Re: Putting Chartalism In Its Place?

[William F Hummel <wfhummel@xxxxxxxxxxx>]

Barkley,

I believe all Federal Reserve Notes were inconvertible.  Notes that
were redeemable in gold or silver were issued by the Treasury.  During
the first couple of decades of the Fed, a number of types were issued,
such as Federal Reserve Notes, Federal Reserve Bank Notes, Legal
Tender Notes, Silver Certificates, and Gold Certificates.

Only the first two listed bore the imprint of the Federal Reserve.
The qualification 'Bank Notes' identified which of the twelve district
banks issued the note.   I have no idea why so many competing types
were issued, and wonder whether Federal Reserve Notes or Legal Tender
Notes sometimes traded at a discount against Gold Certificates of same
denomination.

The San Francisco Fed has a web page that shows large images of US
paper currency from the colonial days to the present.  It is at
http://www.frbsf.org/currency/bills.html

William

>     when Fed Reserve notes were fist issued,
>one could indeed go to a Fed bank and redeem it
>for some quantity of metal, little bags of silver being
>the last such, according to my possibly mistaken
>memory.  That is no longer the case.  What it says
>on the dollar bill now in my pocket is "This note is
>legal tender for all debts, public and private," which
>seems to cover both taxes and private contracts.

All notes now carry that inscription, but the earliest Federal Reserve
notes did not.  Even gold certificates carried that inscription.  The
certificates carried an additional inscription, as on the $20 gold
certificate of 1928 which says "Twenty Dollars in Gold Coin Payable to
the Bearer on Demand"

>     I am really drawing on Keynes in the Treatise
>on Money when I stress the link between chartalism
>and a focus on money as a unit of account rather
>than as a medium of exchange (or with the second
>as a secondary matter).  The unit can be completely
>abstract, as such examples as SDRs and euros
>between 1999 and 2002 and British guineas prior
>to 1971 demonstrate (not going to get into further
>whether or not SDRs are "really" money, they are
>at least "high-powered money," very high-powered).
>But, once it is established its value varies over time
>with the prices of goods for which it is used to price,
>and it exists, also irrespective of the particular forms
>or objects in which can be used to pay it.
>      Also, regarding this matter of definitions, I think
>that a definition should reflect the usage of a word,
>or at least its usage among a relevant discourse
>group.  Thus, I am perfectly willing to tell some student
>that "capital" is not just "money," which is certainly a
>very common street usage of the word, and I can
>back this up by citing basic econ textbooks.  Thus,
>when one wants to define a term widely used among
>economists, I think one should follow to some degree
>what most economists use as its definition.
>      This may be quite different from saying what its
>"true meaning," or "fundamental nature," or
>"ultimate essence" is.  Thus, profit may simply be revenues
>minus costs, but one can still argue that its underlying
>nature is really surplus value exploited from workers.  Or,
>one can say that money is what fulfills some list of accepted
>functions of money, while also arguing that the only way
>in modern economies something gets to actually fulfill
>all those functions is if a government declares it to be
>acceptable for taxes (or acceptable for settlement of
>private contracts, if one is a contract-chartalist).
>Barkley Rosser
>----- Original Message -----
>From: "William F Hummel" <wfhummel@xxxxxxxxxxx>
>To: "Barkley Rosser" <rosserjb@xxxxxxx>
>Sent: Tuesday, September 16, 2003 2:10 PM
>Subject: Re: Putting Chartalism In Its Place?
>
>
>Barkley wrote;
>
>>     Well, actually this is less than clear.
>>If one goes along with the idea that the
>>true nature of money is a unit of account,
>>then its specific "thingness" is essentially
>>irrelevant.
>
>Yes, and this is where money theorists must make a choice.  I
>understand your point about the money abstraction we call the unit of
>account.  However I tend toward the thingness side of money because it
>is much easier for the average citizen to grasp, and I'm as interested
>in communicating with them as with academics.
>
>>Thus, in the US today the money
>>is the "dollar."  But, what is a dollar?  Almost
>>nobody goes in with paper dollar bills (or
>>higher denominated bills, or a bunch of coins)
>>to pay their taxes.  Most pay by check, but
>>some pay by credit card now.
>
>In my view, whether the fiat dollar is tangible as a note or
>intangible as a deposit at the Fed is immaterial.  We can pay taxes
>with either.  When Federal Reserve notes were first issued, you would
>see a $10 bill for example with the inscription "The United States of
>America will pay to the bearer on demand Ten Dollars", a classic case
>of double talk.
>
>It would have made perfect sense if it said something like "This note
>will be accepted against Federal taxes due in the amount of Ten
>Dollars".   In other words, a tax credit.
>
>>As noted
>>already, many governments will accept all
>>kinds of forms of payment, with the list of
>>objects accepted by colonial governments
>>in America becoming quite long in some cases,
>>well beyond coonskins and tobacco.  Did
>>that make all of these objects money?
>
>In my view, the state theory of money applies to a fiat money system,
>meaning credit issued by the state itself.  The theory is not
>invalidated by the state accepting other forms of payment.  Whether
>those other forms are called money or not is a different subject.
>
>William
>
>