Re: [gang8] Re: Putting Chartalism In Its Place?

["William B. Ryan" <w_b_ryan@xxxxxxxxx>]

***>Fungible credit money depends on the promise that
it can be converted at par to fiat money on demand.
You should therefore explain how a national fiat
currency and the credit it supports can long exist
without taxation. <***

You write as if we are in some parallel universe
where it had been Bryan not McKinley who won the
election of 1896.  The greenbacks that were printed
and spent by the federal government were competing
with bank credit that was "redeemable" in specie.  As
a matter of historical fact, the greenbacks always
traded at significant discount to par in respect to
the various forms of bank credit.

What happened is that over the years the greenbacks
were completely eliminated and centralized bank
credit became the monopoly currency--whether in the
form of notes or deposits.  The fact that it is no
longer redeemable in anything does not make it
equivalent in substance to the greenbacks which were
declared by "fiat" to be legal tender.  Bank credit
was and is *lent* into circulation.  The greenbacks
were *spent* into circulation.

Bank credit was not given its "value" through
redeemability for specie, but that it is redeemable
for the goods and services supplied by industry,
including government, either before or after their
delivery, paid for in advance or billed.

Calling bank credit "fiat" and saying it is
"government" money is a form of "newspeak" and is
deceptive.


***>To be negotiable on a national scale, however,
requires the intervention of the government. <***

This is not correct.  There are many historical
exceptions.  Centralized authority, perhaps, but that
is not necessarily government, unless you define
centralized authority to be the essential
characteristic of government and that centralized
authority is government.  But we are here again into
"newspeak."  You speak as if Treasury represents
government and the Fed is a passive player that
automatically responds to the needs of government and
private enterprise, like some kind of pre-programmed
computer subservient to the will of the people.  But
the locus of power is at the Fed not the Treasury.
It isn't the Treasury and the executive branch that
calls the shots in terms of monetary policy.  Fiscal
policy is limited to determining the ratio between
taxation and borrowing.  Treasury is required to
cover every dollar it spends by one or the other.


***>The state theory of money explains how the
government creates and supports the monetary base.
<***

In a parallel universe.


--------- Original Message ---------
DATE: Sun, 14 Sep 2003 09:34:35
From: William F Hummel <wfhummel@xxxxxxxxxxx>
To: pkt@xxxxxxxxxxxxxxxx
[snipped]


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