James writes that "All those talking about a pure credit system
without a measure of value . . . . won't explain how we can derive P
(price level) from H/ky or HV/y when H = quantity of money, the
measure of value, is absent."
Answer: Simply define the equation's H term not as quantity of hard
cash money but as quantity of BANK DEMAND DEPOSIT MONEY. In other
words bank deposit money and only bank deposit money serves as the
measure of value in the pure credit economy. Then P emerges as the
aggregate of prices p of individual goods all expressed as the
quantity of bank deposit money given up in exchange for a unit of each
good.
On Feb 20, 2014, at 2:08 PM, James C.W. Ahiakpor wrote:
> Nice try, Julian Wells. But you're missing the point. The check
> card is certainly a means of payment but it is not a Unit of Account
> (classical identifier of what is money). Perhaps, I should have
> cited Adam Smith's explanation to make the point that the modern
> definition that focuses on the medium of exchange function of money
> as the first identifier of money is a switch in concept: “In
> treating of opulence I shall consider: ... Money as 1st The measure
> by which we compute the value of commodities (as a measure of
> value), [and] 2d The common instrument of commerce or exchange,” and
> “Money as I observed now serves two severall [sic] purposes. It is
> first the measure of value. Every one tells you that the goods he
> has to sell are worth so many pounds, shillings, etc., believing you
> know this as a measure. It is also the instrument of commerce, or
> medium of exchange and permutation” (/Lectures in Jurisprudence/
> 1978: 353, 368).
>
> Also, your check card is an order to pay money. Your vendor's
> computer ascertains from your bank's computer whether it will accept
> the order to pay. Your bank's computer verifies whether you have
> sufficient savings or wealth in your bank account for the amount.
> If you do, the transaction is authorized. If not, the transaction
> will be declined. Usually, your bank will spare you the
> embarrassment of a decline (for a "small" amount, anyway) and
> authorize the payment -- grant you quick credit. Your bank then
> charges you a fee for the service. Your bank also debits your
> account (if you have sufficient funds) and causes to be transferred
> out of its reserves (cash) with the central bank the amount of your
> purchase into the account of your vendor's bank. So, your check card
> transaction works just like a paper check transaction, except with
> lightening speed. All your identifying particulars are already "in
> the system."
>
> So, if we followed the classical definition of money, only a modern
> central bank's currency or cash is money. All other media of
> exchange or means of payment are money substitutes. That was my
> point. Is it so hard to understand?
>
> All those talking about a pure credit system without identifying the
> measure of value are operating in a land of fiction that I cannot
> understand. They won't explain how we can derive P (price level)
> from H/ky or HV/y, when H = quantity of money, the measure of value,
> is absent! Rather, they talk about some other claim on the non-
> existent quantity of money, a check.
>
> The classical definition is also very helpful in understanding that
> a central bank does not CONTROL the money supply, M1 or M2. The
> public's savings rate (currency-deposit ratio) and banks'
> willingness to lend (excess reserves-deposit ratio) have a lot to do
> with the determination of M1 or M2.
>
> James Ahiakpor
>
> Wells, Julian wrote:
>> On 20/02/2014 05:47, "James C.W. Ahiakpor" <[log in to unmask]
>> >
>> wrote:
>>
>>> Alfred Marshall
>>> ". . . 'money' is . . . all those
>>> things which are (at any time and place) generally 'current,'
>>> without
>>> doubt or special inquiry"
>>> Irving Fisher
>>> ła bank note is /generally/ acceptable in
>>> exchange"
>> Contrast these authorities with the Bank of England:
>>
>> "Our advice is to remain vigilant at all times and check all
>> banknotes
>> being passed" (followed by advice about UV scanners and detector
>> pens)
>>
>> (http://www.bankofengland.co.uk/banknotes/pages/retailers/hintstips.aspx
>> )
>>
>> In contrast:
>>
>> Ahiakpor:
>>
>>> Money doesn't include checks; these don't pass from
>>> hand to hand without any special inquiry.
>> Wells:
>>
>> They do (or did) when accompanied by a cheque card; so was cheque +
>> card =
>> money?
>>
>> Similarly, these days when I make an electronic payment from my bank
>> account, the only "special enquiry" that takes place occurs when
>> *my bank*
>> decides (or its computer decides) to issue the relevant amount.
>>
>>
>>
>> n.b. my bank's decision to issue, NOT the recipient's decision to
>> accept.
>>
>>
>>
>> Julian Wells
>>
>>
>> This email has been scanned for all viruses by the MessageLabs Email
>> Security System.
>
>
> --
> James C.W. Ahiakpor, Ph.D.
> Professor
> Department of Economics
> California State University, East Bay
> Hayward, CA 94542
>
> (510) 885-3137 Work
> (510) 885-7175 Fax (Not Private)
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