ABSTRACT
We devote this chapter to money and financial matters. The very basic point of departure is the Roman emperor Vespasianus’ claim “Pecunia non olet” [“Money does not smell”], which is theoretically correct in the sense that money per se has nothing to do with reality. We have so far related our discussion to the neoclassical theory of barter and our Proposition 1, where we claim a logical rift between the macroscopic and the microscopic levels. When we use money as a measure of value, those earlier discussions are irrelevant and we can derive a proposition which says: Proposition 2
With respect to a real analysis equivalent to barter, Proposition 2 holds.
When we pass over to a non-equilibrium analysis where goals and restrictions are formulated in monetary terms, we lose all logical relations to the real economy and consequently Proposition 1 has no meaning.
This implies that collective policy based on the belief that money values reflect the real economy will in the end have asymmetric results. That is particularly clear when we use austerity policy to curb inflation in order to save the values of assets and liabilities.