Is bitcoin ´money´? The Post Keynesian view.
from Paul Davidson
What is Bitcoin? According to Modern Money Theory, bitcoin can not be money since it is not accepted in payment of taxes by any government — nor is it issued by any government via the governed purchase of goods and/or services from the private sector. So what is bitcoin in terms of MMT? I do not know what MMT proponents would respond to this query?
For Post Keynesian liquidity theory of money, the answer is clear.
In Post Keynesian monetary theory money is anything that will settle a legal contractual obligation.
And by the civil law of contracts, the government determines what settles a legal monetary contractual obligation.
Thus not only legal tender but also checks drawn on a bank account (but not financial securities such as stocks) can legally settle any legal contractual obligation (since the government regulates banks to assure that bank deposit liabilities are a “tap” issue that is immediately transferable into legal tender). And the government is the enforcer of legal contractual obligations.
Individuals can make all sorts of production and exchange (purchase) agreements among themselves — but only it calls for a money transfer to discharge the obligation, these contracts are not legal contracts. Thus I can agree to cut my neighbors lawn and he can agree to wash my car in exchange — but this agreement is not legally enforceable.
Bitcoin will not remain a liquid asset unless there is an institution [ a market maker] who will maintain orderliness.
Bitcom is merely another tech fad similar to sub prime mortgage backed derivatives that was sold to the public as being as good as cash and therefore easily convertible into money!
And we all know what happened to this derivative market.
Bitcoin is not money but it is a liquid asset. A liquid asset is any durable that is traded on a well organized market for resale. But to be truly liquid that market must not only be well organized but it must be ORDERLY. By orderly we mean that although the transaction price in terms of some denominated money may (or may not) vary from transaction to transaction, the movement will be small and orderly – so that anyone holding the liquid asset believes he/she can make a fast exit at any moment of time without a significant change in the market price vis-a-vis the last market price transaction.