Nate has put together an excellent response entitled Mount Chapter 3, the full significance of which I suspect even he doesn’t recognize yet, but which I will begin to illuminate in my next post on the subject:
So… now here we sit happily atop Mount Chapter Three. Ain’t the view grand? Now… with all of this as a basis of monetary understanding… we can address Vox’s traps… I mean… questions.
1. Are gold and silver commodity money? All gold and silver? Money is a condition that can be deferentially diagnosed by behavior. Are they functioning like money? Then they are money. Its the behavior that makes them money. It is the commercial commodity that lends subjective value and thus allows us to categorize them in LVM’s terms.
2. Are the Federal Reserve Notes, in both cash and deposit form, commodity money or fiat money? The standard answer is fiat. But in reality FRN’s have characteristics of both credit money and fiat money.
3.Does TMS2 represent your definition of the money supply? No. like M2 it is only a useful tool for estimation. It is flawed… but it serves for watching trends. I am agnostic on the claim that money supply can even be measured accurately. But I lean toward it being a pure impossibility. Its like watching ants at a huge ant mound. You have no idea how many ants are actually there… guessing is pointless… but you can stand back and watch them and tell if the swarm is growing or shrinking.
4. What are the various components of TMS2, commodity money, fiat money, or some combination therein? Given the nature of my explanation of Chapter 3’s 4 types of money… its abundantly clear that all categories in TMS2 are fiat money. Many are credit money as well… but its impossible to parce in our banking system due to the various shenanigans… AND… if you listen to Ludwig… well…
“As a rule it is not possible to ascertain whether a concrete specimen of money-substitutes is a money-certificate or a fiduciary medium”
– Human Action( p. 433)
With apologies to Vox, he has taken a large list of money substitutes and asked me to do what Mises says literally cannot be done.
Read the rest of it there. As for those who are concerned about the score, I think I can assure you, that is almost certainly the least interesting aspect of this debate. Not, of course, that I am conceding anything in the slightest. I am just as capable of seeing the obvious as anyone else, the difference is that I also see that which is, apparently, considerably less obvious.