Where the Austrians stand on money-market mutual funds. Joe Salerno, who helped formulate the Austrian True Money Supply (TMS) measure, talks about them in an interview from not long ago. An excerpt:
I hold a fairly conventional theoretical definition of money as the general medium of exchange, meaning the good in the economy which is routinely and universally accepted in exchange for all other goods and services. Less orthodox is my view of what things constitute the money supply in our current system of central bank-monopolized fiat money. I follow Rothbard’s rule that any item that is either itself money or is redeemable at par on demand for money should be included as a component of the money supply….
In contrast to savings accounts, shares in money market mutual funds (MMMFs) are excluded from TMS because they are not redeemable at par. They are not federally insured and are not claims to a fixed quantity of currency. Rather they are titles to shares of a managed portfolio of highly liquid, short-term securities. The value of these shares, typically maintained at $1.00 per share, could decline below $1.00 (called “breaking the buck”) depending on the performance of the fund’s portfolio. Thus the equity share owner (not depositor) in the fund bears the burden of interest rate and default risk. By the way, in fall 2008, during the financial crisis, the U.S. Treasury established a temporary program to guarantee MMMF shares giving them the character of bank demand deposits, but this program expired in 2009, so we can continue to comfortably omit them from the money supply.
And check out Joe’s book Money: Sound and Unsound.