Saturday, March 29, 2014

Have Labor, Now Seeking Property (Money)

The U.S. IRS has announced that they will consider Bitcoin as property for tax purposes.  Has the IRS revealed a deeper insight into MONEY?

The blogs seem to have treated the announcement with silence, so maybe I am the only commentator who sees significance and revelation in what others are treating as trivia.

Business Insider has comprehensive coverage of the announcement.  It seems that the U.S. IRS has been considering Bitcoin as currency.  No longer!  Now Bitcoin will be treated as property.  Transactions will need to be recorded with gains reported to the I.R.S.

But isn't all money property?  Are we economist, who are devoted to understanding money, so caught-up with differentiating whether money is medium-of-exchange, store-of-value, gift-certificate, I.O.U., or other descriptive adjective, that we miss the over-riding, even obvious, truth that money is really just property?  May be!

Now, when you get to thinking about it, property is a very broad description of anything that might have value, whether physical or intellectual in nature.  Property is easy to create.  The value of property is easy to  improve-upon or increase.

Money is always property.  The important distinction of money is that it is considered as a medium-of-account.  By calling money a medium-of-account, we are simply recognizing that money is being used as the common element of exchange between many classes and types of property.

If money is considered as property, then a number of relationships will be seen in a different light:

1.  The creation of money is a simple creation of property.

2.  Once a particular property is established as a medium-of-account, how is the value of that medium established and maintained?

3.  If money can be created, it can be destroyed.  The rules for property destruction would apply to money, making the process of destruction easier to comprehend.

Labor can also be considered as property, or perhaps better, potential property. That is, one person's time can be traded for property. Labor is only potential property until productive time has been exchanged for property.

If labor is "potential property", what should be the role of government in providing "full employment"?  Should it be the role of government to shepherd the creation of more property?

The IRS ruling on Bitcoin may have done macro-economics quite a favor by pointing out the obvious:  money is property.  Now we economist can apply this observation to our models, hopefully with  improved ability to predict and guide economic affairs.


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