Cash is just a physical version of central bank reserves, analogous to a receipt/proof of your account at the central bank.
I am aware of this. I just think his argument is backwards. Certainly, money is not just a physical thing, and money can effectively be created by banks borrowing and lending from each other. But I don't know that government spending (or taxes, or even legal tender laws) are as central to establishing a currency as Tymoigne believes it to be. In countries where the currency is not very stable (like Russia), the US dollar is frequently used as the de facto currency (especially for larger transactions and contracts), even though the governments of those countries generally don't exactly encourage that. The utility arises from the fact that the USD is a much more reliable store of value than almost any other currency, rather than from the government somehow requiring taxes to be paid in it. After all, it is generally possible to convert your preferred currency to whatever tokens are required to pay taxes.
Well the same thing goes for central bank cash/reserves. They initially came into existence by the government buying your tank or aircraft carrier or your time 9-5 each day, and in exchange they created a financial liability that you get to hold as your asset (either in paper cash or in a reserve account balance, whichever you find more convenient).
Yeah, but it seems bizarre to me to link the method of emitting these tokens to the notion of a fiat currency in general. Yes, the Fed generally injects dollars into the economy by buying government debt. But it could just as well buy any other securities, or run a lottery program, or simply drop banknotes out of helicopters over densely populated areas. I don't see how that would fundamentally change anything, though obviously some methods are more fair than others. And in most capitalist countries, government spending is a relatively small fraction of the economy, especially if you remove the purely redistributive spending (like various social insurance and pension programs).
The only difference is that their IOU doesn't promise to pay a shovel or anything real for that matter upon redemption; it's just abstract credit.
Well, that seems like a very key difference. The value of the IOU is tied to the value of the shovel minus the expected risk that I default on the contract. The value of the fiat money is not tied to anything except the effective quantity in circulation (including multipliers and various non-cash substitutes) and the expected changes to that quantity (e.g. how much the central bank can be trusted not to emit too much money).
Well we call that barter when you trade 'real' for 'real', whereas monetary sales are 'real' for 'financial'.
Well, but the thing is, they are not really barter transactions -- the cigarettes are often not acquired for the purposes of being smoked, but rather as tokens that have a standardized and fairly constant value. For example, Kent cigarettes were used as a currency in Romania in the 70s and 80s: http://news.google.com/newspapers?nid=1946&dat=19841201&id=G6IkAAAAIBAJ&sjid=sqUFAAAAIBAJ&pg=1023,502429 . They often circulated to the point of becoming stale and unusable for their intended purpose. Again, this goes against Tymoigne's argument that currencies have to arise from government debts.
Interestingly enough, since the ban on smoking in federal prisons, the currency has shifted towards books of stamps. Again, this isn't really barter -- the stamps generally aren't being used to send letters, they are being used as tokens for buying and selling other things. Since they have a well-defined value and are easily stored and exchanged for cash, they can be effectively used as a currency. I suppose you could argue that stamps are in fact debt (the postal service made a promise to deliver stamped letters), but it seems to me like that isn't very important, except to guarantee the store of value.