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

[William F Hummel <wfhummel@xxxxxxxxxxx>]

Gunnar writes:

>Re. the following:
>
>> The state theory of money explains how the government creates and
>> supports the monetary base.  Some argue that the State can do that by
>> simply declaring its base money to be legal tender.  That is a
>> necessary, but not sufficient condition.  There must also be a broad
>> need for the private sector to acquire base money, as well as a way to
>> control its abundance.  Both are accomplished through compulsory tax
>> collection.
>
>Comment:
>
>In the case of SDRs - a world currency "created and supported" by the IMF -
>its "abundance" is "controlled" through an "allocation" process based on
>subjective evaluation by the IMF of statistical criteria relating to the
>"adequacy" of  international "liquidity" relative to the level of world
>trade, with another set of statistical criteria governing the actual use of
>SDRs in official settlements among IMF members.
>
>Considering also that the IMF has no "compulsory tax collection" authority,
>does it not follow that the _essentials_ of the State Theory of Money are
>not really such insofar as monetary economics is concerned - that they are
>_non-essential_ attributes of contemporary monetary regimes?
>
>Gunnar
>
As I noted elsewhere, there are any number of monetary systems, both
past and present, that do not conform to the state theory of money.
The theory makes no claim to universality.  If you want to argue that
the theory fails, you need to show that a viable national fiat
currency can exist without taxes.

The IMF is an institution totally dependent on such national
currencies.  Indeed there is a question about the viability of the IMF
itself, given that it has no power to levy "taxes" on the member
nations.

William