Re: Mosler seminar: Tax driven currency

[Per Gunnar Berglund <pgb@xxxxxxxxxxxxxxxxxx>]

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In response to Mat Forstater:=20
________________________

Even if Mat didn't direct himself to me explicitly, I cannot help =
feeling hit by his message.=20

Perhaps I should clarify that I don't think that the assertion that =
currencies are tax-driven on the one hand, and that they are =
credit-driven on the other, stand in contradiction to one another. There =
may be several motives for private agents to hold net financial asset =
balances, negative or positive. The question is more of degree than of =
kind, that is to say.=20

As long as there is no peg between private bank money and State =
currency, the tax motive ought surely to be predominant in the demand =
for the currency. But when there is a permanent peg, making the currency =
and the bank money functionally similar from the private agents' =
perspective, the tax motive becomes mixed up with the general motive(s) =
for holding net financial assets.=20

Suppose, for instance, that a man borrows in a bank to buy a house. If =
there is a peg between State and Bank money, that man effectively =
borrows currency. What reason, then, is there to suppose that he borrows =
this currency due to his future expectations of tax payments? In my =
view, there is little or no reason to suppose that the tax motive plays =
any significant part in the decision. Rather, the borrower is driven by =
his urge to use a piece of real property (the dwelling), which his net =
worth is insufficient to provide for. That, it seems to me, is the prime =
motive for going into net indebtedness. The fact that this move may be =
reflected in the government net financial asset position is of no =
importance for the borrower's decision. It is more of an unintended =
consequence of the borrowing. The same argument may be applied for any =
borrowing or lending transaction. The motives for net borrowing or net =
lending, thus, have no direct link to the need to provide for future =
taxes. If that motive plays any part at all in the game, one would need =
to formulate that role in indirect terms. I doubt such a story can be =
formulated in a sensible and credible way, but then that is not my =
problem is it?=20

Again, I believe it is the "homogeneisation", so to speak, of private =
bank money and State currency that provides real scope for Keynesian =
Functional Finance budget and debt management. I see nothing in the =
quotes provided by Mat to contradict this view. Do you?=20

Kind regards,=20
Per

Per Gunnar Berglund
_______________________________________________________________
Snailmail: Lilla Sallskapets vag 60, SE-12761 Skarholmen, Sweden
Voice/fax: +46-(0)8-88 30 65
Website: =
http://csf.colorado.edu/pkt/pktauthors/Berglund.Per/Mainpage.htm


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