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SSET 13 – VIRTUAL Currency ≡ Currency out of NOTHING
Believing in the virtual currency, [1] present in the current economic theories (classical, neoclassical-Wicksellian, Keynesian,…), does not differ of the Austrian theory that validates the feasibility of the financial creating currency out of nothing.
To think in a virtual currency ≡ emerges from nothing, is equivalent to say that currency maybe cannot be wealth, it is not assign value therefore: “only serve like sterile mean of exchange”, or the “unit of measure for sterile economic calculus.
Let us see the violation of the economic fundamentals of suggesting the feasibility of some kind of currency that is not wealth: [2]
- It implies that it is not useful and/or scarce.
- That it does not useful implies not assign exchange value to it. Retreat to Aristotle, ….
- If it has not value, it would not participate in any exchange, therefore neither would currency prices be generated, which arise from the relative subjective values.
- If it had no value, it not would participate in the law of decreasing marginal utility of wealth, [3] no in the law of relative utility of exchange. [4]
- We already saw that Credit is present wealth. That there is “without interest” credit-currency, because it is “in sight”, is what may make us presume that this currency is not credit-wealth. [5] [6] BUT, when it is borrowed on time, like any economic good, it generates the corresponding interest, if were not wealth, its term loan would not generate interest. [7]
- To maintain that paper currency will become wealth with its exchange for it, is an imperfect interpretation of our category of credit-irregular-currency, which does not deny its present wealth condition (current value), without requiring any exchange. [8]
- In the failed idea of virtual currency-nothing, lies the problem of current theories of not realizing that there is a theory of the economic unit of measurement (neutral), different from the theory of currency (not neutral). [9] Proof of this is the unnecessary consideration of even studying the neutrality of the currency.
The SSET demonstrates clearly the confusion, as it does not happen with other sciences, the neutrality of the entity dimension (value-price of the wealth used as a unit of measurement), with the wealth to be dimensioned (the currency).
- Another form, theoretically unconscious, of manifesting that currency is not wealth, is this reflection: if the currency is demanded is well, and if it is not demanded, is well too… By God, this amounts to saying: if it is wealth, and it is not wealth, too?
CONCLUSION:
The currency is ALWAYS WEALTH, regardless of the “material” with which it is built: money, regular credit (gold standard), irregular credit (paper currency), “bitcoin” … That is our Theory of Currency anticipated the possibility of bitcoin (good of exchange commonly used in a certain market). [10]
I must say that never thought it would be necessary to write this work, BUT I found this reflections of economics students: “there is a currency that is not wealth, will be it by the exchange”, supported by recognized academic... who perhaps did not say that, but after all it is a direct deduction from consider that “it is feasible to create currency from nothing”, and “there is virtual currency”…
Menger has every right, in the history of economic thought, to raise his voice. To the effect, as he claimed in life: history will be responsible for correcting the theories that misinterpret him. [11] I humbly hope to contribute since results of my research on economic theory, which I periodically show on www.carlosbondone.com.
My respect for Carl Menger is no coincidence, while my vocation for economics arose precisely because of a reading, at age 16, of an economist who said: banks create currency out of nothing. That led me to establish a logical investigative chronology: starting from the latest theories to precedents, until finding firm ground that would take me out of the confusion that said sentence generated in my common sense… I confess that in a point I thought that my task culminated in Mises, BUT, I HAD TO CONTINUE, UNTIL ARRIVE TO CARL MENGER, who stimulated me to “continue his task…” (it is my wish). Today I suggest starting the Mengerian School, and founding the Menger Institute.
Carlos A. Bondone
[1] A term coined by Wicksell, a source of inspiration for all schools of thought of the twentieth century.
[2] Paper currency (forced course), fiduciary media, credit-circulatory,…, bitcoin?
[3] That is in spite of the theoretical effort of Mises (unnecesary by the way), to assign it to him (his greater contribution according to Rothbar).
[4] According to the Subjective and Solidarity Economic Theory (SSET), the Austrians post Menger tried to solve the defect of their monetary theory (Hayek was dissatisfied) through his theory of economic cycles. The TESS explains them by means of the simple file of including them in the consequences of any price control (imposing the factual causality of the exchange in replacement of its logical natural causality), with the expansive consequences not proportional in all circumstances.
[5] Its expiration will be decided by each carrier, and only for him, at the moment of his exchange for present wealth, transferring the expiration to his new receiver ... In that process of transfer of carriers, of credit-debt “in sight”, will be altering its value-price over time, if it loses everything (value-price), it will no longer be simultaneously currency and wealth.
[6] Everything has its origin in the confusion that “bequeathed” Mises: “... A person who accepts and has tickets does not grant credit: it does not change a present good for a future good. The immediately convertible banknote of a solvent bank is used everywhere as a fiduciary means instead of money in commercial transactions, and no one establishes a condition between the money and the banknotes it holds. The ticket is a present good like money” (our translation of The theory of money and credit - Chapter XV - 5.) This is a strong expression of Mises' failure: 1) the one who accepts and has tickets does not grant credit, but forgets the credit-debt, current-present, of the original issuer; 2) the ticket is a present good just like money, here it confuses the character of present wealth of all credit (Credit is present wealth), with the absurdity of affirming that: money-gold = paper currency, “because it provides the same service”.
[7] Its current value (discounted the interest) is the present wealth that lends itself to term. This “abstract” (which has nothing of such) is the concrete-observable present wealth of all credit-debt. That is, the interest is the value-price difference, between the present and the future: our theory of interest (as the price of economic time) becomes present once again.
[8] That is, while the currency is maintained in a box, it is not present wealth ¿?
[9] That to say, while the currency is in a box, it is not present wealth (?)
[10] In Argentina, in its hyperinflationary stage, there were provincial currencies, whose value consisted in their “tax cancellation power”
[11] As he expressed it in life, with Böhm-Bawerk respect his theory of interest (temporary preference).
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