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Same document, different interpretation

1 August 2013

Diametrically opposed

In this Dutch-language article I mentioned that in 2012, I was already well underway with this article series, when I still didn’t know about MMM (Modern Money Mechanics).

After I had taken my time (weeks, not days) to read and study MMM thoroughly, I decided it corroborated what I had already written and wanted to write in addition.

The strange thing is, though, that the person who pointed me to that document said that almost everything he thought and knew about money creation was based on that document.

I think his thoughts on that subjects are completely wrong. He thinks the same of me.

How is that possible? Our views are diametrically opposed, yet we read, and both think we understood, the exact same document.

Definition, no; admission, yes

Similar events took place later. In a heated discussion on Twitter on 20 July 2013, with a Dutch, Canadian, Brazilian adherent of MPE (Mathematically Perfected Economy), the Brazilian participant @Brazil4MPE poked fun of my definition of money:

@rudharcom @Holland4MPE @Canada4MPE @Fallen_Grace13 @mike_montagne Rudy's definition of money: "coins and what bank owes" ...LOL... WTF?!

He (she?) probably referred to the statements I made in my most recent numbered articles, numbers  20  and  21 :

Money is coins plus what banks owe the public

I tried to recover from the attack (I am sensitive to public derision) by replying: the money definition that ALL serious economists use & it makes sense”, “Read Wikipedia, read books, try to THINK, for once. U R all SO stupid!” and “So you never ever read MMM either?? Coz that definition is in there too”.

Alas, to no avail, all of that was dismissed with polite and intelligent corrections like:

They should not allow a connection in that mental institute your in”, “Shameful.. Rudas sold humanity for thirty pieces of coins... LOL” and “Stop insulting humanity with your "definitions" then, Rudy. Get lost!”.

Anyway, back to MMM, Brazil4MPE also tweeted about MMM:

ThePeopleVsTheBanks @Brazil4MPE
   
@rudharcom @Holland4MPE @Canada4MPE All people need from that paper is the admission of the crime on page 6. The rest is smoke and mirrors.
   
7:46 PM - 20 Jul 13

OK, so those MPE people did not read or accept this (I quote from PDF version of MMM, pages 1 and 2:

What is Money?
   
If money is viewed simply as a tool used to facilitate transactions, only those media that are readily accepted in exchange for goods, services, and other assets need to be considered. Many things – from stones to baseball cards – have served this monetary function through the ages. Today, in the United States, money used in transactions is mainly of three kinds – currency (paper money and coins in the pockets and purses of the public); demand deposits (non-interest bearing checking accounts in banks); and other checkable deposits, such as negotiable order of withdrawal (NOW) accounts, at all depository institutions, including commercial and savings banks, savings and loan associations, and credit unions. Travelers checks also are included in the definition of transactions money. Since $1 in currency and $1 in checkable deposits are freely convertible into each other and both can be used directly for expenditures, they are money in equal degree. However, only the cash and balances held by the nonbank public are counted in the money supply. Deposits of the U.S. Treasury, depository institutions, foreign banks and official institutions, as well as vault cash in depository institutions are excluded.

But they did read and notice and object to this, on page 6:

In today's world of computerized financial transactions, the Federal Reserve Bank pays for the securities with an "telectronic" check drawn on itself.

And:

The Federal Reserve System has added $10,000 of securities to its assets, which it has paid for, in effect, by creating a liability on itself in the form of bank reserve balances.

So much for intensive perusal of relevant documents.


ECB

Later addition that same day:

Further confirmation of that money definition is in this document by the European Central Bank: The Monetary Policy of the ECB. Table 2.12 on page 50 (51 as numbered in the PDF):

Definitions of euro area monetary aggregates”.

Monetary liabilities of MFIs and central government (post office, treasury) vis--vis non-MFI euro area residents excluding central government.

The English definition is also here (tab “Background”).


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