Re: two currencies and Korean war

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Fri, 25 Jan 2002 13:48:01 -0800, William F Hummel
<wfhummel@xxxxxxxxxxxx>

>Aside from Liu's strange remarks, I haven't seen "chartalism"
>used on this list as a policy prescription.  In my view it is
>simply a description of the key mechanism by which a modern fiat
>money system operates

You know, change that "the key mechanism" to "a key mechanism",
and I am much happier with chartalist theory.  Certainly
businesses must keep the tax man happy or be shut down, but
they must also keep their banker happy or be shut down, given
that obligations are undertaken prior to payment being
received so that business firms often must be net borrowers.
If banks are required by their regulatory authority to have
a particular financial asset on hand in order to avoid being
shut down themselves, and the amount they must have on hand
is determined by the balance of oustanding obligations of one
or more different types, so that for direct purposes and for
purposes of interbank lending they are happy to get that kind
of financial asset, that can also be the basis for a currency
that is widely accepted by the business who must regularly keep
their bank happy.

Of course, combine the two -- acceptability to banks and
acceptability for tax payments -- in one financial asset,
and you may well have something whose acceptability is so
general that its original standing as a financial asset
depends entirely on those two characteristics.

Virtually,

Bruce McFarling, Shortland, NSW
ecbm@xxxxxxxxxxxxxxxxxxx