Can I go to the bank and exchange my dollars for their “assets” which they’ve purchased with those dollars they’ve created themselves?

Nice way to acquire assets. Create money by printing or generating bits and bytes and exchanging them for physical things someone invested time, mind and body into to create!

I think I see the problem here—it relates to what Jonathan said above about the distinctions between the term “money” when used in a theoretical vs. physical sense. A purely theoretical money cannot have any use-value outside of the exchange function. A physical commodity which is used as money in a free market I would argue, as a consequence of the regression theorem, must retain some non-monetary use-value. It strikes me has highly contrived to say the use-value of the pre-money commodity has to somehow evaporate as soon as it is adopted as a money commodity.

Since fiat currency such as FRNs cannot be considered as free market money, there can be no use-value in reservation requirement. But this does not mean that such non-monetary uses cannot exist in reality. The best example that I have seen in this regard is in a little lakeside town called Tortilla Flat in central Arizona, where its “Superstition Saloon” uses thousands of FRN stapled to the walls as wallpaper!

http://www.tortillaflataz.com/

*Robert Fellner’s comment.

Despite your explanation, I don’t see how can you claim that Mises and Rothbard regard money has having s a ‘use value’ in reserve.

Perhaps you think that their position implies “the total reservation demand for the money commodity should include both the monetary and non-monetary demand components” but I don’t see how it does; that it implies most people holding a good as money would also value it in direct use. I think that is certainly the case for Federal Reserve Notes.

First, I think you’re out of your depths with DeLong. He knows a lot more about subjective value theory and the early marginalists than either you or I do.

I do think you are right to point out that he focuses more than he should on a cost of production (even if it is a subjective cost) for Mises in this explanation, but he’s right to be incredulous at the sweeping declarations of value as being artificial or fictional. That was a weak claim on Mises’s part and it was right for DeLong to draw attention to it.

to be equivalent to: “I acknowledge your criticism is valid, Jonathan.” For an added bonus your qualifier is nonsensical and totally untrue! Kind of like DeLong’s comments! Hence why your reply does not read like the acknowledgement of Jonathan’s point, as you quite pathetically attempt to morph it into here by using multiple exclamation points in referring to it now, but it is an attempt to not acknowledge DeLong is completely wrong and a revelation of your inability to ascertain the criticism being made objectively, as your bias clearly prevents you from doing so.

I’m not going to be wasting much more of my time playing your game with you, I just wanted the reader to be aware that the very criticism Jonathan makes of Delong, that he declares Mises view as X when it is not X, is exactly what you did in your “But..” qualifier in your original comment. Or as you call it, your acknowledgment of Jonathan’s point.

In the economic sense, ‘money’ is different from ‘hammer’. Hammer is a linguistic word to describe a certain object. Money, economically, is a type of good (producer, consumer, money) [see Mises' The Theory of Money and Credit], so once something is demanded as a consumer good it can no longer be money.

When speaking of money Austrians almost never discuss the non-monetary demand for money, mostly I suppose because it is of little theoretical interest. But this does not mean that a non-monetary reservation demand for money does not exist. For example, I might wish to purchase and hold a gold coin just out of an appreciation of the fact that the gold was created in the core of a type II supernova.

On page 261 (MES) where Rothbard discusses the marginal utility of money:

“In the case of barter, it was clear that the relative rankings were the result of people’s evaluations of the marginal importance of the direct uses of the various goods. In the case of a monetary economy, however, the direct use-value of the money commodity is overshadowed by its exchange-value.”

Here Rothbard is not saying that the money commodity loses all direct use-value, only that it becomes relatively less important with respect to its exchange-value. The total reservation demand for the money commodity should include both the monetary and non-monetary demand components.

I believe it makes sense to extrapolate from this to say that if a money commodity were to lose all direct-use value then a new money progression with a different commodity would almost certainly occur well before the prior money commodity lost all of its direct use-value.

The point is that you let him bait you into using this space for less than scholarship purposes. Who cares what he has to say personally about anyone. You should have contrasted and refuted his augment step by step and ignored the personal stuff. Everyone would have gained, but instead you dropped to his level and the scholarship and productive debate went with it.

Re-read the excerpt DeLong quotes.

Mises is not calling the money expansion itself artificial. He is saying that credit expansion leads to artificial stimulation.

You don’t think that might be a tad bit relevant?

How can you write: “Daniel Kuehn’s emphatic bias prevents him from acknowledging this obvious fact” when that’s exactly what I do acknowledge in Jonathan’s post?!?!

DeLong points out the problem of Mises considering growth from money expansion “artificial”. Jonathan throws the baby out with the bathwater by pointing to what’s wrong with DeLong without addressing this point. And Jonathan is being childish by calling DeLong a second or third rate scholar.

The guy is intellectually dishonest, period.

1 – Why does Jonathan need to go out of his way to laud DeLong’s accomplishments in the context of this issue? Why?

2 – When will DeLong *ever* afford an Austrian-school economist the same courtesy?

There are also various forms of convertibility: Physical, financial, instant, delayed, certain, uncertain, at the customer’s option or at the bank’s option, tax convertibility, etc. (discussed in my paper “The Law of Reflux”, which you can find by clicking my name above). Since 1933, the Fed has suspended one kind of convertibility: instant physical convertibility into gold. But the Fed’s dollars are still backed by the Fed’s assets.