Re: Putting Chartalism In Its Place?

[William F Hummel <wfhummel@xxxxxxxxxxx>]

Gunnar wrote:

>The following exchange of today's date on Gang8 may be of interest.
>
>Gunnar
>
The conversation below is like two ships passing in the night.
>
>Fellow Gang8 member's statement:
>
>I of course agree...that what gives money its value is its acceptance in taxes.
>
>[My comment:  What does it mean to say that money has value because of "taxes"?
>Consider a Kingdom without PRODUCTION - where is Money's Value?]

A kingdom without production obviously has no need for money.
>
>Fellow Gang8 member's statement:
>
>      My question was, What if the US abolishes taxes, as Mr. Bush seems intent on doing, ultimately.

>      Your answer was,..., if this happens then money will lose its value!
>
>[My comment: If Bush were to nuke America's production capacity, US money would become valueless in a New York second.

One could make the same argument about nuking the people themselves.
>
>BUT, if Bush were to reduce taxes to ZERO, everybody would be happy.
>
>WHY?
>
>Because they would be left holding more of their money's "value" than before.
>
>SO?
>
>Get REAL!]

Get real indeed!  Who cares about a hypothetical planet in which there
is no production?
>
>Gunnar (in feisty mood on a hard day's night!)

In the era of fiat money, there must be a way to control its abundance
to ensure that it remains a viable store of value.  That means what is
issued must also be recaptured, except for what is needed to support
growth.  The only mechanism to accomplish that in the real world is
compulsory taxes and borrowing, or some equivalent thereto.