Re: [gang8] Re: two currencies and Korean war

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

 

Gunnar Tómasson wrote:

In other words, the 'taxation' aspect enables the State to take fiscal action by monetary means - it has nothing to do with monetary theory as such.

Gunnar,

The State Theory of Money assserts that the fundamental function of taxation is to create on the part of the public a financial obligation to the state through the levying of taxes which is payiable with the currency issued by the state.  Taxes are what give currency value.  The fact that the state spends tax revenue is merely to recycle the money supply.  Thus taxation is very much part of monetary theory.  A government that has no tax revenue (or insufficient) would have to support its currency through other means, such as a gold standard.  This is where Reagan missed the point when he compared government with a corporation. Corporation have no authority to impose taxes, although many try through monopolies.

Henry