Re: Taxes, 'reflux' and the value of the currency

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

Per Gunnar Berglund wrote:

>
> Which is precisely the way I see it. Money can be defined in terms of that
> which can be used for the immediate discharge of debts to the State. The
> weakest link in this definition is the meaning of the concept of the
> 'State'. For instance, in occupied or semi-occupied territory (such as was
> the case in Paul's example of Korean War U.S. military scrips), what
> precisely is the 'State'? Is it the foreign power that occupies the
> territory? Is it the puppet regime? Similarly vexing questions arise for
> (e.g.) feudal society where the modern nation states were yet to be
> established. One could go on, but the 'State', I think, is best understood
> as the central authority which is actually in charge for the time being.
>

The Black Swan dollars (BS$) mentioned by Paul is increasing being misunderstood
in this thread.  Paul pointed out clearly that BS$ were accepted only from US
soldiers at the PX.  Thus Koreans only acquired them to resell them in the black
market to GI's at a discount or to Korean currency (Won) speculators.  GIs did
have access to Korean Wons by selling BS$ and other US military goods to Korean
organized crime and Korean suppliers to US Bases.  GIs also pay for Korean
services off base (including gambelling and prostitution) in both K Wond ans
BS$.  There was an underground foreign exchange market operating between BS$ and
Korean Wons, with the K Won constantly depreicating. Th market extends to other
trading ares in Asia, from Japan to Hong Kong.  Thus the BS$ worked as an
illicit  reserve currency, purely on the financial credibility of the US
military which experience had shown to be better than the US government as a
whole.  Remember that the K Won was not convertible and Korean nationals were
not permitted by law to hold US$.  So much of the characterisitics assigned by
this list to the BS$ is not valid.  If anything, the BS$ supports of Chartalist
view of money.

>
> As to international units such as the EU or the IMF, the institutional
> structure is clearly such that the authority of the member states underpins
> the currencies issued by these organisations.
>

Which of course validates the Chartalist view on money.

> As to the empirical side to money, I see little point in even beginning to
> outline a theory of how money impacts our the economic system without first
> bothering to define clearly the concept to be analysed. Good empirical work
> and crisp taxonomy should go hand in hand.

Yes, but orthodox theories on money have been preventing the application of
empirically useful policy options, such as full employment with price stability,
recognition of alternatives to growth from non-trade domestic develpment not
dependent on "hard" currencies or exchange rates.  As these beta policies are
put in place, empirical data will emerge to valid the new theory.  Thus it is
necessary to construct new theories ahead of empirical data, with the help of
logic.  Existing data, resulting from orthodox theroy of money cannot, by
definition, lead to support for Chartalism.

>  I find this tale hard
> to believe. So I guess I would side with the Chartalist point of view that
> State acceptance is a sine qua non for general acceptability.
>

This is empirically obvious in a world of fiat money.

Henry C.K. Liu

> _____________________________________________
> Per Gunnar Berglund
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