RE: Incomes and Exchange rates; part 2

["asecon" <asecon@xxxxxxxxxxxxxx>]

I don't get to understand your position. If there are "fools"everywhere and
they are a lot, so the system will hold, underwise it won't.
What Laura is trying to explain is that in certain countries (one example
is our own country), people need to believe that government is going to do
things well, that is why fixed rules must be established, in order to be
sure that we are not going to end in a economic disaster. Expectations are
mantained calmed by this method.

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> De: John B. O'Donnell <jackodonnell@xxxxxxxx>
> A: POST-KEYNESIAN THOUGHT   <pkt@xxxxxxxxxxxxxxxx>
> Asunto: Re: Incomes and Exchange rates; part 2
> Fecha: Martes 16 de Septiembre de 1997 2:57 PM
>
> Maria Laura Segura wrote:
> >
> > John wrote:
> > > My own position is that gold [or any other commodity backing] is
> > > superfluous to government taxation to establish value for money and
> > > it is the quantity of value that is the sole relevant function of
> > > monetary policy.
> > >
> >
> > John,
> > If I understood you well, you're saying only taxation incomes
> > are sufficient to establish value for money.
>
> No, but your misinterpretation may be because of my language
> peculiarities.
>
> Any taxation, not just that of "incomes" [A concept peculiarly defined
> by U.S. courts that is part of the government practice of obfuscation
> that confirms the tendency to mistrust government.] can establish value
> of a fiat currency. Other methods can also  establish value for a
> currency, but one is enough. And, even with a method of giving currency
> value, there is still a need for a method to give it a particular value.
>
> In logical perception, taxation is sufficient but not necessary to make
> a currency valuable. It is not sufficient [It lacks the ability to
> respond sufficiently quickly to changes in value.] to maintain a
> reasonably constant value of the currency.
>
> > That might be the case in the US, but in some countries
> > where people don't trust there own's government ability
> > to spend, some external insurance is necessary. In these
> > cases the backing works as a control measure and restrains
> > the government from excessive spending (which in most of
> > the cases is financed through monetary emition and leads
> > to high inflation rates)
>
> There are fools everywhere who trust government but we can be grateful
> the sentiment is not universal. The only reliable external insurance to
> constrain the misbehavior of government is the power of the mob when the
> mob is willing and able to exercise that power. [We can hope that the
> threat is sufficient and governments do respect that possibility, but
> they also push the frontier as far as they can without inciting
> rebellion.]
>
> There are many other procedures [Gold standard, etc.] that may appear to
> be "insurance" against the misbehavior of governments, but since
> governments can and have throughout history engaged in one form or
> another of coin clipping, these other methods only appear to be
> insurance. We may all wish it were simpler but the price of freedom and
> security is still vigilance.
>
> 			-- jbod
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