L. Randall Wray is exercised by my suggestion
that he has engaged in semantic sleight-of-hand. To summarise my
argument: it is an obvious fact that a ten dollar bill is not a debt –
because the issuer owes the holder nothing. In fact, we do not hold
dollar bills in order to be repaid, we use them, primarily, to buy
things.
Debts
have a different function and source of value to physical cash. Debts
are used to provide streams of cashflows to their holders, and their
value resides in the debtors ability to meet payments. By contrast,
money is used to pay for things, and its value resides in a network
externality – it has value to me because it is accepted by others. And
the more widely accepted the money is, the more valuable it becomes (a
point completely ignored in Wray’s discussion
of bitcoin, airmiles etc). Debts have nothing to do with network
externalities. So the properties, uses, and value of physical cash are
completely different to those of debts. That is almost certainly one of
the reasons why we have two different words: “money” and “debt”.
For some reason Randall Wray, like many others, is resistant to the uniqueness of money and wants everything to be a debt.
To make two different things seem equivalent one must give the same word two different meanings.
He
correctly observes that debts carry an obligation to be repayed or
redeemed. I don’t know why he thinks I disagree with this. Far from it –
that is very close to the definition of debt or liability that I provide. The point is that a ten dollar bill carries no obligation to be repaid – in fact, it is not even meaningful to ask if you will be repaid for your ten dollar bill.
Now
if the issuer of a ten dollar bill owes you nothing, how can Randall
Wray imply otherwise? By changing the meaning of ‘debt’, ‘redeem’ and
‘repay’. A false equivalence is presenting two things as being the same
when they are different. One way to do this is to attribute two
different meanings to the same word. Which is precisely what he does. He
changes the meaning of ‘debt’ ‘repay’ and ‘redeem’. Helpfully, we can
identify this because he uses inverted commas to signal a change in
meaning and he refers to his “sense of the term”:
‘[Lonergan] goes on to argue that we’d still use the government’s
currency even if it could not be “redeemed” (in my sense of the term)’.
Precisely!
Randall Wray needs to put the word ‘redeem’ in inverted commas when he
talks about “redeeming” “promises to accept currency in payment for
taxes”, because he does not actually mean ‘redeem’. Also, he should make
it clear that it is his “sense of the term”, because he is clearly not
describing repayment, he is describing something else. You can decide
yourself what he is describing – when I quote him directly he seems displeased.
I
think Randall Wray is simply providing a description of the payment of
taxes – a liability of the taxpayer, but something which in no way
changes the distinct properties of money and debt. This is not to say
that the requirement to pay taxes in money issued by the state is not an
important means by which the state establishes its monopoly – it is
(and it is wonderfully described by Mitchell Innes).
State directive is an effective way to establish a dominant standard –
and a dominant standard with network externalities is extremely
difficult to break.
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