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41 sats \ 12 replies \ @Undisciplined 25 Jan \ on: Where does Eugene Fama think currency gets its value from? econ
So, there's a sense in which I agree with him, but I also don't know exactly what he's referring to.
It's almost tautological, though: Money is valuable because it's widely accepted in exchange and money is only widely accepted in exchange when it is widely used for exchange.
There's also a theory that in equilibrium there can only be one money, so all monies either become widely (universally) used as MOE or they implode.
Eeeh, not quite.
Regression theorem situates the circle in time.
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That's what I was attempting to describe:
- A commodity is widely used in exchanges, for whatever reasons.
- People accept the commodity because it's widely used in exchanges.
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Yeye, but that stable equilibrium, Mises teaches us, isn't a paradox or resting on nothing but air.
Regression theorem idea is tha we can regress it back in time to when/where there was no monetary premium and just utility value.
(You know this, of course, just spelling it out for others+clarifying that this is what you meant)
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Yeah, I'm also talking about the more conventional type of equilibrium condition, rather than the Evenly Rotating Economy concept that Austrians prefer, and which has no money.
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that's very close to the Black/Fama-type idea in new monetary econ, I believe.
(though from very different theoretical approaches)
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Yeah I really wonder what he has in mind when he says this.
I talked with my macro colleague about this too and he pointed me to a Ben Bernanke speech on this topic, and Bernanke pretty much said it's not a currency because no one's using it for transactions and it's too volatile.
Seems tautological? Isn't the point to analyze the item's properties and then determine whether it could be used as money?
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I can go dig up my notes on Fama's old banking/money papers but iirc it's to do with last-period effects and intrinsic value
(New monetary economics, etc)
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MOE or they implode.
Gold has happily been existing despite not being used as a MoE for a few hundred years.....
Anyway, I think the traditional concepts of MoE don't really map well to purely digital products. Kinda like potential vs kinetic energy....purely digital products have the potential to be transferred at any time. Given this high potential to be transferred anywhere at anytime lends to it an innate MoE property that physical objects just dont have.
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Gold was a medium of exchange within the past century. I also expect it to implode as a money and collapse to its industrial value.
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That's interesting. But given gold's preeminent place in human history I wouldn't expect that
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Really? You don't expect Bitcoin to absorb the monetary premia of other store-of-value goods?
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No, I don't think so. My Pokemon cards aren't going to zero, that's for sure!
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