But what IF (in an MPE model)……austrian economists decide to start hoarding money in an attempt to deflate the circulation. Would that even be possible?
First of all, whatever you hoard, you have to earn. So you never have to worry about that… because austrian economists are never going to do anything worth rewarding them for.
The only reason any of that would happen, would be IF no one wanted to purchase our [prospective] production (which they hadn’t earned yet) by issuing their promissory obligation. If you and I are the only people on an island then, we have the worst case scenario for your worry then, because you have to want my production if I am going to earn from only you the $100,000 I issue as your representation of entitlement for giving up the house then.
Understanding that, then if you take my promissory obligation, you would do so wanting to consume my production.
This condition exists in all our affairs. We don’t accept promissory notes as representation of entitlement, never wanting to consume so much from the whole system. To consume their equivalent, we have to spend them.
The whole (much larger) system then is comprised of cycles. There are the life cycles of money — which are equivalent or the mirror image of the life cycles of our promissory obligations to each other. As some money periodically expires as existing promissory obligations expire (are paid), the seeming lack of money here too in turn compels issuance of further promissory obligations. Always, new money is only created however where the prospective obligor has not yet earned what they require to spend.
So the need for a circulation is predicated not by how much we are producing and consuming, but how much representation of entitlement is required to sustain desired production and consumption — and always always always having the right to issue promissory obligations to sustain whatever production and consumption we intend to sustain then… we are — contrary to your presumption of calamitous consequences of your imagined shortage — constantly compelled to issue so much further promissory obligations as sustains intended prosperity.
This is not compelled only by presumed shortages which cannot transpire — it is compelled by the natural life cycle of promissory obligations.
You are already “borrowing” FAR MORE THAN THAT — UNDER FAR MORE IMPROBABLE CONDITIONS.
And yet you imagine we would not sustain a vital circulation under MPE™ — in other words, a circulation sufficient to sustain all the prosperity we intend to sustain — when always, always, always, always… we can do so at no more overall cost than the [same] principal [we would spend if we had cash] and at no more immediate cost than the rate of consumption?
If, on our island, I can’t pay my obligation to redeem the promissory notes I issued to you… then having accepted them and knowing I am the only other producer on the island, that’s not a consequence of the shortage you imagine, or hoarding — its because you made the grievous error of taking representation of entitlement which could only be redeemed by my production — which you ought to have understood already that you did not want. That would be YOUR bad — not “the economy’s,” because the money PROVIDED for ensured redemption.
The same things are true of a larger system. You don’t have to take my production then. And we don’t stipulate direct redemption, because that is our intention.
So, what tends to happen then is that all the money (representation of entitlement) which is indispensable to intended prosperity is constantly created without any more cost than the principal — and even at far less immediate cost than the [whole] principle. You have every immediate power to resolve any presumed deficiency without cost then.
There is no reason for an economy if we do not intend to sustain a perpetual sequence of production and consumption however. This is the very object of an economy and monetary system. What you’re saying then is, “Suppose we don’t want to do the only thing we would want to do if we have an economy or monetary system….”
You are supposing that we simply stop producing and consuming — and thus issuing the promissory obligations which are indispensable to the representation of entitlement by which we instead intended all the while, to simply alleviate your supposed calamity of a shortage we would alleviate without cost to do this.
You are forgetting that the shortage you imagine is artificial and without possible (true) remedy under the obfuscation. But the very circumstances you are thus supposing will transpire, are instead the very reason we organize an economy and engineer a proper form of money — which is instead to sustain a potentially eternal sequence of production and consumption between ourselves, by the indispensable means of issuing promissory obligations.