Re: two currencies and Korean war

[Ted Winslow <egwinslow@xxxxxxxxxx>]

Per wrote:

> Keynes was by no means the first or 'orginial' Chartalist, in fact he drew
> heavily on Knapp's State Theory of Money, particularly in the Treatise.
> Chartalism dates back to (at least) the 17th century and late Mercantilist
> writers like Nicholas Barbon. (I guess some would say it goes all the way
> back to Aristotle!) John Locke, who should be credited with the invention of
> the modern Metallist doctrine (as propagated by e.g. Carl Menger), wrote his
> pamphlets on the issue largely in response to the Chartalists of the time.
> The matter under discussion was the recoinage that took place in the 1690s,
> under William and Mary's reign. I made the point before that Locke sought to
> establish a parallel between his Liberal theory of the State and his theory
> of money, basing both on 'common consent'.
>
> Another aspect of Keynes' Chartalism that one must not overlook is that he
> also said 'the rupee is a note printed on silver'. This accords with the
> accounting view I expressed in a previous post on this list, namely that one
> should be careful to distinguish between the material value of the object
> (token) that serves as a certificate of deposit on the one hand, and the
> deposit itself on the other.

Keynes wasn't a "chartalist" in the sense you mean.  As I've just shown
again, he explicitly (in his summary QJE statement of the essence of his
liquidity preference theory) derives the "desire to hold money as a store
of wealth" from an "instinctive or conventional" "feeling about money"
rather than from any form of "chartalism." The explanation of how "very
strong irrational feelings" attaching to "metallic" moneys get transferred
to "fiat" money is given in the section on "Auri Sacra Fames" in A Treatise
on Money (vol VI pp. 258-61).  The psychology invoked there explains why
primitive "moneys" throw light on modern ones. It also explains the
irrational ideas about money he associates with monetary phenomena in India
(something he does as early as Indian Currency and Finance).

That he couldn't have been assuming that people use money and debts
denominated in money to store their wealth because they are chartalists is
also shown by the fact that the history of money is said to start with Solon
not because chartalism begins with Solon but because Solon took advantage of
these "very strong irrational feelings" to use the chartalist character (in
Keynes's sense) of Greek money to reduce the real value of rentier wealth by
means of "debasement."  Why would a rational person (including Paul's
"sensible" person) use money as a store of wealth in face of the fact that
there is "an almost unbroken chronicle in every country which has a history,
back to the earliest dawn of economic record, of a progressive deterioration
in the real value of the successive legal tenders which have represented
money"?

Ted