The card game analogy works reasonably well for private corporations (they are legal fictions ultimately controlled by shareholders, directors, or owners).
But it seems problematic when extending it to the sovereign government / issuer of the currency.
A monetary sovereign can create its own liabilities in its own unit without ever facing nominal insolvency. This is fundamentally different from a household or firm, which can be forced into default or restructuring even if it has real assets. Why should we treat the issuer the same as currency users when their operational constraints are fundamentally different?
I'm convinced it does make sense for governments and central banks to be included, and in fact they *have* to be included to use it for macroeconomics.
You're right that the operating constraints are typically different for a government or a central bank. In the card analogy, that's represented by there being *different rules* about which actions can occur. But the representation of what a government or central bank owns, is owed and owes, as purple, green and pink cards respectively, still works.
Imagine a private sector player, Bob, has £50 cash (represented by him holding a green card; the BoE has the corresponding pink card). Bob can't force the BoE to settle with 0.01 oz of gold (transfer of purple card from BoE to Bob; Bob discards his green card and BoE discards its pink card). But if the BoE itself decided to sell 0.01 oz of gold for £50, those card actions would exactly represent the transaction.
"Why should we treat the issuer the same as currency users when their operational constraints are fundamentally different?"
The reason we should do this is that the analogy works extraordinarily well, and helps us to understand not only basic economics, but even macroeconomics. The analogy is just a different representation of what Steve Keen does with Godley tables, or Perry Mehrling does with balance sheets on a blackboard. What I like about the card analogy is that it's familiar and intuitive.
The card game analogy works reasonably well for private corporations (they are legal fictions ultimately controlled by shareholders, directors, or owners).
But it seems problematic when extending it to the sovereign government / issuer of the currency.
A monetary sovereign can create its own liabilities in its own unit without ever facing nominal insolvency. This is fundamentally different from a household or firm, which can be forced into default or restructuring even if it has real assets. Why should we treat the issuer the same as currency users when their operational constraints are fundamentally different?
Thanks for your comment!
I'm convinced it does make sense for governments and central banks to be included, and in fact they *have* to be included to use it for macroeconomics.
You're right that the operating constraints are typically different for a government or a central bank. In the card analogy, that's represented by there being *different rules* about which actions can occur. But the representation of what a government or central bank owns, is owed and owes, as purple, green and pink cards respectively, still works.
Imagine a private sector player, Bob, has £50 cash (represented by him holding a green card; the BoE has the corresponding pink card). Bob can't force the BoE to settle with 0.01 oz of gold (transfer of purple card from BoE to Bob; Bob discards his green card and BoE discards its pink card). But if the BoE itself decided to sell 0.01 oz of gold for £50, those card actions would exactly represent the transaction.
"Why should we treat the issuer the same as currency users when their operational constraints are fundamentally different?"
The reason we should do this is that the analogy works extraordinarily well, and helps us to understand not only basic economics, but even macroeconomics. The analogy is just a different representation of what Steve Keen does with Godley tables, or Perry Mehrling does with balance sheets on a blackboard. What I like about the card analogy is that it's familiar and intuitive.