PKT message, Re: two currencies and Korean war

Agree - indeed, the whole chartalist story strikes me as curious.

Going back to basics, it seems to me that a newly-organized State can spend its newly-created money in either of two ways: (1) to purchase factor services for subsequent transformation into final output, or (2) to purchase final output.

In the first case, the State's action is indistinguishable from that of non-State Entrepreneurs; in the second case, it serves as a means of 'taxation' via the diversion of part of final output to the State for its use and/or disposition.

In the first case, the issue of 'acceptability' of State Money (IOU's) is on par with that of non-State Money (IOU's) used by non-State Entrepreneurs.

It is only in the second case that the 'acceptability' of the State's Money becomes problematic - a 'problem' which the State can resolve through imposition of Taxes in the amount of State-Money used to divert part of the economy's final output from use and/or disposition by non-State suppliers of factor inputs to the State itself.

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

----- Original Message -----

From: "Alan G. Isaac" <aisaac@xxxxxxxxxxxx>

To: <pkt@xxxxxxxxxxxxxxxx>

Sent: Monday, December 31, 2001 9:23 AM

Subject: Re: two currencies and Korean war

> On Sun, 30 Dec 2001, pdavidso wrote:
> > I have suggested the following (black swan) illustration to tax-based money
> > chartalists several times -- but to little avail.
>
> A great story. And a bull's-eye as well.
>
> Cheers,
> Alan Isaac
>
>