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  • AutorenbildDom T. Ghazan

What's next?

The primordial element of capital is (v)alue—which is indeed a trait of matter, that can be perceived in myriad ways.[1] Consequently, it is continuously under scrutiny by virtue of a set of complexities that ascribe to it its attributes.[2] In an economic context, unequivocally, the prevailing attribute that sets the formal tone in the synallagma is the price of any inquired good on a market at a certain point in time.[3] It bears noting, that—notwithstanding how meticulous the inquiry is undertaken—price-discovery mechanisms are inherently flawed, since, they are merely attempts of approximating the relative value of quantifiable means.[4] Relating thereto, in economics, two doctrines have prevailed throughout the 20th century, both of which align the most vital parameters of productivity and converge in a cost-centric view of matters.[5] Interestingly, capitalizing expected income and its relation with time preference or impatience, is confounded for an opaquism in a tremendous manner, when scrutinized by laymen—whereby, in a nutshell, the central rôle of interest theory results from its accurate means of captivating the essence of human incline to generally prefer present over future yields.[6] So, plutologically, the sum of all vicissitudes pertaining to taxonomies of human behaviour, generally, manifests as the dichotomy of objectivity and subjectivity—even more harshly segregated within the realm of finance.[7]



Regardless of which lens one chooses to employ, delineations on interest and yield cannot be pursued without taking into account the postulates dubbed risk and uncertainty. Mainly, because both attributes, in a dynamic context, delineate the probability of an element becoming obsolete and effectuating consequent repercussions within the system en route to its decline.[8] Suffice it to say, that this legal inquiry shall not delve into ontology more than it already did, hence, presenting risk—for our purposes—as an inevitable consequence of life that can only be mitigated according to one’s proper diligence.[9] Relating thereto, human beings are cognizant of their mortality, nevertheless, oscillating towards ludicrous contestation of the very earth they walk on, more so, in times of ubiquitous uncertainty—wryly, expediting their own demise.[10]



Now, cognizance of uncertainty can eo ipso only be relative, for, not lastly, it is an aggregate whose elements are confined by, and indelibly react with, time and space.[11] That being said, entropically, individual action within such confines is driven by accumulation of particular measurable property that remains constant as systems evolve over time.[12] As a necessary corollary, ceteris paribus, any legal guise of value shall captivate its underlying’s relative (economic) position accurately and sustain it indefinitely—or at least throughout its possessor’s quest of offsetting zero.[13] As regards this phenomenon, cryptographic technology maintains utmost discretion for all market participants, while disseminating vital information in order to attain utmost market symmetry and endorse states of equilibrium.[14] Ultimately, this trait is particularly useful to control variables in anticipation of inflation and economic growth.



While, core drivers for and nominally correlating traits of anticipated inflation are unambiguously acknowledged, its effects on real economic variables are equivocal.[15] Little astoundingly, the cacophony not only continues, but is even amplified with regard to unanticipated inflation.[16] Virtually, sparked-off by the GFC, and revamped by COVID-19, paradigmal questions about cause and effect in financial markets have emerged, especially, pertaining to the basic tenets deciphering how ‘rational economic actors’ perceive their environment and cause repercussions within it.[17] Alas, in parallel to the successful doctrinal emergence of reflexivity, on the meta-plane, reciprocity in statecraft has culminated in major international tension with regard to countervailing contemporary recession.[18] Perhaps, the latter doctrinal paradigm shift can be availed of whilst leveraging new legal vessels to solidify democratic value(s) globally by reducing inefficiencies.[19]



Without further ado, it is time to briefly zero in on the substantive dimension of money and how it can be utilised to capture market sentiment.[20] Above all, it is the denominator economists choose to employ for measuring wealth.[21] Most importantly, the rate of interest on money sets the tone in marginal efficiency for capital-assets that are to be produced.[22] It follows, that as the pre-eminent asset for all productivity—ie the standard for value—it shall therefore be subject to a fixed interest rate.[23] This formal notion permeates all dimensions of monetary economics, thus, ubiquitously affecting all monetary aggregates.[24] As indications of money circulating in the overall economy, M0 to M3 aggregate all guises of value known to the economy in terms of liquidity.[25] Unsurprisingly, therefore, their respective constituents mainly deviate with regard to the pivotal traits of liquidity.[26]



It follows, that fundamentally, money is an asset that has zero life to maturity and can thus be allocated according to the purported liquidity needs and preferences of ‘economic transactors’ at a certain point in time.[27] One bears noting, namely, that money markets comprise myriad money- and money-like assets that vary in terms of security and maturity.[28] Concisely, enabling market participants to choose the guise of monetary value they want to employ in planning their liquidity demand over time while retaining utmost redeemability and at the same time yielding benefits for allocating their resources economically.[29] However, doctrine and practice acknowledge, that there is an unambiguous human propensity to hold cash money, though this incline varies significantly from country to country.[30] Taking this into consideration, in order to translate economic theory into reality, robust monetary policies presuppose means of payment to be deemed legal tender, whence vesting them with accountability and monetary imperium within a sovereign’s fiefdom.[31]



Ultimately, relating to the legal scope of money, individuals can only specialize as owners, producers or workers if a medium at least exists, its value can be measured, and it can be stored as an asset in liquid form.[32] Since, currencies, securities and assets—all three of which represent a different attribute of value—are all measured in money, lastly, emphasis is added that money is defined by reference to four of its main economic functions, that had already been briefly touched upon.[33] However, there is no ubiquitous legal definition for money due to it, by and large, depending on the legal order that employs it as ‘final and complete means of discharging financial obligations.’[34] So, on the one hand, legal money can be ‘whatever the material is, common consent may make it such, to all intents and purposes.’[35] While, on the other hand, it is commonly acknowledged that legal tender ‘only represents payment that a creditor is obliged to accept as payment for a debt.’[36] Consequently, the interim summary is that whether decentralized, cryptographic money can be deemed more than just abstract money in functional terms is a question of law vesting it with currency quality.


-Dom T. Ghazan


[1] Karl Marx, Capital: Volume 1 (Penguin Books 1990) 128. (‘…We have seen that when commodities are in the relation of exchange, their exchange-value manifests itself as something totally independent of their use-value. But if we abstract from their use-value, there remains their value, as it has just been defined. The common factor in the exchange relation, or in the exchange value of the commodity, is therefore its value’)

[2] Smith (n 11) 48. (‘…These rules determine what may be called the relative or exchangeable value of goods.)

[3] Price is a function of value, approximately, if a good is subject to exchange. It denotes in money the amount spent per unit of a good or service cf Black, Hashimzade and Myles, A Dictionary of Economics (n 107) 'Price'. As such, price is an element of contractual essentialia negotii alongside the object of purchase and identities of the contracting parties. Succinctly, all three elements cumulatively constitute peremptory contents of effective and legally binding contracts.

[4] Friedrich A Hayek, Prices and Production (2nd edn, Augustus M Kelly Publishers 1967) 32.

[5] Firstly, the real costs doctrine purports that the supply price of a good must be so as to overcome the disutility involved in its production. Secondly, the alternative costs doctrine purports that a resource’s supply price is to be equal to its potential earning in its next most productive use cf J Maloney, ‘Real Cost Doctrine’, The New Palgrave Dictionary of Economics (Palgrave Macmillan 2018).

[6] Irving Fisher, The Theory of Interest (MacMillan 1930) 62. (‘It is the percentage excess of the present marginal want for one more unit of present goods over the present marginal want for one more unit of future goods.’)

[7] Wealth per se is the conceptual linchpin to economics and can either be implied subjectively or objectively. That is to say, that it either accounts for tangible possessions or the (u)tilities generated by such tangible goods. Succinctly, the whole discipline of economics attempts to create a common denominator for summing up the valeur representée of a heterogenous collection of objects cf Robert L Heilbroner, ‘Wealth’, The New Palgrave Dictionary of Economics (3rd edn, Palgrave Macmillan 2018).

[8] cf Joseph A Schumpeter, Capitalism, Socialism, and Democracy (Taylor & Francis 1976).

[9] Connie Rosati, ‘The Makropulos Case Revisited’ in Ben Bradley, Fred Feldman and Jens Johansson (eds), The Oxford Handbook of Philosophy of Death (1st edn, OUP 2012) 369. (‘…we can choose extinction over life, not only directly, by suicide, but indirectly, by committing ourselves, with full cognizance, to a (r)isky cause or endeavor’)

[10] Personally, I strongly feel that risk-taking preferences are significantly altered by environmental factors, relative to genetic factors across all domains cf Nicos Nicolaou and Scott Shane, ‘Common Genetic Effects on Risk-Taking Preferences and Choices’ (2019) 59 Journal of Risk and Uncertainty 261.

[11] Dennis V Lindley, Understanding Uncertainty (John Wiley 2014) 1. Rudimentarily, uncertainty denominates the human phenomenon of indecisiveness that stems from asymmetric distribution of information.

[12] Unequivocally, ‘as temperature diminishes indefinitely, the entropy of a chemical homogenous body of finite density approaches indefinitely near to the value of zero’ cf Max Planck, Treatise on Thermodynamics (3rd English edition, Dover Publications 1917) § 282.

[13] Werner Heisenberg, The Physical Principles of the Quantum Theory (Carl Eckart and Frank C Hoyt eds, Dover Publications 1930) 20. The art of mastering the uncertainty principle lies in inconspicuously attaining the dexterity of surmounting ‘the indeterminateness in the possible present knowledge of the simultaneous values’ (of assets) without indelibly causing systemic repercussions. For further holistic elucidations pertaining to the matter see Albert Einstein, Relativity: The Special and General Theory (The masterpiece science ed, Pi Press 2005) 133 ff.

[14] Not lastly, by virtue of zero-knowledge proofs, one party can verify to another that a given statement is correct without excessively conveying any additional information cf Douglas Robert Stinson and Maura Paterson, Cryptography (4th edn, CRC Press 2018) 379 ff.

[15] Michael Parkin, ‘Inflation’, The New Palgrave Dictionary of Economics (3rd edn, Palgrave Macmillan 2018) 6433 ff. It bears noting that inflation is the process of continuously rising prices in correlation with continuously falling value of money. In the base scenario—namely, anticipated inflation—x per cent higher anticipated inflation raises nominal interest rates by y per cent, makes wage rates rise y per cent faster, and makes currency depreciate y per cent faster.’

[16] ibid., at 6437. Contrary to anticipated inflation, unanticipated inflation occurs with the onset of systemic anomalies in the business cycle frequency. Thus, wreaking havoc due to unintended consequences on price level, real output, money supply, and the velocity of circulation.

[17] George Soros, ‘Fallibility, Reflexivity, and the Human Uncertainty Principle’ (2013) 20 Journal of Economic Methodology 322. Essentially, reflexivity—in lieu of the efficient market hypothesis—employs a more holistic view on financial markets. Meaning that, instead of merely reflecting an underlying reality, it ascribes to them the means of affecting the future earning flows of the aggregates they reflect upon. Consequently, purporting that behavioural economics erroneously focus on but half of the reflective process. In a nutshell, stopping with ‘mispricing of assets due to cognitive fallibility and not scrutinizing the effects that mispricing can have on the fundamentals.’

[18] Kinch Hoekstra, ‘Hobbes’s Thucydides’ in Al P Martinich and Kinch Hoekstra (eds), The Oxford Handbook of Hobbes (OUP 2016) 567 f. The right of nature might allow individuals or a state to do whatever it deems necessary to preserve itself, but, at the same time does not excuse unnecessary harm. Stringently, its legal derivative—the law of nature—forbids individuals ‘to engage in wanton cruelty.’

[19] cf Lewis McLellan, ‘Taking Tokens into Account’ (Digital Monetary Institute 2021) 36 ff.

[20] To recapitulate, money is a fungible good cf de Soto (n 100).

[21] Heilbroner (n 119) 14517. It bears noting, that the entire study of wealth would be meaningless without a unit to measure it. Thus, money is the standard which enables the extent of objective wealth to be calculated—it is the embodiment of (fiscal) value.

[22] John Maynard Keynes, The General Theory of Employment, Interest, and Money (Springer International Publishing 2018) 195. Concisely, the money-rate of interest is ‘the excess of money contracted for forward delivery.’ Hence, the prevailing opinion is that for every kind of capital-asset there is an analogue of the rate of interest on money.

[23] ibid., at 200 ff. Remarkably, under the current monetary regime, any one asset’s own-rate of interest needs to be reluctant to decline as output decreases.

[24] Economically, an aggregate is the sum of individual values that constitute a total value—the process undertaken to form an aggregate is coined aggregation cf Black, Hashimzade and Myles (n 107) 'Aggregate'.

[25] Initially, the total liabilities that are supplied by central banks, including bank deposits and currency, are referred to as monetary base or M0—whereby, this aggregate does not include non-currency money forms, that are widely used in modern economies. Subsequently, M1 includes currency and assets that are highly liquid, ie already are or can quickly be converted to cash. Thereafter, M2 consists of M1 in addition to ‘near money instruments’ like savings deposits, money market securities, and other time deposits—notably, this iteration contains elements that are not suitable as a medium of exchange. Lastly, M3 consists of M2 in addition to large time deposits, institutional money market funds, short-term repurchase agreements, and larger liquid assets see Benjamin M Friedman, ‘Money Supply’, The New Palgrave Dictionary of Economics (3rd edn, Palgrave Macmillan 2018).

[26] AB Cramp, ‘Liquidity’, The New Palgrave Dictionary of Economics (3rd edn, Palgrave Macmillan 2018) 7910. Liquidity is conceptualized by maturity, easiness and financial strength—all three of which are juxtaposed to financial assets classified as running-, reserve-, and investment assets.

[27] ibid. Lately, in order to identify all readily available money, an aggregate called ‘Money of Zero Maturity’ (MZM) is formed to assess the liquid money circulating in an economy—precisely, it subtracts time deposits from M2 and adds money market funds. Succinctly, indicating all funds readily available, ie redeemable, at par value cf Gordon Scott, ‘Money Zero Maturity (MZM)’ (Investopedia) <https://www.investopedia.com/terms/m/moneyzeromaturity.asp> accessed 28 December 2021.

[28] Maturity, in economics, conventionally prescribes the date at which a security is due for redemption cf Black, Hashimzade and Myles (n 107) 'Maturity'. The intricacies of different instrument types in securitization shall be delineated shortly hereinafter.

[29] Milton Friedman and Charles AE Goodhart, Money, Inflation and the Constitutional Position of the Central Bank (1st edn, Institute of Economic Affairs 2003) 86. (‘…The holders of excess cash will try to adjust their portfolios by buying other assets. But one man’s spending is another man’s receipts. All the people together cannot change the amount of cash all hold—only the monetary authorities can do that.’)

[30] ibid., at 89. Regardless of geographic or demographic predisposition, to my mind, the monetarist view—that advocates a mechanical one-to-one correspondence between changes in money and changes in income—seems to be a prerequisite for longevity of price stability in an interconnected world.

[31] Helmut Siekmann, ‘Deposit Banking and the Use of Monetary Instruments’ in David Fox and Wolfgang Ernst (eds), Money in the Western Legal Tradition: Middle Ages to Bretton Woods (1st edn, OUP 2016) 510. Notwithstanding the functionalist approach of economists—ie money as an abstract concept—e contrario a line has to be drawn once it enters the realm of law, thus, morphing into a specific good of tangibility: currency.

[32] Christine Desan, Making Money: Coin, Currency, and the Coming of Capitalism (1st edn, OUP 2014) 35.

[33] Charles Proctor and FA Mann, Mann on the Legal Aspects of Money (7th edn, OUP 2012) supra note 1.07. Doctrinally, money in economic terms functions as a medium of exchange, a measure of value or as a standard for contractual obligations, a store of value or wealth, and a unit of account.

[34] ibid., at supra note 1.11.

[35] Smith (n 107) supra note 12.36.

[36] ibid., at supra note 12.37.

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