The Monetary System

CHAPTER 6 Redefining the Monetary System and Measurements of Monetary Flow – Towards M5 and M6

“Economic calculation can comprehend everything that is exchanged”¹

— L. Von Mises

As previous chapters have argued, both the intrinsic nature of money and its uses have undergone a major transformation, pointing away from applicable definitions that were previously established over millennia. Alongside updated approaches for observing and measuring its flows and balances, a new definition of today’s money is required.

In the present chapter, we propose a new model for characterizing the full spectrum of money-driven transactional exchanges and balances, which is as varied as the diverse array of monetary receivables and debt instruments presently floating on world markets. By better defining such financial instruments and their regulated markets, the respective tasks of legislators and regulators will be streamlined – particularly in drafting reset parameters for accounting standards and value maintenance guarantees that can conform to real-world conditions, while still retaining the flexibility required to address inevitable deviations from norms that might arise in the future.

Economists usually command only a limited degree of “real power”.² In Europe, as in the USA, economists author many articles and books as indicators of their academic standing. By convention, the trend is to work within existing regulatory and conceptual regimes, rather than in advancing novel concepts that ...