One answer to that sort of thought might be that it would retain full value up to the end in the discharge of an obligation to the government. So you can always pay your taxes with your about-to-expire money, or if you don't pay tax, buy something from someone who does. That might go a long way to keeping the stuff in circulation, although aging money would surely go at a discount.

James Forder
Balliol College Oxford



________________________________________
From: Societies for the History of Economics [[log in to unmask]] On Behalf Of Martin C. Tangora [[log in to unmask]]
Sent: 28 September 2010 23:54
To: [log in to unmask]
Subject: Re: [SHOE] Dated currency

On 9/27/2010 10:33 PM, Pat Gunning wrote:
>Is it not true that money that is due to die tomorrow would, in a world of reasonably astute people, die today?

This is strongly reminiscent of the "surprise quiz paradox."
The instructor says "At some time during the term I will give a surprise quiz."
He can't give it on the last day, because then it wouldn't be a surprise.
Then he can't give it on the second-to-last day, for the same reason.
The recursive argument seems to show that he can't give it at all.

Whether or not the logic is correct, we all know that in the real world
he can give it on almost any day and it will be enough of a surprise.
But the longer he waits, the less of a surprise.

I suggest that money due to die at a fixed future date
will have less exchange value on each succeeding day
up to the date when it goes to zero.

Another analogy comes to mind: assets that truly depreciate
(not just on paper) with salvage value zero.




Martin C. Tangora
University of Illinois at Chicago
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