Kevin D. Hoover wrote: "I have to disagree with Matt Forstater about   
what defines 'fiat currency.'  He implies that it is essential that it   
involve liabilities.  But this seems exactly backwards."  
  
I don't think it serves any useful purpose to deny that modern paper   
currency (fiat money) is the liability of the central bank that issues   
it.  The U.S. dollar is certainly not exchangeable into gold anymore,   
but a defective dollar bill is, by "right," returnable to its issuer for   
a new or non-defective one.  The dollar bill in my pocket is my asset;   
it is also the liability of the Fed.  Why deny that?  The deposit slip I   
get from my bank is a record of my asset (savings or financial wealth);   
it is also a record of the bank's liability -- redeemable to me upon   
request.  
  
What really is the problem with Matt Forstater's apparent rejoicing over   
the thought that token exchanges among monkeys don't involve liabilities   
is that he thinks the use of fiat money is bad or undesirable -- in some   
sense he didn't specify.  But, as Adam Smith long pointed out (and David   
Ricardo strongly endorsed), paper money that is properly managed to   
replicate the same function that would have been performed by metallic   
money is superior to the latter.  It saves on the enormous cost involved   
in digging up the metal, refining, and minting into usable pieces of money.  
  
Matt is also incorrect in his presumption that a barter system of trade   
could not involve liabilities.  Were some one to part with his/her wares   
  on a loan, to be returned with some additional compensation or not, a   
liability would have been created.  The recipient becomes liable to the   
lender up to the agree-upon amount in the commodity.  
  
Assets and liabilities are just definitional categories of transactions.   
  I see nothing inherently undesirable about the existence of liabilities.  
  
James Ahiakpor