Economics Dictionary of ArgumentsHome
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| Cash balance: Cash balance in economics refers to the amount of liquid cash held by an individual, business, or government at a given time. It represents available funds for transactions, investments, or reserves. Managing cash balance efficiently is crucial for liquidity, ensuring that an entity can meet short-term obligations and optimize financial operations. See also Capital, Investments, Entrepreneurship._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Cash Balance - Dictionary of Arguments
Rothbard III 204 Cash balance/Rothbard: For centuries, however, fallacious popular usage has asserted that one whose income is greater than expenditures (exports greater than imports) has a “favorable balance of trade,” while one whose expenditures have been greater than income for a period (imports greater than exports) has suffered an “unfavorable balance of trade.” Such a view implies that the active, important part of the balance of payments is the “trade” part, the exports and imports, and that the changes in the individual’s cash balance are simply passive “balancing factors,” serving to keep the total payments always in balance. In other words, it assumes that the individual spends as much as he wants to on goods and services and that the addition or subtraction from his cash balance appears as an afterthought. On the contrary, changes in cash balance are actively decided upon by each individual in the course of his market actions. >Income, >Consumption, >Saving, >Loans, >Credit, >Money. Rothbard III 264 Cash balance/Rothbard: What is the usefulness of keeping or adding to a cash balance? (…) we may state that the desire to keep a cash balance stems from fundamental uncertainty as to the right time for making purchases, whether of capital or of consumers’ goods. Also important are a basic uncertainty about the individual’s own future value scale and the desire to keep cash on hand to satisfy any changes that might occur. Uncertainty, indeed, is a fundamental feature of all human action, and uncertainty about changing prices and changing value scales are aspects of this basic uncertainty. Money/RothbardVsTradition/RothbardVsMarx: That money in one’s cash balance is performing a service demonstrates the fallacy in the distinction that some writers make between “circulating” money and money in “idle hoards.” In the first place, all money is always in someone’s cash balance. It is never “moving” in some mysterious “circulation.” It is in A’s cash balance, and then when A buys eggs from B, it is shifted to B’s cash balance. Secondly, regardless of the length of time any given unit of money is in one person’s cash balance, it is performing a service to him, and is therefore never in an “idle hoard.” >Marginal Utility of Money/Rothbard, >Opportunity Cost/Rothbard. Rothbard III 759 Cash balance/Rothbard: Reservation demand curve for money: (…) the higher the PPM (purcuasing power of money; the exchange-value of money), the lower the quantity of money demanded in the cash balance. >Demand for money/Rothbard, >Money/Rothbard, >Purchasing power/Rothbard. As a result, the reservation demand curve for money in the cash balance falls as the exchange-value of money increases. This falling demand curve, added to the falling exchange-demand curve for money, yields the market's total demand curvefor money—also falling in the familiar fashion for every commodity. >Currency in circulation/Rothbard. Rothbard III 766 Cash balance/Evenly Rotating Economy/Rothbard: Suppose the ERE (Evenly Rotating Economy) has been established. In such a world of certainty, there would be no risk of loss in investment and no need to keep cash balances on hand in case an emergency for consumer spending should arise. Everyone would therefore allocate his money stock fully, to the purchase of either present goods or future goods, in accordance with his time preferences. No one would keep his money idle in a cash balance. Rothbard III 767 Money, in short, would either be useless or very nearly so in the world of certainty. >Evenly Rotating Economy/Rothbard. In the real world of uncertainty, as contrasted to the ERE, even "idle" money kept in a cash balance performs a use for its owner. Indeed, if it did not perform such a use, it would not be kept in his cash balance. Its uses are based precisely on the fact that the individual is not certain on what he will spend his money or of the precise time that he will spend it in the future. Speculative Demand: It is true (…) that the only use for money is in exchange. From this, however, it must not be inferred, as some writers have done, that this exchange must be immediate. Indeed, the reason that a reservation demand for money exists and cash balances are kept is that the individual is keeping his money in reserve forfuture exchanges. That is the function of a cash balance - to wait for a propitious time to make an exchange. >Speculative Demand/Rothbard._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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