Sunday, May 10, 2009

The quality of money

I hear people around me worrying about the quantity of money the government is printing. I not only hear the talk, I worry about it too. But the real question is about the quality of that money. Are we printing credible dollars? Will people, organizations, nations still want to invest in our money? That is to say, will the people who have financed our economy the past few decades want to continue to do so? Do they perceive the dollar as a quality, credible investment?

If people around the world and in our country, poor and rich alike, continue to see (or begin to see again) the dollar as a credible currency to earn and invest in, and thereby enrich who ever holds it, then our government can print all the money it wants. We can print money, in other words, unless and until there's no one who wants it. The social demand for money is a significant, necessary basis of money.

One problem: The quality of American money has for a really long time been assumed by those who study it to be credible. As a result, right now, compared to the number of social scientists who study the quantity of money, which is many, there are incredibly few who study the quality of it: whether or not American money is credible just hasn't been a burning question.

Until now. I suspect things will now begin to change. Qualitative approaches to all things economic -- like money and marketing -- should begin to take off, as a result of current events (meaning the financial collapse and the question of America's economic credibility and how to re-store it). The interesting questions are how swiftly the intellectual adaptation will take place, who will drive it and benefit, and how.

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