Re Roger Sandilands fascinating comment on what is "money", let me add that
there have been cyclical and secular swings in what serves as a medium of
payment, so it is in vain to seek a changeless definition. Examples:
1. Before 1836, "wildcat" bank notes served as money, being backed by the
U.S. Land Office's accepting them in payment for public lands. This policy
had the effect of "monetizing" vast areas of land. Then, suddenly, President
Jackson issued his "specie circular", demonetizing all that land.
2. Less spectacularly, speculative land values have changed from highly
liquid to the opposite at the peak of every land cycle. This is far from
ancient history! From about 2007-date our homes have changed from ATM
machines to money pits; from liquid to illiquid assets.
3. In the 19-oughts, "Trusts" developed, doing the business of banks,
although not called that, hence not regulated and not even very closely
observed - until the panic of 1907. The trusts did what lenders have always
done during land booms, they moved lending from commercial loans to mortgage
loans. 
4. On Greenspan's watch, a huge shadow banking "system" developed,
unregulated, highly praised by Friedmaniacs as free enterprise at its best
and most innovative. Quality control withered; subprime mortgages
flourished; the rest is history, current history! Blame it all on Fannie Mae
and Freddie Mac and Barney Frank?  Nice try, Ayn-Randians, but I don't think
so!  Paul Krugman has easily torpedoed that one (although I am NOT a
Krugmaniac, either). 

Mason Gaffney

-----Original Message-----
From: Societies for the History of Economics [mailto:[log in to unmask]] On
Behalf Of Roger Sandilands
Sent: Tuesday, June 01, 2010 7:22 AM
To: [log in to unmask]
Subject: Re: [SHOE] Question

In response to Harry Pollard's question as to who first contended that
demand deposits are money, I do not know enough of the history to give a
definitive answer, but I do know that it was still a matter of hot debate in
the 1920s when Edwin Cannan was insisting that only currency (notes and
coin) should count as money, and that banks do not create it. 
Allyn Young (1976-1929), who succeeded Cannan to the Chair of political
Economy at the LSE in 1927, wrote in a letter to Cannan dated June 22, 1926:
"I can quite understand that you would have liked to have been followed by
one of your own pupils, if that had been possible. Yet, although not a pupil
of yours, I can at least put forth a claim to some measure of discipleship.
Except for a few points in monetary theory (for example, I should hold that
banks _do_ "create" deposits!) I think there would be very little difference
between us."
Lauchlin Currie (1902-93), who was a pupil of both Edwin Cannan at the LSE
(1922-25) and Allyn Young at Harvard (1925-27), followed Young in his
definition of money to include demand deposits -- but also to exclude
interest-bearing time deposits (contrary to Keynes and many others). Currie
spelled out his reasons in _The Supply and Control of Money in the United
States_ (Harvard U.P., 1934). 
Chapter II ("The Concept of Money") looks at some of its history and upholds
J.S. Mills's views (while somewhat critical of Keynes's). In chapter V ("The
Concept of Credit") - originally published in the JPE 1933 - he remarks that
the slippery term "credit" had been "in the way of acquiring, among monetary
writers [such as Hawtrey, Taussig and Young], a fairly precise connotation:
means of payment represented by demand deposits. In recent years, however,
and particularly in America, it has become increasingly identified with
something else -- loans of all kinds, and particularly bank loans and
investments."
Currie demonstrated the terrible policy mistakes that had been made as a
result of confusions associated with the word "credit". He appealed for the
abandonment of the term, and constructed the first ever series of "money"
for the US, according to his own definition as currency plus net demand
deposits (i.e., exclusive of cheques in process of collection) including US
Government demand deposits. 
Roger Sandilands