ABSTRACT
In a recent paper on Keynes’s monetary theory and modern banking, Rogers and Rymes argue against Fama’s claim that ‘an accounting system works through book-keeping entries, debits and credits, which do not require any physical medium or the concept of money’ (Fama 1980: 39). They refuse to accept both the fact that in a modern monetary system money is no longer a physical medium of exchange and that in a cashless payment system the concept of money becomes redundant. ‘Reflection will confirm that even if a medium of exchange is not required in a world with a sophisticated electronic accounting system, it does not follow that the concept of money is thereby redundant or that media of exchange no longer exist’ (Rogers and Rymes 1997: 306). Now, if we can certainly agree with them that it is a serious mistake to confuse the concept of money with its physical manifestation, we must reject their idea that money is a tangible thing. ‘Even if money evolves to the stage where cash is replaced by a sophisticated accounting system, money as a tangible thing still exists’ (ibid.: 306). In a cashless system, the concept of money is as essential as in any other (more or less sophisticated) monetary system. Yet, this does not at all imply that money must be a ‘tangible thing’. Whereas a system of book entries is tangible, money is not. By claiming the contrary, Rogers and Rymes are doing precisely what they reproach Fama with: they confuse money with the physical support used to represent it. Money is merely a numerical form, a dimensionless vehicle whose task is to provide information through the intermediation of banks’ book entries. As money is immaterial, it is impossible to identify it with a tangible medium of exchange. This is the core of modern monetary analysis. If this fact is not fully understood, if we insist, anachronistically, on considering money as a material entity, as a physical medium of exchange, we cannot avoid falling into the trap of the neoclassical paradigm.
