Questions That Need to be Answered

By Marc Gauvin (c) 12/4/2014

Reproduction expressly granted provided attribution and original link are given.

Steve Keen, can you explain why it is necessary to model money as a circulating token if as Graziani claims transactions in modern economies consist of ledgers that are modified by the transfer of goods and services?

Also, don't you agree that money systems are discrete LTI Systems and therefore their stability can be determined by the Passive BIBO status of their constituent transactions?

Value Chain Compounding

Next, given that money systems are discrete LTI consisting of a collection of transactions each of which can be modeled in terms of signal processing:

price (input signal) -> [Transaction] -> money (output signal)

Note: output is recorded as both negative (buyer) and positive (seller) account entries.

Considering that any percent (proportional) based financial cost of transactions on top of the value of the cost of goods and services being transacted but assumed as a 'cost',  will compound across the value chain as each link in the chain passes on that cost in its prices, such that output from the value chain (consumer prices) will feed back as costs to the aggregate system and output over subsequent cycles becomes exponential (particularly as value chain cycles accelerate given technology etc.). 
How can inflation be avoided and the stability of units as a reference viable if individual transactions are not necessarily Passive BIBO?

(Note: all that is required for such compounding,  is that each unit have a fixed cost independent of the cost of goods and services, as that would generate a proportional financial cost above the value of the goods and services being traded, for each and every transaction.)

Finally, if as the Bank of England has claimed, essentially money is created as an output of transactions of value free of any liens i.e. "new wealth", then the model of money as a circulating object does not apply, as any such transaction would create its own units that only resolve against existing balances with absolutely no need for any moving tokens as described here.

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