Gang8 (2)

While writing my previous post on Gang8, I had Maynard's book open to page 167, but I didn't think I had a use for the footnote there. Later, on the drive to work, the use of it occurred to me. From the footnote:

...we can draw the line between "money" and "debts" at whatever point is most convenient for handling a particular problem.

What's happening at Gang8 is they see all money as debt. It is just one extreme end of the spectrum described by Keynes.

My position is that the failure to distinguish between money and credit is the source of our economic problems. In mine of 4 November 2009 I wrote:

Economists and pundits continue to utter "money'n'credit" like a single word. But the more we rely on credit for the spending that we do, the greater the cost of using money.

In mine of 8 Feb 2010, I showed how to distinguish money from credit:

In days gone by there were two distinct kinds of money: one with intrinsic value, and one without. These days there are also two distinct kinds of money: one with interest charges, and one without. The extra cost of interest, or the absence of that cost, is the significant feature that distinguishes the two forms of money in our time.

And in mine of 9 Jan 2011, I showed why distinguishing money from credit is essential for policymakers:

As debt is repaid, the monetary authority must allow the increase of non-credit money enough to keep "money'n'credit relative to output" essentially stable.

People don't think in these terms -- that there is too much credit in use. We do what we need to do. How can it be "too much"? And then we get a financial crisis and, for a moment, everyone knows the reliance on credit is excessive.

All the while, of course, everybody wants to reduce their debt, and everybody wants to balance the federal budget. But you can't pay off debt if you use credit for money.

Money and credit are not the same.