Re: Chartalism as Alternative to Neo-liberalism

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

The level of corruption (crony capitalism) is fairly constant in most
countries in boom times as well as in bust times. But corruption gets
attention only when the trouble begins. Crruption, while undesirable was
not the cause of financial crises around the world, but it was used as a
conenient excuse.
Chartalism is not a cure all. But under current conditions of
overcapacity and deflation caused by lack of demand, the Chartalist
approach offers much promise.  Of course, it can be abused like any
other approaches. Neo-liberal monetarism found a window of opportunity
from the excesses of Keynesian fiscal policies which continued through
business cycles instead of merely leaning against the wind.

Henry C.K. Liu

William F Hummel wrote:

> >  They can
> >> issue all the money that is needed, provided there
> >> is no corruption, or waste.
>
> Jim Baird wrote:
> >
> >But isn't that really the whole game?  (One is tempted
> >to quote Keynes on "assuming away the very thing under
> >discussion"...)
>
> Yes indeed.  In essence Chartalist theory simply asserts the
> monopoly position of the State in issuing the currency that it
> demands in taxes.  Without a broad-based and equitable tax
> system, plus proper fiscal and monetary management there is
> nothing about Chartalism that guarantees a viable system.  The
> Treasury should borrow only in its own currency and from the
> public at a market rate, not from the central bank at a pegged
> rate.
>
> A key to proper management is maintaining the own rate of the
> currency at a suitably low level, but not zero.  Bank capital
> ratios should be closely monitored to enforce a healthy banking
> system.  Ultimately the system depends on private sector credit.
> Indeed the amount and quality of credit market debt is a measure
> of the size and vitality of a nation's economy.
>
> >There are complex historical and
> >cultural reasons for the prevalance of corruption and
> >tax avoidance in Latin American societies - these are
> >not things that can just be swept away by a "clean
> >government" campaign.
>
> Agreed, and Argentina will have to find a way to solve these
> cultural problems before it can expect to achieve a first-class
> economy.  When corruption is widespread at the center of
> political power, the problems may even be insurmountable.
>
> >In my understanding of the
> >Chartalist view (which is by far the best monetary
> >model I have come across), a tax system with
> >significant "leaks" in it will always have a tendancy
> >toward hyperinflation.  Tax enforcement is a
> >prerequisite for any kind of stablity  - but it's
> >extremely hard to do...
>
> Leaks in the tax system lead to inequities in the tax burden, but
> don't have much to do with a tendency toward hyperinflation.  A
> hyperinflation is basically due to monetary mismanagement,
> including "printing" money for the Treasury to spend.  That's why
> the Treasury should be required to borrow the funds in the open
> market that it needs to meet any budget deficit.
>
> William F Hummel