Sunday, September 9, 2012

For future reference - MMT's Tom Hickey finally solves the mystery of the origin of the value of money

MMTers are obsessed with proving that the value of money is not based upon the subjective whims of the populace but upon the enforceable pronouncements of the Assaultive and Omniscient State.  But then yesterday, Tom Hickey made this amazing admission:

"You are confusing nominal value and exchange value. The nominal value is stamped on the face of the coin. This is determined by the issuer. What the exchange value may be at any time is market determined" 

So called "nominal value" concerns weights, measures and purity.  It has nothing to do with “value” as that term is used today. As usual, MMTers engage in obscurantism.  However, this is an amazing admission. 

No Austrian denies that governments have mandated the weight, measure and purity of coins over the ages. We deny that governments can impose "exchange value", which is what "value" means. People have subjective values and since we cannot read minds, objective prices resulting from voluntary exchange are the only method for determining and making informed decisions as to the exchange value of zillions of goods and services as valued by 7 billion strangers on this planet. Fiat funny money fatally distorts that calculation process.  Keynesians, MMTers and monetarists are oblivious to even the existence of the calculation process, much less its distortion by fiat funny money.


  1. What most Austrians haven’t realised is that half their “insights” are statements of the blindingly obvious for anyone who has any sort of grasp of economics. A classic example is that idea dealt with above that the value of goods and services is “subjectively” determine. That point about subjectivity is explained in most basic introductory economics text books. The idea is old hat.

    Thus Tom Hickey is not making an “admission”. He is simply making a point which anyone with a knowledge of economics grasped long ago.

    As to the idea that “Keynesians, MMTers and monetarists are oblivious to even the existence of the calculation process” that is just absurd. Again, everyone (including Keynsians, MMTers, etc etc) regards the “calculation process” as a very basic and clearly valid idea. Simpler folk, like Austrians, seem to think it’s a big insight.

    1. 1. The MMTers are obsessed with finding historical examples demonstrating that the value of money comes, not from subjective valuations, but from government decrees. See Warren “Hut Tax” Mosler.

      2. Of course MMTers, Keynesians and monetarists are oblivious to the calculation process. Their policies fatally distort the process causing, among other things, the boom and bust cycle about which they are oblivious. And they are completely oblivious to even the existence of the Austrian position on the topic and/or that this analysis is the basis for the Austrian insistence upon the abolition of fiat funny money. Otherwise, there would exist in the galaxy at least one example of the direct engagement of these Austrian themes.

  2. If the value of a coin is simply the value of its bullion content, why would anyone waste the time & effort to mint coins?
    If the market price paid for bullion was the same as the price of the finished coin, the mint would be operating at a permanent loss.

    Why would any do this?
    I have yet to hear an explanation.

    It is obvious that coins are & always have been tokens, their value determined not by metal content but by the issuer.

    A coin worth only its bullion value is no longer a coin, but merely a hunk of metal.

    Please explain.

  3. The value of anything is purely subjective. I presume that people place a higher value on a coin that is guaranteed as to weight and purity over a rock from the ground.