the attention of human personnel manning the toll booths. In this lecture, I present remarks about the history of monetary systems and about issues of comparative quality or merit , along with a specific proposal about how a system or systems of ‘ideal money’might be established and employed.”[1]

MD: He describes a transfer system. The real money process is insensitive to the myriad of transfer systems employed in the money’s circulation. The process itself is only interested in its media’s creation and destruction and prevention of “all” leaks. He talks of a technological development. Exotic transfer systems are not it. There is nothing technical in addition and subtraction. That’s just simple accounting. I’m going to ignore all his noise about history. I’m just going to look for his solution to all the historical failings. We here at MD already know the best … and yet untried solution.

Main value standard of ideal money

Ideal money is working in the theory similar to the gold standard, but it is generally based on a Nonpolitical Value Standard. “A possible nonpolitical basis for a value standard that could be used for money would be a good industrial consumption price index(ICPI) statistic. This statistic could be calculated from the international price of commodities such as copper, silver, tungsten, and so forth that are used in industrial activities.”[1] John Nash said in his lecture.

MD: Tilt!!!   All money is a perception held by two traders at an instant in time. One has money. The other has an object they will trade for money. In the negotiation step (1) of a trade, they decide how much money is involved. In all our illustrations our money will be measured in units of HULs (Hours of Unskilled Labor). A HUL has traded for the same size hole in the ground for all time … and is expected to do so in all future time. There is no “standard” … .political or otherwise. If the trade is made using existing money, the trade is complete  for both traders. Promise to deliver (2) and Delivery (3) happen simultaneously on-the-spot. That trade is done. It has no impact on any other trade in the entire trading environment. It is just between those two traders. While the trade “uses” money, it doesn’t “create” money.

Money is “created” when one trader promises to do the trade over time and space. And we have all done that. We have bought a house, a car, a washing machine, or a steak dinner by creating money and then returning it a little bit at a time. Our trading promise is certified, the person with the house, the car, the washing machine, or the steak gets money (which we created on the spot). We then go about working to return that money and destroy it as we promised to do. If we are responsible traders (i.e. we don’t default), we pay no interest. If we have a propensity to default, we pay interest actuarially based on that weakness.

So Nash need not make this more complicated than it has to be. We can ignore references to anything “political” for example.

Why gold can not be an ideal money

MD: Not only can gold not be “ideal” money. It can’t be money at all. Anyone holding gold is doing just that … holding gold. They’re no more holding money than someone holding a ribeye steak.

The gold does not reach the standard of ideal money, despite its merits. The main problem is because the silver and gold do not have a constant value all the time.

MD: One gold star for Nash. Real money guarantees perpetual perfect balance between supply and demand for the money itself.

“To the undiscerning minds of the mass of men a pound sterling of gold, a silver five-franc piece, or a paper dollar, represents always a definite unit.

MD: So does a pound of ribeye steak. The pound is the unit … what it is a pound of can play no role at all. We choose the HUL as the best candidate for unit. It is related to time, which is unvarying, and what can be delivered in that time … which is relatively unvarying. Who knows how big a hole an ounce of gold traded for 100 years ago? Most don’t even know what it trades for today. But everyone can put a spade in their hand and in one hour make a hole that is one HUL in size. And they can know that their hole, for all intents and purposes, is the same size hole a HUL would have produced 100 or 5,000 years ago. We don’t need to search the Dead Sea Scrolls for proof.

It has not escaped attention, however, that a given amount of money buys much less at one time than another.”[2]

MD: May have to take back Nash’s gold star. A given amount of “real” money will always trade for the same size hole in the ground … always! It may trade for a different size car or different size ribeye steak or a different number of gold ounces … but that’s because of the supply/demand relation of those things themselves. The supply/demand for the money itself is perpetually perfect and plays no role whatever in the pricing.

in other words, people are used to measuring the value of goods by money, but due to some reasons the value of money itself changes, which causes the value of silver or gold changes. We can’t tell the constant value of the metal, and the fixed mind-sets can not easily be changed.

MD: What he says is only true of an “improper” MOE process like that run by the Fed and every other central bank which ever existed. if everyone does the same thing wrong, that is only one thing being done wrong. People thinking in HULs will never have this problem. Thinking in dollars, a HUL was $1.50 when I was one. It is about $8.00 for those who are HULs today. In both cases, it trades for the same size hole in the ground.

Related factors mentioned in Nash’s lecture

Welfare Economics

“A related topic is that of the considerations to be given by society and the national state to ‘social equity’ and the general ‘economic welfare’.

MD: But we at MD know that (welfare) has nothing whatever to do with money. So we should be able to skip this whole topic … but of course we can’t because we’ve been given this study assignment.

Here the key viewpoint is methodological, as we see it. How should society and the state authorities seek to improve economic welfare generally and what should be done at times of abnormal economic difficulties or ‘depression’?

MD: I don’t know and don’t care … as long as they don’t try to do it by manipulating the MOE process.

We can’t go into it all, but we feel that actions which are clearly understandable as designed for the purpose of achieving a ‘social welfare’ result are best.

MD: Best for whom? “real” money is not concerned. People can “use” it to do the things they feel are good. They can even “create” it to do so … as long as they also return and destroy as they promise to do. But they absolutely cannot “counterfeit” it to do the good things they want to do. That results in bad things for others … and a “proper” MOE process cares nothing about good or bad. It just cares about strict adherence to the process, thereby achieving the predicted and desired result … with zero outside meddling.

And in particular, programs of unemployment compensation seem to be comparatively well structured so that they can operate in proportion to the need.”[3]

MD: Unemployment compensation is no different than broken car compensation. If you can’t cover the risk through self insurance, you better be buying insurance. Regardless, that is no concern of a “proper” MOE process. Nash, this is oh so easy! Are you being paid to give these lectures?

Generally, the social welfare is what we always expect to be improved, and if there is really an ideal money, the whole economy would be influenced, including the social welfare.

MD: Why say the ideal money should do it? Why not say the ideal drug should do it. Or the ideal bullet should do it? “Social welfare” is not the business of money. Trading over time and space is the business of money.

Money, Utility, and Game Theory

MD: You gotta love it when they throw in game theory. Can string theory be far behind? How about global warming?

The concept of utility generally appears in the field of economics but it can be connected with the game theory in mathematics. In the game theory of economics, “utility” is a very important and essential factor. In the book (on game theory and economic behavior) written by the mathematician John von Neumann and the economist Oskar Morgenstern, a utility function is proved, which can be used to put the individual’s preference on the interval scale, and the utility is always preferred to be maximized. (More details can be found in Von Neumann–Morgenstern utility theorem.)

MD: And this is the exact same kind of nonsense Mises spends most of his really boring words on. When it comes to money, why traders make the trades they do is completely irrelevant. We see time and time again “buyers remorse”. It can happen in a day. Or it can happen over several years (e.g. in the case of a boat purchase … two days of glee, the day they buy it and the day they sell it … other than that, it’s just a hole in the water into which they throw money). That’s all irrelevant to the subject of money. But we have our assignment to study this nonsense!

In John Nash’s lecture about ideal money, he gave the opinion that we can through observing the changing relationship between the money and the utility transfer to see “how the ‘quality’ of a money standard can strongly affect the areas of the economy involving financing with longer-term credits.

MD: With a “proper” MOE process, quality is in the transparency and the efficacy of the process. The quality of the governor on a diesel engine is more complicated than that … its parts can break. The MOE process is either operating objectively as dictated … or it is not. Only in the former case does it have quality of any kind … and that quality is of the perfect kind.

And also, we can see that money itself is a sort of ‘utility’, using the word in another sense, comparable to supplies of water, electric energy or telecommunications.

MD: Absolute nonsense. It is never proper to think of money “supply”. A proper MOE process has media is perpetual free supply. There is always exactly as much there as is needed … no more … no less. Nash … no gold stars for you!

And then, if we think about it, money may become as comparable to the quality of some ‘public utility’like the supply of electric energy or of water.”[3] The game theory of economics is a good way to check whether the quality of a money is ideal or not.

MD: The way to check the quality of money is by observing its universal acceptance in use … and observing its trait (built in) of perpetual zero inflation of the money itself. The latter will enable and result in the former.

“Keynesians“

“The thinking of J. M. Keynes was actually multidimensional and consequently there are quite different varieties of persons at the present time who follow, in one way or another, some of the thinking of Keynes.

MD: “Multidimensional”? As in wishy washy? … yep … as in wishy washy.

A very famous saying of Keynes was ‘…in the long run we will all be dead…’”[3] Keynesian economics gives the opinion: in the short run, the change in economic output has a strongly relationship with the change in aggregate demand, the output is always affected by the demand.

MD: How about this from us here at MD: In the long run, inflation of real money will be zero; and in the short run inflation of real money will be zero. It’s more true than what Keynes said … some people die before the long run.

And look what they’re talking about: “aggregate demand”. Money doesn’t care about demand. It is in free supply. There is always in circulation the exact amount that is needed … or some trader is creating it as we speak.

If there is an ideal money which can be stable in a very long period, we do not really need to worry about lots of problems in the long run.

MD: Real money is perfectly stable … perpetually … as is a HUL and the size hole it trades for. It never worries about any problems … long run or short. It perpetually mitigates defaults experienced with interest collections of like amount and this is a stabilizing negative feedback loop.

Asymptotically ideal money

MD: OH PLEASE!!!!!

Main idea

Asymptotically ideal money is the currency close to but still not ideal money. In John Nash’s lecture, “Ideal Money and Asymptotically Ideal Money” focused on” the connection between fluctuation in inflation and exchange rates and the perceived long-term value of money”, he mentioned that: “‘Good money’ is money that is expected to maintain its value over time. ‘Bad money’ is expected to lose value over time, as under conditions of inflation.

MD: So money from a “proper” MOE process (i.e. real money) is “good money”. It (the process) guarantees it (the media) will hold its value in HULs over all time everywhere. It cannot be made to do otherwise without violating the process … at which point it is no longer “the process” … it is no longer “real” money.

The policy of inflation targeting, whereby central banks set monetary policy with the objective of stabilizing inflation at a particular rate, leads in the long run to what Nash called ‘asymptotically ideal money’ – currency that, while not achieving perfect stability, becomes more stable over time.”[4] That means if a currency has shown a trend to be more stable,it could become an asymptotically ideal money or even the ideal money in the future.

MD: A “proper” MOE process is subject to no such manipulation. Thus it can only produce “ideal” results. But the results are only ideal for the traders. They are far from ideal for the money changers or the governments they institute for their protection and force in applying their scam. And they are not ideal results for those in the business of finance. Their cherished and worshiped expression (1+i)^n from which they claim the time value of money … well, it always produces 1.000 … i.e. “real” money has zero time value. So those in the scam of finance need to find other work.

Euro

Currencies may become (asymptotically) ideal money

Euro

John Nash mentioned in his lecture that Euro might become an ideal money in the future, because Euro is used in a large range of places and has a good stability.

MD: We here at MD wished they talked to us when they created the Euro. We could have told them exactly how to do it to make it perfect “real” money (for traders that is). But the Euro was created by money changers to gain control over lots of countries at the same time. It is an open scam … and BREXIT is saying, we’re out … we want to run our own scam. Note, the Euro scam, like our own Constitution scam has no buy/sell agreement.

It is the currency used by the Institutions of the European Union and is the official currency of the eurozone which consists of 18 of the 28 member states of the European Union. In general, Euro has a macroeconomic stability, people in Europe owning large amounts of euros are “served by high stability and low inflation.” Moreover, in March 2014, Euro was commented as “an island of stability” by the head of the European Central Bank.[5]

MD: Every one of those individual entities in the European Union could have instituted their own “proper” MOE process. Ideally, they all would have adopted the HUL as the logical choice for unit of measure. If they had done that, all their money would be freely exchanged with a constant exchange rate … that being 1.000. Had they done that, there would have been no reason to “unionize”. And there wouldn’t be a European Central Bank; or 18 central banks; or 28 central banks. there would be “no central banks”. Just certified certifiers with transparent operations employing a “proper” MOE process. What’s not to love about the simple and the obvious?

References

  • “Ideal money”. Southern Economic Journal, 2002, Vol.69(1), pp.4-11 [Peer Reviewed Journal]. July 1, 2002.
  • “Is an Ideal Money Attainable?”. Journal of Political Economy. 1903. JSTOR 1820954. doi:10.1086/250969.
  • “Lecture by John F. Nash Jr. Ideal Money and Asymptotically Ideal Money” (PDF).
  • “Nobel winner Nash critiques economic theory”. April 27, 2005.
  1. “ECB boss Draghi brands euro an ‘island of stability’ despite sluggish growth and high unemployment”.

External links

  • Fordham eNewsroom on Nash’s 2008 lecture
  • Nash Equilibrium
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  • Monetary economics

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Definition of money

Money is “an in-process promise to complete a trade over time and space”.

Proof

Examine trade: (1) Negotiation; (2) Promise to deliver; (3) Delivery.

With simple barter exchange (2) and (3) happen simultaneously, on-the-spot. Money enables (2) and (3) to happen over time and space.

Thus money is obviously “an in-process promise to complete a trade over time and space”.

The “proper” MOE process

The “proper” Medium of Exchange (MOE) process, first and foremost “guarantees” perfect balance between supply and demand for money … i.e. zero inflation of the money itself. Since this is the nature of every trade, that is easy.

The process “certifies” (i.e. documents) new trading promises .. transparently for all to see … no anonymity. That creates the money, first as a ledger entry. Later it may be exchanged for cash or currency … and back.

This money then circulates anonymously in trade as the most common object in every simple barter exchange. It loses all identity with the trader creating it. All money in the process is the same, be it record, currency, or coin.

The process then monitors in-process trading promises  for performance … transparently. On delivery, the money created is returned and destroyed. On default, that orphaned  money is reclaimed immediately when detected through interest collection of like amount.

To do this fairly requires actuarial techniques. The process is very similar to the operation of a Mutual Insurance Fund … but no money is to be made on investment income. There are no reserves … so there is nothing to invest.

Regardless of the operation,  the relation: INFLATION = DEFAULT – INTEREST = zero must be observed perpetually.

About This Site

The earth is not flat as everyone once thought it to be … before their delusion was removed.

Money is “not” what everyone has been deluded to believe.

This site exposes the delusions … instance by instance … and discusses the impact.

Rebuttal is welcome and essential.

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