Thread by @tymoignee

Thread on monetary analysis
The term "ghost money" is an common concept of pre-modern monetary studies but it is based on a peculiar view of the nature of the unit of account (UA). It is used to say that a UA is used without a physical counterpart (a coin) being present. 1/n

E.g., from 140 BC in Roman times, the sestertius (noted HS) was used to keep record even though the coin itself was not minted at the time & wouldn't be for a long time. Most analysts find this strange because, supposedly, coins are the basis for the establishment of a UA. 2/n

This is precisely backward. Coins cannot exist without a unit of account existing first. Coins need to be valued in something ($, €, HS, etc.) and that is what the UA does. UA comes first, coins (and other monetary instruments) come after UA has been chosen. 3/n

A UA is a purely abstract concept and its relation to the monetary instruments can change. Coins used not to have a value marked on them and the issuer would change their value at will. Think of a dollar bill without a "1" on it, one day the US declares it is worth $2 or $0.5 4/n

UA have existed long before coins and where "ghost money" from their inception. Go back to Mesopotamia times for example in 3000 BC. Again nothing strange about this if one starts from the premise that a UA is not something physical 5/n

but rather something complementary to monetary instruments. In addition, a UA can exist without any monetary instruments being present but monetary instruments cannot exist without a UA. UA must come first. 6/n

Now the UA can be linked to a quantity of metal (or a foreign currency, etc.) but does not change its abstract nature.
Bransbourg notes that "Greeks and Romans associated currency units with physical coins" and this was also the case of Kings in medieval times 7/n

But it does not mean that they were correct; they were actually incorrect to do so and lots of trouble came from assimilating UA and coins.Monetary systems are subsets of financial systems. The latter are abstract record keepers, and evaluators, of transactions and promises 8/n

Gold, silver and other metals had a role to play in past systems, and an important one. But it was not one of recording and valuing, even if the creator of the specific monetary system thought it was. Legal systems struggled a long time with that issue 9/n

under the metalist/nominalism debate
Ultimately, legal scholars understood that financial transactions are different from non-financial transactions and decoupled UA from any physical representation. Bring back monetary systems where they started. fin.