Template:Cash as an anti-asset

Cash, on this view, is a tokenised, abstract, accountable unit of trust. It is a measure of indebtedness. Not specific indebtedness, to an identified person, as arises under a loan, but disembodied, abstract indebtedness in and of itself. This is quite an odd concept. Loans are expressed in monetary units, but are not monetary units themselves: they are contracts to pay and later return monetary units. The monetary unit itself — cash — is the subject of a particular class of contract called a loan. Cash is weird stuff. A banknote is not an asset, but an anti-asset: something that has a negative value in and of itself, and which, therefore, only generates value when you give it away. I can discharge a private debt I owe by transferring away my public token of indebtedness — cash — to the lender. We can see there that to hold cash, and not use it to acquire capital, discharge debts, or create indebtedness in someone else, is wasteful.

There is an important distinction here between holding cash, physically, and putting it in the bank.

When, and while, you hold cash physically, for all intents and purposes, the money is withdrawn from the financial system. It is disengaged. You have an “indebtedness” to yourself. It cancels out. It is meaningless. Worthless. Valueless. If you are robbed of physical cash it only creates a (negative) value when it is taken away, because it deprives you of the value you could have created by giving it away to someone else, in return for an asset.

So holding cash in person is a non-investment. It is to take capital out of the market. Since the value of capital is a function of the time for which it is productively engaged, a capital instrument you have disinvested should progressively waste away. So it does. Cash in your wallet, relative to a capital asset in productive use, must depreciate over time. That is the consequence of inflation. It has nothing really to do with central bank policy or fractional reserve banking: they may affect the rate of wastage, but they do not cause wastage. Cash itself necessarily wastes away.

This is why cash in your wallet is different to cash in the bank. Cash in a bank account is invested: with the bank. You have given away your token of abstract indebtedness to the bank in return for actual private indebtedness for which the bank credits you interest — okay, not much — as a return for your investment, and promises to pay you an equal amount of cash when you ask for it.