Who else misses the good old days when JP Koning wrote mostly about actual, not fake money, and Nick Rowe experimented with red money?
The debate between David Andolfatto and Mike Sproul below is nearly 12 years old but, considering how little has changed since then, could just as well have taken place yesterday.
David starts his blog post Fiat money in theory and in Somalia (2011) with a correct observation: money serves a record-keeping purpose. David explains: “The money in my possession constitutes information about my past contributions to society”. In other words, money is used to track agents’ trading histories.
What David fails to highlight is that in every single trade, there is a buyer and a seller. By giving up goods, the seller makes a contribution to society while the buyer receives something from society. We might call it a negative contribution, although accepting goods from others is of course nothing to be ashamed of. Anyway, such a negative contribution must also be recorded. When the buyer hands out currency to the seller, the reduction in his holdings of currency is that record. Today, most of the recording takes place in banks’ accounting systems, where a debit entry on the buyer’s account is a record of this negative contribution.
