Re: The budget deficit creates wealth

royls@xxxxxxxxx wrote:
On Fri, 27 Oct 2006 00:01:35 +0200, Herman Jurjus <h.jurjus@xxxxxxxxx>
wrote:

royls@xxxxxxxxx wrote:

[snip, snip, snip, snip]
Garbage. Paying back the debt only led to the Great Depression
because the US Federal Reserve money system _defines_ money as debt.
[snip, snip, snip, snip]

Just curious: how else would you suggest they define money?

Historically, there are three kinds of money: commodities, tokens, and
debt. Commodity money is defined as a form of wealth widely accepted
in exchange. Gold is perhaps the best-known commodity money, but many
other commodities such as cattle, cowrie shells, whiskey and wampum
have also been used. IMO gold makes an excellent commodity money, but
in the modern world, it would be economic suicide for any country to
adopt a gold monetary standard: it would be a guarantee of prolonged
deflation.
>
Token or fiat money is defined as a non-wealth medium of exchange
recognized (usually exclusively) for settlement of legal debts (taxes
and judicial awards). Tokens can function very well also, but because
of the temptation of capturing seigniorage, there must be strict
control of their issue, or inflation runs away.

It seems to me then that commodity-money is very much like token-money, but without the possibility to 'strictly control issue' (e.g. gold found in a newly discovered part of the world). Or do i overlook a more fundamental difference between these two kinds of money?

--
Cheers,
Herman Jurjus
.

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