Hmmm. That's starting to sound like a transactions demand for money function. But if we have a demand to hold money for transactions purposes, we can still get an equilibrium in which money is held and valued even if T(t) is always zero.Read it at Worthwhile Canadian Initiative
(Wicksteed said (HT David Glasner) that fiat money has value because the government requires it for payment of taxes. I'm saying that's not sufficient. And it's not even necessary, in the sense that if my local recycler accepted fiat money, even at a negligible price, that would be enough to replace T(t)>0 in ruling out the equilibrium in which fiat money has a price of zero.)
Wicksteed, stocks and flows
by Nick Rowe
Seems like Nick is saying that the money supply is set exogenously by government whereas the operational reality is that in a system in which the central bank is the lender of last resort the money base is determined by demand for reserves for settlement and reserve requirements based on credit creation. Moreover, the size of the money supply (M2) is set endogenously by credit extension that creates credit money.
There is no doubt that money is an idea rather than a thing, that is, a human social construct that underlies a primary social, economic and financial institution. The state theory of money does not deny this and admits that credit money predates state money historically. Anthropologists have also observed that credit money grew out of social relationships involving reciprocity and trust.
The Chartalist claim is that state money, that is, currency, gets value from the necessity of the private sector to settle its government-imposed obligations with government when government only accepts is own liabilities as credits. This allows government to shift private assets to public use through currency expenditures.