Sunday, August 2, 2015

Definitions: I Feel Pretty

So here is a fellow who understands perfectly well what the problems are economically, also understands that the issues are confused by poor definitions, and yet off he goes, using scare quotes and qualifiers to make his case, which is still unclear for failure to define terms and stick to it.
From CBB day one, I’ve tried to significantly broaden how we define and analyze “money” and so-called “money supply”. I draw from Mises’ “fiduciary media” and inclusion of financial instruments with the “functionality” of traditional narrow definitions of money supply (i.e. currency, central bank Credit and bank deposits). For me, the perception of a safe and liquid store of (nominal) value is critical.
Moneyness is a market perception. The epicenter of danger lies in “money’s” virtual insatiable demand. It is prone to over-issuance. There is a powerful proclivity for government intervention, manipulation and inflation. The perception of moneyness is, in the end in a world of fiat, self-destructive.
After the past almost seven years, I don’t question central banks’ capacity to create “money.” And my framework doesn’t ascribe special status and power to commercial bank “money” or balance sheets. Besides, U.S. M2 “money supply” has inflated about $2.5 TN in three years, or 20%. Over three years U.S. Commercial Bank Liabilities have inflated the same $2.5 TN, or almost 20%.
The past three years have witnessed historic “money” and Credit expansion on a global basis. 
Moneyness?  That's new, but not helpful.  Socrates made a big deal about getting definitions right.

I've had correspondents argue definitions change.  True, for example what "gay" meant in the 1950s and before has zero relation to what it means today.  No one used "gay" to mean homosexual before 1950s, and everyone uses it to mean gay after 1980.  The meaning changed.

Money on the other hand, has meant only one thing throughout history, and only around 1920 did it begin to be used to refer to things surely not money, like credit (although even credit economists cannot define.)  But here is the difference.  Plenty of serious writers still use the term strictly, and where it the term money is not used strictly, it is used to cover so many diverse and even contrary things that there is no effective definition outside of the original emerging.  Perhaps someday the term will emerge in all usage to mean something quite different than it means now, say mal-credit, but mal-credit is only one of countless terms that too few people call "money" for it to have ascended to that august definition.

This is likely one of the top ten films of last century, from a 1950s play of the same name.  Listen to the lyrics at minute one and on... (or here )

She is singing about how a handsome boy makes her feel, decidedly not the term as used today.  Perhaps as long as economists subscribe to usury they will never be allowed to achieve clarity.  More for me then.

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