Valis asks: >Can ... someone else comment on the origin of debt as a
corporate asset; the concept seems like such crooked thinking to me.  I
can't imagine average individuals transforming their debts into
negotiables. Are governments doing the same thing in bilateral dealings?<

There's nothing weird about an interest-bearing asset being used as money.
In the 19th century, some bank-issued money (bank notes) paid interest.
(Bank notes were like traveller's checks.) Nowadays, some checking account
money pays interest (like my credit union account). Both of these are
counted by the Big Bean Counters at the Fed as part of the "money" supply.
(BTW, I was once marginally connected with the Bean Counting, as a clerk.)

Corporations nowadays use _government-issued_ debt as a (relatively) liquid
asset, i.e., as money. 

"Money," according to standard definitions, is an object that can be used
as a means of exchange (it's liquid) and a store of value (an asset). If
enough institutions accept T-bills in exchange for goods, services, or
promises, it's a means of exchange. And one institution's debt can be
another's (liquid) asset. The only thing that distinguishes T-bills from
normally-defined money is its relative illiquidity, but where does one draw
the line between "money" and "near-money"? Corporations draw it differently
than we do. 

I guess one can't say that T-bills aren't a unit of account, but then again
checking-account money isn't either. 

The only big confusion for me about T-bills as money is in the way some
corps and financial institutions use them: they do stuff like "repos," in
which institution A sells T-bills to institution B with the promise to buy
it back the next day. This is a way that A can temporarily borrow money
from B, with B garnering interest from the difference between the initial
price and the next day's price. (or is this a "reverse repo"?) 

Jim Devine [EMAIL PROTECTED] &
http://clawww.lmu.edu/Departments/ECON/jdevine.html



Reply via email to