Re: What is Creditary Economics?

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

 Paul:

Now we are getting to the heart of the matter!

In your 1998 paper on OECD Unemployment cited earlier, you state up front
that "Money IS a chartalist institution..."

In 'Understanding Modern Money', Randy Wray cites Keynes as writing that
"...Chartalism BEGINS when the State designates the objective standard which
shall correspond to the money-of-account."  (p. 32)

But CREDIT entered the scene with the FIRST division of labor whereby two or
more individuals pooled their Resources for transformation into Output -
that is to say, Credit had been around long BEFORE the advent of any State.

Also, any individual CREDITOR could transfer all or part of his claim to
share in Output to any other individual in exchange for some present or
future value - thus, pre-State Credit had ALL the attributes of MONEY
'backed' by the economy's work in progress.

Later, two distinct changes were effected through State-instituted
Chartalism.

First.  The LEGAL form and standing of production-related Credit/Money in
the economy's monetized sector changed.

Second.  As monopoly issuer of Credit/Money possessing such legal form and
standing, the State ADDED a TAX-collection function to the pre-existing form
of production-related Credit/Money.

In 'Tract on Monetary Reform', Keynes underscored the Tax-Collection aspect
of "money [as] a chartalist institution" with his delightful account of the
different modes of Tax Collection in Germany, France, and Britain.

His point was that there were several different ways for the State to
collect Taxes - in Germany it does so by issuing Money, which the Germans
put in their wallets; in France, the State does it by issuing Bonds which
the French put in the family safe; while in Britain, the Exchequer sends out
Tax Receipts, which the British throw in the wastepaper basket.

I don't know what came over Keynes between the 'Tract on Monetary Reform'
and the 'Treatise on Money' - except perhaps a desire to play to the
academic gallery.

Gunnar


----- Original Message -----
From: "paul davidson" <pdavidson@xxxxxxx>
To: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Tuesday, April 15, 2003 11:26 AM
Subject: Re: What is Creditary Economics?


> At 08:06 PM 4/14/03 , you wrote:
> >Paul:
> >
> >First, in response to my point:
> >
> >In the real world of NON-COMMODITY MONEY, the amount of money "produced"
is
> >NOT a function of "the quantity of labour applied to producing it" in the
> >first place.
> >
> >You write:
> >
> >So then the elasticity of production is zero for a noncommodity money by
> >defin
> >ition, i.e., when the demand for money increases, the demand for labor in
> >the
> >private sector to produce more money does not increase. So what's your
> >problem?
> >
> >Comment:
> >
> >Given his statement "that money has, both in the long and in the short
> >period, a zero, or at any rate A VERY SMALL, elasticity of production so
> >far as the power of private enterprise is concerned, as distinct from the
> >monetary authority; - elasticity of production meaning, in this context,
the
> >response of the quantity of labour applied to producing it to a rise in
the
> >quantity of labour which a unit of it will command,"
> >Keynes DOES have a problem.
>
>
> The problem , Dear Gunnar, is in your confusion not in Keynes'  or
> Davidson's  writings.
>
>
> No! Keynes was writing a GENERAL THEORY that could cover all kinds of
money
> -- including money on the gold standard!! that is why he includes the
> phrase ", or at any rate A VERY SMALL, elasticity of production " so that
> even in an entrepreneurial system where there is commodity backing for the
> money -- that thing that is chosen as the commodity to back the money will
> have A VERY SMALL, elasticity of production.
>
> Thus rare metals like gold may be used -- but not "peanuts" which Abba
> Lerner suggested was as good a money (numeraire) as anything
> else.  Unfortunately peanuts has a very high elasticity of production and

> can never be the  "thing" that is money  for it does not possess what
> Keynes called in Chapter 17 the "Essential properties"-- If peanuts was
> money then  President Jimmy Carter should have appointed his peanut farmer
> brother Billy as Chairman of the Federal Reserve rather than Paul Volker--
> and then maybe Carter would have obtained a second term.
>
>   Again all this is explained in detail in my books MONEY AND THE REAL
> WORLD and POST KEYNESIAN MACROECONOMIC THEORY -- and if you would only
read
> a bit of this TEXTBOOK Post Keynesian literature instead of making
> grandiose statements about Post Keynesianism (where such statements merely
> illustrates your lack of knowledge regarding Post Keynesian theory), we
> could make more progress.
>
> >For either he failed to edit out the "or at any rate a very small" bit OR
he
> >was confused.
>
>
> I hope you now understand why you are confused about Keynes's GENERAL
> theory-- while Keynes is clear that he is writing a GENERAL theory for the
> whole spectrum of possible monetary systems from commodity money
> (commodity-backed money) to  fiat credit money. The important thing is
that
> the system of money be tied to the use  money contracts and hence the need
> for liquidity
>
> Second, I wrote:
>
> Leaving aside the quesothtion whether Government Taxation 'drives'
> >NON-COMMODITY MONEY into the COMMODITY MONEY category, the level of
> >employment and output is a function of ALL kinds of production-related
> >CREDIT and NOT of money alone.
> >
> >You respond:
> >
> >Please do not conflate the Mosler-Wray definition of chartalist
money --with
> >the Keynes -- Post Keynesian definition -- where the latter only requires
> >production and exchange to be organized in markets via the use of spot
and
> >forward money contracts and the thing that is money is what the
government
> >announces will setle contracts -- or as I put it Money is the means of
> >contractual settlement . [See Keynes, ch1 of THE TREATISE ON MONEY.
> >
> >Comment:
> >
> >The Mosler-Wray and/or the Keynes/Post Keynesian definition of chartalist
> >money has NO bearing on the proposition that "the level of employment and
> >output is a function of ALL kinds of production-related CREDIT and NOT of
> >money alone."
>
>
> Well that may again represent a confusion on your part -- where
> non-monetary credit does not extinguish a credit obligation it merely via
a
> money contract either transfers (or moves into the future a multiple of)
> the original obligation--- which is what the rate of interest is all
about!
>
> pAUL